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: July 31
Date of reporting period: July 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
Disciplined 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 Disciplined 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 Disciplined Value
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Raghavendran Sivaraman, Ph.D., CFA
Co-Portfolio Manager
Managed Fund since 2019
Oleg Nusinzon, CFA
Co-Portfolio Manager
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 Disciplined Value Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Disciplined 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 Disciplined Value Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
July 31, 2023, Class A shares of Columbia Disciplined Value Fund returned 9.59% excluding sales charges. The Fund’s benchmark, the Russell 1000 Value Index, returned 8.28%.
Market overview
For the 12 months ended July 31,
2023, the broad U.S. equity market, as measured by the S&P 500 Index, delivered a gain of 13.02%. The period was marked by continued concerns about a future economic slowdown, amplified by a series of rate hikes
by the U.S. Federal Reserve (Fed) that tapered from aggressive to more measured by period-end to tame stubborn inflation. Momentum picked up as the period progressed as better-than-feared earnings drove equity gains.
The period, however, was far from smooth.
In March, the failure of a pair of
U.S. banks and the collapse of European giant Credit Suisse led to fears of a financial crisis. In response, the Fed created a lending facility to support bank liquidity while the market began to price in multiple
cuts in the federal funds target rate over the second half of 2023. At its March 2023 meeting the Fed raised the federal funds target rate by another quarter-point to a range of 4.75% to 5.0%. The rate hike was
generally welcomed by investors as a signal that the Fed viewed the financial system as remaining on stable footing.
Inflation continued to decline as
the period progressed. Through July 2023, the rate of year-over-year U.S. inflation had decelerated to 3.2%, a meaningful reduction from the four decade high of 9.1% in June 2022, though still higher than the
Fed’s 2% inflation target. Nonetheless, with the economy displaying surprising resilience and employment remaining historically robust, the Fed implemented additional 25 basis point increases at its early May
and late July meetings, bringing the federal funds target rate to the 5.25% to 5.50% range.
Sentiment remained quite positive
through the latter months of the period, as the Fed slowed its pace of rate hikes in response to cooling inflation. Investors were further encouraged by the fact that economic growth and corporate earnings —
while slowing — did not decline to the extent that the markets had anticipated in late 2022. These factors combined to fuel an impressive gain for equities, but the majority of the positive return was generated
by a small group of mega-cap technology-related stocks. Much of the relative strength in this area came from companies expected to benefit from the evolution of artificial intelligence (AI). The growth style strongly
outpaced value as a result, with returns of 17.31% and 8.28%, respectively, for the Russell 1000 Growth Index and the Russell 1000 Value Index. The small-cap Russell 2000 Index, which is less influenced by AI-related
trends and is more sensitive to concerns about the banking sector, returned 7.91% but was unable to keep pace with the rally in large caps.
We divide the metrics for our stock
selection model into three broad themes: quality, valuation, and catalyst. We then rank the securities within a sector/industry from “1” (most attractive) to “5” (least attractive) based upon
an aggregation of the metrics within these themes. We followed our portfolio construction process that allocates capital to the models’ ideas while integrating risk management. Changes in individual security
positions during the annual period were primarily the result of the Fund’s bottom-up stock selection process. While there were some changes in sector allocations over time, all changes were quite modest, as we
maintained our sector neutral investment approach.
The Fund’s notable
contributors during the period
| • | At the style level, stocks ranked high by our valuation and catalyst themes were in favor during the annual period. |
| • | Relative to the benchmark, the largest areas of contribution came from the consumer discretionary, communication services, industrials, utilities and information technology sectors. |
| • | Relative to the benchmark, holdings that contributed most to Fund performance during the period included building materials and construction services provider Builders FirstSource, Inc., homebuilder PulteGroup, Inc. and social media and Facebook parent company Meta Platforms, Inc. |
The Fund’s notable
detractors during the period
| • | Stocks ranked high by our quality theme were out of favor during the annual period. |
| • | Relative to the benchmark, the health care and financials sectors were the largest areas of relative underperformance for the Fund. |
| Columbia Disciplined Value Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | Relative to the benchmark, holdings that detracted most from Fund performance during the period included provider of outsourced clinical services Syneos Health, Inc., global pharmaceutical company Pfizer, Inc. and financial services conglomerate Popular, Inc. |
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. Investing in derivatives is a specialized activity that involves special risks, which may result in significant losses. 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 Disciplined 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 Disciplined Value Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Disciplined Value Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Disciplined Value Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
At July 31, 2023,
securities and/or cash totaling $315,864 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Disciplined Value Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 12 | 09/2023 | USD | 2,768,700 | 151,643 | — |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (c) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended July 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.408% | ||||||||
| 1,917,742 | 22,054,761 | (21,843,703) | 169 | 2,128,969 | (11) | 110,128 | 2,129,821 | |
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
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Value Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
July 31, 2023
July 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 July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 8,002,772 | — | — | 8,002,772 |
| Consumer Discretionary | 9,937,495 | — | — | 9,937,495 |
| Consumer Staples | 13,731,407 | — | — | 13,731,407 |
| Energy | 14,536,269 | — | — | 14,536,269 |
| Financials | 36,467,173 | — | — | 36,467,173 |
| Health Care | 26,691,070 | — | — | 26,691,070 |
| Industrials | 22,905,634 | — | — | 22,905,634 |
| Information Technology | 16,411,855 | — | — | 16,411,855 |
| Materials | 9,074,248 | — | — | 9,074,248 |
| Real Estate | 8,097,576 | — | — | 8,097,576 |
| Utilities | 8,446,854 | — | — | 8,446,854 |
| Total Common Stocks | 174,302,353 | — | — | 174,302,353 |
| Money Market Funds | 2,128,969 | — | — | 2,128,969 |
| Total Investments in Securities | 176,431,322 | — | — | 176,431,322 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 151,643 | — | — | 151,643 |
| Total | 176,582,965 | — | — | 176,582,965 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Disciplined Value Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $146,923,381) | $174,302,353 |
| Affiliated issuers (cost $2,128,659) | 2,128,969 |
| Cash | 516 |
| Receivable for: | |
| Capital shares sold | 23,220 |
| Dividends | 333,484 |
| Foreign tax reclaims | 221 |
| Variation margin for futures contracts | 4,800 |
| Expense reimbursement due from Investment Manager | 2,560 |
| Prepaid expenses | 7,975 |
| Total assets | 176,804,098 |
| Liabilities | |
| Payable for: | |
| Capital shares redeemed | 127,617 |
| Management services fees | 10,864 |
| Distribution and/or service fees | 3,304 |
| Transfer agent fees | 15,181 |
| Trustees’ fees | 82,029 |
| Accounting services fees | 15,045 |
| Other expenses | 8,312 |
| Total liabilities | 262,352 |
| Net assets applicable to outstanding capital stock | $176,541,746 |
| Represented by | |
| Paid in capital | 140,362,233 |
| Total distributable earnings (loss) | 36,179,513 |
| Total - representing net assets applicable to outstanding capital stock | $176,541,746 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Value Fund | Annual Report 2023 | 13 |
Statement of Assets and Liabilities (continued)
July 31, 2023
July 31, 2023
| Class A | |
| Net assets | $50,500,927 |
| Shares outstanding | 5,990,965 |
| Net asset value per share | $8.43 |
| 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) | $8.94 |
| Advisor Class | |
| Net assets | $1,405,562 |
| Shares outstanding | 163,972 |
| Net asset value per share | $8.57 |
| Class C | |
| Net assets | $7,787,750 |
| Shares outstanding | 967,823 |
| Net asset value per share | $8.05 |
| Institutional Class | |
| Net assets | $33,222,690 |
| Shares outstanding | 3,872,904 |
| Net asset value per share | $8.58 |
| Institutional 2 Class | |
| Net assets | $776,236 |
| Shares outstanding | 90,774 |
| Net asset value per share | $8.55 |
| Institutional 3 Class | |
| Net assets | $4,614,129 |
| Shares outstanding | 537,833 |
| Net asset value per share | $8.58 |
| Class R | |
| Net assets | $1,350,658 |
| Shares outstanding | 159,752 |
| Net asset value per share | $8.45 |
| Class V | |
| Net assets | $76,883,794 |
| Shares outstanding | 9,167,622 |
| Net asset value per share | $8.39 |
| Maximum sales charge | 5.75% |
| Maximum offering price per share (calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge for Class V shares) | $8.90 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Disciplined Value Fund | Annual Report 2023 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $4,121,196 |
| Dividends — affiliated issuers | 110,128 |
| Foreign taxes withheld | (6,452) |
| Total income | 4,224,872 |
| Expenses: | |
| Management services fees | 1,319,713 |
| Distribution and/or service fees | |
| Class A | 130,244 |
| Class C | 82,225 |
| Class R | 5,768 |
| Class V | 184,794 |
| Transfer agent fees | |
| Class A | 63,734 |
| Advisor Class | 1,632 |
| Class C | 10,061 |
| Institutional Class | 41,387 |
| Institutional 2 Class | 405 |
| Institutional 3 Class | 493 |
| Class R | 1,410 |
| Class V | 90,378 |
| Trustees’ fees | 26,764 |
| Custodian fees | 8,701 |
| Printing and postage fees | 26,871 |
| Registration fees | 119,269 |
| Accounting services fees | 30,090 |
| Legal fees | 14,883 |
| Interest on collateral | 22 |
| Compensation of chief compliance officer | 34 |
| Other | 15,264 |
| Total expenses | 2,174,142 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (384,959) |
| Fees waived by transfer agent | |
| Institutional 3 Class | (177) |
| Expense reduction | (1,430) |
| Total net expenses | 1,787,576 |
| Net investment income | 2,437,296 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 9,215,815 |
| Investments — affiliated issuers | (11) |
| Futures contracts | 108,207 |
| Net realized gain | 9,324,011 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 3,844,916 |
| Investments — affiliated issuers | 169 |
| Futures contracts | 57,889 |
| Net change in unrealized appreciation (depreciation) | 3,902,974 |
| Net realized and unrealized gain | 13,226,985 |
| Net increase in net assets resulting from operations | $15,664,281 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Disciplined Value Fund | Annual Report 2023 | 15 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $2,437,296 | $2,774,940 |
| Net realized gain | 9,324,011 | 26,259,607 |
| Net change in unrealized appreciation (depreciation) | 3,902,974 | (23,933,139) |
| Net increase in net assets resulting from operations | 15,664,281 | 5,101,408 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (6,034,531) | (13,178,216) |
| Advisor Class | (147,123) | (450,857) |
| Class C | (913,270) | (2,098,648) |
| Institutional Class | (3,889,096) | (9,421,332) |
| Institutional 2 Class | (55,965) | (214,442) |
| Institutional 3 Class | (470,055) | (4,082,447) |
| Class R | (124,826) | (325,322) |
| Class V | (8,507,320) | (20,480,269) |
| Total distributions to shareholders | (20,142,186) | (50,251,533) |
| Increase (decrease) in net assets from capital stock activity | (10,653,432) | 21,129,847 |
| Total decrease in net assets | (15,131,337) | (24,020,278) |
| Net assets at beginning of year | 191,673,083 | 215,693,361 |
| Net assets at end of year | $176,541,746 | $191,673,083 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Disciplined Value Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 772,021 | 6,198,267 | 1,137,028 | 10,540,578 |
| Distributions reinvested | 718,267 | 5,466,014 | 1,328,522 | 11,757,420 |
| Shares redeemed | (1,710,922) | (13,605,218) | (2,112,533) | (22,157,151) |
| Net increase (decrease) | (220,634) | (1,940,937) | 353,017 | 140,847 |
| Advisor Class | ||||
| Shares sold | 23,488 | 187,720 | 18,726 | 175,408 |
| Distributions reinvested | 19,024 | 146,868 | 50,181 | 450,126 |
| Shares redeemed | (31,285) | (251,860) | (83,039) | (782,773) |
| Net increase (decrease) | 11,227 | 82,728 | (14,132) | (157,239) |
| Class C | ||||
| Shares sold | 143,271 | 1,088,693 | 265,974 | 2,297,210 |
| Distributions reinvested | 122,696 | 895,677 | 240,376 | 2,048,000 |
| Shares redeemed | (395,578) | (3,015,550) | (181,575) | (1,644,758) |
| Net increase (decrease) | (129,611) | (1,031,180) | 324,775 | 2,700,452 |
| Institutional Class | ||||
| Shares sold | 493,516 | 3,983,769 | 648,160 | 6,117,610 |
| Distributions reinvested | 477,923 | 3,694,341 | 985,509 | 8,840,019 |
| Shares redeemed | (1,172,718) | (9,507,332) | (914,850) | (8,737,501) |
| Net increase (decrease) | (201,279) | (1,829,222) | 718,819 | 6,220,128 |
| Institutional 2 Class | ||||
| Shares sold | 42,442 | 338,375 | 3,910 | 37,962 |
| Distributions reinvested | 7,235 | 55,709 | 23,905 | 213,710 |
| Shares redeemed | (15,095) | (123,034) | (47,069) | (419,853) |
| Net increase (decrease) | 34,582 | 271,050 | (19,254) | (168,181) |
| Institutional 3 Class | ||||
| Shares sold | 192,869 | 1,577,251 | 564,821 | 5,535,484 |
| Distributions reinvested | 55,159 | 425,826 | 326,304 | 2,926,943 |
| Shares redeemed | (1,113,334) | (9,867,219) | (961,068) | (9,228,876) |
| Net decrease | (865,306) | (7,864,142) | (69,943) | (766,449) |
| Class R | ||||
| Shares sold | 16,363 | 132,985 | 31,554 | 320,659 |
| Distributions reinvested | 16,225 | 123,958 | 36,394 | 323,178 |
| Shares redeemed | (1,806) | (14,261) | (45,143) | (402,257) |
| Net increase | 30,782 | 242,682 | 22,805 | 241,580 |
| Class V | ||||
| Shares sold | 72,000 | 562,058 | 81,990 | 762,488 |
| Distributions reinvested | 1,023,058 | 7,744,552 | 2,068,665 | 18,224,943 |
| Shares redeemed | (868,657) | (6,891,021) | (622,672) | (6,068,722) |
| Net increase | 226,401 | 1,415,589 | 1,527,983 | 12,918,709 |
| Total net increase (decrease) | (1,113,838) | (10,653,432) | 2,844,070 | 21,129,847 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Value 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 | 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 7/31/2023 | $8.68 | 0.11 | 0.62 | 0.73 | (0.13) | (0.85) | (0.98) |
| Year Ended 7/31/2022 | $11.21 | 0.13 | 0.18 | 0.31 | (0.26) | (2.58) | (2.84) |
| Year Ended 7/31/2021 | $8.09 | 0.14 | 3.12 | 3.26 | (0.14) | — | (0.14) |
| Year Ended 7/31/2020 | $9.63 | 0.16 | (0.70) | (0.54) | (0.17) | (0.83) | (1.00) |
| Year Ended 7/31/2019 | $10.82 | 0.15 | (0.31) | (0.16) | (0.16) | (0.87) | (1.03) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $8.82 | 0.13 | 0.62 | 0.75 | (0.15) | (0.85) | (1.00) |
| Year Ended 7/31/2022 | $11.34 | 0.16 | 0.18 | 0.34 | (0.28) | (2.58) | (2.86) |
| Year Ended 7/31/2021 | $8.18 | 0.17 | 3.15 | 3.32 | (0.16) | — | (0.16) |
| Year Ended 7/31/2020 | $9.73 | 0.19 | (0.72) | (0.53) | (0.19) | (0.83) | (1.02) |
| Year Ended 7/31/2019 | $10.92 | 0.18 | (0.32) | (0.14) | (0.18) | (0.87) | (1.05) |
| Class C | |||||||
| Year Ended 7/31/2023 | $8.33 | 0.05 | 0.58 | 0.63 | (0.06) | (0.85) | (0.91) |
| Year Ended 7/31/2022 | $10.86 | 0.06 | 0.17 | 0.23 | (0.18) | (2.58) | (2.76) |
| Year Ended 7/31/2021 | $7.84 | 0.07 | 3.03 | 3.10 | (0.08) | — | (0.08) |
| Year Ended 7/31/2020 | $9.36 | 0.09 | (0.68) | (0.59) | (0.10) | (0.83) | (0.93) |
| Year Ended 7/31/2019 | $10.54 | 0.08 | (0.32) | (0.24) | (0.07) | (0.87) | (0.94) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $8.82 | 0.13 | 0.63 | 0.76 | (0.15) | (0.85) | (1.00) |
| Year Ended 7/31/2022 | $11.35 | 0.16 | 0.17 | 0.33 | (0.28) | (2.58) | (2.86) |
| Year Ended 7/31/2021 | $8.19 | 0.17 | 3.15 | 3.32 | (0.16) | — | (0.16) |
| Year Ended 7/31/2020 | $9.74 | 0.18 | (0.71) | (0.53) | (0.19) | (0.83) | (1.02) |
| Year Ended 7/31/2019 | $10.93 | 0.18 | (0.32) | (0.14) | (0.18) | (0.87) | (1.05) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $8.80 | 0.13 | 0.62 | 0.75 | (0.15) | (0.85) | (1.00) |
| Year Ended 7/31/2022 | $11.33 | 0.16 | 0.18 | 0.34 | (0.29) | (2.58) | (2.87) |
| Year Ended 7/31/2021 | $8.17 | 0.18 | 3.16 | 3.34 | (0.18) | — | (0.18) |
| Year Ended 7/31/2020 | $9.72 | 0.20 | (0.71) | (0.51) | (0.21) | (0.83) | (1.04) |
| Year Ended 7/31/2019 | $10.91 | 0.19 | (0.31) | (0.12) | (0.20) | (0.87) | (1.07) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Disciplined 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 7/31/2023 | $8.43 | 9.59% | 1.26%(c) | 1.04%(c),(d) | 1.36% | 60% | $50,501 |
| Year Ended 7/31/2022 | $8.68 | 2.26% | 1.22% | 1.02%(d) | 1.32% | 66% | $53,946 |
| Year Ended 7/31/2021 | $11.21 | 40.74% | 1.31%(c) | 1.09%(c),(d) | 1.46% | 79% | $65,698 |
| Year Ended 7/31/2020 | $8.09 | (6.75%) | 1.26% | 1.12%(d) | 1.83% | 80% | $56,748 |
| Year Ended 7/31/2019 | $9.63 | (0.87%) | 1.23% | 1.15% | 1.57% | 90% | $74,650 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $8.57 | 9.74% | 1.01%(c) | 0.79%(c),(d) | 1.61% | 60% | $1,406 |
| Year Ended 7/31/2022 | $8.82 | 2.62% | 0.97% | 0.77%(d) | 1.59% | 66% | $1,347 |
| Year Ended 7/31/2021 | $11.34 | 41.09% | 1.06%(c) | 0.84%(c),(d) | 1.71% | 79% | $1,893 |
| Year Ended 7/31/2020 | $8.18 | (6.55%) | 1.01% | 0.87%(d) | 2.12% | 80% | $1,534 |
| Year Ended 7/31/2019 | $9.73 | (0.57%) | 0.98% | 0.90% | 1.81% | 90% | $3,026 |
| Class C | |||||||
| Year Ended 7/31/2023 | $8.05 | 8.72% | 2.01%(c) | 1.79%(c),(d) | 0.61% | 60% | $7,788 |
| Year Ended 7/31/2022 | $8.33 | 1.52% | 1.97% | 1.77%(d) | 0.60% | 66% | $9,139 |
| Year Ended 7/31/2021 | $10.86 | 39.78% | 2.06%(c) | 1.84%(c),(d) | 0.71% | 79% | $8,389 |
| Year Ended 7/31/2020 | $7.84 | (7.45%) | 2.01% | 1.87%(d) | 1.09% | 80% | $7,100 |
| Year Ended 7/31/2019 | $9.36 | (1.66%) | 1.98% | 1.90% | 0.83% | 90% | $11,835 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $8.58 | 9.85% | 1.01%(c) | 0.79%(c),(d) | 1.61% | 60% | $33,223 |
| Year Ended 7/31/2022 | $8.82 | 2.53% | 0.97% | 0.77%(d) | 1.59% | 66% | $35,943 |
| Year Ended 7/31/2021 | $11.35 | 41.04% | 1.07%(c) | 0.84%(c),(d) | 1.75% | 79% | $38,094 |
| Year Ended 7/31/2020 | $8.19 | (6.53%) | 1.01% | 0.87%(d) | 2.07% | 80% | $83,333 |
| Year Ended 7/31/2019 | $9.74 | (0.57%) | 0.98% | 0.90% | 1.80% | 90% | $111,873 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $8.55 | 9.82% | 0.96%(c) | 0.74%(c) | 1.66% | 60% | $776 |
| Year Ended 7/31/2022 | $8.80 | 2.60% | 0.92% | 0.72% | 1.63% | 66% | $494 |
| Year Ended 7/31/2021 | $11.33 | 41.32% | 0.90%(c) | 0.70%(c) | 1.84% | 79% | $855 |
| Year Ended 7/31/2020 | $8.17 | (6.42%) | 0.84% | 0.73% | 2.20% | 80% | $588 |
| Year Ended 7/31/2019 | $9.72 | (0.44%) | 0.83% | 0.76% | 1.96% | 90% | $1,213 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Disciplined Value 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 7/31/2023 | $8.82 | 0.14 | 0.63 | 0.77 | (0.16) | (0.85) | (1.01) |
| Year Ended 7/31/2022 | $11.35 | 0.17 | 0.18 | 0.35 | (0.30) | (2.58) | (2.88) |
| Year Ended 7/31/2021 | $8.19 | 0.19 | 3.15 | 3.34 | (0.18) | — | (0.18) |
| Year Ended 7/31/2020 | $9.74 | 0.20 | (0.71) | (0.51) | (0.21) | (0.83) | (1.04) |
| Year Ended 7/31/2019 | $10.93 | 0.20 | (0.32) | (0.12) | (0.20) | (0.87) | (1.07) |
| Class R | |||||||
| Year Ended 7/31/2023 | $8.71 | 0.09 | 0.61 | 0.70 | (0.11) | (0.85) | (0.96) |
| Year Ended 7/31/2022 | $11.23 | 0.10 | 0.19 | 0.29 | (0.23) | (2.58) | (2.81) |
| Year Ended 7/31/2021 | $8.11 | 0.12 | 3.12 | 3.24 | (0.12) | — | (0.12) |
| Year Ended 7/31/2020 | $9.65 | 0.14 | (0.70) | (0.56) | (0.15) | (0.83) | (0.98) |
| Year Ended 7/31/2019 | $10.83 | 0.13 | (0.31) | (0.18) | (0.13) | (0.87) | (1.00) |
| Class V | |||||||
| Year Ended 7/31/2023 | $8.65 | 0.11 | 0.61 | 0.72 | (0.13) | (0.85) | (0.98) |
| Year Ended 7/31/2022 | $11.18 | 0.13 | 0.18 | 0.31 | (0.26) | (2.58) | (2.84) |
| Year Ended 7/31/2021 | $8.07 | 0.14 | 3.11 | 3.25 | (0.14) | — | (0.14) |
| Year Ended 7/31/2020 | $9.60 | 0.16 | (0.69) | (0.53) | (0.17) | (0.83) | (1.00) |
| Year Ended 7/31/2019 | $10.79 | 0.15 | (0.31) | (0.16) | (0.16) | (0.87) | (1.03) |
| 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 which is less than 0.01%. |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Disciplined 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 7/31/2023 | $8.58 | 9.99% | 0.89%(c) | 0.68%(c) | 1.70% | 60% | $4,614 |
| Year Ended 7/31/2022 | $8.82 | 2.62% | 0.87% | 0.66% | 1.68% | 66% | $12,381 |
| Year Ended 7/31/2021 | $11.35 | 41.28% | 0.80%(c) | 0.66%(c) | 2.12% | 79% | $16,725 |
| Year Ended 7/31/2020 | $8.19 | (6.36%) | 0.79% | 0.68% | 2.28% | 80% | $308,660 |
| Year Ended 7/31/2019 | $9.74 | (0.37%) | 0.78% | 0.71% | 2.01% | 90% | $428,447 |
| Class R | |||||||
| Year Ended 7/31/2023 | $8.45 | 9.15% | 1.51%(c) | 1.29%(c),(d) | 1.12% | 60% | $1,351 |
| Year Ended 7/31/2022 | $8.71 | 2.11% | 1.47% | 1.27%(d) | 1.09% | 66% | $1,123 |
| Year Ended 7/31/2021 | $11.23 | 40.32% | 1.57%(c) | 1.34%(c),(d) | 1.23% | 79% | $1,193 |
| Year Ended 7/31/2020 | $8.11 | (6.96%) | 1.51% | 1.37%(d) | 1.58% | 80% | $1,711 |
| Year Ended 7/31/2019 | $9.65 | (1.05%) | 1.48% | 1.40% | 1.33% | 90% | $2,750 |
| Class V | |||||||
| Year Ended 7/31/2023 | $8.39 | 9.52% | 1.26%(c) | 1.04%(c),(d) | 1.36% | 60% | $76,884 |
| Year Ended 7/31/2022 | $8.65 | 2.29% | 1.22% | 1.02%(d) | 1.34% | 66% | $77,299 |
| Year Ended 7/31/2021 | $11.18 | 40.72% | 1.31%(c) | 1.09%(c),(d) | 1.45% | 79% | $82,848 |
| Year Ended 7/31/2020 | $8.07 | (6.66%) | 1.26% | 1.12%(d) | 1.83% | 80% | $63,800 |
| Year Ended 7/31/2019 | $9.60 | (0.87%) | 1.23% | 1.15% | 1.57% | 90% | $75,537 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Value Fund | Annual Report 2023 | 21 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Disciplined 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. Class V shares are available only to investors who received (and who continuously held) Class V shares in connection with previous fund reorganizations.
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.
| 22 | Columbia Disciplined Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 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
| Columbia Disciplined Value Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
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.
| 24 | Columbia Disciplined Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at July 31, 2023:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 151,643* |
| * | 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 July 31, 2023:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended July 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 2,870,456 |
| * | Based on the ending quarterly outstanding amounts for the year ended July 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.
| Columbia Disciplined Value Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 amendments.
| 26 | Columbia Disciplined Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 0.75% to 0.55% as the Fund’s net assets increase. The effective management services fee rate for the year ended July 31, 2023 was 0.75% 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 "Trustees’ fees" 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 December 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.
| Columbia Disciplined Value Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
For the year ended July 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 | 0.12 |
| Advisor Class | 0.12 |
| Class C | 0.12 |
| Institutional Class | 0.12 |
| Institutional 2 Class | 0.07 |
| Institutional 3 Class | 0.01 |
| Class R | 0.12 |
| Class V | 0.12 |
An annual minimum account balance
fee of $20 may apply to certain accounts with a value below the applicable share class’s initial minimum investment requirements to reduce the impact of small accounts on transfer agency fees. These minimum
account balance fees are remitted to the Fund and recorded as part of expense reductions in the Statement of Operations. For the year ended July 31, 2023, these minimum account balance fees reduced total expenses of
the Fund by $1,430.
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 $46,000 for Class C shares. This amount is based on the most recent information available as of
June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Shareholder services fees
The Fund has adopted a shareholder
services plan that permits it to pay for certain services provided to Class V shareholders by their selling and/or servicing agents. The Fund may pay shareholder servicing fees up to an aggregate annual rate of 0.50%
of the Fund’s average daily net assets attributable to Class V shares (comprised of up to 0.25% for shareholder services and up to 0.25% for administrative support services). These fees are currently limited to
an aggregate annual rate of not more than 0.25% of the Fund’s average daily net assets attributable to Class V shares.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 33,317 |
| Class C | — | 1.00(b) | 210 |
| Class V | 5.75 | 0.50 - 1.00(a) | — |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
| 28 | Columbia Disciplined Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 December 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 July 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, derivative investments 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 July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 3,131,764 | 17,010,422 | 20,142,186 | 22,035,129 | 28,216,404 | 50,251,533 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
| Columbia Disciplined Value Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
At July 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 2,047,124 | 7,195,360 | — | 27,018,568 |
At July 31, 2023, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 149,564,397 | 30,670,500 | (3,651,932) | 27,018,568 |
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 $102,770,070 and $130,654,295, respectively, for the year ended July 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 July 31, 2023.
| 30 | Columbia Disciplined Value Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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
| Columbia Disciplined Value Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 provide services to
the Fund.
| 32 | Columbia Disciplined 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 Disciplined Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Disciplined Value Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as of
July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended July 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 July 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 July 31, 2023 and
the financial highlights for each of the five years in the period ended July 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 July 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Disciplined Value Fund | Annual Report 2023 | 33 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 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 |
| 95.31% | 93.86% | 4.11% | $9,221,732 |
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).
| 34 | Columbia Disciplined 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 | 173 | 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 | 173 | 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 | 173 | 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 Disciplined 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 |
| 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 | 173 | 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 | 171 | 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 | 171 | 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 | 173 | 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 | 173 | Trustee, Catholic Schools Foundation, since 2004 |
| 36 | Columbia Disciplined 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 | 173 | 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 | 171 | 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 | 171 | 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. | 173 | 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 Disciplined Value 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 |
| 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 | 171 | 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 | 173 | 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 | 173 | 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 |
| 38 | Columbia Disciplined 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 Disciplined Value Fund | Annual Report 2023 | 39 |
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.
| 40 | Columbia Disciplined Value Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Disciplined Value Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and
other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Disciplined Value Fund | Annual Report 2023 | 41 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed that Fund performance was well
within the range of that of its peers.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the Investment Manager’s profitability.
| 42 | Columbia Disciplined Value Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Disciplined Value 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/
ANN179_07_N01_(09/23)
Columbia
Disciplined Growth Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
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| 38 | |
| 39 |
If you elect to receive the
shareholder report for Columbia Disciplined Growth 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 Disciplined Growth
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Raghavendran Sivaraman, Ph.D., CFA
Co-Portfolio Manager
Managed Fund since 2019
Oleg Nusinzon, CFA
Co-Portfolio Manager
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 Disciplined Growth Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Disciplined Growth 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 Disciplined Growth Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
July 31, 2023, Class A shares of Columbia Disciplined Growth Fund returned 17.08% excluding sales charges. The Fund’s benchmark, the Russell 1000 Growth Index returned 17.31% for the same time period.
Market overview
For the 12 months ended July 31,
2023, the broad U.S. equity market, as measured by the S&P 500 Index, delivered a gain of 13.02%. The period was marked by continued concerns about a future economic slowdown, amplified by a series of rate hikes
by the U.S. Federal Reserve (Fed) that tapered from aggressive to more measured by period-end to tame stubborn inflation. Momentum picked up as the period progressed as better-than-feared earnings drove equity gains.
The period, however, was far from smooth.
In March, the failure of a pair of
U.S. banks and the collapse of European giant Credit Suisse led to fears of a financial crisis. In response, the Fed created a lending facility to support bank liquidity while the market began to price in multiple
cuts in the federal funds target rate over the second half of 2023. At its March 2023 meeting the Fed raised the federal funds target rate by another quarter-point to a range of 4.75% to 5.0%. The rate hike was
generally welcomed by investors as a signal that the Fed viewed the financial system as remaining on stable footing.
Inflation continued to decline as
the period progressed. Through July 2023, the rate of year-over-year U.S. inflation had decelerated to 3.2%, a meaningful reduction from the four decade high of 9.1% in June 2022, though still higher than the
Fed’s 2% inflation target. Nonetheless, with the economy displaying surprising resilience and employment remaining historically robust, the Fed implemented additional 25 basis point increases at its early May
and late July meetings, bringing the federal funds target rate to the 5.25% to 5.50% range.
Sentiment remained quite positive
through the latter months of the period, as the Fed slowed its pace of rate hikes in response to cooling inflation. Investors were further encouraged by the fact that economic growth and corporate earnings —
while slowing — did not decline to the extent that the markets had anticipated in late 2022. These factors combined to fuel an impressive gain for equities, but the majority of the positive return was generated
by a small group of mega-cap technology-related stocks. Much of the relative strength in this area came from companies expected to benefit from the evolution of artificial intelligence (AI). The growth style strongly
outpaced value as a result, with returns of 17.31% and 8.28%, respectively, for the Russell 1000 Growth Index and the Russell 1000 Value Index. The small-cap Russell 2000 Index, which is less influenced by AI-related
trends and is more sensitive to concerns about the banking sector, returned 7.91% but was unable to keep pace with the rally in large caps.
We divide the metrics for our stock
selection model into three broad themes: quality, valuation, and catalyst. We then rank the securities within a sector/industry from “1” (most attractive) to “5” (least attractive) based upon
an aggregation of the metrics within these themes. We followed our portfolio construction process that allocates capital to the models’ ideas while integrating risk management. Changes in individual security
positions during the annual period were primarily the result of the Fund’s bottom-up stock selection process. While there were some changes in sector allocations over time, all changes were quite modest, as we
maintained our sector neutral investment approach.
The Fund’s notable
detractors during the period
| • | Stocks ranked high by our catalyst and quality themes were out of favor during the annual period. |
| • | The health care and information technology sectors were the areas of largest detraction versus the benchmark during the period. The Fund realized strong absolute performance in the information technology sector, but lagged the benchmark modestly. |
| • | The largest detractors from Fund performance relative to the benchmark included semiconductor company NVIDIA Corp. (due to a relative underweight), tax preparation service company H&R Block, Inc. and health insurance provider Humana, Inc. The Fund sold its position in H&R Block. |
The Fund’s notable
contributors during the period
| • | At the style level, stocks ranked high by our valuation theme were in favor during the annual period. |
| • | Strong stock selection drove Fund performance during the period. |
| Columbia Disciplined Growth Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | The Fund outperformed the benchmark most notably in the industrials and communication services sectors. |
| • | The Fund delivered strong absolute performance in the information technology, industrials and communication services sectors. |
| • | Relative to the benchmark, the Fund’s largest contributors during the period included social media platform and Facebook parent Meta Platforms, Inc., ride share company Uber Technologies, Inc. and research and advisory company Gartner, Inc. The Fund sold its position in Gartner. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Growth securities, at times, may not perform as well as value securities or the stock market in general and may be out of favor with investors. Investing in derivatives is a specialized activity that involves special risks, which may result in significant losses. 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 Disciplined Growth 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 Disciplined Growth Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Disciplined Growth Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
At July 31, 2023, securities and/or
cash totaling $353,610 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 12 | 09/2023 | USD | 2,768,700 | 163,350 | — |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (c) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended July 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.408% | ||||||||
| 2,044,430 | 31,230,811 | (30,852,569) | (85) | 2,422,587 | (447) | 109,437 | 2,423,557 | |
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
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 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 July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 25,285,964 | — | — | 25,285,964 |
| Consumer Discretionary | 34,112,010 | — | — | 34,112,010 |
| Consumer Staples | 8,963,202 | — | — | 8,963,202 |
| Energy | 551,028 | — | — | 551,028 |
| Financials | 13,011,928 | — | — | 13,011,928 |
| Health Care | 24,275,051 | — | — | 24,275,051 |
| Industrials | 13,976,140 | — | — | 13,976,140 |
| Information Technology | 95,640,981 | — | — | 95,640,981 |
| Materials | 2,313,844 | — | — | 2,313,844 |
| Real Estate | 1,938,209 | — | — | 1,938,209 |
| Total Common Stocks | 220,068,357 | — | — | 220,068,357 |
| Money Market Funds | 2,422,587 | — | — | 2,422,587 |
| Total Investments in Securities | 222,490,944 | — | — | 222,490,944 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 163,350 | — | — | 163,350 |
| Total | 222,654,294 | — | — | 222,654,294 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 11 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $115,530,531) | $220,068,357 |
| Affiliated issuers (cost $2,422,399) | 2,422,587 |
| Receivable for: | |
| Capital shares sold | 231,812 |
| Dividends | 124,397 |
| Variation margin for futures contracts | 4,800 |
| Expense reimbursement due from Investment Manager | 1,618 |
| Prepaid expenses | 8,319 |
| Total assets | 222,861,890 |
| Liabilities | |
| Payable for: | |
| Capital shares redeemed | 185,012 |
| Management services fees | 13,704 |
| Distribution and/or service fees | 3,547 |
| Transfer agent fees | 14,553 |
| Trustees’ fees | 92,293 |
| Other expenses | 24,308 |
| Total liabilities | 333,417 |
| Net assets applicable to outstanding capital stock | $222,528,473 |
| Represented by | |
| Paid in capital | 109,800,653 |
| Total distributable earnings (loss) | 112,727,820 |
| Total - representing net assets applicable to outstanding capital stock | $222,528,473 |
| Class A | |
| Net assets | $138,893,767 |
| Shares outstanding | 14,878,063 |
| Net asset value per share | $9.34 |
| 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) | $9.91 |
| Advisor Class | |
| Net assets | $4,571,090 |
| Shares outstanding | 479,544 |
| Net asset value per share | $9.53 |
| Class C | |
| Net assets | $8,089,243 |
| Shares outstanding | 988,494 |
| Net asset value per share | $8.18 |
| Institutional Class | |
| Net assets | $41,401,833 |
| Shares outstanding | 4,316,179 |
| Net asset value per share | $9.59 |
| Institutional 2 Class | |
| Net assets | $3,412,979 |
| Shares outstanding | 334,219 |
| Net asset value per share | $10.21 |
| Institutional 3 Class | |
| Net assets | $25,372,444 |
| Shares outstanding | 2,596,310 |
| Net asset value per share | $9.77 |
| Class R | |
| Net assets | $787,117 |
| Shares outstanding | 85,558 |
| Net asset value per share | $9.20 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,793,612 |
| Dividends — affiliated issuers | 109,437 |
| Total income | 1,903,049 |
| Expenses: | |
| Management services fees | 1,459,451 |
| Distribution and/or service fees | |
| Class A | 297,785 |
| Class C | 86,751 |
| Class R | 2,738 |
| Transfer agent fees | |
| Class A | 110,633 |
| Advisor Class | 4,473 |
| Class C | 8,080 |
| Institutional Class | 34,619 |
| Institutional 2 Class | 2,099 |
| Institutional 3 Class | 1,641 |
| Class R | 508 |
| Trustees’ fees | 28,413 |
| Custodian fees | 9,828 |
| Printing and postage fees | 27,520 |
| Registration fees | 108,105 |
| Accounting services fees | 30,090 |
| Legal fees | 15,107 |
| Interest on collateral | 34 |
| Compensation of chief compliance officer | 34 |
| Other | 14,692 |
| Total expenses | 2,242,601 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (277,568) |
| Expense reduction | (60) |
| Total net expenses | 1,964,973 |
| Net investment loss | (61,924) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 15,016,578 |
| Investments — affiliated issuers | (447) |
| Futures contracts | 312,710 |
| Net realized gain | 15,328,841 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 14,675,045 |
| Investments — affiliated issuers | (85) |
| Futures contracts | 13,813 |
| Net change in unrealized appreciation (depreciation) | 14,688,773 |
| Net realized and unrealized gain | 30,017,614 |
| Net increase in net assets resulting from operations | $29,955,690 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 13 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment loss | $(61,924) | $(263,147) |
| Net realized gain | 15,328,841 | 28,353,140 |
| Net change in unrealized appreciation (depreciation) | 14,688,773 | (46,191,615) |
| Net increase (decrease) in net assets resulting from operations | 29,955,690 | (18,101,622) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (11,920,336) | (35,792,442) |
| Advisor Class | (613,286) | (1,675,194) |
| Class C | (1,081,363) | (3,549,059) |
| Institutional Class | (3,507,339) | (12,561,236) |
| Institutional 2 Class | (320,667) | (1,048,782) |
| Institutional 3 Class | (1,979,187) | (4,245,829) |
| Class R | (53,421) | (136,943) |
| Total distributions to shareholders | (19,475,599) | (59,009,485) |
| Decrease in net assets from capital stock activity | (5,955,869) | (16,176,118) |
| Total increase (decrease) in net assets | 4,524,222 | (93,287,225) |
| Net assets at beginning of year | 218,004,251 | 311,291,476 |
| Net assets at end of year | $222,528,473 | $218,004,251 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 2,317,156 | 18,603,004 | 1,225,449 | 12,292,712 |
| Distributions reinvested | 1,604,074 | 11,661,622 | 3,290,428 | 34,845,634 |
| Shares redeemed | (3,584,241) | (28,449,326) | (3,659,508) | (37,078,655) |
| Net increase | 336,989 | 1,815,300 | 856,369 | 10,059,691 |
| Advisor Class | ||||
| Shares sold | 66,552 | 534,522 | 10,394 | 117,496 |
| Distributions reinvested | 82,614 | 612,168 | 154,551 | 1,661,427 |
| Shares redeemed | (398,865) | (3,013,768) | (154,817) | (1,859,784) |
| Net increase (decrease) | (249,699) | (1,867,078) | 10,128 | (80,861) |
| Class C | ||||
| Shares sold | 196,293 | 1,414,259 | 113,558 | 1,016,098 |
| Distributions reinvested | 167,405 | 1,071,391 | 365,385 | 3,485,771 |
| Shares redeemed | (733,925) | (5,130,601) | (582,934) | (5,491,816) |
| Net decrease | (370,227) | (2,644,951) | (103,991) | (989,947) |
| Institutional Class | ||||
| Shares sold | 1,176,744 | 9,787,972 | 865,114 | 9,134,399 |
| Distributions reinvested | 467,706 | 3,489,088 | 1,042,468 | 11,269,073 |
| Shares redeemed | (2,362,312) | (19,436,340) | (1,606,135) | (16,575,618) |
| Net increase (decrease) | (717,862) | (6,159,280) | 301,447 | 3,827,854 |
| Institutional 2 Class | ||||
| Shares sold | 77,294 | 670,699 | 72,787 | 833,524 |
| Distributions reinvested | 40,386 | 320,667 | 91,757 | 1,048,782 |
| Shares redeemed | (168,412) | (1,405,786) | (152,775) | (1,546,711) |
| Net increase (decrease) | (50,732) | (414,420) | 11,769 | 335,595 |
| Institutional 3 Class | ||||
| Shares sold | 691,348 | 5,816,645 | 780,269 | 8,054,407 |
| Distributions reinvested | 259,629 | 1,970,581 | 384,995 | 4,227,243 |
| Shares redeemed | (549,045) | (4,666,686) | (3,143,120) | (41,753,343) |
| Net increase (decrease) | 401,932 | 3,120,540 | (1,977,856) | (29,471,693) |
| Class R | ||||
| Shares sold | 19,206 | 167,598 | 10,024 | 99,630 |
| Distributions reinvested | 7,413 | 53,154 | 12,962 | 136,105 |
| Shares redeemed | (3,324) | (26,732) | (9,335) | (92,492) |
| Net increase | 23,295 | 194,020 | 13,651 | 143,243 |
| Total net decrease | (626,304) | (5,955,869) | (888,483) | (16,176,118) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Growth 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 (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 7/31/2023 | $8.93 | (0.01) | 1.29 | 1.28 | — | (0.87) | (0.87) |
| Year Ended 7/31/2022 | $12.30 | (0.02) | (0.61) | (0.63) | — | (2.74) | (2.74) |
| Year Ended 7/31/2021 | $10.34 | (0.01) | 3.29 | 3.28 | (0.00)(e) | (1.32) | (1.32) |
| Year Ended 7/31/2020 | $9.24 | 0.01 | 1.83 | 1.84 | (0.04) | (0.70) | (0.74) |
| Year Ended 7/31/2019 | $10.11 | 0.03 | 0.31 | 0.34 | — | (1.21) | (1.21) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $9.08 | 0.01 | 1.31 | 1.32 | — | (0.87) | (0.87) |
| Year Ended 7/31/2022 | $12.45 | 0.01 | (0.63) | (0.62) | — | (2.75) | (2.75) |
| Year Ended 7/31/2021 | $10.44 | 0.02 | 3.33 | 3.35 | (0.02) | (1.32) | (1.34) |
| Year Ended 7/31/2020 | $9.32 | 0.04 | 1.84 | 1.88 | (0.06) | (0.70) | (0.76) |
| Year Ended 7/31/2019 | $10.18 | 0.06 | 0.30 | 0.36 | (0.01) | (1.21) | (1.22) |
| Class C | |||||||
| Year Ended 7/31/2023 | $8.01 | (0.06) | 1.10 | 1.04 | — | (0.87) | (0.87) |
| Year Ended 7/31/2022 | $11.32 | (0.09) | (0.52) | (0.61) | — | (2.70) | (2.70) |
| Year Ended 7/31/2021 | $9.67 | (0.09) | 3.06 | 2.97 | — | (1.32) | (1.32) |
| Year Ended 7/31/2020 | $8.71 | (0.05) | 1.71 | 1.66 | — | (0.70) | (0.70) |
| Year Ended 7/31/2019 | $9.67 | (0.03) | 0.28 | 0.25 | — | (1.21) | (1.21) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $9.13 | 0.01 | 1.32 | 1.33 | — | (0.87) | (0.87) |
| Year Ended 7/31/2022 | $12.50 | 0.01 | (0.63) | (0.62) | — | (2.75) | (2.75) |
| Year Ended 7/31/2021 | $10.48 | 0.02 | 3.34 | 3.36 | (0.02) | (1.32) | (1.34) |
| Year Ended 7/31/2020 | $9.36 | 0.04 | 1.84 | 1.88 | (0.06) | (0.70) | (0.76) |
| Year Ended 7/31/2019 | $10.21 | 0.06 | 0.31 | 0.37 | (0.01) | (1.21) | (1.22) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $9.66 | 0.02 | 1.40 | 1.42 | — | (0.87) | (0.87) |
| Year Ended 7/31/2022 | $13.08 | 0.01 | (0.68) | (0.67) | — | (2.75) | (2.75) |
| Year Ended 7/31/2021 | $10.91 | 0.02 | 3.50 | 3.52 | (0.03) | (1.32) | (1.35) |
| Year Ended 7/31/2020 | $9.71 | 0.05 | 1.92 | 1.97 | (0.07) | (0.70) | (0.77) |
| Year Ended 7/31/2019 | $10.55 | 0.07 | 0.32 | 0.39 | (0.02) | (1.21) | (1.23) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Disciplined Growth 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 7/31/2023 | $9.34 | 17.08% | 1.21%(c) | 1.07%(c),(d) | (0.09%) | 71% | $138,894 |
| Year Ended 7/31/2022 | $8.93 | (8.64%) | 1.17%(c) | 1.07%(c),(d) | (0.16%) | 71% | $129,906 |
| Year Ended 7/31/2021 | $12.30 | 34.51% | 1.17%(c) | 1.10%(c),(d) | (0.09%) | 87% | $168,331 |
| Year Ended 7/31/2020 | $10.34 | 21.22% | 1.17% | 1.16% | 0.16% | 78% | $135,119 |
| Year Ended 7/31/2019 | $9.24 | 4.98% | 1.17% | 1.17% | 0.37% | 78% | $129,678 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $9.53 | 17.25% | 0.96%(c) | 0.82%(c),(d) | 0.17% | 71% | $4,571 |
| Year Ended 7/31/2022 | $9.08 | (8.42%) | 0.92%(c) | 0.82%(c),(d) | 0.09% | 71% | $6,624 |
| Year Ended 7/31/2021 | $12.45 | 34.98% | 0.92%(c) | 0.85%(c),(d) | 0.16% | 87% | $8,951 |
| Year Ended 7/31/2020 | $10.44 | 21.56% | 0.92% | 0.91% | 0.41% | 78% | $8,198 |
| Year Ended 7/31/2019 | $9.32 | 5.17% | 0.92% | 0.92% | 0.62% | 78% | $8,471 |
| Class C | |||||||
| Year Ended 7/31/2023 | $8.18 | 15.98% | 1.96%(c) | 1.82%(c),(d) | (0.84%) | 71% | $8,089 |
| Year Ended 7/31/2022 | $8.01 | (9.25%) | 1.92%(c) | 1.82%(c),(d) | (0.91%) | 71% | $10,877 |
| Year Ended 7/31/2021 | $11.32 | 33.62% | 1.92%(c) | 1.85%(c),(d) | (0.84%) | 87% | $16,557 |
| Year Ended 7/31/2020 | $9.67 | 20.29% | 1.92% | 1.91% | (0.59%) | 78% | $15,962 |
| Year Ended 7/31/2019 | $8.71 | 4.19% | 1.92% | 1.92% | (0.38%) | 78% | $17,964 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $9.59 | 17.26% | 0.96%(c) | 0.82%(c),(d) | 0.16% | 71% | $41,402 |
| Year Ended 7/31/2022 | $9.13 | (8.38%) | 0.92%(c) | 0.82%(c),(d) | 0.09% | 71% | $45,968 |
| Year Ended 7/31/2021 | $12.50 | 34.93% | 0.92%(c) | 0.85%(c),(d) | 0.16% | 87% | $59,164 |
| Year Ended 7/31/2020 | $10.48 | 21.46% | 0.92% | 0.91% | 0.42% | 78% | $66,065 |
| Year Ended 7/31/2019 | $9.36 | 5.26% | 0.92% | 0.92% | 0.61% | 78% | $86,537 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $10.21 | 17.25% | 0.93%(c) | 0.80%(c) | 0.18% | 71% | $3,413 |
| Year Ended 7/31/2022 | $9.66 | (8.38%) | 0.90%(c) | 0.80%(c) | 0.11% | 71% | $3,718 |
| Year Ended 7/31/2021 | $13.08 | 35.00% | 0.89%(c) | 0.82%(c) | 0.18% | 87% | $4,879 |
| Year Ended 7/31/2020 | $10.91 | 21.59% | 0.86% | 0.85% | 0.51% | 78% | $4,611 |
| Year Ended 7/31/2019 | $9.71 | 5.27% | 0.86% | 0.85% | 0.70% | 78% | $10,235 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 17 |
Financial Highlights (continued)
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Institutional 3 Class | |||||||
| Year Ended 7/31/2023 | $9.28 | 0.02 | 1.34 | 1.36 | — | (0.87) | (0.87) |
| Year Ended 7/31/2022 | $12.66 | 0.02 | (0.65) | (0.63) | — | (2.75) | (2.75) |
| Year Ended 7/31/2021 | $10.60 | 0.02 | 3.39 | 3.41 | (0.03) | (1.32) | (1.35) |
| Year Ended 7/31/2020 | $9.46 | 0.05 | 1.86 | 1.91 | (0.07) | (0.70) | (0.77) |
| Year Ended 7/31/2019 | $10.31 | 0.07 | 0.31 | 0.38 | (0.02) | (1.21) | (1.23) |
| Class R | |||||||
| Year Ended 7/31/2023 | $8.84 | (0.03) | 1.26 | 1.23 | — | (0.87) | (0.87) |
| Year Ended 7/31/2022 | $12.21 | (0.04) | (0.61) | (0.65) | — | (2.72) | (2.72) |
| Year Ended 7/31/2021 | $10.34 | (0.04) | 3.27 | 3.23 | (0.04) | (1.32) | (1.36) |
| Year Ended 7/31/2020 | $9.24 | (0.01) | 1.83 | 1.82 | (0.02) | (0.70) | (0.72) |
| Year Ended 7/31/2019 | $10.13 | 0.01 | 0.31 | 0.32 | — | (1.21) | (1.21) |
| 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 which is less than 0.01%. |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Disciplined Growth 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 7/31/2023 | $9.77 | 17.32% | 0.88%(c) | 0.74%(c) | 0.24% | 71% | $25,372 |
| Year Ended 7/31/2022 | $9.28 | (8.32%) | 0.83%(c) | 0.74%(c) | 0.13% | 71% | $20,361 |
| Year Ended 7/31/2021 | $12.66 | 35.05% | 0.82%(c) | 0.77%(c) | 0.20% | 87% | $52,816 |
| Year Ended 7/31/2020 | $10.60 | 21.58% | 0.81% | 0.79% | 0.53% | 78% | $206,590 |
| Year Ended 7/31/2019 | $9.46 | 5.35% | 0.80% | 0.80% | 0.75% | 78% | $213,693 |
| Class R | |||||||
| Year Ended 7/31/2023 | $9.20 | 16.68% | 1.46%(c) | 1.32%(c),(d) | (0.35%) | 71% | $787 |
| Year Ended 7/31/2022 | $8.84 | (8.83%) | 1.42%(c) | 1.32%(c),(d) | (0.40%) | 71% | $550 |
| Year Ended 7/31/2021 | $12.21 | 34.18% | 1.42%(c) | 1.35%(c),(d) | (0.34%) | 87% | $594 |
| Year Ended 7/31/2020 | $10.34 | 20.93% | 1.42% | 1.41% | (0.07%) | 78% | $651 |
| Year Ended 7/31/2019 | $9.24 | 4.74% | 1.42% | 1.42% | 0.12% | 78% | $1,197 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 19 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Disciplined Growth 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 Disciplined Growth Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 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 Disciplined Growth Fund | Annual Report 2023 | 21 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 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.
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.
| 22 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at July 31, 2023:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 163,350* |
| * | 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 July 31, 2023:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended July 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 2,787,175 |
| * | Based on the ending quarterly outstanding amounts for the year ended July 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.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
July 31, 2023
July 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.
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 amendments.
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
| 24 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 0.75% to 0.55% as the Fund’s net assets increase. The effective management services fee rate for the year ended July 31,
2023 was 0.75% 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 "Trustees’ fees" 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 July 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 Disciplined Growth Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 Statement of Operations. For the year ended July 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 $43,000 for Class C shares. This amount is based on the most recent information available as of
June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 176,241 |
| Class C | — | 1.00(b) | 778 |
| (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:
| 26 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, derivative investments, late-year ordinary losses, trustees’ deferred compensation, net operating loss reclassification,
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:
| Excess of distributions over net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 110,454 | (258,789) | 148,335 |
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 July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| — | 19,475,599 | 19,475,599 | 24,368,739 | 34,640,747 | 59,009,486 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized appreciation ($) |
| — | 8,607,015 | — | 104,246,018 |
At July 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) ($) | Net unrealized appreciation ($) |
| 118,408,276 | 105,903,651 | (1,657,633) | 104,246,018 |
| Columbia Disciplined Growth Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 July 31, 2023, the Fund will elect to treat the following late-year ordinary losses and post-October capital losses as arising on August 1, 2023.
| Late year ordinary losses ($) | Post-October capital losses ($) |
| 33,421 | — |
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 $137,815,320 and $163,210,341, respectively, for the year ended July 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 July 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
| 28 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 July 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 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.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Shareholder concentration risk
At July 31, 2023, affiliated
shareholders of record owned 56.6% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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 provide services to
the Fund.
| 30 | Columbia Disciplined Growth 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 Disciplined Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Disciplined Growth Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as
of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended July 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 July 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 July 31,
2023 and the financial highlights for each of the five years in the period ended July 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 July 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Disciplined Growth Fund | Annual Report 2023 | 31 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Capital gain dividend | |
| $9,389,174 |
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 | 173 | 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 Disciplined Growth 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 Disciplined Growth 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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| 34 | Columbia Disciplined Growth 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 | 171 | 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. | 173 | 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 | 171 | 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 Disciplined Growth 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 | 173 | 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 | 173 | 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 Disciplined Growth 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 Disciplined Growth 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 Disciplined Growth Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Disciplined Growth Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and
other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for
the Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work,
deliberations and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in
determining whether to continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that
they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors
considered included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Disciplined Growth Fund | Annual Report 2023 | 39 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of
services provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the
Investment Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the
Management Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of
the Investment Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance
services provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed that the Fund’s
performance for certain periods ranked above median based on information provided by Broadridge.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund
and the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other
things, data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the
Fund’s contribution to the Investment Manager’s profitability.
| 40 | Columbia Disciplined Growth Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board
considered that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also
took into account the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial
products to Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive
compensation to its personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall
conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that
management fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed.The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule
that allow opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Disciplined Growth 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/
ANN178_07_N01_(09/23)
Columbia
Disciplined Core 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 Disciplined Core 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 Disciplined Core
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Raghavendran Sivaraman, Ph.D., CFA
Co-Portfolio Manager
Managed Fund since 2019
Oleg Nusinzon, CFA
Co-Portfolio Manager
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 Disciplined Core Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Disciplined Core 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 Disciplined Core Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that ended
July 31, 2023, Class A shares of Columbia Disciplined Core Fund returned 12.41% excluding sales charges. The Fund’s benchmark, the S&P 500 Index, returned 13.02% for the same time period.
Market overview
For the 12 months ended July 31,
2023, the broad U.S. equity market, as measured by the S&P 500 Index, delivered a gain of 13.02%. The period was marked by continued concerns about a future economic slowdown, amplified by a series of rate hikes
by the U.S. Federal Reserve (Fed) that tapered from aggressive to more measured by period-end to tame stubborn inflation. Momentum picked up as the period progressed as better-than-feared earnings drove equity gains.
The period, however, was far from smooth.
In March, the failure of a pair of
U.S. banks and the collapse of European giant Credit Suisse led to fears of a financial crisis. In response, the Fed created a lending facility to support bank liquidity while the market began to price in multiple
cuts in the federal funds target rate over the second half of 2023. At its March 2023 meeting the Fed raised the federal funds target rate by another quarter-point to a range of 4.75% to 5.0%. The rate hike was
generally welcomed by investors as a signal that the Fed viewed the financial system as remaining on stable footing.
Inflation continued to decline as
the period progressed. Through July 2023, the rate of year-over-year U.S. inflation had decelerated to 3.2%, a meaningful reduction from the four decade high of 9.1% in June 2022, though still higher than the
Fed’s 2% inflation target. Nonetheless, with the economy displaying surprising resilience and employment remaining historically robust, the Fed implemented additional 25 basis point increases at its early May
and late July meetings, bringing the federal funds target rate to the 5.25% to 5.50% range.
Sentiment remained quite positive
through the latter months of the period, as the Fed slowed its pace of rate hikes in response to cooling inflation. Investors were further encouraged by the fact that economic growth and corporate earnings —
while slowing — did not decline to the extent that the markets had anticipated in late 2022. These factors combined to fuel an impressive gain for equities, but the majority of the positive return was generated
by a small group of mega-cap technology-related stocks. Much of the relative strength in this area came from companies expected to benefit from the evolution of artificial intelligence (AI). The growth style strongly
outpaced value as a result, with returns of 17.31% and 8.28%, respectively, for the Russell 1000 Growth Index and the Russell 1000 Value Index. The small-cap Russell 2000 Index, which is less influenced by AI-related
trends and is more sensitive to concerns about the banking sector, returned 7.91% but was unable to keep pace with the rally in large caps.
We divide the metrics for our stock
selection model into three broad themes: quality, valuation, and catalyst. We then rank the securities within a sector/industry from “1” (most attractive) to “5” (least attractive) based upon
an aggregation of the metrics within these themes. We followed our portfolio construction process that allocates capital to the models’ ideas while integrating risk management. Changes in individual security
positions during the annual period were primarily the result of the Fund’s bottom-up stock selection process. While there were some changes in sector allocations over time, all changes were quite modest, as we
maintained our sector neutral investment approach.
The Fund’s notable
detractors during the period
| • | Within our stock selection model, stocks ranked high by our catalyst theme were out of favor during the annual period. |
| • | Health care was the area of largest detraction for the Fund during the period, both on an absolute basis and relative to its benchmark. The sector delivered negative performance for the Fund. |
| • | The Fund’s holdings in the real estate and utilities sectors delivered negative results for the Fund, though the Fund did outperform the benchmark in the utilities sector. |
| • | Relative to the benchmark, the Fund underperformed in the information technology, financials and materials sectors. |
| • | The top individual detractors from Fund performance versus the benchmark during the period included semiconductor company NVIDIA Corp. (due to an underweight position), pharmaceutical company Pfizer and financial services company State Street Corp. |
| Columbia Disciplined Core Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
The Fund’s notable
contributors during the period
| • | At the style level, stocks ranked high by our quality and valuation themes were in favor during the annual period. |
| • | The Fund’s holdings in the information technology, consumer discretionary, communication services, energy and industrials sector delivered strong absolute performance. The Fund outperformed its benchmark in all mentioned sectors with the exception of information technology. |
| • | The top individual contributors to Fund performance relative to the benchmark included social media platform and Facebook parent Meta Platforms, homebuilder PulteGroup, Inc. and software company Adobe Inc. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. 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.
| 6 | Columbia Disciplined Core 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 Disciplined Core Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Disciplined Core Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Disciplined Core Fund | Annual Report 2023 | 9 |
At July 31, 2023,
securities and/or cash totaling $7,054,320 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 333 | 09/2023 | USD | 76,831,425 | 4,255,773 | — |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (c) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Disciplined Core Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Notes to Portfolio of Investments (continued)
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended July 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.408% | ||||||||
| 24,692,126 | 478,531,556 | (435,407,164) | 4,938 | 67,821,456 | (9,515) | 2,260,047 | 67,848,595 | |
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 July 31, 2023:
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Core Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Health Care | 537,396,362 | — | — | 537,396,362 |
| Industrials | 348,494,249 | — | — | 348,494,249 |
| Information Technology | 1,205,995,688 | — | — | 1,205,995,688 |
| Materials | 116,166,290 | — | — | 116,166,290 |
| Real Estate | 99,874,277 | — | — | 99,874,277 |
| Utilities | 89,052,705 | — | — | 89,052,705 |
| Total Common Stocks | 4,233,020,372 | — | — | 4,233,020,372 |
| Money Market Funds | 67,821,456 | — | — | 67,821,456 |
| Total Investments in Securities | 4,300,841,828 | — | — | 4,300,841,828 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 4,255,773 | — | — | 4,255,773 |
| Total | 4,305,097,601 | — | — | 4,305,097,601 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Disciplined Core Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,909,885,346) | $4,233,020,372 |
| Affiliated issuers (cost $67,816,183) | 67,821,456 |
| Receivable for: | |
| Investments sold | 42,001,087 |
| Capital shares sold | 175,444 |
| Dividends | 4,836,950 |
| Variation margin for futures contracts | 133,200 |
| Prepaid expenses | 35,942 |
| Total assets | 4,348,024,451 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 41,508,315 |
| Capital shares redeemed | 2,839,514 |
| Management services fees | 222,130 |
| Distribution and/or service fees | 81,698 |
| Transfer agent fees | 243,686 |
| Trustees’ fees | 399,295 |
| Other expenses | 103,307 |
| Total liabilities | 45,397,945 |
| Net assets applicable to outstanding capital stock | $4,302,626,506 |
| Represented by | |
| Paid in capital | 2,873,941,152 |
| Total distributable earnings (loss) | 1,428,685,354 |
| Total - representing net assets applicable to outstanding capital stock | $4,302,626,506 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Core Fund | Annual Report 2023 | 13 |
Statement of Assets and Liabilities (continued)
July 31, 2023
July 31, 2023
| Class A | |
| Net assets | $3,874,178,089 |
| Shares outstanding | 293,941,527 |
| Net asset value per share | $13.18 |
| 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) | $13.98 |
| Advisor Class | |
| Net assets | $13,148,204 |
| Shares outstanding | 981,359 |
| Net asset value per share | $13.40 |
| Class C | |
| Net assets | $25,952,005 |
| Shares outstanding | 2,039,959 |
| Net asset value per share | $12.72 |
| Institutional Class | |
| Net assets | $299,863,844 |
| Shares outstanding | 22,527,862 |
| Net asset value per share | $13.31 |
| Institutional 2 Class | |
| Net assets | $38,426,342 |
| Shares outstanding | 2,902,982 |
| Net asset value per share | $13.24 |
| Institutional 3 Class | |
| Net assets | $49,195,715 |
| Shares outstanding | 3,690,467 |
| Net asset value per share | $13.33 |
| Class R | |
| Net assets | $1,862,307 |
| Shares outstanding | 141,650 |
| Net asset value per share | $13.15 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Disciplined Core Fund | Annual Report 2023 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $66,885,506 |
| Dividends — affiliated issuers | 2,260,047 |
| Total income | 69,145,553 |
| Expenses: | |
| Management services fees | 25,348,672 |
| Distribution and/or service fees | |
| Class A | 8,987,814 |
| Class C | 260,646 |
| Class R | 9,863 |
| Transfer agent fees | |
| Class A | 2,548,475 |
| Advisor Class | 8,612 |
| Class C | 18,496 |
| Institutional Class | 200,609 |
| Institutional 2 Class | 19,319 |
| Institutional 3 Class | 3,681 |
| Class R | 1,400 |
| Trustees’ fees | 128,900 |
| Custodian fees | 26,812 |
| Printing and postage fees | 210,549 |
| Registration fees | 142,184 |
| Accounting services fees | 30,090 |
| Legal fees | 66,887 |
| Interest on collateral | 1,807 |
| Compensation of chief compliance officer | 749 |
| Other | 71,710 |
| Total expenses | 38,087,275 |
| Expense reduction | (1,260) |
| Total net expenses | 38,086,015 |
| Net investment income | 31,059,538 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 126,455,156 |
| Investments — affiliated issuers | (9,515) |
| Futures contracts | 4,198,535 |
| Net realized gain | 130,644,176 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 305,241,450 |
| Investments — affiliated issuers | 4,938 |
| Futures contracts | 3,289,060 |
| Net change in unrealized appreciation (depreciation) | 308,535,448 |
| Net realized and unrealized gain | 439,179,624 |
| Net increase in net assets resulting from operations | $470,239,162 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Disciplined Core Fund | Annual Report 2023 | 15 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $31,059,538 | $30,775,872 |
| Net realized gain | 130,644,176 | 403,055,604 |
| Net change in unrealized appreciation (depreciation) | 308,535,448 | (652,789,553) |
| Net increase (decrease) in net assets resulting from operations | 470,239,162 | (218,958,077) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (242,551,712) | (692,132,525) |
| Advisor Class | (737,867) | (2,863,254) |
| Class C | (1,679,126) | (6,031,632) |
| Institutional Class | (19,735,811) | (56,018,241) |
| Institutional 2 Class | (2,443,292) | (6,208,973) |
| Institutional 3 Class | (3,945,265) | (11,003,365) |
| Class R | (122,815) | (440,311) |
| Total distributions to shareholders | (271,215,888) | (774,698,301) |
| Increase (decrease) in net assets from capital stock activity | (141,838,629) | 332,266,138 |
| Total increase (decrease) in net assets | 57,184,645 | (661,390,240) |
| Net assets at beginning of year | 4,245,441,861 | 4,906,832,101 |
| Net assets at end of year | $4,302,626,506 | $4,245,441,861 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Disciplined Core Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 2,616,889 | 30,941,030 | 2,963,146 | 41,708,775 |
| Distributions reinvested | 21,323,200 | 239,672,770 | 48,587,824 | 684,116,562 |
| Shares redeemed | (31,295,522) | (369,858,259) | (30,290,069) | (422,979,498) |
| Net increase (decrease) | (7,355,433) | (99,244,459) | 21,260,901 | 302,845,839 |
| Advisor Class | ||||
| Shares sold | 176,902 | 2,115,424 | 146,587 | 2,083,803 |
| Distributions reinvested | 64,407 | 734,886 | 200,181 | 2,858,586 |
| Shares redeemed | (447,879) | (5,412,624) | (319,196) | (4,436,324) |
| Net increase (decrease) | (206,570) | (2,562,314) | 27,572 | 506,065 |
| Class C | ||||
| Shares sold | 296,287 | 3,408,151 | 360,511 | 5,002,715 |
| Distributions reinvested | 151,607 | 1,652,520 | 433,396 | 5,933,190 |
| Shares redeemed | (900,734) | (10,321,849) | (896,827) | (12,190,740) |
| Net decrease | (452,840) | (5,261,178) | (102,920) | (1,254,835) |
| Institutional Class | ||||
| Shares sold | 4,199,531 | 50,092,237 | 4,517,590 | 63,256,343 |
| Distributions reinvested | 1,690,884 | 19,157,715 | 3,817,819 | 54,174,850 |
| Shares redeemed | (7,790,036) | (92,993,358) | (6,166,310) | (87,020,755) |
| Net increase (decrease) | (1,899,621) | (23,743,406) | 2,169,099 | 30,410,438 |
| Institutional 2 Class | ||||
| Shares sold | 580,293 | 6,913,661 | 624,457 | 9,007,849 |
| Distributions reinvested | 213,471 | 2,405,812 | 431,796 | 6,096,959 |
| Shares redeemed | (654,017) | (7,673,186) | (1,137,842) | (16,860,871) |
| Net increase (decrease) | 139,747 | 1,646,287 | (81,589) | (1,756,063) |
| Institutional 3 Class | ||||
| Shares sold | 497,394 | 5,915,109 | 493,022 | 6,979,017 |
| Distributions reinvested | 341,312 | 3,870,474 | 762,919 | 10,841,083 |
| Shares redeemed | (1,807,460) | (21,686,404) | (1,129,567) | (16,510,747) |
| Net increase (decrease) | (968,754) | (11,900,821) | 126,374 | 1,309,353 |
| Class R | ||||
| Shares sold | 26,213 | 308,341 | 37,659 | 518,119 |
| Distributions reinvested | 10,824 | 121,557 | 30,011 | 422,248 |
| Shares redeemed | (97,082) | (1,202,636) | (52,786) | (735,026) |
| Net increase (decrease) | (60,045) | (772,738) | 14,884 | 205,341 |
| Total net increase (decrease) | (10,803,516) | (141,838,629) | 23,414,321 | 332,266,138 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Core 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 7/31/2023 | $12.59 | 0.09 | 1.33 | 1.42 | (0.09) | (0.74) | (0.83) |
| Year Ended 7/31/2022 | $15.64 | 0.09 | (0.60) | (0.51) | (0.12) | (2.42) | (2.54) |
| Year Ended 7/31/2021 | $12.09 | 0.12 | 4.07 | 4.19 | (0.13) | (0.51) | (0.64) |
| Year Ended 7/31/2020 | $12.26 | 0.14 | 0.90 | 1.04 | (0.15) | (1.06) | (1.21) |
| Year Ended 7/31/2019 | $12.76 | 0.14 | 0.27 | 0.41 | (0.11) | (0.80) | (0.91) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $12.78 | 0.12 | 1.36 | 1.48 | (0.12) | (0.74) | (0.86) |
| Year Ended 7/31/2022 | $15.84 | 0.13 | (0.62) | (0.49) | (0.15) | (2.42) | (2.57) |
| Year Ended 7/31/2021 | $12.24 | 0.16 | 4.11 | 4.27 | (0.16) | (0.51) | (0.67) |
| Year Ended 7/31/2020 | $12.40 | 0.17 | 0.91 | 1.08 | (0.18) | (1.06) | (1.24) |
| Year Ended 7/31/2019 | $12.89 | 0.17 | 0.28 | 0.45 | (0.14) | (0.80) | (0.94) |
| Class C | |||||||
| Year Ended 7/31/2023 | $12.18 | 0.00 | 1.28 | 1.28 | — | (0.74) | (0.74) |
| Year Ended 7/31/2022 | $15.20 | (0.02) | (0.58) | (0.60) | (0.00)(e) | (2.42) | (2.42) |
| Year Ended 7/31/2021 | $11.77 | 0.02 | 3.96 | 3.98 | (0.04) | (0.51) | (0.55) |
| Year Ended 7/31/2020 | $11.97 | 0.05 | 0.87 | 0.92 | (0.06) | (1.06) | (1.12) |
| Year Ended 7/31/2019 | $12.47 | 0.05 | 0.27 | 0.32 | (0.02) | (0.80) | (0.82) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $12.71 | 0.12 | 1.34 | 1.46 | (0.12) | (0.74) | (0.86) |
| Year Ended 7/31/2022 | $15.76 | 0.13 | (0.61) | (0.48) | (0.15) | (2.42) | (2.57) |
| Year Ended 7/31/2021 | $12.18 | 0.15 | 4.10 | 4.25 | (0.16) | (0.51) | (0.67) |
| Year Ended 7/31/2020 | $12.34 | 0.17 | 0.91 | 1.08 | (0.18) | (1.06) | (1.24) |
| Year Ended 7/31/2019 | $12.84 | 0.17 | 0.27 | 0.44 | (0.14) | (0.80) | (0.94) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $12.64 | 0.12 | 1.34 | 1.46 | (0.12) | (0.74) | (0.86) |
| Year Ended 7/31/2022 | $15.69 | 0.13 | (0.60) | (0.47) | (0.16) | (2.42) | (2.58) |
| Year Ended 7/31/2021 | $12.13 | 0.16 | 4.07 | 4.23 | (0.16) | (0.51) | (0.67) |
| Year Ended 7/31/2020 | $12.30 | 0.17 | 0.91 | 1.08 | (0.19) | (1.06) | (1.25) |
| Year Ended 7/31/2019 | $12.80 | 0.17 | 0.28 | 0.45 | (0.15) | (0.80) | (0.95) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Disciplined Core 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 7/31/2023 | $13.18 | 12.41% | 0.97%(c) | 0.97%(c),(d) | 0.76% | 50% | $3,874,178 |
| Year Ended 7/31/2022 | $12.59 | (5.00%) | 0.95%(c) | 0.95%(c),(d) | 0.64% | 48% | $3,792,747 |
| Year Ended 7/31/2021 | $15.64 | 35.98% | 0.97%(c) | 0.97%(c),(d) | 0.88% | 69% | $4,379,045 |
| Year Ended 7/31/2020 | $12.09 | 8.86% | 0.98% | 0.98%(d) | 1.18% | 65% | $3,530,283 |
| Year Ended 7/31/2019 | $12.26 | 4.01% | 0.98% | 0.98% | 1.16% | 75% | $3,602,298 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $13.40 | 12.77% | 0.72%(c) | 0.72%(c),(d) | 1.00% | 50% | $13,148 |
| Year Ended 7/31/2022 | $12.78 | (4.78%) | 0.70%(c) | 0.70%(c),(d) | 0.89% | 48% | $15,186 |
| Year Ended 7/31/2021 | $15.84 | 36.25% | 0.72%(c) | 0.72%(c),(d) | 1.13% | 69% | $18,382 |
| Year Ended 7/31/2020 | $12.24 | 9.11% | 0.73% | 0.73%(d) | 1.44% | 65% | $14,050 |
| Year Ended 7/31/2019 | $12.40 | 4.33% | 0.74% | 0.74% | 1.38% | 75% | $17,613 |
| Class C | |||||||
| Year Ended 7/31/2023 | $12.72 | 11.57% | 1.72%(c) | 1.72%(c),(d) | 0.01% | 50% | $25,952 |
| Year Ended 7/31/2022 | $12.18 | (5.69%) | 1.70%(c) | 1.70%(c),(d) | (0.11%) | 48% | $30,361 |
| Year Ended 7/31/2021 | $15.20 | 34.98% | 1.72%(c) | 1.72%(c),(d) | 0.13% | 69% | $39,464 |
| Year Ended 7/31/2020 | $11.77 | 8.00% | 1.73% | 1.73%(d) | 0.43% | 65% | $41,003 |
| Year Ended 7/31/2019 | $11.97 | 3.23% | 1.73% | 1.73% | 0.42% | 75% | $50,697 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $13.31 | 12.68% | 0.72%(c) | 0.72%(c),(d) | 1.01% | 50% | $299,864 |
| Year Ended 7/31/2022 | $12.71 | (4.73%) | 0.70%(c) | 0.70%(c),(d) | 0.89% | 48% | $310,399 |
| Year Ended 7/31/2021 | $15.76 | 36.26% | 0.72%(c) | 0.72%(c),(d) | 1.14% | 69% | $350,842 |
| Year Ended 7/31/2020 | $12.18 | 9.16% | 0.73% | 0.73%(d) | 1.43% | 65% | $437,928 |
| Year Ended 7/31/2019 | $12.34 | 4.26% | 0.74% | 0.74% | 1.42% | 75% | $493,840 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $13.24 | 12.76% | 0.71%(c) | 0.71%(c) | 1.02% | 50% | $38,426 |
| Year Ended 7/31/2022 | $12.64 | (4.74%) | 0.70%(c) | 0.70%(c) | 0.89% | 48% | $34,927 |
| Year Ended 7/31/2021 | $15.69 | 36.28% | 0.70%(c) | 0.70%(c) | 1.15% | 69% | $44,645 |
| Year Ended 7/31/2020 | $12.13 | 9.15% | 0.70% | 0.70% | 1.50% | 65% | $31,437 |
| Year Ended 7/31/2019 | $12.30 | 4.31% | 0.70% | 0.70% | 1.44% | 75% | $53,464 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Disciplined Core 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 7/31/2023 | $12.73 | 0.13 | 1.34 | 1.47 | (0.13) | (0.74) | (0.87) |
| Year Ended 7/31/2022 | $15.78 | 0.13 | (0.60) | (0.47) | (0.16) | (2.42) | (2.58) |
| Year Ended 7/31/2021 | $12.19 | 0.16 | 4.11 | 4.27 | (0.17) | (0.51) | (0.68) |
| Year Ended 7/31/2020 | $12.36 | 0.17 | 0.91 | 1.08 | (0.19) | (1.06) | (1.25) |
| Year Ended 7/31/2019 | $12.85 | 0.18 | 0.28 | 0.46 | (0.15) | (0.80) | (0.95) |
| Class R | |||||||
| Year Ended 7/31/2023 | $12.56 | 0.06 | 1.33 | 1.39 | (0.06) | (0.74) | (0.80) |
| Year Ended 7/31/2022 | $15.60 | 0.05 | (0.59) | (0.54) | (0.08) | (2.42) | (2.50) |
| Year Ended 7/31/2021 | $12.07 | 0.08 | 4.06 | 4.14 | (0.10) | (0.51) | (0.61) |
| Year Ended 7/31/2020 | $12.24 | 0.11 | 0.90 | 1.01 | (0.12) | (1.06) | (1.18) |
| Year Ended 7/31/2019 | $12.74 | 0.11 | 0.27 | 0.38 | (0.08) | (0.80) | (0.88) |
| 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 which is less than 0.01%. |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Disciplined Core 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 7/31/2023 | $13.33 | 12.74% | 0.66%(c) | 0.66%(c) | 1.08% | 50% | $49,196 |
| Year Ended 7/31/2022 | $12.73 | (4.66%) | 0.64%(c) | 0.64%(c) | 0.95% | 48% | $59,290 |
| Year Ended 7/31/2021 | $15.78 | 36.41% | 0.64%(c) | 0.64%(c) | 1.20% | 69% | $71,539 |
| Year Ended 7/31/2020 | $12.19 | 9.15% | 0.65% | 0.65% | 1.50% | 65% | $380,482 |
| Year Ended 7/31/2019 | $12.36 | 4.43% | 0.65% | 0.65% | 1.50% | 75% | $280,889 |
| Class R | |||||||
| Year Ended 7/31/2023 | $13.15 | 12.14% | 1.22%(c) | 1.22%(c),(d) | 0.50% | 50% | $1,862 |
| Year Ended 7/31/2022 | $12.56 | (5.19%) | 1.20%(c) | 1.20%(c),(d) | 0.39% | 48% | $2,532 |
| Year Ended 7/31/2021 | $15.60 | 35.56% | 1.22%(c) | 1.22%(c),(d) | 0.63% | 69% | $2,915 |
| Year Ended 7/31/2020 | $12.07 | 8.62% | 1.23% | 1.23%(d) | 0.94% | 65% | $2,804 |
| Year Ended 7/31/2019 | $12.24 | 3.73% | 1.23% | 1.23% | 0.92% | 75% | $4,398 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Disciplined Core Fund | Annual Report 2023 | 21 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Disciplined Core 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 Disciplined Core Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 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 Disciplined Core Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 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.
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.
| 24 | Columbia Disciplined Core Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at July 31, 2023:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 4,255,773* |
| * | 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 July 31, 2023:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended July 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 62,972,325 |
| * | Based on the ending quarterly outstanding amounts for the year ended July 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.
| Columbia Disciplined Core Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 amendments.
| 26 | Columbia Disciplined Core Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 0.75% to 0.55% as the Fund’s net assets increase. The effective management services fee rate for the year ended July 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 "Trustees’ fees" 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 Disciplined Core Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
For the year ended July 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 | 0.07 |
| Advisor Class | 0.07 |
| Class C | 0.07 |
| Institutional Class | 0.07 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.01 |
| Class R | 0.07 |
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 July 31, 2023, these minimum account balance fees reduced total expenses of
the Fund by $1,260.
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 $1,065,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 462,019 |
| Class C | — | 1.00(b) | 1,629 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
| 28 | Columbia Disciplined Core Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, derivative investments 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 following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| — | (1) | 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.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 28,646,246 | 242,569,642 | 271,215,888 | 303,618,480 | 471,079,821 | 774,698,301 |
| Columbia Disciplined Core Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized appreciation ($) |
| 17,521,246 | 97,569,360 | — | 1,313,991,831 |
At July 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) ($) | Net unrealized appreciation ($) |
| 2,991,105,770 | 1,382,754,303 | (68,762,472) | 1,313,991,831 |
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 $1,989,024,805 and $2,403,545,393, respectively, for the year ended July 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 July 31, 2023.
| 30 | Columbia Disciplined Core Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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 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
| Columbia Disciplined Core Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 31, 2023, affiliated
shareholders of record owned 80.7% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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 provide services to
the Fund.
| 32 | Columbia Disciplined Core 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 Disciplined Core Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Disciplined Core Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as of
July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended July 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 July 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 July 31, 2023 and
the financial highlights for each of the five years in the period ended July 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 July 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Disciplined Core Fund | Annual Report 2023 | 33 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 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 |
| 92.68% | 92.19% | 1.57% | $103,878,866 |
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).
| 34 | Columbia Disciplined Core 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 | 173 | 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 | 173 | 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 | 173 | 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 Disciplined Core 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 |
| 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 | 173 | 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 | 171 | 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 | 171 | 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 | 173 | 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 | 173 | Trustee, Catholic Schools Foundation, since 2004 |
| 36 | Columbia Disciplined Core 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 | 173 | 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 | 171 | 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 | 171 | 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. | 173 | 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 Disciplined Core 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 |
| 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 | 171 | 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 | 173 | 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 | 173 | 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 |
| 38 | Columbia Disciplined Core 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 Disciplined Core Fund | Annual Report 2023 | 39 |
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.
| 40 | Columbia Disciplined Core Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Disciplined Core Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and
other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Disciplined Core Fund | Annual Report 2023 | 41 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed that Fund performance was well
within the range of that of its peers.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the Investment Manager’s profitability.
| 42 | Columbia Disciplined Core Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Disciplined Core 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/
ANN177_07_N01_(09/23)
Columbia Income
Opportunities Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 39 | |
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| 47 |
If you elect to receive the
shareholder report for Columbia Income 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 Income Opportunities
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with a high total return through current income and capital appreciation.
Portfolio management
Brian Lavin, CFA
Lead Portfolio Manager
Managed Fund since 2003
Daniel DeYoung
Portfolio Manager
Managed Fund since 2019
| Columbia Income Opportunities Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Income 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 Income Opportunities Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended July 31, 2023, Class A shares of Columbia Income Opportunities Fund returned 3.05% excluding sales charges. The Fund’s benchmark, the unmanaged ICE BofA BB-B US Cash Pay High Yield Constrained Index,
returned 3.56% for the same period.
Market Overview
The positive return for
high-yield corporate bonds for the 12 months ended July 31, 2023 was entirely driven by coupon income as prices declined modestly. Inflation data, U.S. Federal Reserve (Fed) interest rate increases and accompanying
commentary, a regional banking crisis, and a congressional standoff on the U.S. debt ceiling all contributed to market volatility. Persistently high inflation data drove expectations for accelerated Fed policy
tightening, and higher U.S. Treasury rates were the primary headwind to total returns for fixed-income assets generally. The yield on the 10-year Treasury ended the period at 3.97%, an increase of 130 basis points
relative to its starting point of 2.67% 12 months earlier. (A basis point is 1/100 of a percent.)
High-yield corporate bond spreads
traded in a relatively wide range as investors speculated as to whether the Fed would be able to rein in inflation without throwing the economy into recession. However, spreads ultimately narrowed for the 12 months as
investor concerns around slowing growth, the ability of corporations and consumers to withstand the Fed’s ongoing tightening, the banking crisis, and debt ceiling negotiations subsided.
The broader high-yield corporate
bond market as gauged by the ICE BofA US Cash Pay High Yield Constrained Index returned 4.16% over the twelve months ended July 31, 2023. Higher quality issuers, such as those in the Fund’s benchmark,
underperformed, with BB, B and CCC-rated issues returning 2.58%, 4.86% and 8.66%, respectively, as credit sentiment strengthened over the period.
The Fund’s most notable
detractors
| • | Detractors from relative performance included security selection within cable & satellite TV and health services, as well as an overweight allocation to electric utility-generation. |
| • | Selection within cable & satellite TV lagged primarily due to an overweight allocation to Dish Network Corp. |
| • | Within health services, a mix of overweight and underweight allocations across several issuers including Radiology Partners, DaVita, Inc., Syneos Health, Inc. and Owens & Minor, Inc. weighed on relative performance. |
The Fund’s notable
contributors during the period
| • | Positive contributions to the Fund’s performance during the period, relative to the benchmark, were driven primarily by security selection. |
| • | In sector terms, security selection was most additive within support services, metals & mining, and telecommunications-wirelines. |
| ○ | Within support services, overweight positions in several outperforming issuers drove contributions, including Cengage Learning, Inc., Uber Technologies, Inc., IAA Spinco, Inc. and Ascend Learning LLC. |
| ○ | An overweight allocation to HudBay Minerals, Inc. was the primary driver of positive results within metals & mining. |
| ○ | By contrast, positive contributions within wirelines were led by an underweight allocation to Lumen Technologies, Inc. |
| • | Selection was modestly positive across several additional sectors including beverages, specialty retail, technology hardware & equipment, and food-wholesale, with contributions spread across a range of issuers. |
| • | From an industry allocation perspective, overweight allocations to media content and midstream issuers within gas distribution were notable contributors. |
| • | The Fund held an allocation of just under 3.6% on average in out-of-benchmark CCC-rated issuers, contributing to relative return as lower quality issuers outperformed over the period. As a reminder, the Fund is not a forced seller of downgraded issues and will continue to hold high conviction names. |
| Columbia Income Opportunities Fund | Annual Report 2023 | 5 |
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. 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. 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. 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. Non-investment-grade (high-yield or junk) securities present greater price volatility and more risk to principal and income than higher rated securities. 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. 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.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 Income 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 Income Opportunities Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Income Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Income Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Income Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Income Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 15 |
Notes to Portfolio of
Investments
| (a) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At July 31, 2023, the total value of these securities amounted to $61, which represents less than 0.01% of total net assets. |
| (b) | Non-income producing investment. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | 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 July 31, 2023, the total value of these securities amounted to $543,437,163, which represents 76.92% of total net assets. |
| (e) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (f) | Represents a security purchased on a when-issued basis. |
| (g) | Represents a security in default. |
| (h) | Principal and interest may not be guaranteed by a governmental entity. |
| (i) | The stated interest rate represents the weighted average interest rate at July 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. |
| (j) | Variable rate security. The interest rate shown was the current rate as of July 31, 2023. |
| (k) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
| (l) | 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 July 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, 5.408% | ||||||||
| 26,788,697 | 204,348,585 | (211,616,644) | 1,118 | 19,521,756 | (199) | 885,783 | 19,529,568 | |
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
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Income Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Fair value measurements (continued)
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
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 July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 953 | — | 61 | 1,014 |
| Consumer Discretionary | 89,916 | — | — | 89,916 |
| Industrials | 7,684 | — | — | 7,684 |
| Utilities | — | — | 0* | 0* |
| Total Common Stocks | 98,553 | — | 61 | 98,614 |
| Convertible Bonds | — | 6,532,565 | — | 6,532,565 |
| Corporate Bonds & Notes | — | 645,929,903 | — | 645,929,903 |
| Foreign Government Obligations | — | 3,746,873 | — | 3,746,873 |
| Senior Loans | — | 22,354,431 | — | 22,354,431 |
| Money Market Funds | 19,521,756 | — | — | 19,521,756 |
| Total Investments in Securities | 19,620,309 | 678,563,772 | 61 | 698,184,142 |
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 17 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $738,062,907) | $678,662,386 |
| Affiliated issuers (cost $19,518,560) | 19,521,756 |
| Cash | 100,764 |
| Receivable for: | |
| Capital shares sold | 2,827,204 |
| Dividends | 90,733 |
| Interest | 10,748,397 |
| Foreign tax reclaims | 8,262 |
| Expense reimbursement due from Investment Manager | 6,298 |
| Prepaid expenses | 13,820 |
| Total assets | 711,979,620 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 500,000 |
| Capital shares redeemed | 1,517,199 |
| Distributions to shareholders | 3,093,144 |
| Management services fees | 37,412 |
| Distribution and/or service fees | 4,748 |
| Transfer agent fees | 58,515 |
| Trustees’ fees | 239,362 |
| Other expenses | 51,328 |
| Total liabilities | 5,501,708 |
| Net assets applicable to outstanding capital stock | $706,477,912 |
| Represented by | |
| Paid in capital | 789,024,990 |
| Total distributable earnings (loss) | (82,547,078) |
| Total - representing net assets applicable to outstanding capital stock | $706,477,912 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Income Opportunities Fund | Annual Report 2023 |
Statement of Assets and Liabilities (continued)
July 31, 2023
July 31, 2023
| Class A | |
| Net assets | $207,300,938 |
| Shares outstanding | 24,566,946 |
| Net asset value per share | $8.44 |
| 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) | $8.86 |
| Advisor Class | |
| Net assets | $17,753,554 |
| Shares outstanding | 2,096,586 |
| Net asset value per share | $8.47 |
| Class C | |
| Net assets | $5,904,610 |
| Shares outstanding | 700,492 |
| Net asset value per share | $8.43 |
| Institutional Class | |
| Net assets | $190,837,418 |
| Shares outstanding | 22,567,624 |
| Net asset value per share | $8.46 |
| Institutional 2 Class | |
| Net assets | $146,854,938 |
| Shares outstanding | 17,352,059 |
| Net asset value per share | $8.46 |
| Institutional 3 Class | |
| Net assets | $137,456,638 |
| Shares outstanding | 16,265,654 |
| Net asset value per share | $8.45 |
| Class R | |
| Net assets | $369,816 |
| Shares outstanding | 43,835 |
| Net asset value per share | $8.44 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 19 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,790 |
| Dividends — affiliated issuers | 885,783 |
| Interest | 42,686,043 |
| Interfund lending | 5,344 |
| Total income | 43,578,960 |
| Expenses: | |
| Management services fees | 4,643,311 |
| Distribution and/or service fees | |
| Class A | 542,452 |
| Class C | 71,180 |
| Class R | 1,872 |
| Transfer agent fees | |
| Class A | 273,543 |
| Advisor Class | 24,287 |
| Class C | 8,983 |
| Institutional Class | 243,110 |
| Institutional 2 Class | 78,364 |
| Institutional 3 Class | 9,457 |
| Class R | 472 |
| Trustees’ fees | 55,039 |
| Custodian fees | 11,425 |
| Printing and postage fees | 100,782 |
| Registration fees | 123,767 |
| Accounting services fees | 31,899 |
| Legal fees | 22,312 |
| Compensation of chief compliance officer | 139 |
| Other | 23,273 |
| Total expenses | 6,265,667 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (817,406) |
| Fees waived by transfer agent | |
| Institutional 2 Class | (2,909) |
| Institutional 3 Class | (3,516) |
| Expense reduction | (360) |
| Total net expenses | 5,441,476 |
| Net investment income | 38,137,484 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (19,067,083) |
| Investments — affiliated issuers | (199) |
| Net realized loss | (19,067,282) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 2,107,398 |
| Investments — affiliated issuers | 1,118 |
| Net change in unrealized appreciation (depreciation) | 2,108,516 |
| Net realized and unrealized loss | (16,958,766) |
| Net increase in net assets resulting from operations | $21,178,718 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Income Opportunities Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $38,137,484 | $37,313,647 |
| Net realized gain (loss) | (19,067,282) | 3,141,724 |
| Net change in unrealized appreciation (depreciation) | 2,108,516 | (101,507,765) |
| Net increase (decrease) in net assets resulting from operations | 21,178,718 | (61,052,394) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (11,282,772) | (19,000,531) |
| Advisor Class | (1,045,497) | (2,134,723) |
| Class C | (316,496) | (677,664) |
| Institutional Class | (10,495,448) | (17,983,042) |
| Institutional 2 Class | (7,662,405) | (10,279,556) |
| Institutional 3 Class | (7,896,530) | (14,112,849) |
| Class R | (18,539) | (27,402) |
| Total distributions to shareholders | (38,717,687) | (64,215,767) |
| Decrease in net assets from capital stock activity | (45,266,753) | (51,726,510) |
| Total decrease in net assets | (62,805,722) | (176,994,671) |
| Net assets at beginning of year | 769,283,634 | 946,278,305 |
| Net assets at end of year | $706,477,912 | $769,283,634 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 21 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 8,064,742 | 67,256,403 | 7,368,457 | 67,505,118 |
| Distributions reinvested | 1,218,925 | 10,140,855 | 1,830,589 | 17,101,778 |
| Shares redeemed | (12,139,529) | (101,392,355) | (11,051,880) | (101,559,839) |
| Net decrease | (2,855,862) | (23,995,097) | (1,852,834) | (16,952,943) |
| Advisor Class | ||||
| Shares sold | 712,307 | 6,022,465 | 1,300,199 | 12,198,938 |
| Distributions reinvested | 124,992 | 1,042,943 | 225,904 | 2,122,191 |
| Shares redeemed | (1,418,551) | (11,770,023) | (2,218,615) | (20,724,951) |
| Net decrease | (581,252) | (4,704,615) | (692,512) | (6,403,822) |
| Class C | ||||
| Shares sold | 97,591 | 818,350 | 146,098 | 1,392,343 |
| Distributions reinvested | 37,782 | 313,864 | 71,843 | 672,157 |
| Shares redeemed | (405,051) | (3,375,069) | (416,402) | (3,808,889) |
| Net decrease | (269,678) | (2,242,855) | (198,461) | (1,744,389) |
| Institutional Class | ||||
| Shares sold | 3,216,369 | 26,903,207 | 2,458,343 | 23,235,066 |
| Distributions reinvested | 1,105,150 | 9,214,128 | 1,689,905 | 15,833,340 |
| Shares redeemed | (5,547,887) | (46,449,710) | (8,120,179) | (75,695,735) |
| Net decrease | (1,226,368) | (10,332,375) | (3,971,931) | (36,627,329) |
| Institutional 2 Class | ||||
| Shares sold | 5,177,380 | 43,259,159 | 4,661,464 | 43,564,103 |
| Distributions reinvested | 916,821 | 7,652,791 | 1,100,200 | 10,274,442 |
| Shares redeemed | (4,796,885) | (40,203,641) | (2,922,277) | (26,628,737) |
| Net increase | 1,297,316 | 10,708,309 | 2,839,387 | 27,209,808 |
| Institutional 3 Class | ||||
| Shares sold | 3,795,281 | 31,700,843 | 2,342,608 | 22,177,383 |
| Distributions reinvested | 312,951 | 2,608,197 | 502,161 | 4,707,435 |
| Shares redeemed | (5,877,319) | (49,002,060) | (4,860,961) | (44,069,827) |
| Net decrease | (1,769,087) | (14,693,020) | (2,016,192) | (17,185,009) |
| Class R | ||||
| Shares sold | 3,376 | 28,004 | 7,155 | 68,608 |
| Distributions reinvested | 1,968 | 16,372 | 2,507 | 23,414 |
| Shares redeemed | (6,116) | (51,476) | (11,705) | (114,848) |
| Net decrease | (772) | (7,100) | (2,043) | (22,826) |
| Total net decrease | (5,405,703) | (45,266,753) | (5,894,586) | (51,726,510) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Columbia Income Opportunities 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 7/31/2023 | $8.63 | 0.43 | (0.18) | 0.25 | (0.44) | — | (0.44) |
| Year Ended 7/31/2022 | $9.96 | 0.38 | (1.04) | (0.66) | (0.37) | (0.30) | (0.67) |
| Year Ended 7/31/2021 | $9.67 | 0.41 | 0.33 | 0.74 | (0.45) | — | (0.45) |
| Year Ended 7/31/2020 | $9.87 | 0.43 | (0.21)(d) | 0.22 | (0.42) | — | (0.42) |
| Year Ended 7/31/2019 | $9.61 | 0.45 | 0.26 | 0.71 | (0.45) | — | (0.45) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $8.66 | 0.45 | (0.18) | 0.27 | (0.46) | — | (0.46) |
| Year Ended 7/31/2022 | $9.99 | 0.40 | (1.04) | (0.64) | (0.39) | (0.30) | (0.69) |
| Year Ended 7/31/2021 | $9.70 | 0.43 | 0.34 | 0.77 | (0.48) | — | (0.48) |
| Year Ended 7/31/2020 | $9.91 | 0.46 | (0.23)(d) | 0.23 | (0.44) | — | (0.44) |
| Year Ended 7/31/2019 | $9.64 | 0.48 | 0.27 | 0.75 | (0.48) | — | (0.48) |
| Class C | |||||||
| Year Ended 7/31/2023 | $8.62 | 0.36 | (0.18) | 0.18 | (0.37) | — | (0.37) |
| Year Ended 7/31/2022 | $9.95 | 0.31 | (1.04) | (0.73) | (0.30) | (0.30) | (0.60) |
| Year Ended 7/31/2021 | $9.66 | 0.34 | 0.33 | 0.67 | (0.38) | — | (0.38) |
| Year Ended 7/31/2020 | $9.86 | 0.36 | (0.21)(d) | 0.15 | (0.35) | — | (0.35) |
| Year Ended 7/31/2019 | $9.60 | 0.38 | 0.26 | 0.64 | (0.38) | — | (0.38) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $8.65 | 0.45 | (0.18) | 0.27 | (0.46) | — | (0.46) |
| Year Ended 7/31/2022 | $9.98 | 0.40 | (1.04) | (0.64) | (0.39) | (0.30) | (0.69) |
| Year Ended 7/31/2021 | $9.69 | 0.44 | 0.33 | 0.77 | (0.48) | — | (0.48) |
| Year Ended 7/31/2020 | $9.89 | 0.45 | (0.21)(d) | 0.24 | (0.44) | — | (0.44) |
| Year Ended 7/31/2019 | $9.63 | 0.48 | 0.26 | 0.74 | (0.48) | — | (0.48) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $8.66 | 0.46 | (0.20) | 0.26 | (0.46) | — | (0.46) |
| Year Ended 7/31/2022 | $9.99 | 0.41 | (1.04) | (0.63) | (0.40) | (0.30) | (0.70) |
| Year Ended 7/31/2021 | $9.70 | 0.45 | 0.33 | 0.78 | (0.49) | — | (0.49) |
| Year Ended 7/31/2020 | $9.90 | 0.46 | (0.21)(d) | 0.25 | (0.45) | — | (0.45) |
| Year Ended 7/31/2019 | $9.63 | 0.48 | 0.27 | 0.75 | (0.48) | — | (0.48) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia Income 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 7/31/2023 | $8.44 | 3.05% | 1.08% | 0.96%(c) | 5.12% | 22% | $207,301 |
| Year Ended 7/31/2022 | $8.63 | (6.99%) | 1.05% | 0.95%(c) | 4.10% | 34% | $236,681 |
| Year Ended 7/31/2021 | $9.96 | 7.85% | 1.15% | 1.01%(c) | 4.18% | 58% | $291,523 |
| Year Ended 7/31/2020 | $9.67 | 2.32% | 1.09% | 1.04%(c) | 4.45% | 56% | $314,014 |
| Year Ended 7/31/2019 | $9.87 | 7.62% | 1.04% | 1.04% | 4.69% | 43% | $373,159 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $8.47 | 3.32% | 0.82% | 0.71%(c) | 5.35% | 22% | $17,754 |
| Year Ended 7/31/2022 | $8.66 | (6.73%) | 0.80% | 0.70%(c) | 4.33% | 34% | $23,192 |
| Year Ended 7/31/2021 | $9.99 | 8.11% | 0.90% | 0.76%(c) | 4.42% | 58% | $33,674 |
| Year Ended 7/31/2020 | $9.70 | 2.48% | 0.84% | 0.79%(c) | 4.70% | 56% | $11,317 |
| Year Ended 7/31/2019 | $9.91 | 7.99% | 0.79% | 0.79% | 4.93% | 43% | $15,240 |
| Class C | |||||||
| Year Ended 7/31/2023 | $8.43 | 2.28% | 1.82% | 1.71%(c) | 4.35% | 22% | $5,905 |
| Year Ended 7/31/2022 | $8.62 | (7.70%) | 1.80% | 1.70%(c) | 3.33% | 34% | $8,365 |
| Year Ended 7/31/2021 | $9.95 | 7.04% | 1.90% | 1.77%(c) | 3.43% | 58% | $11,626 |
| Year Ended 7/31/2020 | $9.66 | 1.55% | 1.84% | 1.79%(c) | 3.70% | 56% | $26,465 |
| Year Ended 7/31/2019 | $9.86 | 6.82% | 1.79% | 1.79% | 3.95% | 43% | $36,860 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $8.46 | 3.32% | 0.82% | 0.71%(c) | 5.36% | 22% | $190,837 |
| Year Ended 7/31/2022 | $8.65 | (6.74%) | 0.80% | 0.70%(c) | 4.34% | 34% | $205,801 |
| Year Ended 7/31/2021 | $9.98 | 8.11% | 0.91% | 0.77%(c) | 4.46% | 58% | $277,062 |
| Year Ended 7/31/2020 | $9.69 | 2.58% | 0.87% | 0.78%(c) | 4.76% | 56% | $702,635 |
| Year Ended 7/31/2019 | $9.89 | 7.89% | 0.79% | 0.79% | 4.94% | 43% | $323,071 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $8.46 | 3.27% | 0.76% | 0.64% | 5.44% | 22% | $146,855 |
| Year Ended 7/31/2022 | $8.66 | (6.66%) | 0.73% | 0.63% | 4.44% | 34% | $138,972 |
| Year Ended 7/31/2021 | $9.99 | 8.24% | 0.74% | 0.64% | 4.55% | 58% | $131,971 |
| Year Ended 7/31/2020 | $9.70 | 2.65% | 0.73% | 0.71% | 4.79% | 56% | $108,883 |
| Year Ended 7/31/2019 | $9.90 | 8.08% | 0.72% | 0.72% | 5.01% | 43% | $80,781 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Income Opportunities 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 7/31/2023 | $8.64 | 0.46 | (0.18) | 0.28 | (0.47) | — | (0.47) |
| Year Ended 7/31/2022 | $9.97 | 0.41 | (1.04) | (0.63) | (0.40) | (0.30) | (0.70) |
| Year Ended 7/31/2021 | $9.69 | 0.45 | 0.32 | 0.77 | (0.49) | — | (0.49) |
| Year Ended 7/31/2020 | $9.89 | 0.47 | (0.21)(d) | 0.26 | (0.46) | — | (0.46) |
| Year Ended 7/31/2019 | $9.62 | 0.49 | 0.27 | 0.76 | (0.49) | — | (0.49) |
| Class R | |||||||
| Year Ended 7/31/2023 | $8.63 | 0.41 | (0.18) | 0.23 | (0.42) | — | (0.42) |
| Year Ended 7/31/2022 | $9.96 | 0.36 | (1.05) | (0.69) | (0.34) | (0.30) | (0.64) |
| Year Ended 7/31/2021 | $9.67 | 0.38 | 0.34 | 0.72 | (0.43) | — | (0.43) |
| Year Ended 7/31/2020 | $9.87 | 0.41 | (0.22)(d) | 0.19 | (0.39) | — | (0.39) |
| Year Ended 7/31/2019 | $9.61 | 0.43 | 0.26 | 0.69 | (0.43) | — | (0.43) |
| 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) | 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 timing of Fund shares sold and redeemed in relation to fluctuations in the market value of the portfolio. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 26 | Columbia Income 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 7/31/2023 | $8.45 | 3.44% | 0.70% | 0.59% | 5.48% | 22% | $137,457 |
| Year Ended 7/31/2022 | $8.64 | (6.64%) | 0.68% | 0.58% | 4.46% | 34% | $155,887 |
| Year Ended 7/31/2021 | $9.97 | 8.19% | 0.68% | 0.61% | 4.61% | 58% | $199,959 |
| Year Ended 7/31/2020 | $9.69 | 2.70% | 0.68% | 0.66% | 4.83% | 56% | $399,854 |
| Year Ended 7/31/2019 | $9.89 | 8.13% | 0.67% | 0.67% | 5.06% | 43% | $430,191 |
| Class R | |||||||
| Year Ended 7/31/2023 | $8.44 | 2.80% | 1.32% | 1.21%(c) | 4.86% | 22% | $370 |
| Year Ended 7/31/2022 | $8.63 | (7.23%) | 1.30% | 1.20%(c) | 3.86% | 34% | $385 |
| Year Ended 7/31/2021 | $9.96 | 7.59% | 1.40% | 1.26%(c) | 3.93% | 58% | $464 |
| Year Ended 7/31/2020 | $9.67 | 2.06% | 1.32% | 1.29%(c) | 4.16% | 56% | $486 |
| Year Ended 7/31/2019 | $9.87 | 7.35% | 1.29% | 1.29% | 4.44% | 43% | $949 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 27 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Income 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,
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.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Foreign equity securities are
valued based on the closing price or last trade 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
| 28 | Columbia Income Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
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.
| Columbia Income Opportunities Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
The value of additional securities
received as an income payment through a payment-in-kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
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.
| 30 | Columbia Income Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
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 amendments.
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 July 31, 2023 was 0.65% of the Fund’s
average daily net assets.
| Columbia Income Opportunities Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 "Trustees’ fees" 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 December 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 July 31,
2023, the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| 32 | Columbia Income Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 Statement of Operations. For the year ended July 31, 2023, these minimum account balance fees reduced total expenses of
the Fund by $360.
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 $885,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 4.75 | 0.50 - 1.00(a) | 44,918 |
| Class C | — | 1.00(b) | 24 |
| (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 through November 30, 2023 | |
| Class A | 0.96% |
| Advisor Class | 0.71 |
| Class C | 1.71 |
| Institutional Class | 0.71 |
| Institutional 2 Class | 0.64 |
| Institutional 3 Class | 0.59 |
| Class R | 1.21 |
| Columbia Income Opportunities Fund | Annual Report 2023 | 33 |
Notes to Financial Statements (continued)
July 31, 2023
July 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. Reflected in the contractual cap commitment, prior to December 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.
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 July 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.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 299,995 | (299,996) | 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.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 38,717,687 | — | 38,717,687 | 42,684,727 | 21,531,040 | 64,215,767 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized (depreciation) ($) |
| 3,546,541 | — | (22,073,729) | (60,688,115) |
At July 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) ($) | Net unrealized (depreciation) ($) |
| 758,872,257 | 2,699,847 | (63,387,962) | (60,688,115) |
| 34 | Columbia Income Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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 July 31,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (7,692,907) | (14,380,822) | (22,073,729) | — |
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 $150,946,713 and $192,654,512, respectively, for the year ended July 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’s activity in the
Interfund Program during the year ended July 31, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 4,100,000 | 4.77 | 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 July 31, 2023.
| Columbia Income Opportunities Fund | Annual Report 2023 | 35 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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.
| 36 | Columbia Income Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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.
Shareholder concentration risk
At July 31, 2023, affiliated
shareholders of record owned 35.6% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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.
| Columbia Income Opportunities Fund | Annual Report 2023 | 37 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 provide services to
the Fund.
| 38 | Columbia Income 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 Income Opportunities Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Income Opportunities Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as
of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended July 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 July 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 July 31,
2023 and the financial highlights for each of the five years in the period ended July 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 July 31, 2023 by correspondence with the custodian, transfer agent, broker and agent banks. We
believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Income Opportunities Fund | Annual Report 2023 | 39 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 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 | |
| 99.62% |
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 | 173 | 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 |
| 40 | Columbia Income 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 |
| 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 Income Opportunities 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 |
| 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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| 42 | Columbia Income 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 | 171 | 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. | 173 | 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 | 171 | 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 Income Opportunities Fund | Annual Report 2023 | 43 |
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 | 173 | 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 | 173 | 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.
| 44 | Columbia Income 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 Income Opportunities Fund | Annual Report 2023 | 45 |
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.
| 46 | Columbia Income Opportunities Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Income Opportunities Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and
other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Income Opportunities Fund | Annual Report 2023 | 47 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed that the Fund’s performance
for certain periods ranked above median based on information provided by Broadridge.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the
| 48 | Columbia Income Opportunities Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
Investment Manager’s profitability. The Board reviewed the fees charged to comparable institutional or other accounts/vehicles managed by the Investment Manager and discussed differences in how the products are managed and operated, thus explaining many of the differences in fees.
(Unaudited)
Investment Manager’s profitability. The Board reviewed the fees charged to comparable institutional or other accounts/vehicles managed by the Investment Manager and discussed differences in how the products are managed and operated, thus explaining many of the differences in fees.
The Board considered the reports of
JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary
objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain
exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper
comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) was slightly below the peer universe’s median expense ratio shown in
the reports.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Income Opportunities Fund | Annual Report 2023 | 49 |
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/
ANN164_07_N01_(09/23)
Columbia Limited
Duration Credit Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
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| 8 | |
| 13 | |
| 15 | |
| 16 | |
| 18 | |
| 22 | |
| 34 | |
| 35 | |
| 35 | |
| 42 | |
| 43 |
If you elect to receive the
shareholder report for Columbia Limited Duration Credit 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 Limited Duration Credit
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with a level of current income consistent with preservation of capital.
Portfolio management
Tom Murphy, CFA
Lead Portfolio Manager
Managed Fund since 2003
Royce D. Wilson, CFA
Portfolio Manager
Managed Fund since 2012
John Dawson, CFA
Portfolio Manager
Managed Fund since 2020
Shannon Rinehart, CFA
Portfolio Manager
Managed Fund since February 2022
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Limited Duration Credit 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 Limited Duration Credit Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended July 31, 2023, Class A shares of Columbia Limited Duration Credit Fund returned 1.26% excluding sales charges. The Fund’s benchmark, the Bloomberg U.S. 1-5 Year Corporate Index, returned 0.88% for the same
period.
Market overview
As the period opened, the U.S.
Federal Reserve (Fed) was already well along the path of tightening policy in response to elevated consumer price inflation, which peaked at 9.1% in June of 2022 while remaining well above the central bank’s 2%
target. The Fed implemented further rate hikes at its September, November and December meetings totaling 225 basis points, bringing the fed funds target range to 4.25% - 4.50% by year-end, as compared to 0% - 0.25% at
the beginning of 2022.
Entering 2023, with inflation
showing signs of moderating, markets began to look ahead to the end of the Fed’s rate hiking cycle, leading Treasury yields to ease off their recent highs. On February 1, the Fed raised its benchmark overnight
lending rate by a comparatively moderate 25 basis points, to a target range of 4.50% to 4.75%.
In March, the failure of a pair of
U.S. banks and the collapse of European giant Credit Suisse led to fears of a financial crisis. In response, the Fed created a lending facility to support bank liquidity while the market began to price in multiple
cuts in the federal funds target rate over the second half of 2023. At its March 23 meeting, the Fed raised the federal funds target rate by another quarter-point to a range of 4.75% to 5.0%. The rate hike was
generally welcomed by investors as a signal that the Fed viewed the financial system as remaining on stable footing.
Inflation continued to decline as
the period progressed, with June consumer price inflation measured at 3.0%. Nonetheless, with the economy displaying surprising resilience and employment remaining historically robust, the Fed implemented additional
25 basis point increases at its early May and late July meetings, bringing the federal funds target rate to the 5.25% to 5.50% range. As of July 31, 2023, the yield on the 10-year Treasury was 3.97%, an increase of
130 basis points relative to its starting point of 2.67% 12 months earlier. (A basis point is 1/100 of a percent.)
The Fund’s notable
contributors during the period
| • | Positive contributions to the Fund’s performance relative to the benchmark were led by security selection, most notably exposure to a media & entertainment company and a food & beverage company. |
| • | The Fund’s allocation across industries was also beneficial, specifically an overweight to life insurers and underweights to retailers and pharmaceutical companies. |
| • | More broadly, the Fund’s overweight to credit risk proved additive as risk sentiment strengthened over the period on hopes that the Fed would be successful in reining in inflation while avoiding a recession. |
The Fund’s notable
detractors during the period
| • | The Fund’s modestly above-benchmark stance with respect to overall portfolio duration and corresponding interest rate sensitivity weighed on performance relative to the benchmark as interest rates rose over the period. |
Derivatives usage
The Fund employed futures
contracts during the period in order to manage portfolio duration relative to the benchmark. On a stand-alone basis, the use of these derivatives had a positive impact on Fund performance.
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. 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. 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
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
accounting standards generally applicable to U.S.
issuers. Risks are enhanced for emerging market issuers. 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. 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 Limited Duration Credit 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 Limited Duration Credit Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Limited Duration Credit Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
At July 31, 2023,
securities and/or cash totaling $1,603,497 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | 890 | 09/2023 | USD | 180,697,813 | — | (2,155,770) |
Notes to Portfolio of
Investments
| (a) | 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 July 31, 2023. |
| (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 July 31, 2023, the total value of these securities amounted to $154,041,747, which represents 26.75% of total net assets. |
| (c) | Variable rate security. The interest rate shown was the current rate as of July 31, 2023. |
| (d) | Represents a security purchased on a when-issued basis. |
| (e) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Notes to Portfolio of Investments (continued)
| (f) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended July 31, 2023 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 5.408% | ||||||||
| 17,548,686 | 315,357,035 | (317,936,693) | (1,377) | 14,967,651 | (2,389) | 603,599 | 14,973,641 | |
Abbreviation Legend
| 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 accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at July 31, 2023:
The following table is a summary of the inputs used to value the Fund’s investments at July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Corporate Bonds & Notes | — | 521,274,909 | — | 521,274,909 |
| U.S. Treasury Obligations | — | 33,229,803 | — | 33,229,803 |
| Money Market Funds | 14,967,651 | — | — | 14,967,651 |
| Total Investments in Securities | 14,967,651 | 554,504,712 | — | 569,472,363 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 1,427,085 | — | — | 1,427,085 |
| Liability | ||||
| Futures Contracts | (2,155,770) | — | — | (2,155,770) |
| Total | 14,238,966 | 554,504,712 | — | 568,743,678 |
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.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $579,414,509) | $554,504,712 |
| Affiliated issuers (cost $14,968,818) | 14,967,651 |
| Margin deposits on: | |
| Futures contracts | 1,603,497 |
| Receivable for: | |
| Investments sold | 2,962,141 |
| Capital shares sold | 1,834,092 |
| Dividends | 80,206 |
| Interest | 4,501,705 |
| Variation margin for futures contracts | 56,850 |
| Expense reimbursement due from Investment Manager | 4,166 |
| Prepaid expenses | 11,829 |
| Total assets | 580,526,849 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 2,081,000 |
| Capital shares redeemed | 843,313 |
| Distributions to shareholders | 1,453,935 |
| Variation margin for futures contracts | 67,867 |
| Management services fees | 20,266 |
| Distribution and/or service fees | 4,047 |
| Transfer agent fees | 80,165 |
| Trustees’ fees | 108,189 |
| Other expenses | 37,301 |
| Total liabilities | 4,696,083 |
| Net assets applicable to outstanding capital stock | $575,830,766 |
| Represented by | |
| Paid in capital | 648,015,876 |
| Total distributable earnings (loss) | (72,185,110) |
| Total - representing net assets applicable to outstanding capital stock | $575,830,766 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 13 |
Statement of Assets and Liabilities (continued)
July 31, 2023
July 31, 2023
| Class A | |
| Net assets | $164,625,532 |
| Shares outstanding | 17,304,298 |
| Net asset value per share | $9.51 |
| 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) | $9.80 |
| Advisor Class | |
| Net assets | $60,902,585 |
| Shares outstanding | 6,399,327 |
| Net asset value per share | $9.52 |
| Class C | |
| Net assets | $7,503,773 |
| Shares outstanding | 788,837 |
| Net asset value per share | $9.51 |
| Institutional Class | |
| Net assets | $270,446,229 |
| Shares outstanding | 28,407,787 |
| Net asset value per share | $9.52 |
| Institutional 2 Class | |
| Net assets | $15,537,740 |
| Shares outstanding | 1,631,708 |
| Net asset value per share | $9.52 |
| Institutional 3 Class | |
| Net assets | $56,814,907 |
| Shares outstanding | 5,966,878 |
| Net asset value per share | $9.52 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $603,599 |
| Interest | 19,539,243 |
| Interfund lending | 324 |
| Foreign taxes withheld | (16,168) |
| Total income | 20,126,998 |
| Expenses: | |
| Management services fees | 2,700,948 |
| Distribution and/or service fees | |
| Class A | 452,081 |
| Class C | 89,204 |
| Transfer agent fees | |
| Class A | 194,056 |
| Advisor Class | 69,943 |
| Class C | 9,568 |
| Institutional Class | 302,724 |
| Institutional 2 Class | 10,701 |
| Institutional 3 Class | 6,900 |
| Trustees’ fees | 37,860 |
| Custodian fees | 6,659 |
| Printing and postage fees | 48,031 |
| Registration fees | 117,467 |
| Accounting services fees | 30,090 |
| Legal fees | 20,978 |
| Compensation of chief compliance officer | 120 |
| Other | 21,927 |
| Total expenses | 4,119,257 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (537,840) |
| Expense reduction | (20) |
| Total net expenses | 3,581,397 |
| Net investment income | 16,545,601 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (24,053,959) |
| Investments — affiliated issuers | (2,389) |
| Futures contracts | 808,295 |
| Net realized loss | (23,248,053) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 12,624,631 |
| Investments — affiliated issuers | (1,377) |
| Futures contracts | 608,816 |
| Net change in unrealized appreciation (depreciation) | 13,232,070 |
| Net realized and unrealized loss | (10,015,983) |
| Net increase in net assets resulting from operations | $6,529,618 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 15 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $16,545,601 | $12,117,093 |
| Net realized loss | (23,248,053) | (22,201,040) |
| Net change in unrealized appreciation (depreciation) | 13,232,070 | (54,786,645) |
| Net increase (decrease) in net assets resulting from operations | 6,529,618 | (64,870,592) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (4,676,066) | (3,722,417) |
| Advisor Class | (1,853,338) | (1,402,681) |
| Class C | (163,429) | (175,302) |
| Institutional Class | (7,989,431) | (8,556,597) |
| Institutional 2 Class | (516,616) | (1,736,446) |
| Institutional 3 Class | (2,145,420) | (3,444,184) |
| Total distributions to shareholders | (17,344,300) | (19,037,627) |
| Decrease in net assets from capital stock activity | (132,399,716) | (307,503,745) |
| Total decrease in net assets | (143,214,398) | (391,411,964) |
| Net assets at beginning of year | 719,045,164 | 1,110,457,128 |
| Net assets at end of year | $575,830,766 | $719,045,164 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 2,434,687 | 22,986,017 | 3,696,529 | 37,587,260 |
| Distributions reinvested | 458,592 | 4,334,506 | 343,931 | 3,447,168 |
| Shares redeemed | (5,898,042) | (55,799,923) | (6,096,618) | (60,846,549) |
| Net decrease | (3,004,763) | (28,479,400) | (2,056,158) | (19,812,121) |
| Advisor Class | ||||
| Shares sold | 2,494,557 | 23,474,275 | 2,329,296 | 23,259,364 |
| Distributions reinvested | 195,965 | 1,853,320 | 139,876 | 1,402,355 |
| Shares redeemed | (2,850,020) | (26,956,071) | (3,709,834) | (36,941,272) |
| Net decrease | (159,498) | (1,628,476) | (1,240,662) | (12,279,553) |
| Class C | ||||
| Shares sold | 338,424 | 3,203,688 | 361,837 | 3,673,483 |
| Distributions reinvested | 13,838 | 130,742 | 14,992 | 151,391 |
| Shares redeemed | (669,139) | (6,338,132) | (1,544,799) | (15,307,691) |
| Net decrease | (316,877) | (3,003,702) | (1,167,970) | (11,482,817) |
| Institutional Class | ||||
| Shares sold | 14,389,673 | 136,446,467 | 13,495,137 | 135,897,800 |
| Distributions reinvested | 759,619 | 7,186,049 | 769,300 | 7,733,870 |
| Shares redeemed | (18,647,714) | (176,418,083) | (30,610,510) | (303,031,741) |
| Net decrease | (3,498,422) | (32,785,567) | (16,346,073) | (159,400,071) |
| Institutional 2 Class | ||||
| Shares sold | 1,057,061 | 9,900,192 | 3,008,545 | 30,491,727 |
| Distributions reinvested | 54,601 | 516,597 | 172,681 | 1,736,424 |
| Shares redeemed | (1,268,857) | (12,013,631) | (10,233,374) | (99,167,098) |
| Net decrease | (157,195) | (1,596,842) | (7,052,148) | (66,938,947) |
| Institutional 3 Class | ||||
| Shares sold | 839,887 | 7,962,049 | 5,087,076 | 51,661,635 |
| Distributions reinvested | 223,009 | 2,106,778 | 340,351 | 3,418,336 |
| Shares redeemed | (7,987,897) | (74,974,556) | (9,377,988) | (92,670,207) |
| Net decrease | (6,925,001) | (64,905,729) | (3,950,561) | (37,590,236) |
| Total net decrease | (14,061,756) | (132,399,716) | (31,813,572) | (307,503,745) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Limited Duration Credit 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 | 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 7/31/2023 | $9.64 | 0.23 | (0.11) | 0.12 | (0.25) | — | (0.25) |
| Year Ended 7/31/2022 | $10.43 | 0.10 | (0.72) | (0.62) | (0.10) | (0.07) | (0.17) |
| Year Ended 7/31/2021 | $10.38 | 0.09 | 0.06 | 0.15 | (0.10) | — | (0.10) |
| Year Ended 7/31/2020 | $9.97 | 0.19 | 0.41 | 0.60 | (0.19) | — | (0.19) |
| Year Ended 7/31/2019 | $9.66 | 0.23 | 0.32 | 0.55 | (0.24) | — | (0.24) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $9.64 | 0.26 | (0.11) | 0.15 | (0.27) | — | (0.27) |
| Year Ended 7/31/2022 | $10.44 | 0.13 | (0.74) | (0.61) | (0.12) | (0.07) | (0.19) |
| Year Ended 7/31/2021 | $10.38 | 0.12 | 0.06 | 0.18 | (0.12) | — | (0.12) |
| Year Ended 7/31/2020 | $9.97 | 0.21 | 0.42 | 0.63 | (0.22) | — | (0.22) |
| Year Ended 7/31/2019 | $9.66 | 0.25 | 0.32 | 0.57 | (0.26) | — | (0.26) |
| Class C | |||||||
| Year Ended 7/31/2023 | $9.64 | 0.16 | (0.11) | 0.05 | (0.18) | — | (0.18) |
| Year Ended 7/31/2022 | $10.43 | 0.02 | (0.72) | (0.70) | (0.02) | (0.07) | (0.09) |
| Year Ended 7/31/2021 | $10.38 | 0.02 | 0.05 | 0.07 | (0.02) | — | (0.02) |
| Year Ended 7/31/2020 | $9.97 | 0.11 | 0.41 | 0.52 | (0.11) | — | (0.11) |
| Year Ended 7/31/2019 | $9.66 | 0.15 | 0.32 | 0.47 | (0.16) | — | (0.16) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $9.65 | 0.26 | (0.12) | 0.14 | (0.27) | — | (0.27) |
| Year Ended 7/31/2022 | $10.44 | 0.12 | (0.72) | (0.60) | (0.12) | (0.07) | (0.19) |
| Year Ended 7/31/2021 | $10.39 | 0.12 | 0.05 | 0.17 | (0.12) | — | (0.12) |
| Year Ended 7/31/2020 | $9.98 | 0.21 | 0.42 | 0.63 | (0.22) | — | (0.22) |
| Year Ended 7/31/2019 | $9.67 | 0.25 | 0.32 | 0.57 | (0.26) | — | (0.26) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $9.65 | 0.26 | (0.11) | 0.15 | (0.28) | — | (0.28) |
| Year Ended 7/31/2022 | $10.44 | 0.13 | (0.72) | (0.59) | (0.13) | (0.07) | (0.20) |
| Year Ended 7/31/2021 | $10.39 | 0.12 | 0.06 | 0.18 | (0.13) | — | (0.13) |
| Year Ended 7/31/2020 | $9.98 | 0.22 | 0.41 | 0.63 | (0.22) | — | (0.22) |
| Year Ended 7/31/2019 | $9.67 | 0.26 | 0.32 | 0.58 | (0.27) | — | (0.27) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Limited Duration Credit 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 7/31/2023 | $9.51 | 1.26% | 0.83% | 0.75%(c) | 2.46% | 61% | $164,626 |
| Year Ended 7/31/2022 | $9.64 | (6.02%) | 0.81% | 0.76%(c) | 1.02% | 79% | $195,763 |
| Year Ended 7/31/2021 | $10.43 | 1.43% | 0.82% | 0.77%(c) | 0.89% | 98% | $233,349 |
| Year Ended 7/31/2020 | $10.38 | 6.09% | 0.83% | 0.79%(c) | 1.88% | 88% | $188,642 |
| Year Ended 7/31/2019 | $9.97 | 5.75% | 0.84% | 0.80% | 2.34% | 99% | $173,843 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $9.52 | 1.62% | 0.58% | 0.49%(c) | 2.72% | 61% | $60,903 |
| Year Ended 7/31/2022 | $9.64 | (5.88%) | 0.56% | 0.51%(c) | 1.27% | 79% | $63,244 |
| Year Ended 7/31/2021 | $10.44 | 1.78% | 0.57% | 0.52%(c) | 1.14% | 98% | $81,406 |
| Year Ended 7/31/2020 | $10.38 | 6.36% | 0.58% | 0.54%(c) | 2.12% | 88% | $58,965 |
| Year Ended 7/31/2019 | $9.97 | 6.02% | 0.59% | 0.55% | 2.59% | 99% | $48,340 |
| Class C | |||||||
| Year Ended 7/31/2023 | $9.51 | 0.50% | 1.58% | 1.50%(c) | 1.70% | 61% | $7,504 |
| Year Ended 7/31/2022 | $9.64 | (6.73%) | 1.56% | 1.51%(c) | 0.20% | 79% | $10,658 |
| Year Ended 7/31/2021 | $10.43 | 0.68% | 1.57% | 1.52%(c) | 0.16% | 98% | $23,715 |
| Year Ended 7/31/2020 | $10.38 | 5.30% | 1.58% | 1.54%(c) | 1.13% | 88% | $22,932 |
| Year Ended 7/31/2019 | $9.97 | 4.96% | 1.59% | 1.55% | 1.59% | 99% | $22,797 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $9.52 | 1.51% | 0.58% | 0.50%(c) | 2.71% | 61% | $270,446 |
| Year Ended 7/31/2022 | $9.65 | (5.78%) | 0.56% | 0.51%(c) | 1.24% | 79% | $307,759 |
| Year Ended 7/31/2021 | $10.44 | 1.68% | 0.57% | 0.52%(c) | 1.13% | 98% | $503,810 |
| Year Ended 7/31/2020 | $10.39 | 6.35% | 0.58% | 0.54%(c) | 2.07% | 88% | $326,594 |
| Year Ended 7/31/2019 | $9.98 | 6.01% | 0.59% | 0.55% | 2.59% | 99% | $166,238 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $9.52 | 1.56% | 0.53% | 0.45% | 2.77% | 61% | $15,538 |
| Year Ended 7/31/2022 | $9.65 | (5.73%) | 0.51% | 0.46% | 1.29% | 79% | $17,257 |
| Year Ended 7/31/2021 | $10.44 | 1.73% | 0.52% | 0.48% | 1.18% | 98% | $92,315 |
| Year Ended 7/31/2020 | $10.39 | 6.41% | 0.52% | 0.48% | 2.20% | 88% | $61,362 |
| Year Ended 7/31/2019 | $9.98 | 6.08% | 0.53% | 0.49% | 2.65% | 99% | $66,741 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Limited Duration Credit 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 7/31/2023 | $9.65 | 0.26 | (0.11) | 0.15 | (0.28) | — | (0.28) |
| Year Ended 7/31/2022 | $10.44 | 0.14 | (0.73) | (0.59) | (0.13) | (0.07) | (0.20) |
| Year Ended 7/31/2021 | $10.39 | 0.13 | 0.05 | 0.18 | (0.13) | — | (0.13) |
| Year Ended 7/31/2020 | $9.98 | 0.23 | 0.41 | 0.64 | (0.23) | — | (0.23) |
| Year Ended 7/31/2019 | $9.67 | 0.26 | 0.32 | 0.58 | (0.27) | — | (0.27) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | The benefits derived from expense reductions had an impact of less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Limited Duration Credit 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 7/31/2023 | $9.52 | 1.61% | 0.48% | 0.40% | 2.73% | 61% | $56,815 |
| Year Ended 7/31/2022 | $9.65 | (5.69%) | 0.46% | 0.42% | 1.35% | 79% | $124,365 |
| Year Ended 7/31/2021 | $10.44 | 1.78% | 0.47% | 0.43% | 1.25% | 98% | $175,861 |
| Year Ended 7/31/2020 | $10.39 | 6.47% | 0.47% | 0.43% | 2.24% | 88% | $159,121 |
| Year Ended 7/31/2019 | $9.98 | 6.13% | 0.48% | 0.44% | 2.70% | 99% | $177,100 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 21 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Limited Duration Credit
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
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.
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.
| 22 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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.
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.
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
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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. 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.
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 July 31, 2023:
| 24 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 2,155,770* |
| * | 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 July 31, 2023:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended July 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 158,854,018 |
| Futures contracts — short | 87,936,680 |
| * | Based on the ending quarterly outstanding amounts for the year ended July 31, 2023. |
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. 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.
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
July 31, 2023
July 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.
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.
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 amendments.
| 26 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 0.43% to 0.28% as the Fund’s net assets increase. The effective management services fee rate for the year ended July 31, 2023 was 0.43% 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 "Trustees’ fees" 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 Limited Duration Credit Fund | Annual Report 2023 | 27 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
For the year ended July 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 | 0.11 |
| Advisor Class | 0.11 |
| Class C | 0.11 |
| Institutional Class | 0.11 |
| 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 July 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 $462,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.50 - 1.00(a) | 71,891 |
| Class C | — | 1.00(b) | 991 |
| (a) | This charge is imposed on certain investments of between $1 million and $50 million redeemed within 18 months after purchase, as follows: 1.00% if redeemed within 12 months after purchase, and 0.50% if redeemed more than 12, but less than 18, months after purchase, with certain limited exceptions. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
The Fund’s other share
classes are not subject to sales charges.
| 28 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, derivative investments, principal and/or interest from fixed income securities, 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.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 217,117 | (217,117) | — |
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 July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 17,344,300 | — | 17,344,300 | 17,096,439 | 1,941,188 | 19,037,627 |
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized (depreciation) ($) |
| 1,733,803 | — | (47,252,506) | (25,104,969) |
At July 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) ($) | Net unrealized (depreciation) ($) |
| 593,848,647 | 639,917 | (25,744,886) | (25,104,969) |
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 July 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 July 31,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (15,957,297) | (31,295,209) | (47,252,506) | — |
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 $369,164,894 and $488,433,756, respectively, for the year ended July 31, 2023, of which $50,207,507 and
$56,803,693, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| 30 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 31, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 400,000 | 4.85 | 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 July 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 July 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 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.
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 31, 2023, affiliated
shareholders of record owned 43.2% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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.
| 32 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 provide services to
the Fund.
| Columbia Limited Duration Credit 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 Columbia Limited Duration Credit Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Limited Duration Credit Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund")
as of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related
notes, and the financial highlights for each of the five years in the period ended July 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 July 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 July
31, 2023 and the financial highlights for each of the five years in the period ended July 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 July 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 34 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 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 | |
| 99.74% |
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 | 173 | 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 Limited Duration Credit 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 | Columbia Limited Duration Credit 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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| Columbia Limited Duration Credit 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 | 171 | 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. | 173 | 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 | 171 | 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 | Columbia Limited Duration Credit 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 | 173 | 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 | 173 | 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 Limited Duration Credit 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 | Columbia Limited Duration Credit 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. |
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 41 |
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 Limited Duration Credit Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Limited Duration Credit Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund
and other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Limited Duration Credit Fund | Annual Report 2023 | 43 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed the Fund’s underperformance
for certain periods, noting that such Fund’s performance was generally consistent with expectations in light of the interrelationship of the Fund’s specific investment strategy with prevailing market
conditions.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the
| 44 | Columbia Limited Duration Credit Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
Investment Manager’s profitability. The Board reviewed the fees charged to comparable institutional or other accounts/vehicles managed by the Investment Manager and discussed differences in how the products are managed and operated, thus explaining many of the differences in fees.
(Unaudited)
Investment Manager’s profitability. The Board reviewed the fees charged to comparable institutional or other accounts/vehicles managed by the Investment Manager and discussed differences in how the products are managed and operated, thus explaining many of the differences in fees.
The Board considered the reports of
JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary
objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain
exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper
comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Limited Duration Credit 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/
ANN183_07_N01_(09/23)
Columbia Short-Term
Cash Fund
Shares of the
Fund are issued solely in private placement transactions that do not involve any public offering within the meaning of Section 4(a)(2) of the Securities Act of 1933, as amended (the 1933 Act). Investments in the Fund
may be made only by investment companies, common or commingled trust funds, or similar organizations or persons that are accredited investors within the meaning of Regulation D under the 1933 Act.
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 4 | |
| 5 | |
| 9 | |
| 10 | |
| 11 | |
| 12 | |
| 13 | |
| 21 | |
| 22 | |
| 22 | |
| 28 | |
| 29 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Short-Term Cash Fund (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 or searching the website of the 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.
Monthly schedule of portfolio
holdings
The Fund’s portfolio holdings
are filed with the SEC monthly on Form N-MFP. The Fund’s Form N-MFP filings are available on the SEC’s website at sec.gov and can be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
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 Short-Term Cash
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 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 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.
| 4 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Portfolio of Investments
July 31, 2023
July 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 Short-Term Cash Fund | Annual Report 2023 | 5 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
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 July 31, 2023, the total value of these securities amounted to $4,869,847,300, which represents 27.96% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of July 31, 2023. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Short-Term Cash Fund | Annual Report 2023 | 7 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Abbreviation Legend
| 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 July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Commercial Paper | — | 357,278,752 | — | 357,278,752 |
| Asset-Backed Securities — Non-Agency | — | 469,214,522 | — | 469,214,522 |
| Certificates of Deposit | — | 1,239,881,288 | — | 1,239,881,288 |
| Commercial Paper | — | 4,982,455,095 | — | 4,982,455,095 |
| Repurchase Agreements | — | 3,665,001,305 | — | 3,665,001,305 |
| Treasury Bills | — | 2,461,295,093 | — | 2,461,295,093 |
| U.S. Government & Agency Obligations | — | 3,077,003,310 | — | 3,077,003,310 |
| U.S. Treasury Obligations | — | 646,509,645 | — | 646,509,645 |
| Total Investments in Securities | — | 16,898,639,010 | — | 16,898,639,010 |
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.
| 8 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $13,238,275,551) | $13,233,637,705 |
| Repurchase agreements (cost $3,665,000,000) | 3,665,001,305 |
| Cash | 571,274,998 |
| Receivable for: | |
| Dividends | 299,083 |
| Interest | 25,631,066 |
| Prepaid expenses | 120,628 |
| Total assets | 17,495,964,785 |
| Liabilities | |
| Payable for: | |
| Distributions to shareholders | 77,234,780 |
| Trustees’ fees | 644,521 |
| Other expenses | 86,944 |
| Total liabilities | 77,966,245 |
| Net assets applicable to outstanding capital stock | $17,417,998,540 |
| Represented by | |
| Paid in capital | 17,422,958,141 |
| Total distributable earnings (loss) | (4,959,601) |
| Total - representing net assets applicable to outstanding capital stock | $17,417,998,540 |
| Shares outstanding | 17,423,939,837 |
| Net asset value per share | 0.9997 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Short-Term Cash Fund | Annual Report 2023 | 9 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $359,757 |
| Interest | 666,244,801 |
| Total income | 666,604,558 |
| Expenses: | |
| Trustees’ fees | 355,742 |
| Custodian fees | 74,741 |
| Shareholder reports and communication | 16,295 |
| Accounting services fees | 30,090 |
| Legal fees | 233,106 |
| Fidelity and surety fees | 86,783 |
| Commitment fees for bank credit facility | 98,311 |
| Compensation of chief compliance officer | 2,906 |
| Other | 17,207 |
| Total expenses | 915,181 |
| Net investment income | 665,689,377 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 4,758 |
| Net realized gain | 4,758 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 2,104,537 |
| Net change in unrealized appreciation (depreciation) | 2,104,537 |
| Net realized and unrealized gain | 2,109,295 |
| Net increase in net assets resulting from operations | $667,798,672 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 10 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $665,689,377 | $63,253,848 |
| Net realized gain | 4,758 | 230 |
| Net change in unrealized appreciation (depreciation) | 2,104,537 | (6,680,900) |
| Net increase in net assets resulting from operations | 667,798,672 | 56,573,178 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | (665,490,426) | (63,454,663) |
| Total distributions to shareholders | (665,490,426) | (63,454,663) |
| Increase (decrease) in net assets from capital stock activity | 392,671,933 | (3,124,617,787) |
| Total increase (decrease) in net assets | 394,980,179 | (3,131,499,272) |
| Net assets at beginning of year | 17,023,018,361 | 20,154,517,633 |
| Net assets at end of year | $17,417,998,540 | $17,023,018,361 |
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Shares sold | 74,966,237,080 | 74,936,517,047 | 94,773,615,131 | 94,747,876,135 |
| Shares redeemed | (74,573,853,486) | (74,543,845,114) | (97,898,750,207) | (97,872,493,922) |
| Total net increase (decrease) | 392,383,594 | 392,671,933 | (3,125,135,076) | (3,124,617,787) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Short-Term Cash Fund | Annual Report 2023 | 11 |
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 held for the periods shown. Total return assumes reinvestment of all dividends and
distributions, if any. Total return is 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.
| Year Ended July 31, | |||||
| 2023 | 2022 | 2021 | 2020 | 2019 | |
| Per share data | |||||
| Net asset value, beginning of period | $0.9995 | $0.9999 | $1.0000 | $0.9999 | $0.9999 |
| Income from investment operations: | |||||
| Net investment income | 0.0415 | 0.0035 | 0.0009 | 0.0132 | 0.0234 |
| Net realized and unrealized gain (loss) | 0.0001 | (0.0001) | (0.0000)(a) | 0.0001 | 0.0001 |
| Total from investment operations | 0.0416 | 0.0034 | 0.0009 | 0.0133 | 0.0235 |
| Less distributions to shareholders from: | |||||
| Net investment income | (0.0414) | (0.0038) | (0.0010) | (0.0132) | (0.0235) |
| Total distributions to shareholders | (0.0414) | (0.0038) | (0.0010) | (0.0132) | (0.0235) |
| Net asset value, end of period | $0.9997 | $0.9995 | $0.9999 | $1.0000 | $0.9999 |
| Total return | 4.22% | 0.38% | 0.10% | 1.32% | 2.37% |
| Ratios to average net assets | |||||
| Total gross expenses | 0.01% | 0.00%(a) | 0.01% | 0.00%(a) | 0.00%(a) |
| Total net expenses | 0.01% | 0.00%(a) | 0.01% | 0.00%(a) | 0.00%(a) |
| Net investment income | 4.13% | 0.35% | 0.09% | 1.32% | 2.34% |
| Supplemental data | |||||
| Net assets, end of period (in thousands) | $17,417,999 | $17,023,018 | $20,154,518 | $14,286,658 | $13,799,707 |
| Notes to Financial Highlights | |
| (a) | Rounds to zero. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Short-Term Cash Fund
(the Fund), a series of Columbia Funds Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The Trust may issue an unlimited
number of shares (without par value). Investments in the Fund may be made only by investment companies, common or commingled trust funds, or similar organizations or persons that are accredited investors within the
meaning of Regulation D under the Securities Act of 1933, as amended.
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.
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.
The Fund calculates its net asset
value to four decimals (e.g., $1.0000) using market-based pricing and operates with a floating net asset value. Although the Fund is a money market fund, the net asset value of the Fund will fluctuate with changes in
the values of the Fund’s portfolio securities. As a result, the Fund’s net asset value may be above or below $1.0000. Prior to October 1, 2016, the Fund maintained a stable net asset 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.
Repurchase agreements
The Fund may invest in repurchase
agreement transactions with institutions that management has determined are creditworthy. The Fund, through the custodian, receives delivery of the underlying securities collateralizing a repurchase agreement.
Management is responsible for determining that the collateral is at least equal, at all times, to the value of the
| Columbia Short-Term Cash Fund | Annual Report 2023 | 13 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays in or restrictions on the Fund’s ability to dispose of the
underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights.
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.
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 July 31, 2023:
| Federal Reserve Bank ($) | RBC Dominion Securities ($) | TD Securities ($) | Total ($) | |
| Assets | ||||
| Repurchase agreements | 3,365,000,000 | 200,000,833 | 100,000,472 | 3,665,001,305 |
| Total financial and derivative net assets | 3,365,000,000 | 200,000,833 | 100,000,472 | 3,665,001,305 |
| Total collateral received (pledged) (a) | 3,365,000,000 | 200,000,833 | 100,000,472 | 3,665,001,305 |
| 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
Dividend income is recorded on the
ex-dividend date.
Interest income, including
amortization of premium and discount, is recognized daily.
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.
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.
| 14 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 after the fiscal year in which the capital gains were earned, unless offset by any available
capital loss carryforward. 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 pronouncements and
regulatory updates
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 amendments.
Money Market Fund Reforms
In July 2023, the Securities and
Exchange Commission (SEC) adopted amendments to certain rules that govern money market funds under the Investment Company Act of 1940. The amendments increase the daily liquid asset and weekly liquid asset
minimum requirements. In addition, effective October 2, 2023, the amendments remove provisions from the current rule that permit the Fund to temporarily suspend redemptions and to impose liquidity fees if weekly
assets fall below a certain threshold. The amendments will also require the Fund to impose, by October 2024, a mandatory liquidity fee when the Fund experiences daily net redemptions that exceed five percent of
net assets, unless the liquidity costs are de minimis. The Fund will be required to impose a discretionary liquidity fee of up to 2% if the Fund’s Board or its delegate determines that a fee is in the best
interest of the Fund. The rule amendments will become effective 60 days after publication in the Federal Register with a tiered transition period for the Fund to comply with the amendments.
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, subject
to the policies set by the Board of Trustees, the Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Fund does not pay a management fee for
the investment advisory or administrative services provided to the Fund, but it may pay taxes, brokerage commissions and nonadvisory expenses.
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
| Columbia Short-Term Cash Fund | Annual Report 2023 | 15 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 "Trustees’ fees" 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
The Fund has a Transfer and
Dividend Disbursing Agent Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, under which
the Fund does not pay an annual fee to the Transfer Agent.
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.
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 July 31, 2023, these differences
were primarily due to differing treatment for trustees’ deferred compensation, distributions 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:
| Excess of distributions over net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 4,758 | (4,758) | — |
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 July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 665,490,426 | — | 665,490,426 | 63,454,663 | — | 63,454,663 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized (depreciation) ($) |
| 77,548,699 | — | — | (4,636,542) |
| 16 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
At July 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) ($) | Net unrealized (depreciation) ($) |
| 16,903,275,552 | 216,125 | (4,852,667) | (4,636,542) |
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. 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.
As noted above, the Fund may only
participate in the Interfund Program as a lending fund. The Fund did not lend money under the Interfund Program during the year ended July 31, 2023.
Note 6. 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 disclosed as Commitment fees for bank credit facility 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 July 31, 2023.
| Columbia Short-Term Cash Fund | Annual Report 2023 | 17 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Note 7. 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.
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve heightened risks relative to investments in U.S. securities. Investing in foreign securities subjects the Fund to the risks associated with the issuer’s country of organization and places of business
operations, including risks associated with political, regulatory, economic, social, diplomatic and other conditions or events occurring in the country or region, which may result in significant market volatility. In
addition, certain foreign securities may be more volatile and less liquid than U.S. securities. Investing in emerging markets may increase these risks and expose the Fund to elevated risks associated with increased
inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any one or a few specific countries, the Fund will be particularly susceptible to the risks associated
with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater risk than that of a fund that is more geographically diversified. The financial information and
disclosure made available by issuers of emerging market securities may be considerably less reliable than publicly available information about other foreign securities. The Public Company Accounting Oversight Board,
which regulates auditors of U.S. public companies, is unable to inspect audit work papers in certain foreign countries. Investors in foreign countries often have limited rights and few practical remedies to pursue
shareholder claims, including class actions or fraud claims, and the ability of the U.S. Securities and Exchange Commission, the U.S. Department of Justice and other authorities to bring and enforce actions against
foreign issuers or foreign persons is limited.
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.
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
| 18 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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.
Money market fund risk
At times of (i) significant
redemption activity by shareholders, including, for example, when a single investor or a few large investors make a significant redemption of Fund shares, (ii) insufficient levels of cash in the Fund’s portfolio
to satisfy redemption activity, and (iii) disruption in the normal operation of the markets in which the Fund buys and sells portfolio securities, the Fund could be forced to sell portfolio securities at unfavorable
prices in order to generate sufficient cash to pay redeeming shareholders. Sales of portfolio securities at such times could result in losses to the Fund. In addition, neither the Investment Manager nor any of its
affiliates has a legal obligation to provide financial support to the Fund, and you should not expect that they or any person will provide financial support to the Fund at any time. The Fund may suspend redemptions or
the payment of redemption proceeds when permitted by applicable regulations.
If, at any time, the Fund’s
weekly liquid assets fall below 30% of its total assets and the Board of Trustees determines it is in the best interests of the Fund, the Fund may, as early as the same day and at any time during the day, impose a fee
of up to 2% of the value of all shares redeemed and/or temporarily suspend redemptions (sometimes referred to as imposing redemption gates) for up to 10 business days. If, at the end of any business day, the
Fund’s weekly liquid assets fall below 10% of its total assets, the Fund must impose a fee, as of the beginning of the next business day, of 1% of the value of all shares redeemed, unless the Board of Trustees
determines that imposing such a fee is not in the best interests of the Fund or the Board of Trustees determines that a lower or higher fee (not to exceed 2% of the value of all shares redeemed) would be in the best
interests of the Fund. These determinations may affect the composition of the investment portfolio, performance and operating expenses of the Fund.
Shareholder concentration risk
At July 31, 2023, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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 8. 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 9. 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 Short-Term Cash Fund | Annual Report 2023 | 19 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 provide services to
the Fund.
| 20 | Columbia Short-Term Cash 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 Short-Term Cash Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Short-Term Cash Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as of
July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended July 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 July 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 July 31, 2023 and
the financial highlights for each of the five years in the period ended July 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 July 31, 2023 by correspondence with the custodian 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Short-Term Cash Fund | Annual Report 2023 | 21 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 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 | |
| 100.00% |
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 | 173 | 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 |
| 22 | Columbia Short-Term Cash 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 Short-Term Cash Fund | Annual Report 2023 | 23 |
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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| 24 | Columbia Short-Term Cash 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 | 171 | 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. | 173 | 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 | 171 | 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 Short-Term Cash Fund | Annual Report 2023 | 25 |
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 | 173 | 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 | 173 | 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 or contacting your financial intermediary.
| 26 | Columbia Short-Term Cash 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 Short-Term Cash Fund | Annual Report 2023 | 27 |
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.
| 28 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Short-Term Cash Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and
other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund; |
| • | Information on the Fund’s management fees and total expenses; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
Following an analysis and
discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
| Columbia Short-Term Cash Fund | Annual Report 2023 | 29 |
Approval of Management Agreement (continued)
(Unaudited)
The Board specifically considered the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
(Unaudited)
The Board specifically considered the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
In this connection, the Board
carefully reviewed the investment performance of the Fund for various periods (including since manager inception) and the net assets of the Fund for various periods. The Board observed that the Fund’s investment
performance met expectations.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data showing the Fund’s contribution to the Investment Manager’s profitability.
The Board considered the reports of
JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary
objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain
exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper
comparison universe.
The Board observed that the Fund,
commonly referred to as a “cash pool fund,” was established for the exclusive use of managing the cash positions of other funds managed by Columbia Threadneedle Investments and, because the Investment
Manager collects management fees on funds that invest in the Fund, the Fund does not pay management fees. The Board also noted that the Fund does not pay transfer agency or distribution fees.
| 30 | Columbia Short-Term Cash Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the Management Agreement.
(Unaudited)
After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs
of services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
Because the Fund does not pay
management fees, the Board did not believe it necessary to consider potential economies of scale associated with the growth of the Fund.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Short-Term Cash Fund | Annual Report 2023 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. 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.
ANN224_07_N01_(09/23)
Columbia Government
Money Market Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 27 | |
| 28 | |
| 28 | |
| 34 | |
| 35 |
If you elect to receive the
shareholder report for Columbia Government Money Market 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.
Monthly schedule of portfolio
holdings
The Fund’s portfolio holdings
are filed with the SEC monthly on Form N-MFP. The Fund’s Form N-MFP filings are available on the SEC’s website at sec.gov and can 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 Government Money Market
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with maximum current income consistent with liquidity and stability of principal.
| Columbia Government Money Market Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio breakdown (%) (at July 31, 2023) | |
| Repurchase Agreements | 15.2 |
| Treasury Bills | 37.7 |
| U.S. Government & Agency Obligations | 44.1 |
| U.S. Treasury Obligations | 3.0 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Government Money Market 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.
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.
From time to time, the Investment
Manager and its affiliates may waive fees and/or reimburse certain expenses of the Fund so that Fund level expenses (expenses directly attributable to the Fund and not to a specific share class) are waived
proportionately across all share classes. This arrangement may be revised or terminated at any time without notice. Had the Investment Manager and its affiliates not waived fees and/or reimbursed the expenses of the
Fund during the six months ended July 31, 2023, the annualized expense ratios would have been 0.35% for Institutional Class. The actual expenses paid would have been $1.76 for Institutional Class; the hypothetical
expenses paid would have been $1.76 for Institutional Class.
Other share classes may have had
expense waiver/reimbursement changes; however, the changes were not considered material.
| Columbia Government Money Market Fund | Annual Report 2023 | 5 |
Portfolio of Investments
July 31, 2023
July 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.
| 6 | Columbia Government Money Market Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Notes to Portfolio of
Investments
| (a) | Variable rate security. The interest rate shown was the current rate as of July 31, 2023. |
Abbreviation Legend
| 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.
Short-term securities are
valued using amortized cost, as permitted under Rule 2a-7 of the Investment Company Act of 1940, as amended. Generally, amortized cost approximates the current fair value of these securities, but because the value is
not obtained from a quoted price in an active market, such securities are reflected as Level 2.
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 Government Money Market Fund | Annual Report 2023 | 7 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at July 31, 2023:
The following table is a summary of the inputs used to value the Fund’s investments at July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Repurchase Agreements | — | 175,000,000 | — | 175,000,000 |
| Treasury Bills | — | 436,376,711 | — | 436,376,711 |
| U.S. Government & Agency Obligations | — | 510,260,780 | — | 510,260,780 |
| U.S. Treasury Obligations | — | 35,001,087 | — | 35,001,087 |
| Total Investments in Securities | — | 1,156,638,578 | — | 1,156,638,578 |
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 represent certain short-term obligations which are valued using amortized cost, an income approach which converts future cash flows to a present value based upon the discount or premium at
purchase.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Columbia Government Money Market Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $981,638,578) | $981,638,578 |
| Repurchase agreements (cost $175,000,000) | 175,000,000 |
| Cash | 17,492,820 |
| Receivable for: | |
| Capital shares sold | 9,072,556 |
| Interest | 1,960,282 |
| Expense reimbursement due from Investment Manager | 16,420 |
| Prepaid expenses | 12,588 |
| Total assets | 1,185,193,244 |
| Liabilities | |
| Payable for: | |
| Capital shares redeemed | 2,613,005 |
| Distributions to shareholders | 4,861,877 |
| Management services fees | 31,149 |
| Transfer agent fees | 55,719 |
| Trustees’ fees | 206,840 |
| Other expenses | 73,106 |
| Total liabilities | 7,841,696 |
| Net assets applicable to outstanding capital stock | $1,177,351,548 |
| Represented by | |
| Paid in capital | 1,177,636,402 |
| Total distributable earnings (loss) | (284,854) |
| Total - representing net assets applicable to outstanding capital stock | $1,177,351,548 |
| Class A | |
| Net assets | $470,303,827 |
| Shares outstanding | 470,272,539 |
| Net asset value per share | $1.00 |
| Class C | |
| Net assets | $15,048,186 |
| Shares outstanding | 15,051,959 |
| Net asset value per share | $1.00 |
| Institutional Class | |
| Net assets | $165,022,392 |
| Shares outstanding | 165,060,048 |
| Net asset value per share | $1.00 |
| Institutional 2 Class | |
| Net assets | $459,642,885 |
| Shares outstanding | 459,660,732 |
| Net asset value per share | $1.00 |
| Institutional 3 Class | |
| Net assets | $63,299,844 |
| Shares outstanding | 63,316,385 |
| Net asset value per share | $1.00 |
| Class R | |
| Net assets | $4,034,414 |
| Shares outstanding | 4,034,537 |
| Net asset value per share | $1.00 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Government Money Market Fund | Annual Report 2023 | 9 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $10,007 |
| Interest | 34,988,102 |
| Total income | 34,998,109 |
| Expenses: | |
| Management services fees | 2,695,687 |
| Transfer agent fees | |
| Class A | 553,263 |
| Class C | 22,346 |
| Institutional Class | 132,976 |
| Institutional 2 Class | 116,550 |
| Institutional 3 Class | 5,746 |
| Class R | 5,244 |
| Trustees’ fees | 51,839 |
| Custodian fees | 13,323 |
| Printing and postage fees | 172,097 |
| Registration fees | 179,532 |
| Accounting services fees | 30,090 |
| Legal fees | 23,657 |
| Compensation of chief compliance officer | 140 |
| Other | 21,670 |
| Total expenses | 4,024,160 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (1,458,051) |
| Expense reduction | (2,501) |
| Total net expenses | 2,563,608 |
| Net investment income | 32,434,501 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (31,343) |
| Net realized loss | (31,343) |
| Net realized and unrealized loss | (31,343) |
| Net increase in net assets resulting from operations | $32,403,158 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 10 | Columbia Government Money Market Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $32,434,501 | $938,103 |
| Net realized gain (loss) | (31,343) | 11,112 |
| Net increase in net assets resulting from operations | 32,403,158 | 949,215 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (16,271,550) | (612,241) |
| Class C | (613,947) | (26,485) |
| Institutional Class | (4,081,752) | (153,207) |
| Institutional 2 Class | (9,058,021) | (129,098) |
| Institutional 3 Class | (2,268,883) | (120,536) |
| Class R | (146,439) | (6,600) |
| Total distributions to shareholders | (32,440,592) | (1,048,167) |
| Increase in net assets from capital stock activity | 567,629,305 | 90,311,602 |
| Total increase in net assets | 567,591,871 | 90,212,650 |
| Net assets at beginning of year | 609,759,677 | 519,547,027 |
| Net assets at end of year | $1,177,351,548 | $609,759,677 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Government Money Market Fund | Annual Report 2023 | 11 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 401,232,824 | 401,232,825 | 122,477,570 | 122,477,570 |
| Distributions reinvested | 15,932,946 | 15,932,946 | 597,837 | 597,837 |
| Shares redeemed | (314,340,365) | (314,340,366) | (114,573,092) | (114,573,093) |
| Net increase | 102,825,405 | 102,825,405 | 8,502,315 | 8,502,314 |
| Class C | ||||
| Shares sold | 11,798,401 | 11,798,402 | 15,149,503 | 15,149,502 |
| Distributions reinvested | 605,282 | 605,282 | 26,015 | 26,015 |
| Shares redeemed | (15,038,551) | (15,038,552) | (8,307,486) | (8,307,486) |
| Net increase (decrease) | (2,634,868) | (2,634,868) | 6,868,032 | 6,868,031 |
| Institutional Class | ||||
| Shares sold | 135,620,457 | 135,620,457 | 42,765,056 | 42,765,056 |
| Distributions reinvested | 4,011,279 | 4,011,279 | 150,864 | 150,864 |
| Shares redeemed | (66,422,424) | (66,422,423) | (36,762,655) | (36,762,655) |
| Net increase | 73,209,312 | 73,209,313 | 6,153,265 | 6,153,265 |
| Institutional 2 Class | ||||
| Shares sold | 443,335,707 | 443,335,707 | 86,490,850 | 86,490,850 |
| Distributions reinvested | 9,058,000 | 9,058,001 | 129,098 | 129,098 |
| Shares redeemed | (64,661,319) | (64,661,320) | (22,337,086) | (22,337,086) |
| Net increase | 387,732,388 | 387,732,388 | 64,282,862 | 64,282,862 |
| Institutional 3 Class | ||||
| Shares sold | 54,964,716 | 54,964,715 | 58,820,671 | 58,820,670 |
| Distributions reinvested | 2,268,484 | 2,268,484 | 120,527 | 120,527 |
| Shares redeemed | (50,952,934) | (50,952,934) | (52,869,413) | (52,869,413) |
| Net increase | 6,280,266 | 6,280,265 | 6,071,785 | 6,071,784 |
| Class R | ||||
| Shares sold | 3,022,001 | 3,022,001 | 1,797,153 | 1,797,154 |
| Distributions reinvested | 145,753 | 145,753 | 6,533 | 6,533 |
| Shares redeemed | (2,950,952) | (2,950,952) | (3,370,341) | (3,370,341) |
| Net increase (decrease) | 216,802 | 216,802 | (1,566,655) | (1,566,654) |
| Total net increase | 567,629,305 | 567,629,305 | 90,311,604 | 90,311,602 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Government Money Market 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, and is
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.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class A | |||||||
| Year Ended 7/31/2023 | $1.00 | 0.04 | (0.00)(b) | 0.04 | (0.04) | — | (0.04) |
| Year Ended 7/31/2022 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 7/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Year Ended 7/31/2020 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | (0.00)(b) | (0.01) |
| Year Ended 7/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | — | (0.02) |
| Class C | |||||||
| Year Ended 7/31/2023 | $1.00 | 0.04 | (0.00)(b) | 0.04 | (0.04) | — | (0.04) |
| Year Ended 7/31/2022 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 7/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Year Ended 7/31/2020 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | (0.00)(b) | (0.01) |
| Year Ended 7/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | — | (0.02) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $1.00 | 0.04 | (0.00)(b) | 0.04 | (0.04) | — | (0.04) |
| Year Ended 7/31/2022 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 7/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Year Ended 7/31/2020 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | (0.00)(b) | (0.01) |
| Year Ended 7/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | — | (0.02) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $1.00 | 0.04 | (0.00)(b) | 0.04 | (0.04) | — | (0.04) |
| Year Ended 7/31/2022 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 7/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Year Ended 7/31/2020 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | (0.00)(b) | (0.01) |
| Year Ended 7/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | — | (0.02) |
| Institutional 3 Class | |||||||
| Year Ended 7/31/2023 | $1.00 | 0.04 | (0.00)(b) | 0.04 | (0.04) | — | (0.04) |
| Year Ended 7/31/2022 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 7/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Year Ended 7/31/2020 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | (0.00)(b) | (0.01) |
| Year Ended 7/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | — | (0.02) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Government Money Market Fund | Annual Report 2023 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets | Total net expense ratio to average net assets(a) | Net investment income ratio to average net assets | Net assets, end of period (000’s) | |
| Class A | ||||||
| Year Ended 7/31/2023 | $1.00 | 3.76% | 0.52% | 0.34%(c) | 3.79% | $470,304 |
| Year Ended 7/31/2022 | $1.00 | 0.17% | 0.61% | 0.17%(c),(d) | 0.15% | $367,496 |
| Year Ended 7/31/2021 | $1.00 | 0.01% | 0.63% | 0.08%(c),(d) | 0.01% | $359,058 |
| Year Ended 7/31/2020 | $1.00 | 0.90% | 0.63% | 0.39%(c),(d) | 0.82% | $395,640 |
| Year Ended 7/31/2019 | $1.00 | 1.83% | 0.65% | 0.50% | 1.83% | $380,309 |
| Class C | ||||||
| Year Ended 7/31/2023 | $1.00 | 3.76% | 0.52% | 0.35%(c) | 3.63% | $15,048 |
| Year Ended 7/31/2022 | $1.00 | 0.16% | 0.61% | 0.20%(c),(d) | 0.20% | $17,684 |
| Year Ended 7/31/2021 | $1.00 | 0.01% | 0.63% | 0.08%(c),(d) | 0.01% | $10,818 |
| Year Ended 7/31/2020 | $1.00 | 0.90% | 0.62% | 0.34%(c),(d) | 0.58% | $16,598 |
| Year Ended 7/31/2019 | $1.00 | 1.83% | 0.65% | 0.50% | 1.85% | $7,541 |
| Institutional Class | ||||||
| Year Ended 7/31/2023 | $1.00 | 3.76% | 0.51% | 0.34%(c) | 3.83% | $165,022 |
| Year Ended 7/31/2022 | $1.00 | 0.17% | 0.61% | 0.17%(c),(d) | 0.15% | $91,817 |
| Year Ended 7/31/2021 | $1.00 | 0.01% | 0.63% | 0.08%(c),(d) | 0.01% | $85,679 |
| Year Ended 7/31/2020 | $1.00 | 0.90% | 0.63% | 0.37%(c),(d) | 0.74% | $94,458 |
| Year Ended 7/31/2019 | $1.00 | 1.83% | 0.65% | 0.50% | 1.82% | $69,331 |
| Institutional 2 Class | ||||||
| Year Ended 7/31/2023 | $1.00 | 3.84% | 0.44% | 0.26% | 4.36% | $459,643 |
| Year Ended 7/31/2022 | $1.00 | 0.20% | 0.49% | 0.25%(d) | 0.45% | $71,925 |
| Year Ended 7/31/2021 | $1.00 | 0.01% | 0.52% | 0.07%(d) | 0.01% | $7,647 |
| Year Ended 7/31/2020 | $1.00 | 1.00% | 0.51% | 0.29%(d) | 0.82% | $8,354 |
| Year Ended 7/31/2019 | $1.00 | 1.96% | 0.52% | 0.36% | 2.06% | $4,674 |
| Institutional 3 Class | ||||||
| Year Ended 7/31/2023 | $1.00 | 3.88% | 0.40% | 0.22% | 3.82% | $63,300 |
| Year Ended 7/31/2022 | $1.00 | 0.21% | 0.46% | 0.13%(d) | 0.20% | $57,021 |
| Year Ended 7/31/2021 | $1.00 | 0.01% | 0.47% | 0.08%(d) | 0.01% | $50,960 |
| Year Ended 7/31/2020 | $1.00 | 1.04% | 0.46% | 0.26%(d) | 0.97% | $63,239 |
| Year Ended 7/31/2019 | $1.00 | 2.02% | 0.47% | 0.31% | 2.06% | $69,061 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Government Money Market Fund | Annual Report 2023 | 15 |
Financial Highlights (continued)
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class R | |||||||
| Year Ended 7/31/2023 | $1.00 | 0.04 | (0.00)(b) | 0.04 | (0.04) | — | (0.04) |
| Year Ended 7/31/2022 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 7/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Year Ended 7/31/2020 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | (0.00)(b) | (0.01) |
| Year Ended 7/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | — | (0.02) |
| Notes to Financial Highlights | |
| (a) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (b) | Rounds to zero. |
| (c) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (d) | Ratios include the impact of voluntary waivers paid by the Investment Manager. For the periods indicated below, if the Investment Manager had not paid these voluntary waivers, the Fund’s net expense ratio would increase by: |
| 7/31/2022 | 7/31/2021 | 7/31/2020 | |
| Class A | 0.24% | 0.36% | 0.08% |
| Class C | 0.21% | 0.36% | 0.11% |
| Institutional Class | 0.24% | 0.36% | 0.09% |
| Institutional 2 Class | 0.04% | 0.27% | 0.06% |
| Institutional 3 Class | 0.13% | 0.21% | 0.03% |
| Class R | 0.26% | 0.37% | 0.09% |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Government Money Market Fund | Annual Report 2023 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets | Total net expense ratio to average net assets(a) | Net investment income ratio to average net assets | Net assets, end of period (000’s) | |
| Class R | ||||||
| Year Ended 7/31/2023 | $1.00 | 3.76% | 0.52% | 0.34%(c) | 3.67% | $4,034 |
| Year Ended 7/31/2022 | $1.00 | 0.17% | 0.61% | 0.15%(c),(d) | 0.12% | $3,818 |
| Year Ended 7/31/2021 | $1.00 | 0.01% | 0.63% | 0.07%(c),(d) | 0.01% | $5,385 |
| Year Ended 7/31/2020 | $1.00 | 0.90% | 0.63% | 0.37%(c),(d) | 0.72% | $4,606 |
| Year Ended 7/31/2019 | $1.00 | 1.82% | 0.65% | 0.50% | 1.84% | $2,917 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Government Money Market Fund | Annual Report 2023 | 17 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Government Money Market
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. Institutional Class, Institutional 2 Class, Institutional
3 Class and Class R shares are available 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
Certain securities in the Fund are
valued utilizing the amortized cost valuation method permitted in accordance with Rule 2a-7 under the 1940 Act provided certain conditions are met, including that the Board of Trustees continues to believe that the
amortized cost valuation method fairly reflects the market-based net asset value per share of the Fund. This method involves valuing a portfolio security initially at its cost and thereafter assuming a constant
accretion or amortization to maturity of any discount or premium, respectively. The Board of Trustees has established procedures intended to stabilize the Fund’s net asset value for purposes of purchases and
redemptions of Fund shares at $1.00 per share. These procedures include determinations, at such intervals as the Board of Trustees deems appropriate and reasonable in light of current market conditions, of the extent,
if any, to which the Fund’s market-based net asset value deviates from $1.00 per share. In the event such deviation exceeds 1/2 of 1%, the Board of Trustees will promptly consider what action, if any, should be
initiated.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Repurchase agreements
The Fund may invest in repurchase
agreement transactions with institutions that management has determined are creditworthy. The Fund, through the custodian, receives delivery of the underlying securities collateralizing a repurchase agreement.
Management is responsible for determining that the collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in
the event of default or
| 18 | Columbia Government Money Market Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
insolvency of the counterparty. These risks
include possible delays in or restrictions on the Fund’s ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to
assert its rights.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of July 31, 2023:
| RBC Dominion Securities ($) | TD Securities ($) | Total ($) | |
| Assets | |||
| Repurchase agreements | 105,000,000 | 70,000,000 | 175,000,000 |
| Total financial and derivative net assets | 105,000,000 | 70,000,000 | 175,000,000 |
| Total collateral received (pledged) (a) | 105,000,000 | 70,000,000 | 175,000,000 |
| 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
Dividend income is recorded on the
ex-dividend date.
Interest income, including
amortization of premium and discount, is recognized daily.
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 after the fiscal year in which the capital gains were earned or more frequently to seek to
maintain a net asset value of $1.00 per share, unless such capital gains are offset by any available capital loss carryforward. Income distributions and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP.
| Columbia Government Money Market Fund | Annual Report 2023 | 19 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 amendments.
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 0.33% to 0.12% as the Fund’s net assets increase. The effective management services fee rate for the year ended July 31, 2023 was 0.33% 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 "Trustees’ fees" 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
| 20 | Columbia Government Money Market Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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 |
| Class C | 0.13 |
| Institutional Class | 0.12 |
| 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 July 31, 2023, these minimum account balance fees reduced total expenses of
the Fund by $2,501.
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 an annual rate of up to 0.10% of the Fund’s average daily net assets attributable to Class A shares, and a fee at an annual rate of up
to 0.75% and 0.50% of the Fund’s average daily net assets attributable to Class C and Class R shares, respectively. For the year ended July 31, 2023, the Fund did not pay fees for Class A, Class C and Class
R shares. The contractual fee suspension on Class A, Class C and Class R shares is effective through November 30, 2023.
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $370,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or Contingent Deferred Sales Charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
CDSCs received by the Distributor
for distributing Fund shares for the year ended July 31, 2023, if any, are listed below. These CDSCs are from the sale of shares issued by the Fund in exchange for shares of a non-money market fund subject to a CDSC
that were subsequently redeemed within the CDSC timeframe imposed from the original purchase.
| Columbia Government Money Market Fund | Annual Report 2023 | 21 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | — | — | 9,678 |
| Class C | — | — | 2,147 |
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. In addition, from time to time, the Investment Manager and its affiliates may waive or absorb expenses of
the Fund with the intent of allowing the Fund to avoid a negative net yield or to increase the Fund’s positive net yield. The Fund’s yield would be negative if Fund expenses exceed Fund income. Any such
expense limitation is voluntary and may be revised or terminated at any time without notice to shareholders and, accordingly, any positive net yield resulting therefrom will cease. In addition to the contractual
agreement, the Investment Manager and certain of its affiliates have voluntarily agreed to waive fees and/or reimburse Fund expenses (excluding certain fees and expenses described above) so that Fund level expenses
(expenses directly attributable to the Fund and not to a specific share class) are waived proportionately across all share classes. This arrangement may be revised or discontinued at any time. 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. The contractual expense cap includes distribution and
shareholder services fees. As discussed above, the distribution and/or shareholder services fee is not charged to Class A, Class C and Class R shares.
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 July 31, 2023, these differences
were primarily due to differing treatment for 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.
The Fund did not have any permanent
differences; therefore, no reclassifications were made.
| 22 | Columbia Government Money Market Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 32,440,592 | — | 32,440,592 | 1,040,011 | 8,156 | 1,048,167 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized appreciation ($) |
| 4,814,288 | — | (31,343) | — |
At July 31, 2023, the cost of all
investments for federal income tax purposes was $1,156,638,578. Tax cost of investments may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at July 31, 2023, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended July 31,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (31,343) | — | (31,343) | — |
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. 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.
As noted above, the Fund may only
participate in the Interfund Program as a lending fund. The Fund did not lend money under the Interfund Program during the year ended July 31, 2023.
Note 6. 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
| Columbia Government Money Market Fund | Annual Report 2023 | 23 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 July 31, 2023.
Note 7. 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.
Government money market fund risk
Although government money market
funds (such as the Fund) may seek to preserve the value of shareholders’ investment at $1.00 per share, the net asset values of such money market fund shares can fall, and in infrequent cases in the past have
fallen, below $1.00 per share, potentially causing shareholders who redeem their shares at such net asset values to lose money from their original investment.
At times of (i) significant
redemption activity by shareholders, including, for example, when a single investor or a few large investors make a significant redemption of Fund shares, (ii) insufficient levels of cash in the Fund’s portfolio
to satisfy redemption activity, and (iii) disruption in the normal operation of the markets in which the Fund buys and sells portfolio securities, the Fund could be forced to sell portfolio securities at unfavorable
prices in order to generate sufficient cash to pay redeeming shareholders. Sales of portfolio securities at such times could result in losses to the Fund and cause the net asset value of Fund shares to fall below
$1.00 per share. Additionally, in some cases, the default of a single portfolio security could cause the net asset value of Fund shares to fall below $1.00 per share. In addition, neither the Investment Manager nor
any of its affiliates has a legal obligation to provide financial support to the Fund, and you should not expect that they or any person will provide financial support to the Fund at any time. The Fund may suspend
redemptions or the payment of redemption proceeds when permitted by applicable regulations.
It is possible that, during periods
of low prevailing interest rates or otherwise, the income from portfolio securities may be less than the amount needed to pay ongoing Fund operating expenses and may prevent payment of any dividends or distributions
to Fund shareholders or cause the net asset value of Fund shares to fall below $1.00 per share. In such cases, the Fund may reduce or eliminate the payment of such dividends or distributions or seek to reduce certain
of its operating expenses. There is no guarantee that such actions would enable the Fund to maintain a constant net asset value of $1.00 per share.
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.
| 24 | Columbia Government Money Market Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 July 31, 2023, affiliated
shareholders of record owned 54.0% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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 8. 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 9. 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
| Columbia Government Money Market Fund | Annual Report 2023 | 25 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 provide services to the Fund.
| 26 | Columbia Government Money Market 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 Government Money Market Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Government Money Market Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund")
as of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related
notes, and the financial highlights for each of the five years in the period ended July 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 July 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 July
31, 2023 and the financial highlights for each of the five years in the period ended July 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 July 31, 2023 by correspondence with the custodian 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Government Money Market Fund | Annual Report 2023 | 27 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 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 | |
| 99.95% |
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 | 173 | 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 |
| 28 | Columbia Government Money Market 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 Government Money Market 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 |
| 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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| 30 | Columbia Government Money Market 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 | 171 | 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. | 173 | 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 | 171 | 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 Government Money Market 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 |
| 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 | 173 | 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 | 173 | 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.
| 32 | Columbia Government Money Market 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 Government Money Market Fund | Annual Report 2023 | 33 |
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.
| 34 | Columbia Government Money Market Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Government Money Market Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund
and other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Government Money Market Fund | Annual Report 2023 | 35 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and (iii) the net assets of the Fund. The Board observed that Fund performance was well within the range
of that of its peers.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the Investment Manager’s profitability.
| 36 | Columbia Government Money Market Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
(Unaudited)
The Board considered the reports of JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Government Money Market Fund | Annual Report 2023 | 37 |
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/
ANN200_07_N01_(09/23)
Columbia Minnesota
Tax-Exempt Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 40 | |
| 40 | |
| 46 | |
| 47 |
If you elect to receive the
shareholder report for Columbia Minnesota Tax-Exempt 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 Minnesota Tax-Exempt
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders with a high level of income generally exempt from federal income tax as well as from Minnesota state and local tax.
Portfolio management
Douglas White, CFA
Lead Portfolio Manager
Managed Fund since 2018
Catherine Stienstra
Portfolio Manager
Managed Fund since 2007
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Minnesota Tax-Exempt 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.
| Quality breakdown (%) (at July 31, 2023) | |
| AAA rating | 16.4 |
| AA rating | 28.8 |
| A rating | 20.7 |
| BBB rating | 11.6 |
| BB rating | 6.0 |
| Not rated | 16.5 |
| Total | 100.0 |
Percentages indicated are based
upon total fixed income investments.
Bond ratings apply to the underlying
holdings of the Fund and not the Fund itself and are divided into categories ranging from highest to lowest credit quality, determined by using the middle rating of Moody’s, S&P and Fitch, after dropping the
highest and lowest available ratings. When ratings are available from only two rating agencies, the lower rating is used. When a rating is available from only one rating agency, that rating is used. If a security is
not rated but has a rating by Kroll and/or DBRS, the same methodology is applied to those bonds that would otherwise be not rated. When a bond is not rated by any rating agency, it is designated as “Not
rated.” Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily. The ratings assigned by credit rating agencies are but one
of the considerations that the Investment Manager and/or Fund’s subadviser incorporates into its credit analysis process, along with such other issuer-specific factors as cash flows, capital structure and
leverage ratios, ability to de-leverage (repay) through free cash flow, quality of management, market positioning and access to capital, as well as such security-specific factors as the terms of the security (e.g.,
interest rate and time to maturity) and the amount and type of any collateral.
| 4 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended July 31, 2023, Class A shares of Columbia Minnesota Tax-Exempt Fund returned -2.06% excluding sales charges. Institutional Class shares of the Fund returned -1.86%. The Fund’s benchmark, the Bloomberg
Minnesota Municipal Bond Index returned 0.63% and the national municipal bond market, as measured by the Bloomberg Municipal Bond Index, returned 0.93%.
Market overview
The U.S. bond market posted
negative returns in the reporting period. Persistent inflation, stronger-than-expected economic growth and a tight labor market prompted the U.S. Federal Reserve (Fed) to raise interest rates aggressively. The federal
funds target rate stood in a range of 5.25-5.50% at the end of July 2023, up from 2.25% -2.50% a year earlier. The Fed’s aggressive approach weighed heavily on the fixed-income market, with the impact of falling
prices outweighing the contribution from yield.
The Bloomberg Minnesota Municipal
Bond Index slightly underperformed the Bloomberg Municipal Bond Index for the period. The State of Minnesota continued to benefit from favorable economic fundamentals, which contributed to a strong outlook for
the state budget heading into the 2024 fiscal year. In the lead-up to the budget process, the state was sitting on a record high $15.5 billion in budget reserves, equivalent to 26% of revenues. Minnesota’s
economy is underpinned by income levels above the national median, high educational attainment, and one of the lowest unemployment rates in the nation. It also benefits from a diverse economic landscape, with the Twin
Cities metro area registering the highest number of Fortune 500 companies per capita in the United States. However, one emerging headwind is that recent negative net population migration could challenge
employers’ ability to find enough workers over time.
The Fund’s notable
detractors during the period
| • | The Fund maintained a duration (interest rate sensitivity) longer than that of the benchmark, with a focus on longer maturities that offered relatively higher income. This positioning was largely based on management’s view that a downturn in economic growth would cause interest rates to fall (leading to price appreciation). Economic growth reaccelerated in late 2022, however, causing rates to rise and adversely affecting Fund performance. While the Fund’s longer duration helped results from the beginning of 2023 through the end of the period, the benefit was insufficient to offset the earlier shortfall. |
| • | A position in the bonds of the Puerto Rico Electric Power Authority (PREPA) was a key detractor. The utility company entered bankruptcy in July 2017 with just over $8 billion in outstanding debt. In late June, the bankruptcy court issued a surprise ruling that bondholders can claim a percentage of the outstanding debt’s value that was much lower than expected. Bondholders have begun to work on an appeal. |
| • | Overweight positions in below-investment-grade bonds also detracted, as did overweights in the charter schools and senior care sectors. Security selection in 17-year and longer maturities and in AA and A rated bonds detracted, as well. |
The Fund’s notable
contributors during the period
| • | Overweight positions in municipal bonds with maturities of 12 years and longer, which outperformed the broader market, helped results. |
| • | Overweights in A and BBB rated issues also aided relative performance, as did an underweight in state general obligation debt. |
Fixed-income securities present
issuer default risk. The Fund invests substantially in municipal securities and will be affected by tax, legislative, regulatory, demographic or political changes, as well as changes impacting a state’s financial, economic or other
conditions. A relatively small number of tax-exempt issuers may necessitate the Fund investing more heavily in a single issuer and, therefore, being more exposed to the risk of loss than a fund that invests more
broadly. The value of the Fund’s portfolio may be more volatile than a more geographically diversified fund. 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. 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. Market risk may affect a single issuer, sector of the economy, industry or
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
the market as a whole. Federal and state tax rules apply to capital gain distributions and any gains or losses on sales. Income may be subject to state or local taxes. 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 Minnesota Tax-Exempt 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 Minnesota Tax-Exempt Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Minnesota Tax-Exempt Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 11 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 15 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
| Money Market Funds 0.1% | ||
| Shares | Value ($) | |
| Dreyfus Tax Exempt Cash Management Fund, Institutional Shares, 3.579%(j) | 120,966 | 120,954 |
| JPMorgan Institutional Tax Free Money Market Fund, Institutional Shares, 3.537%(j) | 96,720 | 96,720 |
| Total Money Market Funds (Cost $217,685) | 217,674 | |
| Total Investments in Securities (Cost: $596,742,671) | 543,195,580 | |
| Other Assets & Liabilities, Net | 4,469,472 | |
| Net Assets | 547,665,052 | |
Notes to Portfolio of
Investments
| (a) | The Fund is entitled to receive principal and interest from the guarantor after a day or a week’s notice or upon maturity. The maturity date disclosed represents the final maturity. |
| (b) | Represents a variable rate security where the coupon rate adjusts on specified dates (generally daily or weekly) using the prevailing money market rate. The interest rate shown was the current rate as of July 31, 2023. |
| (c) | Income from this security may be subject to alternative minimum tax. |
| (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 July 31, 2023. |
| (e) | 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 July 31, 2023, the total value of these securities amounted to $5,400,623, which represents 0.99% of total net assets. |
| (f) | Zero coupon bond. |
| (g) | Represents a security purchased on a when-issued basis. |
| (h) | Municipal obligations include debt obligations issued by or on behalf of territories, possessions, or sovereign nations within the territorial boundaries of the United States. At July 31, 2023, the total value of these securities amounted to $14,934,733, which represents 2.73% of total net assets. |
| (i) | Represents a security in default. |
| (j) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
Abbreviation Legend
| FNMA | Federal National Mortgage Association |
| GNMA | Government National Mortgage Association |
| NPFGC | National Public Finance Guarantee Corporation |
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.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 17 |
Portfolio of Investments (continued)
July 31, 2023
July 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 July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Floating Rate Notes | — | 2,300,000 | — | 2,300,000 |
| Municipal Bonds | — | 540,677,906 | — | 540,677,906 |
| Money Market Funds | 217,674 | — | — | 217,674 |
| Total Investments in Securities | 217,674 | 542,977,906 | — | 543,195,580 |
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 Minnesota Tax-Exempt Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $596,742,671) | $543,195,580 |
| Receivable for: | |
| Capital shares sold | 2,428,729 |
| Dividends | 8,539 |
| Interest | 6,795,626 |
| Prepaid expenses | 11,013 |
| Total assets | 552,439,487 |
| Liabilities | |
| Due to custodian | 22,036 |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 1,792,051 |
| Capital shares redeemed | 1,264,647 |
| Distributions to shareholders | 1,522,383 |
| Management services fees | 20,797 |
| Distribution and/or service fees | 8,615 |
| Transfer agent fees | 27,408 |
| Trustees’ fees | 86,103 |
| Other expenses | 30,395 |
| Total liabilities | 4,774,435 |
| Net assets applicable to outstanding capital stock | $547,665,052 |
| Represented by | |
| Paid in capital | 625,909,558 |
| Total distributable earnings (loss) | (78,244,506) |
| Total - representing net assets applicable to outstanding capital stock | $547,665,052 |
| Class A | |
| Net assets | $301,958,835 |
| Shares outstanding | 15,624,597 |
| Net asset value per share | $19.33 |
| 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) | $19.93 |
| Advisor Class | |
| Net assets | $19,437,220 |
| Shares outstanding | 1,006,168 |
| Net asset value per share | $19.32 |
| Class C | |
| Net assets | $29,587,477 |
| Shares outstanding | 1,530,933 |
| Net asset value per share | $19.33 |
| Institutional Class | |
| Net assets | $176,454,312 |
| Shares outstanding | 9,137,782 |
| Net asset value per share | $19.31 |
| Institutional 2 Class | |
| Net assets | $8,847,323 |
| Shares outstanding | 458,445 |
| Net asset value per share | $19.30 |
| Institutional 3 Class | |
| Net assets | $11,379,885 |
| Shares outstanding | 588,468 |
| Net asset value per share | $19.34 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 19 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $74,577 |
| Interest | 21,320,946 |
| Total income | 21,395,523 |
| Expenses: | |
| Management services fees | 2,652,137 |
| Distribution and/or service fees | |
| Class A | 796,502 |
| Class C | 345,539 |
| Transfer agent fees | |
| Class A | 179,998 |
| Advisor Class | 10,393 |
| Class C | 19,545 |
| Institutional Class | 103,929 |
| Institutional 2 Class | 4,385 |
| Institutional 3 Class | 1,169 |
| Trustees’ fees | 34,104 |
| Custodian fees | 12,074 |
| Printing and postage fees | 37,682 |
| Registration fees | 21,305 |
| Accounting services fees | 30,090 |
| Legal fees | 20,403 |
| Interest on interfund lending | 5,476 |
| Compensation of chief compliance officer | 108 |
| Other | 20,372 |
| Total expenses | 4,295,211 |
| Expense reduction | (40) |
| Total net expenses | 4,295,171 |
| Net investment income | 17,100,352 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (11,247,008) |
| Futures contracts | 370,331 |
| Net realized loss | (10,876,677) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (21,953,318) |
| Net change in unrealized appreciation (depreciation) | (21,953,318) |
| Net realized and unrealized loss | (32,829,995) |
| Net decrease in net assets resulting from operations | $(15,729,643) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $17,100,352 | $17,389,703 |
| Net realized loss | (10,876,677) | (11,888,347) |
| Net change in unrealized appreciation (depreciation) | (21,953,318) | (81,210,344) |
| Net decrease in net assets resulting from operations | (15,729,643) | (75,708,988) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (9,329,497) | (10,142,005) |
| Advisor Class | (585,535) | (588,662) |
| Class C | (752,866) | (755,020) |
| Institutional Class | (5,841,540) | (6,832,301) |
| Institutional 2 Class | (249,836) | (204,199) |
| Institutional 3 Class | (386,923) | (429,770) |
| Total distributions to shareholders | (17,146,197) | (18,951,957) |
| Decrease in net assets from capital stock activity | (77,640,142) | (62,459,830) |
| Total decrease in net assets | (110,515,982) | (157,120,775) |
| Net assets at beginning of year | 658,181,034 | 815,301,809 |
| Net assets at end of year | $547,665,052 | $658,181,034 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 21 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 3,684,799 | 71,456,993 | 2,827,601 | 59,709,697 |
| Distributions reinvested | 476,060 | 9,178,888 | 465,213 | 10,004,049 |
| Shares redeemed | (6,134,704) | (118,119,110) | (5,677,289) | (117,834,520) |
| Net decrease | (1,973,845) | (37,483,229) | (2,384,475) | (48,120,774) |
| Advisor Class | ||||
| Shares sold | 529,513 | 10,225,629 | 1,104,949 | 22,853,745 |
| Distributions reinvested | 30,350 | 585,226 | 27,304 | 584,883 |
| Shares redeemed | (602,010) | (11,560,961) | (1,045,297) | (21,511,716) |
| Net increase (decrease) | (42,147) | (750,106) | 86,956 | 1,926,912 |
| Class C | ||||
| Shares sold | 280,824 | 5,456,528 | 434,477 | 9,383,550 |
| Distributions reinvested | 38,735 | 746,669 | 34,621 | 743,222 |
| Shares redeemed | (750,255) | (14,538,527) | (674,590) | (14,361,509) |
| Net decrease | (430,696) | (8,335,330) | (205,492) | (4,234,737) |
| Institutional Class | ||||
| Shares sold | 6,081,194 | 117,227,630 | 5,249,253 | 110,912,003 |
| Distributions reinvested | 297,813 | 5,739,596 | 311,932 | 6,701,166 |
| Shares redeemed | (7,868,143) | (152,166,292) | (6,428,241) | (132,167,853) |
| Net decrease | (1,489,136) | (29,199,066) | (867,056) | (14,554,684) |
| Institutional 2 Class | ||||
| Shares sold | 247,829 | 4,793,841 | 456,513 | 9,573,828 |
| Distributions reinvested | 12,764 | 245,695 | 9,463 | 201,519 |
| Shares redeemed | (242,333) | (4,674,799) | (331,764) | (6,785,476) |
| Net increase | 18,260 | 364,737 | 134,212 | 2,989,871 |
| Institutional 3 Class | ||||
| Shares sold | 272,461 | 5,273,763 | 315,473 | 6,705,144 |
| Distributions reinvested | 20,008 | 385,942 | 19,954 | 429,189 |
| Shares redeemed | (409,517) | (7,896,853) | (361,055) | (7,600,751) |
| Net decrease | (117,048) | (2,237,148) | (25,628) | (466,418) |
| Total net decrease | (4,034,612) | (77,640,142) | (3,261,483) | (62,459,830) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Columbia Minnesota Tax-Exempt 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 7/31/2023 | $20.33 | 0.57 | (1.00) | (0.43) | (0.57) | — | (0.57) |
| Year Ended 7/31/2022 | $22.88 | 0.48 | (2.51) | (2.03) | (0.48) | (0.04) | (0.52) |
| Year Ended 7/31/2021(e) | $22.56 | 0.48 | 0.34 | 0.82 | (0.49) | (0.01) | (0.50) |
| Year Ended 7/31/2020(e) | $22.22 | 0.56 | 0.34 | 0.90 | (0.56) | — | (0.56) |
| Year Ended 7/31/2019(e) | $21.49 | 0.64 | 0.73 | 1.37 | (0.64) | — | (0.64) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $20.32 | 0.62 | (1.00) | (0.38) | (0.62) | — | (0.62) |
| Year Ended 7/31/2022 | $22.87 | 0.53 | (2.51) | (1.98) | (0.53) | (0.04) | (0.57) |
| Year Ended 7/31/2021(e) | $22.55 | 0.54 | 0.34 | 0.88 | (0.55) | (0.01) | (0.56) |
| Year Ended 7/31/2020(e) | $22.21 | 0.60 | 0.34 | 0.94 | (0.60) | — | (0.60) |
| Year Ended 7/31/2019(e) | $21.47 | 0.68 | 0.78 | 1.46 | (0.72) | — | (0.72) |
| Class C | |||||||
| Year Ended 7/31/2023 | $20.33 | 0.42 | (0.99) | (0.57) | (0.43) | — | (0.43) |
| Year Ended 7/31/2022 | $22.88 | 0.31 | (2.50) | (2.19) | (0.32) | (0.04) | (0.36) |
| Year Ended 7/31/2021(e) | $22.56 | 0.32 | 0.33 | 0.65 | (0.32) | (0.01) | (0.33) |
| Year Ended 7/31/2020(e) | $22.22 | 0.40 | 0.34 | 0.74 | (0.40) | — | (0.40) |
| Year Ended 7/31/2019(e) | $21.49 | 0.48 | 0.73 | 1.21 | (0.48) | — | (0.48) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $20.32 | 0.62 | (1.01) | (0.39) | (0.62) | — | (0.62) |
| Year Ended 7/31/2022 | $22.86 | 0.53 | (2.50) | (1.97) | (0.53) | (0.04) | (0.57) |
| Year Ended 7/31/2021(e) | $22.54 | 0.54 | 0.34 | 0.88 | (0.55) | (0.01) | (0.56) |
| Year Ended 7/31/2020(e) | $22.20 | 0.60 | 0.34 | 0.94 | (0.60) | — | (0.60) |
| Year Ended 7/31/2019(e) | $21.47 | 0.68 | 0.77 | 1.45 | (0.72) | — | (0.72) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia Minnesota Tax-Exempt 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 7/31/2023 | $19.33 | (2.06%) | 0.80%(c) | 0.80%(c),(d) | 2.92% | 12% | $301,959 |
| Year Ended 7/31/2022 | $20.33 | (8.97%) | 0.77%(c) | 0.77%(c),(d) | 2.20% | 19% | $357,808 |
| Year Ended 7/31/2021(e) | $22.88 | 3.69% | 0.77% | 0.77%(d) | 2.15% | 7% | $457,218 |
| Year Ended 7/31/2020(e) | $22.56 | 4.17% | 0.77% | 0.77%(d) | 2.49% | 25% | $421,457 |
| Year Ended 7/31/2019(e) | $22.22 | 6.50% | 0.78% | 0.78% | 2.95% | 18% | $414,107 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $19.32 | (1.81%) | 0.55%(c) | 0.55%(c),(d) | 3.17% | 12% | $19,437 |
| Year Ended 7/31/2022 | $20.32 | (8.74%) | 0.52%(c) | 0.52%(c),(d) | 2.48% | 19% | $21,305 |
| Year Ended 7/31/2021(e) | $22.87 | 3.90% | 0.52% | 0.52%(d) | 2.39% | 7% | $21,987 |
| Year Ended 7/31/2020(e) | $22.55 | 4.44% | 0.52% | 0.52%(d) | 2.74% | 25% | $13,938 |
| Year Ended 7/31/2019(e) | $22.21 | 6.77% | 0.53% | 0.53% | 3.19% | 18% | $12,205 |
| Class C | |||||||
| Year Ended 7/31/2023 | $19.33 | (2.79%) | 1.55%(c) | 1.55%(c),(d) | 2.16% | 12% | $29,587 |
| Year Ended 7/31/2022 | $20.33 | (9.65%) | 1.52%(c) | 1.52%(c),(d) | 1.45% | 19% | $39,886 |
| Year Ended 7/31/2021(e) | $22.88 | 2.91% | 1.52% | 1.52%(d) | 1.41% | 7% | $49,588 |
| Year Ended 7/31/2020(e) | $22.56 | 3.40% | 1.53% | 1.53%(d) | 1.74% | 25% | $58,885 |
| Year Ended 7/31/2019(e) | $22.22 | 5.70% | 1.53% | 1.53% | 2.20% | 18% | $58,620 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $19.31 | (1.86%) | 0.55%(c) | 0.55%(c),(d) | 3.17% | 12% | $176,454 |
| Year Ended 7/31/2022 | $20.32 | (8.70%) | 0.52%(c) | 0.52%(c),(d) | 2.45% | 19% | $215,892 |
| Year Ended 7/31/2021(e) | $22.86 | 3.86% | 0.52% | 0.52%(d) | 2.39% | 7% | $262,778 |
| Year Ended 7/31/2020(e) | $22.54 | 4.44% | 0.52% | 0.52%(d) | 2.74% | 25% | $208,340 |
| Year Ended 7/31/2019(e) | $22.20 | 6.76% | 0.53% | 0.53% | 3.19% | 18% | $156,662 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Minnesota Tax-Exempt 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 2 Class | |||||||
| Year Ended 7/31/2023 | $20.30 | 0.62 | (1.00) | (0.38) | (0.62) | — | (0.62) |
| Year Ended 7/31/2022 | $22.85 | 0.53 | (2.51) | (1.98) | (0.53) | (0.04) | (0.57) |
| Year Ended 7/31/2021(e) | $22.53 | 0.54 | 0.33 | 0.87 | (0.54) | (0.01) | (0.55) |
| Year Ended 7/31/2020(e) | $22.18 | 0.60 | 0.35 | 0.95 | (0.60) | — | (0.60) |
| Year Ended 7/31/2019(e) | $21.45 | 0.68 | 0.73 | 1.41 | (0.68) | — | (0.68) |
| Institutional 3 Class | |||||||
| Year Ended 7/31/2023 | $20.34 | 0.63 | (1.00) | (0.37) | (0.63) | — | (0.63) |
| Year Ended 7/31/2022 | $22.90 | 0.54 | (2.52) | (1.98) | (0.54) | (0.04) | (0.58) |
| Year Ended 7/31/2021(e) | $22.58 | 0.55 | 0.34 | 0.89 | (0.56) | (0.01) | (0.57) |
| Year Ended 7/31/2020(e) | $22.23 | 0.60 | 0.35 | 0.95 | (0.60) | — | (0.60) |
| Year Ended 7/31/2019(e) | $21.50 | 0.68 | 0.77 | 1.45 | (0.72) | — | (0.72) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (e) | 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 Minnesota Tax-Exempt 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 2 Class | |||||||
| Year Ended 7/31/2023 | $19.30 | (1.82%) | 0.55%(c) | 0.55%(c) | 3.17% | 12% | $8,847 |
| Year Ended 7/31/2022 | $20.30 | (8.76%) | 0.53%(c) | 0.53%(c) | 2.49% | 19% | $8,937 |
| Year Ended 7/31/2021(e) | $22.85 | 3.99% | 0.53% | 0.53% | 2.39% | 7% | $6,991 |
| Year Ended 7/31/2020(e) | $22.53 | 4.24% | 0.54% | 0.54% | 2.72% | 25% | $5,519 |
| Year Ended 7/31/2019(e) | $22.18 | 6.95% | 0.54% | 0.54% | 3.20% | 18% | $2,683 |
| Institutional 3 Class | |||||||
| Year Ended 7/31/2023 | $19.34 | (1.76%) | 0.50%(c) | 0.50%(c) | 3.22% | 12% | $11,380 |
| Year Ended 7/31/2022 | $20.34 | (8.73%) | 0.48%(c) | 0.48%(c) | 2.50% | 19% | $14,353 |
| Year Ended 7/31/2021(e) | $22.90 | 4.09% | 0.48% | 0.48% | 2.43% | 7% | $16,740 |
| Year Ended 7/31/2020(e) | $22.58 | 4.29% | 0.48% | 0.48% | 2.77% | 25% | $12,274 |
| Year Ended 7/31/2019(e) | $22.23 | 6.80% | 0.49% | 0.49% | 3.24% | 18% | $9,387 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 27 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Minnesota Tax-Exempt
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
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
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.
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.
| 28 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
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
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 29 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 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.
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 July 31, 2023:
| Amount of realized gain (loss) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Interest rate risk | 370,331 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended July 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — short | 11,049,997 |
| 30 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
| * | Based on the ending daily outstanding amounts for the year ended July 31, 2023. |
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. 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 net tax-exempt and 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.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 31 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 amendments.
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 0.47% to 0.31% as the Fund’s net assets increase. The effective management services fee rate for the year ended July 31, 2023 was 0.46% 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 "Trustees’ fees" 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
| 32 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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 | 0.06 |
| Advisor Class | 0.06 |
| Class C | 0.06 |
| Institutional Class | 0.06 |
| 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 July 31, 2023, these minimum account balance fees reduced total expenses of
the Fund by $40.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25% 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 $444,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.75(a) | 110,772 |
| Class C | — | 1.00(b) | 2,538 |
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 33 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
| (a) | This charge is imposed on certain investments of $500,000 or more if redeemed within 12 months after purchase. |
| (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.
At July 31, 2023, these differences
were primarily due to differing treatment for tax straddles, principal and/or interest from fixed income securities, defaulted securities/troubled debt, capital loss carryforwards, trustees’ deferred
compensation, distributions and re-characterization of distributions for investments. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets.
Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 397,926 | (397,924) | (2) |
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.
| 34 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | ||||||
| Ordinary income ($) | Tax-exempt income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Tax-exempt income ($) | Long-term capital gains ($) | Total ($) |
| 9,735 | 17,136,462 | — | 17,146,197 | 1,320,351 | 17,579,857 | 51,749 | 18,951,957 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed tax- exempt income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| — | 2,248,257 | — | (24,633,474) | (54,251,471) |
At July 31, 2023, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 597,447,051 | 640,808 | (54,892,279) | (54,251,471) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at July 31, 2023, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended July 31,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (6,411,603) | (18,221,871) | (24,633,474) | — |
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 $67,041,683 and $143,170,196, respectively, for the year ended July 31, 2023. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 35 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The Fund’s activity in the
Interfund Program during the year ended July 31, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 2,048,000 | 3.99 | 25 |
Interest expense incurred by the
Fund is recorded as interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at July 31, 2023.
Note 7. 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 July 31, 2023.
Note 8. 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.
| 36 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
Municipal securities risk
Municipal securities are debt
obligations generally issued to obtain funds for various public purposes, including general financing for state and local governments, or financing for a specific project or public facility, and include obligations of
the governments of the U.S. territories, commonwealths and possessions such as Guam, Puerto Rico and the U.S. Virgin Islands to the extent such obligations are exempt from state and U.S. federal income taxes. The
value of municipal securities can be significantly affected by actual or expected political and legislative changes at the federal or state level. Municipal securities may be fully or partially backed by the taxing
authority of the local government, by the credit of a private issuer, by the current or anticipated revenues from a specific project or specific assets or by domestic or foreign entities providing credit support, such
as letters of credit, guarantees or insurance, and are generally classified into general obligation bonds and special revenue obligations. Because many municipal securities are issued to finance projects in sectors
such as education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal market.
Issuers in a state, territory,
commonwealth or possession in which the Fund invests may experience significant financial difficulties for various reasons, including as the result of events that cannot be reasonably anticipated or controlled such as
economic downturns or similar periods of economic stress, social conflict or unrest, labor disruption and natural disasters. Such financial difficulties may lead to credit rating downgrades or defaults of such issuers
which in turn, could affect the market values and marketability of many or all municipal obligations of issuers in such state, territory, commonwealth or possession. The value of the Fund’s shares will be
negatively impacted to the extent it invests in such securities. The Fund’s annual and semiannual reports show the Fund’s investment exposures at a point in time. The risk of investing in the Fund is
directly correlated to the Fund’s investment exposures.
Because the Fund invests
substantially in municipal securities issued by the state identified in the Fund’s name and political sub-divisions of that state, the Fund will be particularly affected by adverse tax, legislative, regulatory,
demographic or political changes as well as changes impacting the state’s financial, economic or other condition and prospects. In addition, because of the relatively small number of issuers of tax-exempt
securities in the state, the Fund may invest a higher percentage of assets in a single issuer and, therefore, be more exposed to the risk of loss than a fund that invests more broadly. The value of municipal and other
securities owned by the Fund also may be adversely affected by future changes in federal or state income tax laws.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 37 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
Shareholder concentration risk
At July 31, 2023, affiliated
shareholders of record owned 64.7% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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 9. 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 10. 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 provide services to
the Fund.
| 38 | Columbia Minnesota Tax-Exempt 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 Minnesota Tax-Exempt Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Minnesota Tax-Exempt Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as
of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended July 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 July 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 July 31,
2023 and the financial highlights for each of the five years in the period ended July 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 July 31, 2023 by correspondence with the custodian, transfer agents and broker; when replies were
not received from the broker, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 39 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Exempt- interest dividends | |
| 99.94% |
Exempt-interest dividends. The
percentage of net investment income distributed during the fiscal year that qualifies as exempt-interest dividends for federal income tax purposes. A portion of the income may be subject to federal alternative minimum
tax.
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 | 173 | 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 |
| 40 | Columbia Minnesota Tax-Exempt 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 Minnesota Tax-Exempt 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 |
| 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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| 42 | Columbia Minnesota Tax-Exempt 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 | 171 | 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. | 173 | 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 | 171 | 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 Minnesota Tax-Exempt Fund | Annual Report 2023 | 43 |
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 | 173 | 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 | 173 | 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.
| 44 | Columbia Minnesota Tax-Exempt 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 Minnesota Tax-Exempt Fund | Annual Report 2023 | 45 |
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.
| 46 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Minnesota Tax-Exempt Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and
other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 47 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed the Fund’s underperformance
for certain periods, noting that such Fund’s performance was generally consistent with expectations in light of the interrelationship of the Fund’s specific investment strategy with prevailing market
conditions.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
| 48 | Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
Comparative fees, costs of services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
(Unaudited)
Comparative fees, costs of services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the Investment Manager’s profitability.
The Board considered the reports of
JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary
objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain
exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper
comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
| Columbia Minnesota Tax-Exempt Fund | Annual Report 2023 | 49 |
Approval of Management Agreement (continued)
(Unaudited)
On June 22, 2023, the Board, including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the Management Agreement.
(Unaudited)
On June 22, 2023, the Board, including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the Management Agreement.
| 50 | Columbia Minnesota Tax-Exempt 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/
ANN199_07_N01_(09/23)
Columbia Global
Opportunities 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 Global 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 Global Opportunities
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks to provide shareholders maximum total return through a combination of growth of capital and current income.
Portfolio management
Dan Boncarosky, CFA
Lead Portfolio Manager
Managed Fund since 2017
Thomas Nakamura
Portfolio Manager
Managed Fund since 2022
| Columbia Global Opportunities Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Global 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 Global Opportunities Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended July 31, 2023, Class A shares of Columbia Global Opportunities Fund returned 3.17% excluding sales charges. The Fund’s Blended Benchmark returned 4.80% for the same time period. Over the same 12 months,
the MSCI ACWI All Cap Index (Net) returned 12.45% and the Bloomberg Global Aggregate Index returned -2.70%.
Market overview
In the face of recessionary
concerns and aggressive monetary tightening occurring in the U.S. and throughout the world, equity markets kept chugging along, generating strong returns over the 12-month period ending July 31, 2023. U.S. equities
posted an impressive double-digit return for the period (with the S&P 500 Index returning 13.02%) but were outdone by their foreign developed markets counterpart, which received some additional help from a falling
U.S. dollar. Emerging markets trailed the returns of foreign developed markets but showed much improvement after posting deeply negative returns in the previous annual period. With regard to U.S. style and market
capitalization, small caps maintained a slight edge over large caps through the first six months of the period but would yield the lead back to large caps after facing a significant decline as a result of a regional
banking crisis that cropped up towards the end of the first quarter of 2023. A similar story played out for value-oriented stocks, which led through the first half of the period but were overtaken in the second half
as growth-oriented stocks posted an impressive rally, mostly led by a handful of mega-cap technology stocks.
On the other hand, fixed-income
markets faced more challenged results, generating negative returns over the 12-month period. The U.S. Federal Reserve (Fed) shaped a difficult landscape for bonds by raising interest rates by 3% over the reporting
period in an effort to combat inflation. Inflation figures have come down considerably since the start of the reporting period but still remain moderately higher than the Fed’s 2% inflation target. Within the
fixed-income market, sectors that were less sensitive to interest rates and more sensitive to credit, such as high-yield bonds and leveraged loans, outperformed their higher quality counterparts over the reporting
period. Among those higher quality sectors, U.S. investment-grade corporate bonds fared better than mortgage-backed securities and longer dated U.S. Treasuries.
The Fund’s notable
detractors during the period
| • | Global fixed-income assets detracted from performance, as style decisions and security selection were challenged over the period. Additionally, the decision to overweight the asset class also weighed on results. |
| • | While the decision to overweight emerging market equities proved beneficial, the combination of weak style decisions and security selection led the asset class to detract from relative results. |
| • | Foreign developed market equities also detracted from performance as the result of weaker security selection. |
The Fund’s notable
contributors during the period
| • | U.S. large-cap equities proved to be the largest contributor to Fund performance during the period, fueled by strong style decisions as well as security selection. |
| • | U.S. small-cap equities also added to relative results primarily due to strong security selection within the asset class. |
| • | Although an allocation to commodities was removed several months into the period, the allocation still made a positive contribution to performance as the asset class outperformed other areas of the market while it remained as a position within the Fund. |
Derivative usage
During the period, the Fund used
forward contracts, futures, options and swaps in an effort to enhance returns, to hedge existing positions, to manage the Fund’s overall risk exposure, to increase market and credit exposure, to increase
investment and/or to change the effective duration of the Fund’s portfolio. Overall, the Fund’s use of derivatives, on a stand-alone basis, had a negative impact on Fund performance.
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The Fund’s investment in other funds subjects it to the investment performance (positive or negative), risks and expenses of these underlying funds. 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
| 6 | Columbia Global Opportunities Fund | Annual Report 2023 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
principal and income than higher rated 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. 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. 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 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 Global Opportunities 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.
| 8 | Columbia Global Opportunities Fund | Annual Report 2023 |
Portfolio of Investments
July 31, 2023
July 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 Global Opportunities Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Global Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Global Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Global Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
At July 31, 2023,
securities and/or cash totaling $8,302,548 were pledged as collateral.
Investments in
derivatives
| Forward foreign currency exchange contracts | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 234,804 USD | 312,000 SGD | Barclays | 08/29/2023 | 166 | — |
| 8,619,960 USD | 12,795,000 AUD | Citi | 08/29/2023 | — | (16,575) |
| 17,188,809 USD | 15,430,572 EUR | Citi | 08/29/2023 | — | (198,035) |
| 315,161 USD | 10,747,000 THB | Citi | 08/29/2023 | — | (306) |
| 3,600,000 GBP | 4,636,039 USD | Goldman Sachs International | 08/29/2023 | 15,299 | — |
| 3,620,327 USD | 2,818,000 GBP | Goldman Sachs International | 08/29/2023 | — | (3,314) |
| 316,952 USD | 1,435,000 MYR | Goldman Sachs International | 08/29/2023 | 2,017 | — |
| 1,610,000 CNY | 225,664 USD | HSBC | 08/29/2023 | — | (638) |
| 6,395,956,000 IDR | 424,698 USD | HSBC | 08/29/2023 | 1,190 | — |
| 3,133,626,000 KRW | 2,454,031 USD | HSBC | 08/29/2023 | — | (3,073) |
| 18,405,000 TWD | 592,754 USD | HSBC | 08/29/2023 | 6,892 | — |
| 7,454,482 USD | 53,184,000 CNY | HSBC | 08/29/2023 | 21,083 | — |
| 1,188,000 AUD | 805,652 USD | Morgan Stanley | 08/03/2023 | 7,642 | — |
| 2,328,000 CAD | 1,746,351 USD | Morgan Stanley | 08/03/2023 | — | (19,116) |
| 629,000 CHF | 734,064 USD | Morgan Stanley | 08/03/2023 | 12,690 | — |
| 3,109,000 DKK | 463,222 USD | Morgan Stanley | 08/03/2023 | 4,461 | — |
| 3,852,000 EUR | 4,274,025 USD | Morgan Stanley | 08/03/2023 | 38,521 | — |
| 91,000 EUR | 99,550 USD | Morgan Stanley | 08/03/2023 | — | (510) |
| 439,000 GBP | 568,142 USD | Morgan Stanley | 08/03/2023 | 4,748 | — |
| 82,727,000 JPY | 597,460 USD | Morgan Stanley | 08/03/2023 | 15,858 | — |
| 2,135,828,000 KRW | 1,644,020 USD | Morgan Stanley | 08/03/2023 | — | (31,565) |
| 7,118,000 NOK | 651,580 USD | Morgan Stanley | 08/03/2023 | — | (50,763) |
| 1,394,000 NZD | 870,823 USD | Morgan Stanley | 08/03/2023 | 5,008 | — |
| 13,996,000 SEK | 1,355,550 USD | Morgan Stanley | 08/03/2023 | 25,868 | — |
| 671,000 SGD | 505,016 USD | Morgan Stanley | 08/03/2023 | 383 | — |
| 268,000 SGD | 198,377 USD | Morgan Stanley | 08/03/2023 | — | (3,176) |
| 84,081,000 TWD | 2,743,263 USD | Morgan Stanley | 08/03/2023 | 67,746 | — |
| 795,315 USD | 1,188,000 AUD | Morgan Stanley | 08/03/2023 | 2,695 | — |
| 298,349 USD | 395,000 CAD | Morgan Stanley | 08/03/2023 | 1,204 | — |
| 1,468,184 USD | 1,933,000 CAD | Morgan Stanley | 08/03/2023 | — | (2,270) |
| 696,397 USD | 629,000 CHF | Morgan Stanley | 08/03/2023 | 24,977 | — |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 15 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
| Forward foreign currency exchange contracts (continued) | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 449,488 USD | 3,109,000 DKK | Morgan Stanley | 08/03/2023 | 9,273 | — |
| 4,252,380 USD | 3,943,000 EUR | Morgan Stanley | 08/03/2023 | 83,183 | — |
| 548,644 USD | 439,000 GBP | Morgan Stanley | 08/03/2023 | 14,749 | — |
| 589,096 USD | 82,727,000 JPY | Morgan Stanley | 08/03/2023 | — | (7,495) |
| 1,670,897 USD | 2,135,828,000 KRW | Morgan Stanley | 08/03/2023 | 4,687 | — |
| 708,606 USD | 7,118,000 NOK | Morgan Stanley | 08/03/2023 | — | (6,263) |
| 847,524 USD | 1,394,000 NZD | Morgan Stanley | 08/03/2023 | 18,291 | — |
| 1,294,656 USD | 13,996,000 SEK | Morgan Stanley | 08/03/2023 | 35,026 | — |
| 599,636 USD | 805,000 SGD | Morgan Stanley | 08/03/2023 | 5,773 | — |
| 100,845 USD | 134,000 SGD | Morgan Stanley | 08/03/2023 | — | (69) |
| 2,685,324 USD | 84,081,000 TWD | Morgan Stanley | 08/03/2023 | — | (9,808) |
| 10,672,000 CHF | 12,372,939 USD | Morgan Stanley | 08/29/2023 | 96,324 | — |
| 6,997,000 MXN | 411,044 USD | Morgan Stanley | 08/29/2023 | — | (4,580) |
| 616,792 USD | 532,000 CHF | Morgan Stanley | 08/29/2023 | — | (4,802) |
| 138,512 USD | 3,000,000 CZK | Morgan Stanley | 08/29/2023 | — | (610) |
| 153,155 USD | 555,000 ILS | Morgan Stanley | 08/29/2023 | — | (2,036) |
| 11,375,652 USD | 1,601,900,365 JPY | Morgan Stanley | 08/29/2023 | — | (62,336) |
| 196,319 USD | 790,000 PLN | Morgan Stanley | 08/29/2023 | 593 | — |
| 2,044,000 CAD | 1,553,460 USD | Morgan Stanley | 09/21/2023 | 2,307 | — |
| 1,707,182,000 KRW | 1,338,964 USD | Morgan Stanley | 09/21/2023 | — | (1,044) |
| 4,704,000 NOK | 471,127 USD | Morgan Stanley | 09/21/2023 | 6,236 | — |
| 1,230,000 SGD | 927,882 USD | Morgan Stanley | 09/21/2023 | 615 | — |
| 81,752,000 TWD | 2,622,417 USD | Morgan Stanley | 09/21/2023 | 15,081 | — |
| 985,014 USD | 1,451,000 AUD | Morgan Stanley | 09/21/2023 | — | (8,627) |
| 780,130 USD | 665,000 CHF | Morgan Stanley | 09/21/2023 | — | (13,313) |
| 465,900 USD | 3,118,000 DKK | Morgan Stanley | 09/21/2023 | — | (4,417) |
| 4,242,411 USD | 3,815,000 EUR | Morgan Stanley | 09/21/2023 | — | (37,200) |
| 671,836 USD | 519,000 GBP | Morgan Stanley | 09/21/2023 | — | (5,634) |
| 882,763 USD | 1,413,000 NZD | Morgan Stanley | 09/21/2023 | — | (5,092) |
| 1,462,731 USD | 15,058,000 SEK | Morgan Stanley | 09/21/2023 | — | (28,645) |
| 8,131,999 USD | 84,433,000 SEK | UBS | 08/29/2023 | — | (99,113) |
| 889,000 CAD | 672,784 USD | Wells Fargo | 08/29/2023 | — | (1,648) |
| 45,500,000 NOK | 4,508,960 USD | Wells Fargo | 08/29/2023 | 14,824 | — |
| 2,657,837 USD | 3,512,000 CAD | Wells Fargo | 08/29/2023 | 6,511 | — |
| 4,554,742 USD | 6,000,000 CAD | Wells Fargo | 08/29/2023 | — | (2,894) |
| 215,470 USD | 1,441,000 DKK | Wells Fargo | 08/29/2023 | — | (2,467) |
| 4,725,581 USD | 662,000,000 JPY | Wells Fargo | 08/29/2023 | — | (50,250) |
| 10,902,276 USD | 109,965,803 NOK | Wells Fargo | 08/29/2023 | — | (40,708) |
| 8,536,014 USD | 13,806,000 NZD | Wells Fargo | 08/29/2023 | 39,390 | — |
| Total | 611,311 | (728,392) | |||
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| 10-Year Mini Japanese Government Bond | 21 | 09/2023 | JPY | 308,427,000 | — | (17,784) |
| Australian 10-Year Bond | 206 | 09/2023 | AUD | 23,867,088 | — | (125,361) |
| Canadian Government 10-Year Bond | 42 | 09/2023 | CAD | 5,044,200 | — | (110,535) |
| Euro-Bobl | 15 | 09/2023 | EUR | 1,738,350 | — | (15,514) |
| Euro-BTP | 14 | 09/2023 | EUR | 1,624,000 | 6,970 | — |
| Euro-Bund | 19 | 09/2023 | EUR | 2,527,000 | — | (25,181) |
| Euro-Buxl 30-Year | 2 | 09/2023 | EUR | 269,160 | — | (3,247) |
| Euro-OAT | 61 | 09/2023 | EUR | 7,779,940 | — | (63,247) |
| Japanese 10-Year Government Bond | 6 | 09/2023 | JPY | 880,800,000 | — | (54,099) |
| Long Gilt | 96 | 09/2023 | GBP | 9,228,480 | — | (25,246) |
| SPI 200 Index | 30 | 09/2023 | AUD | 5,518,500 | 143,798 | — |
| TOPIX Index | 46 | 09/2023 | JPY | 1,070,420,000 | 271,087 | — |
| U.S. Long Bond | 33 | 09/2023 | USD | 4,106,438 | — | (91,325) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Global Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
| Long futures contracts (continued) | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 10-Year Note | 303 | 09/2023 | USD | 33,756,094 | — | (892,188) |
| U.S. Treasury 5-Year Note | 113 | 09/2023 | USD | 12,070,695 | — | (279,157) |
| U.S. Treasury Ultra 10-Year Note | 56 | 09/2023 | USD | 6,551,125 | — | (161,555) |
| U.S. Treasury Ultra Bond | 50 | 09/2023 | USD | 6,610,938 | — | (138,742) |
| Total | 421,855 | (2,003,181) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Euro STOXX 50 Index | (155) | 09/2023 | EUR | (6,968,800) | — | (302,591) |
| FTSE 100 Index | (55) | 09/2023 | GBP | (4,228,950) | 1,343 | — |
| FTSE 100 Index | (83) | 09/2023 | GBP | (6,381,870) | — | (112,210) |
| MSCI EAFE Index | (34) | 09/2023 | USD | (3,749,860) | — | (118,747) |
| MSCI Emerging Markets Index | (225) | 09/2023 | USD | (11,860,875) | — | (483,201) |
| Russell 2000 Index E-mini | (130) | 09/2023 | USD | (13,088,400) | — | (727,347) |
| S&P 500 Index E-mini | (83) | 09/2023 | USD | (19,150,175) | — | (1,045,153) |
| S&P/TSX 60 Index | (20) | 09/2023 | CAD | (4,960,000) | — | (119,509) |
| Total | 1,343 | (2,908,758) | ||||
* 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) | Non-income producing investment. |
| (b) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At July 31, 2023, the total value of these securities amounted to $244,147, which represents 0.07% of total net assets. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | 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 July 31, 2023, the total value of these securities amounted to $10,627,429, which represents 2.95% of total net assets. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 17 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Notes to Portfolio of Investments (continued)
| (e) | 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 July 31, 2023, the total market value of these securities amounted to $181,866, which represents 0.05% of total net assets. Additional information on these securities is as follows: |
| Security | Acquisition Dates | Shares | Cost ($) | Value ($) |
| Ascent Resources, Class B | 02/20/2014-03/01/2016 | 195,286 | 8,147 | 43,744 |
| Detsky Mir PJSC | 02/08/2017-09/21/2020 | 290,936 | 422,858 | — |
| Fix Price Group PLC, GDR | 03/05/2021-03/08/2021 | 95,918 | 935,775 | 138,122 |
| Lukoil PJSC | 01/25/2022-01/26/2022 | 2,750 | 225,708 | — |
| 1,592,488 | 181,866 |
| (f) | As a result of sanctions and restricted cross-border payments, certain income and/or principal has not been recognized by the Fund. The Fund will continue to monitor the net realizable value and record the income when it is considered collectible. |
| (g) | Principal amounts are denominated in United States Dollars unless otherwise noted. |
| (h) | Principal and interest may not be guaranteed by a governmental entity. |
| (i) | Zero coupon bond. |
| (j) | Represents a security purchased on a when-issued basis. |
| (k) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
| (l) | 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 July 31, 2023 are as follows: |
Abbreviation Legend
| ADR | American Depositary Receipt |
| GDR | Global Depositary Receipt |
| TBA | To Be Announced |
Currency Legend
| AUD | Australian Dollar |
| CAD | Canada Dollar |
| CHF | Swiss Franc |
| CNY | China Yuan Renminbi |
| CZK | Czech Koruna |
| DKK | Danish Krone |
| EUR | Euro |
| GBP | British Pound |
| IDR | Indonesian Rupiah |
| ILS | Israeli Shekel |
| JPY | Japanese Yen |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Global Opportunities Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Currency Legend (continued)
| KRW | South Korean Won |
| MXN | Mexican Peso |
| MYR | Malaysian Ringgit |
| NOK | Norwegian Krone |
| NZD | New Zealand Dollar |
| PLN | Polish Zloty |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| THB | Thai Baht |
| TWD | New Taiwan Dollar |
| 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.
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 July 31, 2023:
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 19 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Brazil | 3,713,038 | — | — | 3,713,038 |
| Canada | 3,894,411 | — | — | 3,894,411 |
| China | 999,120 | 11,337,436 | — | 12,336,556 |
| Denmark | — | 794,490 | — | 794,490 |
| Finland | — | 810,476 | — | 810,476 |
| France | 12,361 | 3,042,771 | — | 3,055,132 |
| Germany | — | 1,053,026 | — | 1,053,026 |
| Greece | — | 1,124,937 | — | 1,124,937 |
| Hong Kong | — | 986,434 | — | 986,434 |
| India | 2,800,281 | 4,506,068 | 62,281 | 7,368,630 |
| Indonesia | — | 2,400,788 | — | 2,400,788 |
| Ireland | 7,265 | 865,810 | — | 873,075 |
| Israel | 1,073,810 | 584,499 | — | 1,658,309 |
| Japan | — | 10,949,395 | — | 10,949,395 |
| Jersey | 300,259 | — | — | 300,259 |
| Kazakhstan | — | 234,477 | — | 234,477 |
| Mexico | 1,979,328 | — | — | 1,979,328 |
| Netherlands | — | 5,859,816 | — | 5,859,816 |
| Norway | — | 758,600 | — | 758,600 |
| Philippines | — | 303,251 | — | 303,251 |
| Poland | — | 369,938 | — | 369,938 |
| Russian Federation | — | — | 138,122 | 138,122 |
| Saudi Arabia | — | 178,542 | — | 178,542 |
| Singapore | — | 1,338,411 | — | 1,338,411 |
| South Africa | — | 1,056,841 | — | 1,056,841 |
| South Korea | 309,095 | 5,570,430 | — | 5,879,525 |
| Sweden | — | 116,711 | — | 116,711 |
| Switzerland | — | 2,464,817 | — | 2,464,817 |
| Taiwan | 221,005 | 5,496,539 | — | 5,717,544 |
| United Kingdom | 2,520,916 | 4,657,253 | — | 7,178,169 |
| United States | 147,939,685 | 920,487 | 43,744 | 148,903,916 |
| Total Common Stocks | 166,567,496 | 70,361,137 | 244,147 | 237,172,780 |
| Exchange-Traded Equity Funds | 7,626,355 | — | — | 7,626,355 |
| Foreign Government Obligations | — | 26,947,046 | — | 26,947,046 |
| Inflation-Indexed Bonds | — | 3,068,758 | — | 3,068,758 |
| Residential Mortgage-Backed Securities - Agency | — | 20,279,991 | — | 20,279,991 |
| Call Option Contracts Purchased | 15,393 | — | — | 15,393 |
| Money Market Funds | 76,294,419 | — | — | 76,294,419 |
| Total Investments in Securities | 250,503,663 | 120,656,932 | 244,147 | 371,404,742 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 611,311 | — | 611,311 |
| Futures Contracts | 423,198 | — | — | 423,198 |
| Swap Contracts | — | 450,776 | — | 450,776 |
| Liability | ||||
| Forward Foreign Currency Exchange Contracts | — | (728,392) | — | (728,392) |
| Futures Contracts | (4,911,939) | — | — | (4,911,939) |
| Total | 246,014,922 | 120,990,627 | 244,147 | 367,249,696 |
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.
Forward foreign currency exchange
contracts, futures contracts and swap contracts are valued at unrealized appreciation (depreciation).
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.
| 20 | Columbia Global Opportunities Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $263,911,760) | $295,094,930 |
| Affiliated issuers (cost $76,299,490) | 76,294,419 |
| Option contracts purchased (cost $30,329) | 15,393 |
| Cash | 1,108 |
| Foreign currency (cost $925,236) | 924,358 |
| Margin deposits on: | |
| Futures contracts | 7,269,593 |
| Swap contracts | 1,032,955 |
| Unrealized appreciation on forward foreign currency exchange contracts | 611,311 |
| Receivable for: | |
| Investments sold | 297,214 |
| Capital shares sold | 8,345 |
| Dividends | 634,314 |
| Interest | 147,295 |
| Foreign tax reclaims | 205,071 |
| Variation margin for futures contracts | 218,642 |
| Prepaid expenses | 9,682 |
| Total assets | 382,764,630 |
| Liabilities | |
| Unrealized depreciation on forward foreign currency exchange contracts | 728,392 |
| Payable for: | |
| Investments purchased | 186,555 |
| Investments purchased on a delayed delivery basis | 20,257,633 |
| Capital shares redeemed | 412,324 |
| Variation margin for futures contracts | 237,929 |
| Variation margin for swap contracts | 10,178 |
| Foreign capital gains taxes deferred | 151,929 |
| Management services fees | 21,322 |
| Distribution and/or service fees | 7,284 |
| Transfer agent fees | 34,506 |
| Trustees’ fees | 117,435 |
| Other expenses | 69,919 |
| Total liabilities | 22,235,406 |
| Net assets applicable to outstanding capital stock | $360,529,224 |
| Represented by | |
| Paid in capital | 344,761,837 |
| Total distributable earnings (loss) | 15,767,387 |
| Total - representing net assets applicable to outstanding capital stock | $360,529,224 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 21 |
Statement of Assets and Liabilities (continued)
July 31, 2023
July 31, 2023
| Class A | |
| Net assets | $340,329,661 |
| Shares outstanding | 27,652,150 |
| Net asset value per share | $12.31 |
| 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) | $13.06 |
| Advisor Class | |
| Net assets | $2,894,489 |
| Shares outstanding | 231,771 |
| Net asset value per share | $12.49 |
| Class C | |
| Net assets | $3,098,264 |
| Shares outstanding | 268,624 |
| Net asset value per share | $11.53 |
| Institutional Class | |
| Net assets | $11,705,036 |
| Shares outstanding | 939,943 |
| Net asset value per share | $12.45 |
| Institutional 2 Class | |
| Net assets | $1,401,888 |
| Shares outstanding | 111,722 |
| Net asset value per share | $12.55 |
| Institutional 3 Class | |
| Net assets | $126,114 |
| Shares outstanding | 10,097 |
| Net asset value per share | $12.49 |
| Class R | |
| Net assets | $973,772 |
| Shares outstanding | 80,522 |
| Net asset value per share | $12.09 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | Columbia Global Opportunities Fund | Annual Report 2023 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $5,167,390 |
| Dividends — affiliated issuers | 3,327,463 |
| Interest | 918,780 |
| Interfund lending | 1,278 |
| Foreign taxes withheld | (281,493) |
| Total income | 9,133,418 |
| Expenses: | |
| Management services fees | 2,678,343 |
| Distribution and/or service fees | |
| Class A | 868,128 |
| Class C | 36,487 |
| Class R | 5,685 |
| Transfer agent fees | |
| Class A | 381,061 |
| Advisor Class | 4,528 |
| Class C | 4,011 |
| Institutional Class | 15,888 |
| Institutional 2 Class | 2,300 |
| Institutional 3 Class | 27 |
| Class R | 1,250 |
| Trustees’ fees | 34,661 |
| Custodian fees | 130,998 |
| Printing and postage fees | 57,656 |
| Registration fees | 108,788 |
| Accounting services fees | 74,096 |
| Legal fees | 17,598 |
| Interest on collateral | 14,407 |
| Interest on interfund lending | 127 |
| Compensation of chief compliance officer | 72 |
| Other | 24,441 |
| Total expenses | 4,460,552 |
| Expense reduction | (40) |
| Total net expenses | 4,460,512 |
| Net investment income | 4,672,906 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 23 |
Statement of Operations (continued)
Year Ended July 31, 2023
Year Ended July 31, 2023
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | $7,470 |
| Investments — affiliated issuers | 563,461 |
| Foreign currency translations | (76,553) |
| Forward foreign currency exchange contracts | 667,560 |
| Futures contracts | (12,871,066) |
| Option contracts purchased | (30,296) |
| Option contracts written | 41,937 |
| Swap contracts | 15,325 |
| Net realized loss | (11,682,162) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 22,065,195 |
| Investments — affiliated issuers | (1,517,918) |
| Foreign currency translations | 35,810 |
| Forward foreign currency exchange contracts | (840,687) |
| Futures contracts | (4,621,664) |
| Option contracts purchased | (14,936) |
| Option contracts written | (507) |
| Swap contracts | 1,171,234 |
| Foreign capital gains tax | (105,741) |
| Net change in unrealized appreciation (depreciation) | 16,170,786 |
| Net realized and unrealized gain | 4,488,624 |
| Net increase in net assets resulting from operations | $9,161,530 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 24 | Columbia Global Opportunities Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $4,672,906 | $4,594,854 |
| Net realized gain (loss) | (11,682,162) | 14,897,343 |
| Net change in unrealized appreciation (depreciation) | 16,170,786 | (106,025,819) |
| Net increase (decrease) in net assets resulting from operations | 9,161,530 | (86,533,622) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (21,176,508) | (36,213,160) |
| Advisor Class | (311,508) | (543,838) |
| Class C | (247,120) | (502,067) |
| Institutional Class | (878,321) | (1,766,596) |
| Institutional 2 Class | (217,506) | (422,139) |
| Institutional 3 Class | (8,609) | (12,732) |
| Class R | (64,369) | (116,588) |
| Total distributions to shareholders | (22,903,941) | (39,577,120) |
| Decrease in net assets from capital stock activity | (41,209,296) | (17,097,827) |
| Total decrease in net assets | (54,951,707) | (143,208,569) |
| Net assets at beginning of year | 415,480,931 | 558,689,500 |
| Net assets at end of year | $360,529,224 | $415,480,931 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 25 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 209,358 | 2,485,328 | 405,146 | 6,128,599 |
| Distributions reinvested | 1,852,833 | 21,048,187 | 2,419,046 | 36,043,786 |
| Shares redeemed | (4,338,981) | (51,654,171) | (3,913,707) | (57,369,485) |
| Net decrease | (2,276,790) | (28,120,656) | (1,089,515) | (15,197,100) |
| Advisor Class | ||||
| Shares sold | 32,205 | 387,454 | 36,987 | 562,508 |
| Distributions reinvested | 25,762 | 296,526 | 34,705 | 522,310 |
| Shares redeemed | (293,617) | (3,550,087) | (49,408) | (728,178) |
| Net increase (decrease) | (235,650) | (2,866,107) | 22,284 | 356,640 |
| Class C | ||||
| Shares sold | 15,712 | 176,814 | 26,238 | 375,384 |
| Distributions reinvested | 23,095 | 247,120 | 35,382 | 502,066 |
| Shares redeemed | (143,274) | (1,591,396) | (168,555) | (2,346,574) |
| Net decrease | (104,467) | (1,167,462) | (106,935) | (1,469,124) |
| Institutional Class | ||||
| Shares sold | 377,616 | 4,583,777 | 473,257 | 6,934,505 |
| Distributions reinvested | 75,210 | 863,405 | 113,714 | 1,706,853 |
| Shares redeemed | (927,403) | (11,185,055) | (673,252) | (9,817,447) |
| Net decrease | (474,577) | (5,737,873) | (86,281) | (1,176,089) |
| Institutional 2 Class | ||||
| Shares sold | 76,205 | 909,791 | 85,511 | 1,283,077 |
| Distributions reinvested | 18,815 | 217,506 | 27,938 | 422,139 |
| Shares redeemed | (331,327) | (4,041,649) | (106,140) | (1,579,370) |
| Net increase (decrease) | (236,307) | (2,914,352) | 7,309 | 125,846 |
| Institutional 3 Class | ||||
| Shares sold | 544 | 6,580 | 6,088 | 98,702 |
| Distributions reinvested | 735 | 8,453 | 830 | 12,477 |
| Shares redeemed | (2,462) | (28,334) | (1,059) | (17,328) |
| Net increase (decrease) | (1,183) | (13,301) | 5,859 | 93,851 |
| Class R | ||||
| Shares sold | 13,127 | 153,867 | 14,477 | 205,812 |
| Distributions reinvested | 5,643 | 63,086 | 7,791 | 114,689 |
| Shares redeemed | (50,484) | (606,498) | (9,945) | (152,352) |
| Net increase (decrease) | (31,714) | (389,545) | 12,323 | 168,149 |
| Total net decrease | (3,360,688) | (41,209,296) | (1,234,956) | (17,097,827) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | Columbia Global Opportunities 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 7/31/2023 | $12.72 | 0.15 | 0.19 | 0.34 | — | (0.75) | (0.75) |
| Year Ended 7/31/2022 | $16.49 | 0.14 | (2.70) | (2.56) | (0.12) | (1.09) | (1.21) |
| Year Ended 7/31/2021 | $14.66 | 0.06 | 2.46 | 2.52 | (0.34) | (0.35) | (0.69) |
| Year Ended 7/31/2020 | $14.01 | 0.13 | 0.77 | 0.90 | (0.25) | — | (0.25) |
| Year Ended 7/31/2019 | $13.80 | 0.23 | 0.03 | 0.26 | (0.05) | — | (0.05) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $12.87 | 0.17 | 0.20 | 0.37 | — | (0.75) | (0.75) |
| Year Ended 7/31/2022 | $16.64 | 0.17 | (2.71) | (2.54) | (0.14) | (1.09) | (1.23) |
| Year Ended 7/31/2021 | $14.79 | 0.10 | 2.47 | 2.57 | (0.37) | (0.35) | (0.72) |
| Year Ended 7/31/2020 | $14.13 | 0.18 | 0.78 | 0.96 | (0.30) | — | (0.30) |
| Year Ended 7/31/2019 | $13.93 | 0.25 | 0.03 | 0.28 | (0.08) | — | (0.08) |
| Class C | |||||||
| Year Ended 7/31/2023 | $12.06 | 0.05 | 0.17 | 0.22 | — | (0.75) | (0.75) |
| Year Ended 7/31/2022 | $15.75 | 0.02 | (2.55) | (2.53) | (0.07) | (1.09) | (1.16) |
| Year Ended 7/31/2021 | $14.04 | (0.05) | 2.34 | 2.29 | (0.23) | (0.35) | (0.58) |
| Year Ended 7/31/2020 | $13.40 | 0.02 | 0.74 | 0.76 | (0.12) | — | (0.12) |
| Year Ended 7/31/2019 | $13.25 | 0.12 | 0.03 | 0.15 | — | — | — |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $12.83 | 0.18 | 0.19 | 0.37 | — | (0.75) | (0.75) |
| Year Ended 7/31/2022 | $16.60 | 0.17 | (2.71) | (2.54) | (0.14) | (1.09) | (1.23) |
| Year Ended 7/31/2021 | $14.75 | 0.10 | 2.47 | 2.57 | (0.37) | (0.35) | (0.72) |
| Year Ended 7/31/2020 | $14.10 | 0.17 | 0.78 | 0.95 | (0.30) | — | (0.30) |
| Year Ended 7/31/2019 | $13.89 | 0.27 | 0.02 | 0.29 | (0.08) | — | (0.08) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $12.92 | 0.19 | 0.19 | 0.38 | — | (0.75) | (0.75) |
| Year Ended 7/31/2022 | $16.70 | 0.18 | (2.73) | (2.55) | (0.14) | (1.09) | (1.23) |
| Year Ended 7/31/2021 | $14.84 | 0.11 | 2.48 | 2.59 | (0.38) | (0.35) | (0.73) |
| Year Ended 7/31/2020 | $14.18 | 0.18 | 0.78 | 0.96 | (0.30) | — | (0.30) |
| Year Ended 7/31/2019 | $13.97 | 0.27 | 0.02 | 0.29 | (0.08) | — | (0.08) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 28 | Columbia Global 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 (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class A | |||||||
| Year Ended 7/31/2023 | $12.31 | 3.17% | 1.20%(c),(d) | 1.20%(c),(d),(e) | 1.24% | 115% | $340,330 |
| Year Ended 7/31/2022 | $12.72 | (16.59%) | 1.15%(c),(d) | 1.15%(c),(d) | 0.92% | 98% | $380,766 |
| Year Ended 7/31/2021 | $16.49 | 17.46% | 1.16%(c) | 1.16%(c) | 0.40% | 107% | $511,405 |
| Year Ended 7/31/2020 | $14.66 | 6.49% | 1.15%(c) | 1.15%(c) | 0.92% | 125% | $476,670 |
| Year Ended 7/31/2019 | $14.01 | 1.88% | 1.13% | 1.13% | 1.70% | 104% | $504,182 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $12.49 | 3.38% | 0.94%(c),(d) | 0.94%(c),(d),(e) | 1.41% | 115% | $2,894 |
| Year Ended 7/31/2022 | $12.87 | (16.34%) | 0.90%(c),(d) | 0.90%(c),(d) | 1.17% | 98% | $6,015 |
| Year Ended 7/31/2021 | $16.64 | 17.70% | 0.91%(c) | 0.91%(c) | 0.65% | 107% | $7,407 |
| Year Ended 7/31/2020 | $14.79 | 6.83% | 0.90%(c) | 0.90%(c) | 1.27% | 125% | $6,365 |
| Year Ended 7/31/2019 | $14.13 | 2.06% | 0.88% | 0.88% | 1.79% | 104% | $5,606 |
| Class C | |||||||
| Year Ended 7/31/2023 | $11.53 | 2.32% | 1.95%(c),(d) | 1.95%(c),(d),(e) | 0.46% | 115% | $3,098 |
| Year Ended 7/31/2022 | $12.06 | (17.17%) | 1.89%(c),(d) | 1.89%(c),(d) | 0.16% | 98% | $4,499 |
| Year Ended 7/31/2021 | $15.75 | 16.56% | 1.90%(c) | 1.90%(c) | (0.36%) | 107% | $7,562 |
| Year Ended 7/31/2020 | $14.04 | 5.68% | 1.90%(c) | 1.90%(c) | 0.13% | 125% | $10,839 |
| Year Ended 7/31/2019 | $13.40 | 1.13% | 1.88% | 1.88% | 0.95% | 104% | $12,935 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $12.45 | 3.39% | 0.95%(c),(d) | 0.95%(c),(d),(e) | 1.46% | 115% | $11,705 |
| Year Ended 7/31/2022 | $12.83 | (16.38%) | 0.89%(c),(d) | 0.89%(c),(d) | 1.16% | 98% | $18,151 |
| Year Ended 7/31/2021 | $16.60 | 17.75% | 0.91%(c) | 0.91%(c) | 0.65% | 107% | $24,909 |
| Year Ended 7/31/2020 | $14.75 | 6.78% | 0.90%(c) | 0.90%(c) | 1.18% | 125% | $20,763 |
| Year Ended 7/31/2019 | $14.10 | 2.14% | 0.88% | 0.88% | 1.95% | 104% | $22,219 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $12.55 | 3.45% | 0.90%(c),(d) | 0.90%(c),(d) | 1.52% | 115% | $1,402 |
| Year Ended 7/31/2022 | $12.92 | (16.33%) | 0.86%(c),(d) | 0.86%(c),(d) | 1.21% | 98% | $4,496 |
| Year Ended 7/31/2021 | $16.70 | 17.75% | 0.88%(c) | 0.88%(c) | 0.69% | 107% | $5,688 |
| Year Ended 7/31/2020 | $14.84 | 6.86% | 0.86%(c) | 0.86%(c) | 1.27% | 125% | $4,229 |
| Year Ended 7/31/2019 | $14.18 | 2.17% | 0.84% | 0.84% | 1.97% | 104% | $3,864 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 29 |
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 7/31/2023 | $12.86 | 0.19 | 0.19 | 0.38 | — | (0.75) | (0.75) |
| Year Ended 7/31/2022 | $16.62 | 0.20 | (2.73) | (2.53) | (0.14) | (1.09) | (1.23) |
| Year Ended 7/31/2021 | $14.77 | 0.11 | 2.47 | 2.58 | (0.38) | (0.35) | (0.73) |
| Year Ended 7/31/2020 | $14.12 | 0.23 | 0.73 | 0.96 | (0.31) | — | (0.31) |
| Year Ended 7/31/2019 | $13.91 | 0.25 | 0.05 | 0.30 | (0.09) | — | (0.09) |
| Class R | |||||||
| Year Ended 7/31/2023 | $12.55 | 0.11 | 0.18 | 0.29 | — | (0.75) | (0.75) |
| Year Ended 7/31/2022 | $16.30 | 0.10 | (2.66) | (2.56) | (0.10) | (1.09) | (1.19) |
| Year Ended 7/31/2021 | $14.50 | 0.02 | 2.43 | 2.45 | (0.30) | (0.35) | (0.65) |
| Year Ended 7/31/2020 | $13.85 | 0.07 | 0.79 | 0.86 | (0.21) | — | (0.21) |
| Year Ended 7/31/2019 | $13.64 | 0.20 | 0.02 | 0.22 | (0.01) | — | (0.01) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense. For the periods indicated below, if interest on collateral expense had been excluded, expenses would have been lower by: |
| (d) | 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%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 30 | Columbia Global 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 (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Institutional 3 Class | |||||||
| Year Ended 7/31/2023 | $12.49 | 3.46% | 0.86%(c),(d) | 0.86%(c),(d) | 1.57% | 115% | $126 |
| Year Ended 7/31/2022 | $12.86 | (16.27%) | 0.83%(c),(d) | 0.83%(c),(d) | 1.42% | 98% | $145 |
| Year Ended 7/31/2021 | $16.62 | 17.83% | 0.83%(c) | 0.83%(c) | 0.72% | 107% | $90 |
| Year Ended 7/31/2020 | $14.77 | 6.86% | 0.80% | 0.80% | 1.60% | 125% | $78 |
| Year Ended 7/31/2019 | $14.12 | 2.21% | 0.81% | 0.81% | 1.78% | 104% | $139 |
| Class R | |||||||
| Year Ended 7/31/2023 | $12.09 | 2.80% | 1.45%(c),(d) | 1.45%(c),(d),(e) | 0.97% | 115% | $974 |
| Year Ended 7/31/2022 | $12.55 | (16.76%) | 1.40%(c),(d) | 1.40%(c),(d) | 0.66% | 98% | $1,408 |
| Year Ended 7/31/2021 | $16.30 | 17.19% | 1.41%(c) | 1.41%(c) | 0.15% | 107% | $1,628 |
| Year Ended 7/31/2020 | $14.50 | 6.23% | 1.39%(c) | 1.39%(c) | 0.52% | 125% | $1,359 |
| Year Ended 7/31/2019 | $13.85 | 1.63% | 1.38% | 1.38% | 1.49% | 104% | $2,004 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 31 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Global 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,
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.
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.
| 32 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
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.
| Columbia Global Opportunities Fund | Annual Report 2023 | 33 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
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.
| 34 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities, to shift foreign currency exposure back to U.S. dollars, to shift investment exposure from one currency to another, to shift U.S. dollar exposure to achieve
a representative weighted mix of major currencies in its benchmark, to recover an underweight country exposure in its portfolio, to generate total return through long and short positions versus the U.S. dollar and
primarily for the purpose of gaining market exposure to various foreign currencies. These instruments may be used for other purposes in future periods.
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, 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 produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market, to maintain appropriate equity market exposure while
keeping sufficient cash to accommodate daily redemptions and primarily for the purpose of gaining market exposure to various currency, interest rate, and equity markets. 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.
| Columbia Global Opportunities Fund | Annual Report 2023 | 35 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to produce incremental earnings, to decrease the Fund’s exposure to
equity risk, to increase return on investments and to protect gains. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded in the
over-the-counter market depends upon the performance of the other party. Collateral may be collected or posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for
such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
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.
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.
| 36 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index. These instruments may be used for other purposes in future periods. Credit default swap contracts are transactions in which one party
pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although specified credit events are
contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront 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.
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.
| Columbia Global Opportunities Fund | Annual Report 2023 | 37 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at July 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 | 450,776* |
| Equity risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 416,228* |
| Equity risk | Investments, at value — Option contracts purchased | 15,393 |
| Foreign exchange risk | Unrealized appreciation on forward foreign currency exchange contracts | 611,311 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 6,970* |
| Total | 1,500,678 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 2,908,758* |
| Foreign exchange risk | Unrealized depreciation on forward foreign currency exchange contracts | 728,392 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 2,003,181* |
| Total | 5,640,331 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin for futures and centrally cleared swaps, if any, is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended July 31, 2023:
| 38 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended July 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 127,074,574 |
| Futures contracts — short | 56,534,310 |
| Credit default swap contracts — sell protection | 31,646,936 |
| Derivative instrument | Average value ($)* |
| Option contracts purchased | 9,680 |
| Option contracts written | (2,475) |
| Derivative instrument | Average unrealized appreciation ($)* | Average unrealized depreciation ($)* |
| Forward foreign currency exchange contracts | 997,618 | (643,193) |
| * | Based on the ending quarterly outstanding amounts for the year ended July 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
| Columbia Global Opportunities Fund | Annual Report 2023 | 39 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 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.
Treasury inflation protected
securities
The Fund may invest in treasury
inflation protected securities (TIPS). The principal amount of TIPS is adjusted periodically and is increased for inflation or decreased for deflation based on a monthly published index. These adjustments are recorded
as interest income in the Statement of Operations. Coupon payments are based on the adjusted principal at the time the interest is paid.
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 July 31, 2023:
| Barclays ($) | Citi ($) | Goldman Sachs International ($) | HSBC ($) | Morgan Stanley ($) (a) | Morgan Stanley ($) (a) | Morgan Stanley ($) (a) | UBS ($) | Wells Fargo ($) | Total ($) | |
| Assets | ||||||||||
| Forward foreign currency exchange contracts | 166 | - | 17,316 | 29,165 | 503,939 | - | - | - | 60,725 | 611,311 |
| Call option contracts purchased | - | - | - | - | - | 15,393 | - | - | - | 15,393 |
| Total assets | 166 | - | 17,316 | 29,165 | 503,939 | 15,393 | - | - | 60,725 | 626,704 |
| Liabilities | ||||||||||
| Centrally cleared credit default swap contracts (b) | - | - | - | - | - | - | 10,178 | - | - | 10,178 |
| Forward foreign currency exchange contracts | - | 214,916 | 3,314 | 3,711 | 309,371 | - | - | 99,113 | 97,967 | 728,392 |
| Total liabilities | - | 214,916 | 3,314 | 3,711 | 309,371 | - | 10,178 | 99,113 | 97,967 | 738,570 |
| Total financial and derivative net assets | 166 | (214,916) | 14,002 | 25,454 | 194,568 | 15,393 | (10,178) | (99,113) | (37,242) | (111,866) |
| Total collateral received (pledged) (c) | - | - | - | - | - | - | (10,178) | - | - | (10,178) |
| Net amount (d) | 166 | (214,916) | 14,002 | 25,454 | 194,568 | 15,393 | - | (99,113) | (37,242) | (101,688) |
| (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) | 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.
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.
| 40 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
Income and capital gain
distributions from the Underlying Funds, if any, are 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.
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.
| Columbia Global Opportunities Fund | Annual Report 2023 | 41 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 amendments.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund 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 a blend of (i) 0.00% on assets invested
in Columbia proprietary funds, including exchange-traded funds, that pay an investment management fee to the Investment Manager, and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities, instruments and other assets not described above, including other funds advised by the Investment Manager that do not pay a management services fee, derivatives and individual securities. The
effective management services fee rate for the year ended July 31, 2023 was 0.72% of the Fund’s average daily net assets.
In addition to the fees and
expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which the Fund invests. Because the Underlying Funds have varied expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in the Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
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 "Trustees’ fees" in the Statement of Operations.
| 42 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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 | 0.11 |
| Advisor Class | 0.11 |
| Class C | 0.11 |
| Institutional Class | 0.11 |
| Institutional 2 Class | 0.06 |
| Institutional 3 Class | 0.02 |
| Class R | 0.11 |
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 July 31, 2023, these minimum account balance fees reduced total expenses of
the Fund by $40.
Distribution and service fees
The Fund has entered into an
agreement with Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution and shareholder
services. Under a Plan and Agreement of Distribution, the Fund pays a fee at the maximum annual rates of up to 0.25%, 1.00% and 0.50% of the Fund’s average daily net assets attributable to Class A, Class C and
Class R shares, respectively. For Class C shares, of the 1.00% fee, up to 0.75% can be reimbursed for distribution expenses and up to an additional 0.25% can be reimbursed for shareholder servicing expenses. For Class
R shares, of the 0.50% fee, up to 0.25% can be reimbursed for shareholder servicing expenses.
| Columbia Global Opportunities Fund | Annual Report 2023 | 43 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The amount of distribution and
shareholder services expenses incurred by the Distributor and not yet reimbursed (unreimbursed expense) was approximately $362,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 5.75 | 0.50 - 1.00(a) | 44,772 |
| Class C | — | 1.00(b) | 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. 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.
| 44 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
At July 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, foreign currency transactions, derivative investments, swap investments, passive foreign investment company (pfic) holdings, former
pfic holdings, tax straddles, defaulted securities/troubled debt, capital loss carryforwards, trustees’ deferred compensation, net operating loss reclassification, excess distributions, foreign capital gains tax
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 (loss) ($) | Paid in capital ($) |
| 21,491,963 | (684,125) | (20,807,838) |
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 July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| — | 22,903,941 | 22,903,941 | 12,192,950 | 27,384,170 | 39,577,120 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized appreciation ($) |
| — | — | (12,309,476) | 28,345,748 |
At July 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) ($) | Net unrealized appreciation ($) |
| 338,903,948 | 48,129,779 | (19,784,031) | 28,345,748 |
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 July 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 July 31,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (9,398,245) | (2,911,231) | (12,309,476) | — |
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 Global Opportunities Fund | Annual Report 2023 | 45 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 $351,572,288 and $420,713,640, respectively, for the year ended July 31, 2023, of which $238,365,418 and
$236,845,921, 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 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 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 July 31, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 900,000 | 5.10 | 1 |
| Lender | 1,542,857 | 4.38 | 7 |
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 July 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%.
| 46 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The Fund had no borrowings during
the year ended July 31, 2023.
Note 9. Significant
risks
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.
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve heightened risks relative to investments in U.S. securities. Investing in foreign securities subjects the Fund to the risks associated with the issuer’s country of organization and places of business
operations, including risks associated with political, regulatory, economic, social, diplomatic and other conditions or events occurring in the country or region, which may result in significant market volatility. In
addition, certain foreign securities may be more volatile and less liquid than U.S. securities. Investing in emerging markets may increase these risks and expose the Fund to elevated risks associated with increased
inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any one or a few specific countries, the Fund will be particularly susceptible to the risks associated
with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater risk than that of a fund that is more geographically diversified. The financial information and
disclosure made available by issuers of emerging market securities may be considerably less reliable than publicly available information about other foreign securities. The Public Company Accounting Oversight Board,
which regulates auditors of U.S. public companies, is unable to inspect audit work papers in certain foreign countries. Investors in foreign countries often have limited rights and few practical remedies to pursue
shareholder claims, including class actions or fraud claims, and the ability of the U.S. Securities and Exchange Commission, the U.S. Department of Justice and other authorities to bring and enforce actions against
foreign issuers or foreign persons is limited.
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 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.
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
| Columbia Global Opportunities Fund | Annual Report 2023 | 47 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
to increase the collateral. Leverage can create an
interest expense that may lower the Fund’s overall returns. Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss.
There can be no guarantee that a leveraging strategy will be successful.
Market 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.
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.
Shareholder concentration risk
At July 31, 2023, affiliated
shareholders of record owned 86.9% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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
| 48 | Columbia Global Opportunities Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 provide services to
the Fund.
| Columbia Global Opportunities Fund | Annual Report 2023 | 49 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Series Trust II and Shareholders of Columbia Global Opportunities Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Global Opportunities Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as
of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes,
and the financial highlights for each of the five years in the period ended July 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 July 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 July 31,
2023 and the financial highlights for each of the five years in the period ended July 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 July 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 50 | Columbia Global Opportunities Fund | Annual Report 2023 |
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 | 173 | 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 | 173 | 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 |
| Columbia Global Opportunities 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 |
| 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 | 173 | 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 | 173 | 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 | 171 | 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 | 171 | 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 |
| 52 | Columbia Global 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 |
| 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| Columbia Global 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 |
| 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 | 171 | 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. | 173 | 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 | 171 | 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 |
| 54 | Columbia Global 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 |
| 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 | 173 | 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 | 173 | 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 Global Opportunities Fund | Annual Report 2023 | 55 |
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
| 56 | Columbia Global Opportunities 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 Global Opportunities Fund | Annual Report 2023 | 57 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Global Opportunities Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and
other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| 58 | Columbia Global Opportunities Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed the Fund’s underperformance
for certain periods, noting that appropriate steps (such as changes to the portfolio management team) had been taken to help improve the Fund’s performance.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally, and the Investment Manager’s willingness to take steps intended to improve performance. After reviewing these and related factors, the Board
concluded, within the context of their overall conclusions, that the performance of the Fund and the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 59 |
Approval of Management Agreement (continued)
(Unaudited)
Comparative fees, costs of services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
(Unaudited)
Comparative fees, costs of services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the Investment Manager’s profitability.
The Board considered the reports of
JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary
objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain
exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper
comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
| 60 | Columbia Global Opportunities Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
On June 22, 2023, the Board, including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the Management Agreement.
(Unaudited)
On June 22, 2023, the Board, including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the Management Agreement.
| Columbia Global Opportunities Fund | Annual Report 2023 | 61 |
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/
ANN156_07_N01_(09/23)
Columbia Floating
Rate Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 55 |
If you elect to receive the
shareholder report for Columbia Floating Rate 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 Floating Rate
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, preservation of capital.
Portfolio management
Vesa Tontti, CFA
Lead Portfolio Manager
Managed Fund since 2019
Daniel DeYoung
Portfolio Manager
Managed Fund since 2020
Stanton Ray
Portfolio Manager
Managed Fund since July 2023
| Columbia Floating Rate Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Floating Rate 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 Floating Rate Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended July 31, 2023, Class A shares of Columbia Floating Rate Fund returned 8.32% excluding sales charges. The Fund underperformed its benchmark, the unmanaged Credit Suisse Leveraged Loan Index, which returned
9.49%.
Market overview
The U.S. leveraged loan market
posted strong positive returns amid a challenging annual period for fixed-income markets. This is primarily because, given its floating rate nature, the leveraged loan market typically benefits from rising interest
rates. Thus, the leveraged loan market did not encounter the same headwinds from rising interest rates as most other fixed-income sectors did during the annual period. The U.S. leveraged loan market also benefited
from generally supportive technicals, or supply/demand dynamics, as well as from better than consensus anticipated corporate earnings results, easing inflation data and, later in the period, overall improving investor
sentiment. Still, there was significant volatility within the U.S. leveraged loan market.
When the period began in August
2022, the U.S. leveraged loan market posted strong positive returns, driven by better-than-feared corporate earnings and expectations for a more moderate pace of interest rate hikes by the U.S. Federal Reserve. The
tone changed with persistently high and broadening inflation data, and, in turn, the loan market lost ground in September. The leveraged loan market then recovered in the fourth quarter of 2022 but was still trading
at levels typically associated with a significant economic downturn, a trend that continued well into the new calendar year. The market continued to post positive returns in the first two months of 2023 but fell in
March, due largely to the uncertainty created by the collapse of Silicon Valley Bank and wider concerns about the health of regional banks. U.S. regional banks do not play any significant role in the U.S. leveraged
loan market, neither as issuers of loans nor as providers of capital to the current issuers in the market. However, tightening lending standards throughout the banking industry could negatively impact consumer and
business access to capital, which could create a drag on U.S. economic growth. The market posted positive returns in April but negative returns in May, and then enjoyed a strong rally in June and July, as
investors’ recession concerns abated.
A major headwind for the U.S.
leveraged loan market through much of the period was outflows from floating rate retail and exchange-traded funds. For loan investors, rising interest rates mean considerably improved fund distributions, but that
benefit was overshadowed by investors’ concerns about the ability of consumers and corporations to withstand persistently high inflation and the resulting tighter monetary policy, the impact of war in Ukraine on
the global economy, slowing U.S. economic growth, and the credit quality of loan market issuers specifically. Collateralized loan obligation (CLO) fund origination, another major source of demand for the loan market,
was also down significantly compared to the prior annual period. Despite the weak overall demand, the market remained relatively balanced as the supply, or issuance of new loans, similarly slowed through the first
half of the annual period. During the second half of the annual period, CLO fund origination picked up but remained light. Total deal volume for the first seven months of 2023 was the lowest since 2009. Further, the
deal flow was dominated by refinancings, which does not provide additional supply to the market. Transactions to finance leveraged buyouts — and, in fact, any merger and acquisition activity — ticked up
modestly but was still at the lowest level since 2010 at the end of the annual period.
The best performing industries
within the benchmark, based on total return, during the annual period were energy, housing, shipping, utilities and aerospace. The only industry in the benchmark to post a negative return during the period was
telecommunications. However, other industries with weak performance included broadcasting, health care, metals/minerals and cable/wireless video. From a credit quality perspective, those issues with higher ratings
outperformed lower rated issues during the period as a whole.
At the end of July 2023, the
trailing 12-month loan default rate for the market, examined by principal amount and inclusive of distressed exchanges, was 2.99%, as measured by JP Morgan. This was higher than the 1.12% rate at the end of July 2022,
but still meaningfully below the five-year high of 4.2% at the end of June 2020 and slightly below the historical average rate of approximately 3.1%.
The Fund’s notable
detractors during the period
| • | While the Fund posted solid positive absolute returns, it underperformed the benchmark on a relative basis due primarily to credit selection. |
| Columbia Floating Rate Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| • | Credit selection in the information technology industry detracted most from the Fund’s relative results. To a lesser degree, credit selection in the telecommunications, cable/wireless video, service and manufacturing industries also hurt. |
| • | From a credit quality perspective, a higher exposure than the benchmark to issues rated CC and C and to defaulted issues detracted from the Fund’s relative results, offset largely by effective credit selection within this ratings category. |
| • | Credit selection among issues rated CCC/split CCC and issues rated BB and split B dampened the Fund’s relative results. (A split rating is when the same bond is rated differently by the different rating agencies.) |
| • | Given the strong performance of the benchmark during the period overall, having a position in cash, albeit a modest one, detracted. However, it should be noted the Fund’s cash position provided relatively attractive interest income. |
The Fund’s notable
contributors during the period
| • | From an industry perspective, credit selection in and having an underweighted allocation to the health care industry contributed most positively to the Fund’s relative results. |
| • | Selection in the broadcasting industry added value as well, offset only partially by the detracting effect of an overweighted allocation to this weakly-performing industry. |
| • | Selection in the retail, consumer durables and aerospace industries also helped. |
| • | Credit selection among issues rated split BB and B boosted Fund performance. |
Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Fixed-income securities and loan investments 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 or other similarly rated instruments 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. Investment in loans may include highly leveraged transactions whereby the borrower assumes large amounts of debt in order to have the financial resources to attempt to achieve its business objectives. These transactions involve
greater risk (including default and bankruptcy) than other investments. 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. 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 Floating Rate 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 Floating Rate Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Floating Rate Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Floating Rate Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Floating Rate Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 13 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Floating Rate Fund | Annual Report 2023 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 15 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Floating Rate Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 17 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Floating Rate Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 19 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Columbia Floating Rate Fund | Annual Report 2023 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 21 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Floating Rate Fund | Annual Report 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 July 31, 2023, the total value of these securities amounted to $0, which represents less than 0.01% of total net assets. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | 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 July 31, 2023, the total value of these securities amounted to $32,227,782, which represents 4.38% of total net assets. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 23 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Notes to Portfolio of Investments (continued)
| (e) | Represents a security in default. |
| (f) | Represents a security purchased on a forward commitment basis. |
| (g) | The stated interest rate represents the weighted average interest rate at July 31, 2023 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (h) | Variable rate security. The interest rate shown was the current rate as of July 31, 2023. |
| (i) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (j) | At July 31, 2023, the Fund had unfunded senior loan commitments pursuant to the terms of the loan agreement. The Fund receives a stated coupon rate until the borrower draws on the loan commitment, at which time the rate will become the stated rate in the loan agreement. |
| Borrower | Unfunded Commitment ($) |
| athenahealth Group, Inc. Delayed Draw Term Loan 02/15/2029 3.500% | 335,368 |
| (k) | The borrower filed for protection under Chapter 11 of the U.S. Federal Bankruptcy Code. |
| (l) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
| (m) | 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 July 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, 5.408% | ||||||||
| 35,402,772 | 397,988,388 | (333,304,148) | (3,370) | 100,083,642 | 5,620 | 1,172,782 | 100,123,691 | |
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.
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.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 24 | Columbia Floating Rate Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 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 July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 758,305 | — | 0* | 758,305 |
| Consumer Discretionary | — | 2,194 | — | 2,194 |
| Energy | — | 807,688 | 81,658 | 889,346 |
| Financials | — | 1,495,071 | — | 1,495,071 |
| Industrials | — | 435,322 | — | 435,322 |
| Information Technology | — | 900,949 | — | 900,949 |
| Total Common Stocks | 758,305 | 3,641,224 | 81,658 | 4,481,187 |
| Convertible Bonds | — | 831,750 | — | 831,750 |
| Convertible Preferred Stocks | ||||
| Information Technology | — | — | 2,370 | 2,370 |
| Total Convertible Preferred Stocks | — | — | 2,370 | 2,370 |
| Corporate Bonds & Notes | — | 36,064,252 | — | 36,064,252 |
| Exchange-Traded Fixed Income Funds | 8,063,590 | — | — | 8,063,590 |
| Senior Loans | — | 637,360,855 | 7,598,088 | 644,958,943 |
| Money Market Funds | 100,083,642 | — | — | 100,083,642 |
| Total Investments in Securities | 108,905,537 | 677,898,081 | 7,682,116 | 794,485,734 |
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The following table is a
reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
| Balance as of 07/31/2022 ($) | 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 ($) | Balance as of 07/31/2023 ($) | |
| Common Stocks | 156,345 | - | 248,653 | (71,450) | - | (248,653) | - | (3,237) | 81,658 |
| Convertible Preferred Stocks | - | - | - | (48,763) | - | - | 51,133 | - | 2,370 |
| Senior Loans | 15,031,508 | 4,059 | (5,421) | 488,910 | 1,234,989 | (3,953,358) | 6,238,707 | (11,441,306) | 7,598,088 |
| Total | 15,187,853 | 4,059 | 243,232 | 368,697 | 1,234,989 | (4,202,011) | 6,289,840 | (11,444,543) | 7,682,116 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at July 31, 2023 was $67,466, which is comprised of Common Stocks of $(71,450), Convertible Preferred Stocks of $(48,763) and Senior Loans of $187,679.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 25 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Fair value measurements (continued)
The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain common stocks, convertible preferred stocks and senior loans classified as Level 3 securities are valued using the market approach and utilize single market quotations from broker dealers which may have included, but were not limited to, observable transactions for identical or similar assets in the market and the distressed nature of the security. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, manual price reviews and other control procedures. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain common stocks, convertible preferred stocks and senior loans classified as Level 3 securities are valued using the market approach and utilize single market quotations from broker dealers which may have included, but were not limited to, observable transactions for identical or similar assets in the market and the distressed nature of the security. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, manual price reviews and other control procedures. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
Financial assets were transferred from
Level 2 to Level 3 due to utilizing a single market quotation from a broker dealer. As a result, management concluded that the market input(s) were generally unobservable.
Financial assets were transferred from
Level 3 to Level 2 as observable market inputs were utilized and management determined that there was sufficient, reliable and observable market data to value these assets as of period end.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | Columbia Floating Rate Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $727,166,022) | $694,402,092 |
| Affiliated issuers (cost $100,084,655) | 100,083,642 |
| Cash | 2,465,662 |
| Receivable for: | |
| Capital shares sold | 4,953,805 |
| Dividends | 293,067 |
| Interest | 3,634,058 |
| Expense reimbursement due from Investment Manager | 1,339 |
| Prepaid expenses | 10,644 |
| Total assets | 805,844,309 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 7,741,074 |
| Investments purchased on a delayed delivery basis | 55,839,188 |
| Capital shares redeemed | 1,637,099 |
| Distributions to shareholders | 4,689,387 |
| Management services fees | 38,346 |
| Distribution and/or service fees | 6,526 |
| Transfer agent fees | 52,795 |
| Trustees’ fees | 104,256 |
| Other expenses | 79,402 |
| Total liabilities | 70,188,073 |
| Net assets applicable to outstanding capital stock | $735,656,236 |
| Represented by | |
| Paid in capital | 865,036,898 |
| Total distributable earnings (loss) | (129,380,662) |
| Total - representing net assets applicable to outstanding capital stock | $735,656,236 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 27 |
Statement of Assets and Liabilities (continued)
July 31, 2023
July 31, 2023
| Class A | |
| Net assets | $214,863,056 |
| Shares outstanding | 6,426,736 |
| Net asset value per share | $33.43 |
| 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) | $34.46 |
| Advisor Class | |
| Net assets | $15,137,106 |
| Shares outstanding | 453,459 |
| Net asset value per share | $33.38 |
| Class C | |
| Net assets | $25,376,398 |
| Shares outstanding | 758,912 |
| Net asset value per share | $33.44 |
| Institutional Class | |
| Net assets | $278,860,223 |
| Shares outstanding | 8,352,419 |
| Net asset value per share | $33.39 |
| Institutional 2 Class | |
| Net assets | $130,041,012 |
| Shares outstanding | 3,874,676 |
| Net asset value per share | $33.56 |
| Institutional 3 Class | |
| Net assets | $70,077,304 |
| Shares outstanding | 2,097,111 |
| Net asset value per share | $33.42 |
| Class R | |
| Net assets | $1,301,137 |
| Shares outstanding | 38,886 |
| Net asset value per share | $33.46 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 28 | Columbia Floating Rate Fund | Annual Report 2023 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $167,162 |
| Dividends — affiliated issuers | 1,172,782 |
| Interest | 62,434,838 |
| Interfund lending | 4,974 |
| Total income | 63,779,756 |
| Expenses: | |
| Management services fees | 5,022,399 |
| Distribution and/or service fees | |
| Class A | 588,350 |
| Class C | 279,536 |
| Class R | 7,314 |
| Transfer agent fees | |
| Class A | 204,389 |
| Advisor Class | 21,738 |
| Class C | 24,285 |
| Institutional Class | 308,062 |
| Institutional 2 Class | 21,687 |
| Institutional 3 Class | 6,962 |
| Class R | 1,272 |
| Trustees’ fees | 40,119 |
| Custodian fees | 202,731 |
| Printing and postage fees | 62,523 |
| Registration fees | 130,079 |
| Accounting services fees | 40,290 |
| Legal fees | 34,732 |
| Compensation of chief compliance officer | 159 |
| Other | 24,626 |
| Total expenses | 7,021,253 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (316,516) |
| Fees waived by transfer agent | |
| Institutional 2 Class | (952) |
| Institutional 3 Class | (3,055) |
| Total net expenses | 6,700,730 |
| Net investment income | 57,079,026 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (24,576,974) |
| Investments — affiliated issuers | 5,620 |
| Foreign currency translations | 1,101 |
| Net realized loss | (24,570,253) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 26,350,892 |
| Investments — affiliated issuers | (3,370) |
| Net change in unrealized appreciation (depreciation) | 26,347,522 |
| Net realized and unrealized gain | 1,777,269 |
| Net increase in net assets resulting from operations | $58,856,295 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 29 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $57,079,026 | $30,704,575 |
| Net realized loss | (24,570,253) | (5,362,342) |
| Net change in unrealized appreciation (depreciation) | 26,347,522 | (56,259,596) |
| Net increase (decrease) in net assets resulting from operations | 58,856,295 | (30,917,363) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (17,470,987) | (7,177,290) |
| Advisor Class | (1,845,966) | (898,900) |
| Class C | (1,857,679) | (728,593) |
| Institutional Class | (26,635,095) | (11,619,932) |
| Institutional 2 Class | (2,782,237) | (2,814,601) |
| Institutional 3 Class | (7,381,925) | (5,595,976) |
| Class R | (104,892) | (37,944) |
| Total distributions to shareholders | (58,078,781) | (28,873,236) |
| Increase (decrease) in net assets from capital stock activity | (213,088,931) | 257,726,848 |
| Total increase (decrease) in net assets | (212,311,417) | 197,936,249 |
| Net assets at beginning of year | 947,967,653 | 750,031,404 |
| Net assets at end of year | $735,656,236 | $947,967,653 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 30 | Columbia Floating Rate Fund | Annual Report 2023 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 1,042,571 | 34,570,269 | 3,132,965 | 108,901,968 |
| Distributions reinvested | 510,632 | 16,881,114 | 200,174 | 6,921,144 |
| Shares redeemed | (2,637,371) | (87,270,707) | (1,841,680) | (63,550,710) |
| Net increase (decrease) | (1,084,168) | (35,819,324) | 1,491,459 | 52,272,402 |
| Advisor Class | ||||
| Shares sold | 180,232 | 5,985,895 | 783,961 | 27,158,942 |
| Distributions reinvested | 55,897 | 1,844,271 | 26,097 | 898,803 |
| Shares redeemed | (784,845) | (25,854,466) | (429,823) | (14,763,435) |
| Net increase (decrease) | (548,716) | (18,024,300) | 380,235 | 13,294,310 |
| Class C | ||||
| Shares sold | 190,556 | 6,310,440 | 415,816 | 14,467,714 |
| Distributions reinvested | 50,771 | 1,678,611 | 17,992 | 622,461 |
| Shares redeemed | (419,034) | (13,859,780) | (352,201) | (12,176,027) |
| Net increase (decrease) | (177,707) | (5,870,729) | 81,607 | 2,914,148 |
| Institutional Class | ||||
| Shares sold | 2,756,958 | 91,218,987 | 11,790,540 | 408,766,910 |
| Distributions reinvested | 711,779 | 23,494,527 | 281,212 | 9,668,290 |
| Shares redeemed | (8,653,327) | (286,002,184) | (5,617,405) | (192,021,963) |
| Net increase (decrease) | (5,184,590) | (171,288,670) | 6,454,347 | 226,413,237 |
| Institutional 2 Class | ||||
| Shares sold | 3,416,977 | 114,539,473 | 1,391,028 | 49,059,007 |
| Distributions reinvested | 83,392 | 2,771,585 | 80,616 | 2,813,163 |
| Shares redeemed | (1,174,267) | (38,950,324) | (2,621,346) | (90,824,940) |
| Net increase (decrease) | 2,326,102 | 78,360,734 | (1,149,702) | (38,952,770) |
| Institutional 3 Class | ||||
| Shares sold | 929,710 | 30,989,435 | 1,957,384 | 68,522,188 |
| Distributions reinvested | 223,388 | 7,377,811 | 161,429 | 5,595,970 |
| Shares redeemed | (2,983,952) | (98,561,676) | (2,135,974) | (72,638,690) |
| Net increase (decrease) | (1,830,854) | (60,194,430) | (17,161) | 1,479,468 |
| Class R | ||||
| Shares sold | 9,542 | 314,187 | 34,709 | 1,171,125 |
| Distributions reinvested | 2,983 | 98,682 | 980 | 33,952 |
| Shares redeemed | (20,160) | (665,081) | (26,414) | (899,024) |
| Net increase (decrease) | (7,635) | (252,212) | 9,275 | 306,053 |
| Total net increase (decrease) | (6,507,568) | (213,088,931) | 7,250,060 | 257,726,848 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 31 |
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 | Total distributions to shareholders | |
| Class A | ||||||
| Year Ended 7/31/2023 | $33.27 | 2.42 | 0.23 | 2.65 | (2.49) | (2.49) |
| Year Ended 7/31/2022 | $35.28 | 1.15 | (2.08) | (0.93) | (1.08) | (1.08) |
| Year Ended 7/31/2021(d) | $33.22 | 1.12 | 1.98 | 3.10 | (1.04) | (1.04) |
| Year Ended 7/31/2020(d) | $35.88 | 1.48 | (2.62) | (1.14) | (1.52) | (1.52) |
| Year Ended 7/31/2019(d) | $36.61 | 1.68 | (0.69) | 0.99 | (1.72) | (1.72) |
| Advisor Class | ||||||
| Year Ended 7/31/2023 | $33.22 | 2.44 | 0.29 | 2.73 | (2.57) | (2.57) |
| Year Ended 7/31/2022 | $35.23 | 1.25 | (2.09) | (0.84) | (1.17) | (1.17) |
| Year Ended 7/31/2021(d) | $33.17 | 1.21 | 1.97 | 3.18 | (1.12) | (1.12) |
| Year Ended 7/31/2020(d) | $35.82 | 1.56 | (2.61) | (1.05) | (1.60) | (1.60) |
| Year Ended 7/31/2019(d) | $36.55 | 1.76 | (0.69) | 1.07 | (1.80) | (1.80) |
| Class C | ||||||
| Year Ended 7/31/2023 | $33.28 | 2.17 | 0.23 | 2.40 | (2.24) | (2.24) |
| Year Ended 7/31/2022 | $35.29 | 0.89 | (2.08) | (1.19) | (0.82) | (0.82) |
| Year Ended 7/31/2021(d) | $33.23 | 0.87 | 1.97 | 2.84 | (0.78) | (0.78) |
| Year Ended 7/31/2020(d) | $35.89 | 1.24 | (2.62) | (1.38) | (1.28) | (1.28) |
| Year Ended 7/31/2019(d) | $36.62 | 1.40 | (0.69) | 0.71 | (1.44) | (1.44) |
| Institutional Class | ||||||
| Year Ended 7/31/2023 | $33.22 | 2.47 | 0.27 | 2.74 | (2.57) | (2.57) |
| Year Ended 7/31/2022 | $35.23 | 1.26 | (2.10) | (0.84) | (1.17) | (1.17) |
| Year Ended 7/31/2021(d) | $33.18 | 1.21 | 1.96 | 3.17 | (1.12) | (1.12) |
| Year Ended 7/31/2020(d) | $35.83 | 1.56 | (2.61) | (1.05) | (1.60) | (1.60) |
| Year Ended 7/31/2019(d) | $36.56 | 1.76 | (0.69) | 1.07 | (1.80) | (1.80) |
| Institutional 2 Class | ||||||
| Year Ended 7/31/2023 | $33.40 | 2.50 | 0.26 | 2.76 | (2.60) | (2.60) |
| Year Ended 7/31/2022 | $35.42 | 1.22 | (2.05) | (0.83) | (1.19) | (1.19) |
| Year Ended 7/31/2021(d) | $33.35 | 1.22 | 1.99 | 3.21 | (1.14) | (1.14) |
| Year Ended 7/31/2020(d) | $36.01 | 1.52 | (2.54) | (1.02) | (1.64) | (1.64) |
| Year Ended 7/31/2019(d) | $36.74 | 1.76 | (0.69) | 1.07 | (1.80) | (1.80) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 32 | Columbia Floating Rate 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 7/31/2023 | $33.43 | 8.32% | 1.05% | 1.01% | 7.27% | 35% | $214,863 |
| Year Ended 7/31/2022 | $33.27 | (2.70%) | 1.04% | 1.02%(c) | 3.33% | 35% | $249,880 |
| Year Ended 7/31/2021(d) | $35.28 | 9.35% | 1.06% | 1.02%(c) | 3.24% | 75% | $212,382 |
| Year Ended 7/31/2020(d) | $33.22 | (3.11%) | 1.05% | 1.02%(c) | 4.32% | 37% | $204,715 |
| Year Ended 7/31/2019(d) | $35.88 | 2.79% | 1.02% | 1.02% | 4.68% | 32% | $323,191 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $33.38 | 8.59% | 0.80% | 0.76% | 7.32% | 35% | $15,137 |
| Year Ended 7/31/2022 | $33.22 | (2.48%) | 0.79% | 0.77%(c) | 3.63% | 35% | $33,290 |
| Year Ended 7/31/2021(d) | $35.23 | 9.73% | 0.81% | 0.77%(c) | 3.48% | 75% | $21,910 |
| Year Ended 7/31/2020(d) | $33.17 | (2.99%) | 0.80% | 0.77%(c) | 4.56% | 37% | $19,905 |
| Year Ended 7/31/2019(d) | $35.82 | 3.05% | 0.77% | 0.77% | 4.95% | 32% | $29,255 |
| Class C | |||||||
| Year Ended 7/31/2023 | $33.44 | 7.50% | 1.80% | 1.76% | 6.50% | 35% | $25,376 |
| Year Ended 7/31/2022 | $33.28 | (3.43%) | 1.79% | 1.77%(c) | 2.56% | 35% | $31,167 |
| Year Ended 7/31/2021(d) | $35.29 | 8.56% | 1.81% | 1.77%(c) | 2.52% | 75% | $30,173 |
| Year Ended 7/31/2020(d) | $33.23 | (3.83%) | 1.80% | 1.77%(c) | 3.56% | 37% | $48,167 |
| Year Ended 7/31/2019(d) | $35.89 | 2.02% | 1.77% | 1.77% | 3.93% | 32% | $75,406 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $33.39 | 8.62% | 0.80% | 0.76% | 7.41% | 35% | $278,860 |
| Year Ended 7/31/2022 | $33.22 | (2.47%) | 0.79% | 0.77%(c) | 3.66% | 35% | $449,743 |
| Year Ended 7/31/2021(d) | $35.23 | 9.73% | 0.81% | 0.77%(c) | 3.49% | 75% | $249,552 |
| Year Ended 7/31/2020(d) | $33.18 | (2.99%) | 0.80% | 0.77%(c) | 4.59% | 37% | $213,695 |
| Year Ended 7/31/2019(d) | $35.83 | 3.05% | 0.77% | 0.77% | 4.93% | 32% | $446,512 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $33.56 | 8.62% | 0.78% | 0.72% | 7.54% | 35% | $130,041 |
| Year Ended 7/31/2022 | $33.40 | (2.44%) | 0.75% | 0.73% | 3.50% | 35% | $51,720 |
| Year Ended 7/31/2021(d) | $35.42 | 9.70% | 0.77% | 0.73% | 3.51% | 75% | $95,567 |
| Year Ended 7/31/2020(d) | $33.35 | (2.80%) | 0.77% | 0.73% | 4.51% | 37% | $68,780 |
| Year Ended 7/31/2019(d) | $36.01 | 2.98% | 0.74% | 0.74% | 4.91% | 32% | $56,376 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 33 |
Financial Highlights (continued)
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Total distributions to shareholders | |
| Institutional 3 Class | ||||||
| Year Ended 7/31/2023 | $33.25 | 2.47 | 0.30 | 2.77 | (2.60) | (2.60) |
| Year Ended 7/31/2022 | $35.27 | 1.25 | (2.07) | (0.82) | (1.20) | (1.20) |
| Year Ended 7/31/2021(d) | $33.21 | 1.23 | 1.99 | 3.22 | (1.16) | (1.16) |
| Year Ended 7/31/2020(d) | $35.87 | 1.60 | (2.62) | (1.02) | (1.64) | (1.64) |
| Year Ended 7/31/2019(d) | $36.60 | 1.80 | (0.69) | 1.11 | (1.84) | (1.84) |
| Class R | ||||||
| Year Ended 7/31/2023 | $33.30 | 2.33 | 0.24 | 2.57 | (2.41) | (2.41) |
| Year Ended 7/31/2022 | $35.31 | 1.07 | (2.08) | (1.01) | (1.00) | (1.00) |
| Year Ended 7/31/2021(d) | $33.25 | 1.04 | 1.97 | 3.01 | (0.95) | (0.95) |
| Year Ended 7/31/2020(d) | $35.91 | 1.40 | (2.62) | (1.22) | (1.44) | (1.44) |
| Year Ended 7/31/2019(d) | $36.64 | 1.60 | (0.73) | 0.87 | (1.60) | (1.60) |
| 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.
| 34 | Columbia Floating Rate 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 7/31/2023 | $33.42 | 8.70% | 0.72% | 0.68% | 7.39% | 35% | $70,077 |
| Year Ended 7/31/2022 | $33.25 | (2.41%) | 0.70% | 0.68% | 3.60% | 35% | $130,619 |
| Year Ended 7/31/2021(d) | $35.27 | 9.82% | 0.72% | 0.68% | 3.55% | 75% | $139,132 |
| Year Ended 7/31/2020(d) | $33.21 | (2.90%) | 0.71% | 0.69% | 4.66% | 37% | $75,271 |
| Year Ended 7/31/2019(d) | $35.87 | 3.13% | 0.69% | 0.69% | 5.02% | 32% | $106,005 |
| Class R | |||||||
| Year Ended 7/31/2023 | $33.46 | 8.05% | 1.30% | 1.26% | 6.99% | 35% | $1,301 |
| Year Ended 7/31/2022 | $33.30 | (2.95%) | 1.29% | 1.27%(c) | 3.09% | 35% | $1,549 |
| Year Ended 7/31/2021(d) | $35.31 | 9.16% | 1.31% | 1.27%(c) | 2.99% | 75% | $1,315 |
| Year Ended 7/31/2020(d) | $33.25 | (3.46%) | 1.30% | 1.27%(c) | 4.06% | 37% | $1,572 |
| Year Ended 7/31/2019(d) | $35.91 | 2.54% | 1.27% | 1.27% | 4.42% | 32% | $2,439 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Floating Rate Fund | Annual Report 2023 | 35 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Floating Rate 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.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Foreign equity securities are
valued based on the closing price or last trade 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
| 36 | Columbia Floating Rate Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Investments in senior loans
The Fund may invest in senior loan
participations and assignments of all or a portion of a loan. When the Fund purchases a senior loan participation, the Fund typically enters into a contractual relationship with the lender or third party selling such
participations (Selling Participant), but not the borrower, and assumes the credit risk of the borrower, Selling Participant and any other parties positioned between the Fund and the borrower. In addition, the Fund
may not directly benefit from the collateral supporting the senior loan that it has purchased from the Selling Participant. In contrast, 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 participations or 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 participations and assignments are vulnerable to market,
economic or other conditions or events that may reduce the demand for loan participations and assignments and certain loan participations and assignments which were liquid when purchased, may become illiquid.
| Columbia Floating Rate Fund | Annual Report 2023 | 37 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The Fund may enter into senior loan
participations and 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 generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
The value of additional securities
received as an income payment through a payment-in-kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
| 38 | Columbia Floating Rate Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 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 amendments.
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 July 31, 2023 was 0.65% of the Fund’s
average daily net assets.
| Columbia Floating Rate Fund | Annual Report 2023 | 39 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 "Trustees’ fees" 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 December 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 July 31,
2023, the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| 40 | Columbia Floating Rate Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 Statement of Operations. For the year ended July 31, 2023, no minimum account balance fees were charged by the Fund.
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 $898,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.50 - 1.00(a) | 156,087 |
| Class C | — | 1.00(b) | 3,508 |
| (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
| Columbia Floating Rate Fund | Annual Report 2023 | 41 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 December 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.
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 July 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, investments in partnerships and/or grantor trusts, principal and/or interest from fixed income securities, defaulted
securities/troubled debt, capital loss carryforwards, trustees’ deferred compensation, distributions, foreign currency transactions, passive foreign investment company (pfic) holdings 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 (loss) ($) | Paid in capital ($) |
| (203,377) | 203,468 | (91) |
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 July 31, 2023 | Year Ended July 31, 2022 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 58,078,781 | — | 58,078,781 | 28,873,236 | — | 28,873,236 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 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 ($) | Net unrealized (depreciation) ($) |
| 4,985,778 | — | (96,545,501) | (33,028,000) |
At July 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) ($) | Net unrealized (depreciation) ($) |
| 827,513,734 | 4,129,513 | (37,157,513) | (33,028,000) |
| 42 | Columbia Floating Rate Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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 July 31,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (14,095,562) | (82,449,939) | (96,545,501) | — |
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 $258,267,835 and $478,496,485, respectively, for the year ended July 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’s activity in the
Interfund Program during the year ended July 31, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 2,358,824 | 4.38 | 17 |
Interest income earned by the Fund
is recorded as interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at July 31, 2023.
| Columbia Floating Rate Fund | Annual Report 2023 | 43 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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.
Floating rate loan risk
Floating rate loans are generally
subject to legal or contractual restrictions on resale, may trade infrequently on the secondary market, may trade only in the over-the-counter market and are typically subject to extended settlement periods. Each of
these factors may result in increased liquidity risk and impaired value when the Fund needs to liquidate such loans. Additionally, portfolio managers may avoid the receipt of material, non-public information
(Confidential Information) about the issuers of floating rate loans (including from the issuer itself) being considered for acquisition by the Fund, or held in the Fund. A decision not to receive Confidential
Information may disadvantage the Fund and could adversely affect the Fund’s performance. Certain floating rate and other loans may not be fully collateralized and may decline in value. Because rates on certain
floating rate loans reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can cause fluctuations in the Fund’s NAV.
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, though the
values of floating rate instruments tend to move less in response to changes in interest rates than the values of fixed rate instruments.
| 44 | Columbia Floating Rate Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Debt instruments with floating coupon rates are
typically less sensitive to interest rate changes, but these debt instruments may decline in value if their coupon rates do not keep pace with increases in interest rates. Because rates on certain floating rate loans
and floating rate debt instruments reset only periodically, changes in interest rates (and particularly sudden and significant changes) can be expected to cause fluctuations in the Fund’s NAV. Because the Fund
invests primarily in floating rate loans and floating rate debt securities, a decrease in interest rates will typically reduce the amount of income the Fund receives from such loans. Changes in interest rates may also
affect the liquidity of the Fund’s investments in debt instruments. In general, the longer the maturity or duration of a debt instrument, the greater its sensitivity to changes in interest rates. Interest rate
declines also may increase prepayments of debt obligations, which, in turn, would increase prepayment risk. Very low or negative interest rates may impact the Fund’s yield and may increase the risk that, if
followed by rising interest rates, the Fund’s performance will be negatively impacted. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation. 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. Such actions may negatively affect
the value of debt instruments held by the Fund, resulting in a negative impact on the Fund’s performance and NAV. Rising interest rates may prompt redemptions from the Fund, which may force the Fund to sell
investments at a time when it is not advantageous to do so, which could result in losses.
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 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.
| Columbia Floating Rate Fund | Annual Report 2023 | 45 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 July 31, 2023, affiliated
shareholders of record owned 42.1% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed 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 provide services to
the Fund.
| 46 | Columbia Floating Rate 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 Floating Rate Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Floating Rate Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the "Fund") as of
July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes, and
the financial highlights for each of the five years in the period ended July 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 July 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 July 31, 2023 and
the financial highlights for each of the five years in the period ended July 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 July 31, 2023 by correspondence with the custodian, transfer agent, brokers and agent banks; 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Floating Rate Fund | Annual Report 2023 | 47 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 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 | |
| 99.45% |
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 | 173 | 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 Floating Rate 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 Floating Rate 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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| 50 | Columbia Floating Rate 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 | 171 | 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. | 173 | 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 | 171 | 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 Floating Rate 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 | 173 | 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 | 173 | 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 Floating Rate 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 Floating Rate 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 December 1, 2018
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | the Fund’s highly liquid investment minimum (defined as the minimum percentage of net assets that must be invested in cash and any investment reasonably expected to be convertible to cash in current market conditions in three business days or less without the conversion to cash significantly changing the market value of the investment) was assessed and continues to be appropriate;] |
| • | 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 Floating Rate Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Columbia Floating Rate Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to the Fund and other
funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Floating Rate Fund | Annual Report 2023 | 55 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed that Fund performance was well
within the range of that of its peers.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
Comparative fees, costs of
services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the
| 56 | Columbia Floating Rate Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
Investment Manager’s profitability. The Board reviewed the fees charged to comparable institutional or other accounts/vehicles managed by the Investment Manager and discussed differences in how the products are managed and operated, thus explaining many of the differences in fees.
(Unaudited)
Investment Manager’s profitability. The Board reviewed the fees charged to comparable institutional or other accounts/vehicles managed by the Investment Manager and discussed differences in how the products are managed and operated, thus explaining many of the differences in fees.
The Board considered the reports of
JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary
objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain
exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper
comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
On June 22, 2023, the Board,
including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the
Management Agreement.
| Columbia Floating Rate Fund | Annual Report 2023 | 57 |
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/
ANN149_07_N01_(09/23)
Columbia Strategic
Municipal Income Fund
Not FDIC or NCUA Insured •
No Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
| 7 | |
| 8 | |
| 31 | |
| 32 | |
| 33 | |
| 36 | |
| 40 | |
| 51 | |
| 52 | |
| 52 | |
| 58 | |
| 59 |
If you elect to receive the
shareholder report for Columbia Strategic Municipal 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 Strategic Municipal Income
Fund | Annual Report 2023
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks total return, with a focus on income exempt from federal income tax and capital appreciation.
Portfolio management
Catherine Stienstra
Lead Portfolio Manager
Managed Fund since 2007
Douglas White, CFA
Portfolio Manager
Managed Fund since 2018
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
Performance of a hypothetical $10,000 investment (July 31, 2013 — July 31, 2023)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class A shares of Columbia Strategic Municipal 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 Strategic Municipal Income Fund | Annual Report 2023 |
Manager Discussion of Fund Performance
(Unaudited)
(Unaudited)
For the 12-month period that
ended July 31, 2023, Class A shares of Columbia Strategic Municipal Income Fund returned -1.11% excluding sales charges. Institutional Class shares of the Fund returned -0.87%. The Fund’s primary benchmark, the
Bloomberg Municipal Bond Index (Bloomberg Index), returned 0.93%. The Fund’s secondary benchmark, the Bloomberg High Yield Municipal Bond Index, returned -0.20%.
Market overview
The municipal bond market
experienced significant volatility during the annual period, impacted primarily by efforts of the U.S. Federal Reserve (Fed) to return inflation to its target levels and the resultant dramatic increase in interest
rates. As the period began in August 2022, the Bloomberg Index saw broad-based negative returns, followed by its worst September monthly return on record. The municipal bond market then delivered positive performance
in the fourth calendar quarter. The Fed’s aggressive hiking campaign showed initial signs of cooling, boosting investor sentiment and driving a long-awaited relief rally that continued into January 2023.
Unfortunately, sentiment quickly unwound in February, as the market reconsidered the persistence of inflation and a still too strong labor market. A more hawkish Fed led to a sell-off in U.S. Treasury and municipal
bond yields alike. (Hawkish tends to suggest higher interest rates; opposite of dovish.)
Then came March 2023 when,
partially driven by higher interest rates, an unforeseen banking crisis unfolded, with three U.S. regional banks and Credit Suisse in need of rescue in quick succession. The weakness in the banking sector led to
municipal bond yields moving lower and, in turn, solid positive first calendar quarter returns for the Bloomberg Index. Both U.S. Treasury and municipal bond yields then rose during the second quarter of 2023, as the
regional banking crisis ebbed and the focus on the Fed’s tightening monetary policy reignited. For the first time since it started hiking in March 2022, the Fed did not raise rates at its June 2023 meeting.
However, in late July, the Fed approved another rate hike, its 11th of the current cycle, bringing its targeted federal funds rate to its highest level in more than 22 years. Further, the Fed indicated additional
interest rate increases may be implemented before year end. The Bloomberg Index posted a modestly negative return for the second quarter of 2023 but a moderately positive return for July, as performance was broadly
positive across maturities, credit ratings and states for the month amid a consensus shift in favor of a soft landing with a recession no longer imminent. Notably, the municipal bond market outperformed both U.S.
Treasuries and the broad U.S. fixed-income market for the last five months of the period and did so even more significantly for the annual period overall.
The Fund’s notable
detractors during the period
| • | Detracting most from the Fund’s relative results was a position in the bonds of PREPA, the Puerto Rico Electric Power Authority. |
| ○ | The utility company had entered bankruptcy in July 2017 with just more than $8 billion in outstanding bonds. |
| ○ | In late June 2023, investors were blindsided when the bankruptcy court ruled that bondholders could claim just less than 29% of the value of the utility’s outstanding debt. Bondholders have already begun to work on an appeal. |
| • | From a sector perspective, the Fund’s overweight in the continuing care retirement communities (CCRC) and housing sectors detracted from results relative to the Bloomberg Index. CCRCs were negatively affected by the lingering effects of the COVID-19 pandemic as well as by some of the labor costs and labor shortages impacting the health care sector broadly. |
| • | Fund overweights in non-rated municipal bonds and in bonds rated below BB dampened relative results, as non-rated and B-rated categories posted negative returns, while bonds rated BB and all investment-grade rating categories posted positive returns for the period. |
| • | Issue selection within the airport, local general obligation and CCRC sectors and among bonds with maturities of six to 25 years detracted. |
The Fund’s notable
contributors during the period
| • | Having an overweight to BBB-rated bonds contributed positively, as this credit quality segment was the best performing investment-grade rating category during the period, even outperforming some of the higher quality high-yield rating categories. |
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 5 |
Manager Discussion of Fund Performance (continued)
(Unaudited)
(Unaudited)
| ○ | To a lesser degree, the Fund’s underweights in bonds rated AA and AAA also helped. |
| • | Yield curve positioning proved beneficial. |
| ○ | Having an overweight to bonds with maturities of 17 years and longer and an underweight to bonds with maturities of eight years and shorter particularly helped. |
| ○ | While the best performing maturity segment of the municipal bond yield curve during the period was bonds with maturities of 12 to 17 years, longer maturity bonds were the next best. Six year and shorter maturity bonds posted negative returns during the period. |
| • | Security selection in the hospital, toll roads and leasing sectors added value. |
Fixed-income securities present
issuer default risk. The Fund invests substantially in municipal securities and will be affected by tax, legislative, regulatory, demographic or political changes, as well as changes impacting a state’s financial, economic or other
conditions. A relatively small number of tax-exempt issuers may necessitate the Fund investing more heavily in a single issuer and, therefore, be more exposed to the risk of loss than a fund that invests more broadly.
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. 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. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Federal and state tax rules apply to capital gain distributions and any gains or losses on sales. Income may be subject to state, local or alternative minimum taxes. 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 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 Strategic Municipal 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 Strategic Municipal Income Fund | Annual Report 2023 | 7 |
Portfolio of Investments
July 31, 2023
July 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 Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 9 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 11 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 13 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 15 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 17 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 19 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 21 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 23 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 25 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 26 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 27 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 28 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Notes to Portfolio of
Investments
| (a) | The Fund is entitled to receive principal and interest from the guarantor after a day or a week’s notice or upon maturity. The maturity date disclosed represents the final maturity. |
| (b) | Represents a variable rate security where the coupon rate adjusts on specified dates (generally daily or weekly) using the prevailing money market rate. The interest rate shown was the current rate as of July 31, 2023. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | 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 July 31, 2023, the total value of these securities amounted to $88,984,089, which represents 5.02% of total net assets. |
| (e) | Income from this security may be subject to alternative minimum tax. |
| (f) | Zero coupon bond. |
| (g) | Represents a security in default. |
| (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 July 31, 2023. |
| (i) | Municipal obligations include debt obligations issued by or on behalf of territories, possessions, or sovereign nations within the territorial boundaries of the United States. At July 31, 2023, the total value of these securities amounted to $70,186,364, which represents 3.96% of total net assets. |
| (j) | The rate shown is the seven-day current annualized yield at July 31, 2023. |
Abbreviation Legend
| AGM | Assured Guaranty Municipal Corporation |
| BAM | Build America Mutual Assurance Co. |
| FHA | Federal Housing Authority |
| GNMA | Government National Mortgage Association |
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 Strategic Municipal Income Fund | Annual Report 2023 | 29 |
Portfolio of Investments (continued)
July 31, 2023
July 31, 2023
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at July 31, 2023:
The following table is a summary of the inputs used to value the Fund’s investments at July 31, 2023:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Floating Rate Notes | — | 25,450,000 | — | 25,450,000 |
| Municipal Bonds | — | 1,756,308,332 | — | 1,756,308,332 |
| Money Market Funds | 147,838 | — | — | 147,838 |
| Total Investments in Securities | 147,838 | 1,781,758,332 | — | 1,781,906,170 |
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.
| 30 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Statement of Assets and Liabilities
July 31, 2023
July 31, 2023
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,942,247,891) | $1,781,906,170 |
| Cash | 84,584 |
| Receivable for: | |
| Capital shares sold | 6,822,141 |
| Dividends | 28,740 |
| Interest | 17,079,715 |
| Expense reimbursement due from Investment Manager | 2,769 |
| Prepaid expenses | 21,415 |
| Total assets | 1,805,945,534 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 23,803,350 |
| Capital shares redeemed | 3,591,298 |
| Distributions to shareholders | 5,470,483 |
| Management services fees | 67,423 |
| Distribution and/or service fees | 17,849 |
| Transfer agent fees | 104,244 |
| Trustees’ fees | 139,116 |
| Other expenses | 49,576 |
| Total liabilities | 33,243,339 |
| Net assets applicable to outstanding capital stock | $1,772,702,195 |
| Represented by | |
| Paid in capital | 2,070,454,233 |
| Total distributable earnings (loss) | (297,752,038) |
| Total - representing net assets applicable to outstanding capital stock | $1,772,702,195 |
| Class A | |
| Net assets | $660,007,079 |
| Shares outstanding | 45,811,638 |
| Net asset value per share | $14.41 |
| 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) | $14.86 |
| Advisor Class | |
| Net assets | $53,541,250 |
| Shares outstanding | 3,721,321 |
| Net asset value per share | $14.39 |
| Class C | |
| Net assets | $52,402,658 |
| Shares outstanding | 3,634,995 |
| Net asset value per share | $14.42 |
| Institutional Class | |
| Net assets | $840,109,124 |
| Shares outstanding | 58,427,570 |
| Net asset value per share | $14.38 |
| Institutional 2 Class | |
| Net assets | $27,632,259 |
| Shares outstanding | 1,921,655 |
| Net asset value per share | $14.38 |
| Institutional 3 Class | |
| Net assets | $139,009,825 |
| Shares outstanding | 9,652,108 |
| Net asset value per share | $14.40 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 31 |
Statement of Operations
Year Ended July 31, 2023
Year Ended July 31, 2023
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $124,331 |
| Interest | 72,212,000 |
| Total income | 72,336,331 |
| Expenses: | |
| Management services fees | 8,361,523 |
| Distribution and/or service fees | |
| Class A | 1,696,676 |
| Class C | 586,689 |
| Transfer agent fees | |
| Class A | 433,117 |
| Advisor Class | 29,016 |
| Class C | 37,468 |
| Institutional Class | 543,276 |
| Institutional 2 Class | 16,158 |
| Institutional 3 Class | 11,183 |
| Trustees’ fees | 61,555 |
| Custodian fees | 17,201 |
| Printing and postage fees | 71,051 |
| Registration fees | 206,048 |
| Accounting services fees | 40,290 |
| Legal fees | 37,221 |
| Interest on interfund lending | 24,585 |
| Compensation of chief compliance officer | 332 |
| Other | 40,216 |
| Total expenses | 12,213,605 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (525,033) |
| Total net expenses | 11,688,572 |
| Net investment income | 60,647,759 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (63,249,123) |
| Futures contracts | (440,898) |
| Net realized loss | (63,690,021) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (39,482,292) |
| Net change in unrealized appreciation (depreciation) | (39,482,292) |
| Net realized and unrealized loss | (103,172,313) |
| Net decrease in net assets resulting from operations | $(42,524,554) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 32 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Statement of Changes in Net Assets
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | |
| Operations | ||
| Net investment income | $60,647,759 | $63,624,939 |
| Net realized loss | (63,690,021) | (49,244,312) |
| Net change in unrealized appreciation (depreciation) | (39,482,292) | (330,228,192) |
| Net decrease in net assets resulting from operations | (42,524,554) | (315,847,565) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class A | (22,536,479) | (22,734,612) |
| Advisor Class | (1,625,624) | (1,861,750) |
| Class C | (1,507,459) | (1,561,720) |
| Institutional Class | (30,260,924) | (42,470,650) |
| Institutional 2 Class | (992,219) | (1,701,293) |
| Institutional 3 Class | (5,160,608) | (5,484,231) |
| Total distributions to shareholders | (62,083,313) | (75,814,256) |
| Decrease in net assets from capital stock activity | (280,989,420) | (332,870,273) |
| Total decrease in net assets | (385,597,287) | (724,532,094) |
| Net assets at beginning of year | 2,158,299,482 | 2,882,831,576 |
| Net assets at end of year | $1,772,702,195 | $2,158,299,482 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 33 |
Statement of Changes in Net Assets (continued)
| Year Ended | Year Ended | |||
| July 31, 2023 | July 31, 2022 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class A | ||||
| Shares sold | 11,284,180 | 161,342,103 | 10,441,838 | 163,542,769 |
| Distributions reinvested | 1,531,599 | 21,814,899 | 1,363,034 | 21,920,344 |
| Shares redeemed | (17,493,940) | (248,939,566) | (14,336,534) | (222,273,825) |
| Net decrease | (4,678,161) | (65,782,564) | (2,531,662) | (36,810,712) |
| Advisor Class | ||||
| Shares sold | 1,903,746 | 27,261,919 | 2,534,113 | 39,299,927 |
| Distributions reinvested | 114,245 | 1,625,377 | 115,598 | 1,861,738 |
| Shares redeemed | (1,853,386) | (26,243,798) | (3,288,205) | (50,780,468) |
| Net increase (decrease) | 164,605 | 2,643,498 | (638,494) | (9,618,803) |
| Class C | ||||
| Shares sold | 616,278 | 8,816,429 | 784,505 | 12,526,763 |
| Distributions reinvested | 97,316 | 1,386,571 | 86,780 | 1,397,235 |
| Shares redeemed | (1,698,018) | (24,243,499) | (1,466,026) | (22,972,742) |
| Net decrease | (984,424) | (14,040,499) | (594,741) | (9,048,744) |
| Institutional Class | ||||
| Shares sold | 35,662,984 | 509,063,144 | 46,854,422 | 745,069,761 |
| Distributions reinvested | 1,910,477 | 27,138,397 | 2,297,911 | 37,017,887 |
| Shares redeemed | (50,231,502) | (711,421,347) | (68,482,086) | (1,055,729,577) |
| Net decrease | (12,658,041) | (175,219,806) | (19,329,753) | (273,641,929) |
| Institutional 2 Class | ||||
| Shares sold | 1,005,462 | 14,508,421 | 2,504,081 | 39,031,395 |
| Distributions reinvested | 69,771 | 992,057 | 105,080 | 1,697,403 |
| Shares redeemed | (1,825,994) | (25,626,974) | (3,565,590) | (54,256,211) |
| Net decrease | (750,761) | (10,126,496) | (956,429) | (13,527,413) |
| Institutional 3 Class | ||||
| Shares sold | 4,225,119 | 60,421,944 | 6,287,425 | 99,644,453 |
| Distributions reinvested | 181,342 | 2,580,795 | 193,030 | 3,106,446 |
| Shares redeemed | (5,739,432) | (81,466,292) | (6,026,252) | (92,973,571) |
| Net increase (decrease) | (1,332,971) | (18,463,553) | 454,203 | 9,777,328 |
| Total net decrease | (20,239,753) | (280,989,420) | (23,596,876) | (332,870,273) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 34 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
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BLANK]
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 35 |
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 7/31/2023 | $15.07 | 0.47 | (0.65) | (0.18) | (0.48) | — | (0.48) |
| Year Ended 7/31/2022 | $17.28 | 0.36 | (2.14) | (1.78) | (0.37) | (0.06) | (0.43) |
| Year Ended 7/31/2021(g) | $16.69 | 0.37 | 0.59 | 0.96 | (0.37) | — | (0.37) |
| Year Ended 7/31/2020(g) | $16.48 | 0.44 | 0.25 | 0.69 | (0.44) | (0.04) | (0.48) |
| Year Ended 7/31/2019(g) | $15.98 | 0.52 | 0.54 | 1.06 | (0.52) | (0.04) | (0.56) |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $15.04 | 0.50 | (0.64) | (0.14) | (0.51) | — | (0.51) |
| Year Ended 7/31/2022 | $17.26 | 0.40 | (2.15) | (1.75) | (0.41) | (0.06) | (0.47) |
| Year Ended 7/31/2021(g) | $16.67 | 0.41 | 0.59 | 1.00 | (0.41) | — | (0.41) |
| Year Ended 7/31/2020(g) | $16.46 | 0.48 | 0.25 | 0.73 | (0.48) | (0.04) | (0.52) |
| Year Ended 7/31/2019(g) | $15.95 | 0.56 | 0.55 | 1.11 | (0.56) | (0.04) | (0.60) |
| Class C | |||||||
| Year Ended 7/31/2023 | $15.08 | 0.36 | (0.65) | (0.29) | (0.37) | — | (0.37) |
| Year Ended 7/31/2022 | $17.29 | 0.24 | (2.14) | (1.90) | (0.25) | (0.06) | (0.31) |
| Year Ended 7/31/2021(g) | $16.71 | 0.25 | 0.58 | 0.83 | (0.25) | — | (0.25) |
| Year Ended 7/31/2020(g) | $16.49 | 0.32 | 0.26 | 0.58 | (0.32) | (0.04) | (0.36) |
| Year Ended 7/31/2019(g) | $15.99 | 0.40 | 0.54 | 0.94 | (0.40) | (0.04) | (0.44) |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $15.04 | 0.50 | (0.65) | (0.15) | (0.51) | — | (0.51) |
| Year Ended 7/31/2022 | $17.25 | 0.40 | (2.14) | (1.74) | (0.41) | (0.06) | (0.47) |
| Year Ended 7/31/2021(g) | $16.66 | 0.41 | 0.59 | 1.00 | (0.41) | — | (0.41) |
| Year Ended 7/31/2020(g) | $16.45 | 0.48 | 0.25 | 0.73 | (0.48) | (0.04) | (0.52) |
| Year Ended 7/31/2019(g) | $15.94 | 0.56 | 0.55 | 1.11 | (0.56) | (0.04) | (0.60) |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $15.04 | 0.50 | (0.64) | (0.14) | (0.52) | — | (0.52) |
| Year Ended 7/31/2022 | $17.25 | 0.40 | (2.14) | (1.74) | (0.41) | (0.06) | (0.47) |
| Year Ended 7/31/2021(g) | $16.66 | 0.41 | 0.60 | 1.01 | (0.42) | — | (0.42) |
| Year Ended 7/31/2020(g) | $16.45 | 0.48 | 0.25 | 0.73 | (0.48) | (0.04) | (0.52) |
| Year Ended 7/31/2019(g) | $15.94 | 0.56 | 0.55 | 1.11 | (0.56) | (0.04) | (0.60) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 36 | Columbia Strategic Municipal 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 7/31/2023 | $14.41 | (1.11%) | 0.80%(c) | 0.77%(c) | 3.24% | 19% | $660,007 |
| Year Ended 7/31/2022 | $15.07 | (10.43%) | 0.78%(c),(d) | 0.78%(c),(d),(e),(f) | 2.24% | 29% | $760,677 |
| Year Ended 7/31/2021(g) | $17.28 | 5.91% | 0.78%(h) | 0.78%(f),(h) | 2.21% | 14% | $916,301 |
| Year Ended 7/31/2020(g) | $16.69 | 4.25% | 0.80%(i) | 0.80%(e),(f),(i) | 2.66% | 32% | $843,707 |
| Year Ended 7/31/2019(g) | $16.48 | 7.05% | 0.81% | 0.81%(f) | 3.23% | 30% | $792,540 |
| Advisor Class | |||||||
| Year Ended 7/31/2023 | $14.39 | (0.80%) | 0.55%(c) | 0.52%(c) | 3.49% | 19% | $53,541 |
| Year Ended 7/31/2022 | $15.04 | (10.28%) | 0.53%(c),(d) | 0.53%(c),(d),(e),(f) | 2.47% | 29% | $53,510 |
| Year Ended 7/31/2021(g) | $17.26 | 6.06% | 0.53%(h) | 0.53%(f),(h) | 2.46% | 14% | $72,397 |
| Year Ended 7/31/2020(g) | $16.67 | 4.77% | 0.55%(i) | 0.55%(e),(f),(i) | 2.91% | 32% | $60,124 |
| Year Ended 7/31/2019(g) | $16.46 | 7.06% | 0.56% | 0.56%(f) | 3.47% | 30% | $46,584 |
| Class C | |||||||
| Year Ended 7/31/2023 | $14.42 | (1.85%) | 1.55%(c) | 1.53%(c) | 2.48% | 19% | $52,403 |
| Year Ended 7/31/2022 | $15.08 | (11.09%) | 1.53%(c),(d) | 1.53%(c),(d),(e),(f) | 1.48% | 29% | $69,643 |
| Year Ended 7/31/2021(g) | $17.29 | 4.93% | 1.53%(h) | 1.53%(f),(h) | 1.46% | 14% | $90,170 |
| Year Ended 7/31/2020(g) | $16.71 | 3.73% | 1.55%(i) | 1.55%(e),(f),(i) | 1.91% | 32% | $91,717 |
| Year Ended 7/31/2019(g) | $16.49 | 5.98% | 1.56% | 1.56%(f) | 2.48% | 30% | $72,283 |
| Institutional Class | |||||||
| Year Ended 7/31/2023 | $14.38 | (0.87%) | 0.55%(c) | 0.53%(c) | 3.47% | 19% | $840,109 |
| Year Ended 7/31/2022 | $15.04 | (10.22%) | 0.53%(c),(d) | 0.53%(c),(d),(e),(f) | 2.45% | 29% | $1,068,842 |
| Year Ended 7/31/2021(g) | $17.25 | 6.00% | 0.53%(h) | 0.53%(f),(h) | 2.46% | 14% | $1,559,431 |
| Year Ended 7/31/2020(g) | $16.66 | 4.77% | 0.55%(i) | 0.55%(e),(f),(i) | 2.91% | 32% | $1,218,644 |
| Year Ended 7/31/2019(g) | $16.45 | 7.06% | 0.56% | 0.56%(f) | 3.46% | 30% | $930,894 |
| Institutional 2 Class | |||||||
| Year Ended 7/31/2023 | $14.38 | (0.86%) | 0.55%(c) | 0.52%(c) | 3.47% | 19% | $27,632 |
| Year Ended 7/31/2022 | $15.04 | (10.22%) | 0.52%(c),(d) | 0.52%(c),(d),(f) | 2.44% | 29% | $40,187 |
| Year Ended 7/31/2021(g) | $17.25 | 6.01% | 0.53%(h) | 0.52%(f),(h) | 2.47% | 14% | $62,604 |
| Year Ended 7/31/2020(g) | $16.66 | 4.78% | 0.54%(i) | 0.54%(f),(i) | 2.91% | 32% | $51,339 |
| Year Ended 7/31/2019(g) | $16.45 | 7.06% | 0.55% | 0.55%(f) | 3.45% | 30% | $39,068 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 37 |
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 7/31/2023 | $15.06 | 0.51 | (0.65) | (0.14) | (0.52) | — | (0.52) |
| Year Ended 7/31/2022 | $17.28 | 0.41 | (2.15) | (1.74) | (0.42) | (0.06) | (0.48) |
| Year Ended 7/31/2021(g) | $16.69 | 0.42 | 0.60 | 1.02 | (0.43) | — | (0.43) |
| Year Ended 7/31/2020(g) | $16.47 | 0.48 | 0.26 | 0.74 | (0.48) | (0.04) | (0.52) |
| Year Ended 7/31/2019(g) | $15.97 | 0.56 | 0.58 | 1.14 | (0.60) | (0.04) | (0.64) |
| 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) | Ratios include interest on collateral expense which is less than 0.01%. |
| (e) | The benefits derived from expense reductions had an impact of less than 0.01%. |
| (f) | Ratios include the impact of voluntary waivers paid by the Investment Manager. If the Investment Manager had not paid these voluntary waivers, the Fund’s net expense ratio would increase by less than 0.01%. |
| (g) | 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. |
| (h) | Ratios include interest and fee expense related to the participation in certain inverse floater programs. If interest and fee expense related to the participation in certain inverse floater programs had been excluded, expenses would have been lower by less than 0.01%. Due to an equal increase in interest income from fixed rate municipal bonds held in trust, there is no impact on the Fund’s net assets, net asset value per share, total return or net investment income. |
| (i) | Ratios include interest and fee expense related to the participation in certain inverse floater programs. If interest and fee expense related to the participation in certain inverse floater programs had been excluded, expenses would have been lower by 0.01%. Due to an equal increase in interest income from fixed rate municipal bonds held in trust, there is no impact on the Fund’s net assets, net asset value per share, total return or net investment income. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 38 | Columbia Strategic Municipal 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 7/31/2023 | $14.40 | (0.81%) | 0.50%(c) | 0.47%(c) | 3.53% | 19% | $139,010 |
| Year Ended 7/31/2022 | $15.06 | (10.21%) | 0.48%(c),(d) | 0.47%(c),(d),(f) | 2.55% | 29% | $165,440 |
| Year Ended 7/31/2021(g) | $17.28 | 6.24% | 0.48%(h) | 0.47%(f),(h) | 2.51% | 14% | $181,928 |
| Year Ended 7/31/2020(g) | $16.69 | 4.58% | 0.49%(i) | 0.49%(f),(i) | 2.96% | 32% | $104,667 |
| Year Ended 7/31/2019(g) | $16.47 | 7.38% | 0.50% | 0.50%(f) | 3.52% | 30% | $52,836 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 39 |
Notes to Financial Statements
July 31, 2023
July 31, 2023
Note 1. Organization
Columbia Strategic Municipal
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
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
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.
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.
| 40 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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.
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
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 41 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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 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.
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 July 31, 2023:
| Amount of realized gain (loss) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Interest rate risk | (440,898) |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended July 31, 2023:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — short | 46,170,137 |
| 42 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
| * | Based on the ending daily outstanding amounts for the year ended July 31, 2023. |
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. 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 net tax-exempt and 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.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 43 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 amendments.
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 0.48% to 0.29% as the Fund’s net assets increase. The effective management services fee rate for the year ended July 31, 2023 was 0.46% 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 "Trustees’ fees" 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
| 44 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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 July 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 | 0.06 |
| Advisor Class | 0.06 |
| Class C | 0.06 |
| Institutional Class | 0.06 |
| 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 July 31, 2023, no minimum account balance fees were charged by the Fund.
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 $376,000 for Class C shares. This amount is based on the most recent information available as
of June 30, 2023, and may be recovered from future payments under the distribution plan or contingent deferred sales charges (CDSCs). To the extent the unreimbursed expense has been fully recovered, the distribution
and/or shareholder services fee is reduced.
Sales charges (unaudited)
Sales charges, including front-end
charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended July 31, 2023, if any, are listed below:
| Front End (%) | CDSC (%) | Amount ($) | |
| Class A | 3.00 | 0.75(a) | 207,683 |
| Class C | — | 1.00(b) | 1,971 |
| (a) | This charge is imposed on certain investments of $500,000 or more if redeemed within 12 months after purchase. |
| (b) | This charge applies to redemptions within 12 months after purchase, with certain limited exceptions. |
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 45 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
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. Prior to December 1, 2022, expenses associated with investments in affiliated and non-affiliated pooled
investment vehicles (including mutual funds and exchange-traded funds) were included with the waivers and/or expense reimbursement arrangement. 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 July 31, 2023, these differences
were primarily due to differing treatment for deferral/reversal of wash sale losses, tax straddles, principal and/or interest from fixed income securities, defaulted securities/troubled debt, capital loss
carryforwards, trustees’ deferred compensation, distributions, re-characterization of distributions for 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 (loss) ($) | Paid in capital ($) |
| (543,166) | 543,166 | — |
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.
| 46 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended July 31, 2023 | Year Ended July 31, 2022 | ||||||
| Ordinary income ($) | Tax-exempt income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Tax-exempt income ($) | Long-term capital gains ($) | Total ($) |
| 38,638 | 62,044,675 | — | 62,083,313 | 7,757,391 | 64,946,840 | 3,110,025 | 75,814,256 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At July 31, 2023, the components of
distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed tax- exempt income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| — | 11,516,683 | — | (134,408,972) | (169,251,363) |
At July 31, 2023, the cost of all
investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 1,951,157,533 | 1,012,584 | (170,263,947) | (169,251,363) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at July 31, 2023, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended July 31,
2023, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (87,221,830) | (47,187,142) | (134,408,972) | — |
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 $341,563,245 and $638,438,745, respectively, for the year ended July 31, 2023. The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 47 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
The Fund’s activity in the
Interfund Program during the year ended July 31, 2023 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 3,984,211 | 3.92 | 57 |
Interest expense incurred by the
Fund is recorded as interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at July 31, 2023.
Note 7. 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 July 31, 2023.
Note 8. 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.
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.
| 48 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Notes to Financial Statements (continued)
July 31, 2023
July 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.
Municipal securities risk
Municipal securities are debt
obligations generally issued to obtain funds for various public purposes, including general financing for state and local governments, or financing for a specific project or public facility, and include obligations of
the governments of the U.S. territories, commonwealths and possessions such as Guam, Puerto Rico and the U.S. Virgin Islands to the extent such obligations are exempt from state and U.S. federal income taxes. The
value of municipal securities can be significantly affected by actual or expected political and legislative changes at the federal or state level. Municipal securities may be fully or partially backed by the taxing
authority of the local government, by the credit of a private issuer, by the current or anticipated revenues from a specific project or specific assets or by domestic or foreign entities providing credit support, such
as letters of credit, guarantees or insurance, and are generally classified into general obligation bonds and special revenue obligations. Because many municipal securities are issued to finance projects in sectors
such as education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal market.
Issuers in a state, territory,
commonwealth or possession in which the Fund invests may experience significant financial difficulties for various reasons, including as the result of events that cannot be reasonably anticipated or controlled such as
economic downturns or similar periods of economic stress, social conflict or unrest, labor disruption and natural disasters. Such financial difficulties may lead to credit rating downgrades or defaults of such issuers
which in turn, could affect the market values and marketability of many or all municipal obligations of issuers in such state, territory, commonwealth or possession. The value of the Fund’s shares will be
negatively impacted to the extent it invests in such securities. The Fund’s annual and semiannual reports show the Fund’s investment exposures at a point in time. The risk of investing in the Fund is
directly correlated to the Fund’s investment exposures.
Securities issued by a particular
state and its instrumentalities are subject to the risk of unfavorable developments in such state. A municipal security can be significantly affected by adverse tax, legislative, regulatory, demographic or political
changes as well as changes in a particular state’s (state and its instrumentalities’) financial, economic or other condition and prospects.
Shareholder concentration risk
At July 31, 2023, affiliated
shareholders of record owned 49.9% of the outstanding shares of the Fund in one or more accounts. Fund shares sold to or redeemed by concentrated accounts may have a significant effect on the operations of the Fund.
In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less
liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 49 |
Notes to Financial Statements (continued)
July 31, 2023
July 31, 2023
Note 9. 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 10. 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 provide services to
the Fund.
| 50 | Columbia Strategic Municipal 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 Strategic Municipal Income Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Strategic Municipal Income Fund (one of the funds constituting Columbia Funds Series Trust II, referred to hereafter as the
"Fund") as of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the
related notes, and the financial highlights for each of the five years in the period ended July 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 July 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 July 31, 2023 and the financial highlights for each of the five years in the period ended July 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 July 31, 2023 by correspondence with the custodian, transfer agents 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
September 21, 2023
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 51 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended July 31, 2023. Shareholders will be notified in early 2024 of the amounts for use in preparing 2023 income tax returns.
| Exempt- interest dividends | |
| 99.94% |
Exempt-interest dividends. The
percentage of net investment income distributed during the fiscal year that qualifies as exempt-interest dividends for federal income tax purposes. A portion of the income may be subject to federal alternative minimum
tax.
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 | 173 | 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 |
| 52 | Columbia Strategic Municipal 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | 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 Strategic Municipal Income 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 |
| 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 | 171 | 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 | 173 | 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 | 173 | 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 | 173 | 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 | 171 | None |
| 54 | Columbia Strategic Municipal 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 | 171 | 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. | 173 | 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 | 171 | 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 Strategic Municipal Income 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 | 173 | 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 | 173 | 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 Strategic Municipal 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 Strategic Municipal Income 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 Strategic Municipal Income Fund | Annual Report 2023 |
Approval of Management
Agreement
(Unaudited)
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to the Columbia Strategic Municipal Income Fund (the Fund). Under a management agreement (the Management Agreement), the Investment Manager provides investment advice and other services to
the Fund and other funds distributed by Columbia Management Investment Distributors, Inc. (collectively, the Funds).
On an annual basis, the
Fund’s Board of Trustees (the Board), including the independent Board members (the Independent Trustees), considers renewal of the Management Agreement. The Investment Manager prepared detailed reports for the
Board and its Contracts Committee (including its Contracts Subcommittee) in February, March, April, May and June 2023, including reports providing the results of analyses performed by a third-party data provider,
Broadridge Financial Solutions, Inc. (Broadridge), and comprehensive responses by the Investment Manager to written requests for information by independent legal counsel to the Independent Trustees (Independent Legal
Counsel), to assist the Board in making this determination. In addition, throughout the year, the Board (or its committees or subcommittees) regularly meets with portfolio management teams and senior management
personnel and reviews information prepared by the Investment Manager addressing the services the Investment Manager provides and Fund performance. The Board also accords appropriate weight to the work, deliberations
and conclusions of the various committees (including their subcommittees), such as the Contracts Committee, the Investment Review Committee, the Audit Committee and the Compliance Committee in determining whether to
continue the Management Agreement.
The Board, at its June 22, 2023
Board meeting (the June Meeting), considered the renewal of the Management Agreement for an additional one-year term. At the June Meeting, Independent Legal Counsel reviewed with the Independent Trustees various
factors relevant to the Board’s consideration of advisory agreements and the Board’s legal responsibilities related to such consideration. The Independent Trustees considered all information that they,
their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to approve the continuation of the Management Agreement. Among other things, the information and factors considered included
the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by Broadridge, as well as performance relative to one or more benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by Broadridge; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | Terms of the Management Agreement; |
| • | Descriptions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of transfer agency and shareholder services to the Fund; |
| • | Descriptions of various services performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services; |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund; and |
| • | Report provided by the Board’s independent fee consultant, JDL Consultants, LLC (JDL). |
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 59 |
Approval of Management Agreement (continued)
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
(Unaudited)
Following an analysis and discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the renewal of the Management Agreement.
Nature, extent and quality of
services provided by the Investment Manager
The Board analyzed various
reports and presentations it had received detailing the services performed by the Investment Manager, as well as its history, expertise, resources and relative capabilities, and the qualifications of its personnel.
The Board specifically considered
the many developments during recent years concerning the services provided by the Investment Manager. Among other things, the Board noted the organization and depth of the equity and credit research departments. The
Board further observed the enhancements to the investment risk management department’s processes, systems and oversight over the past several years. The Board also took into account the broad scope of services
provided by the Investment Manager to the Fund, including, among other services, investment, risk and compliance oversight. The Board also took into account the information it received concerning the Investment
Manager’s ability to attract and retain key portfolio management personnel and that it has sufficient resources to provide competitive and adequate compensation to investment personnel.
In connection with the
Board’s evaluation of the overall package of services provided by the Investment Manager, the Board also considered the nature, quality and range of administrative services provided to the Fund by the Investment
Manager, as well as the achievements in 2022 in the performance of administrative services, and noted the various enhancements anticipated for 2023. In evaluating the quality of services provided under the Management
Agreement, the Board also took into account the organization and strength of the Fund’s and its service providers’ compliance programs. The Board also reviewed the financial condition of the Investment
Manager and its affiliates and each entity’s ability to carry out its responsibilities under the Management Agreement and the Fund’s other service agreements.
In addition, the Board discussed
the acceptability of the terms of the Management Agreement, noting that no changes were proposed from the form of agreement previously approved. The Board also noted the wide array of legal and compliance services
provided to the Fund under the Management Agreement.
After reviewing these and related
factors (including investment performance as discussed below), the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the
Management Agreement supported the continuation of the Management Agreement.
Investment performance
The Board carefully reviewed the
investment performance of the Fund, including detailed reports providing the results of analyses performed by each of the Investment Manager, Broadridge and JDL collectively showing, for various periods (including
since manager inception): (i) the performance of the Fund, (ii) the Fund’s performance relative to peers and benchmarks and (iii) the net assets of the Fund. The Board observed the Fund’s underperformance
for certain periods, noting that such Fund’s performance was generally consistent with expectations in light of the interrelationship of the Fund’s specific investment strategy with prevailing market
conditions.
The Board also reviewed a
description of the third-party data provider’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Board also considered the
Investment Manager’s performance and reputation generally. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the performance of the Fund and
the Investment Manager, in light of other considerations, supported the continuation of the Management Agreement.
| 60 | Columbia Strategic Municipal Income Fund | Annual Report 2023 |
Approval of Management Agreement (continued)
(Unaudited)
Comparative fees, costs of services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
(Unaudited)
Comparative fees, costs of services provided and the profits realized by the Investment Manager and its affiliates from their relationships with the Fund
The Board reviewed comparative
fees and the costs of services provided under the Management Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things,
data (based on analyses conducted by Broadridge and JDL) showing a comparison of the Fund’s expenses with median expenses paid by funds in its comparative peer universe, as well as data showing the Fund’s
contribution to the Investment Manager’s profitability.
The Board considered the reports of
JDL, which assisted in the Board’s analysis of the Funds’ performance and expenses and the reasonableness of the Funds’ fee rates. The Board accorded particular weight to the notion that a primary
objective of the level of fees is to achieve a rational pricing model applied consistently across the various product lines in the Fund family, while assuring that the overall fees for each Fund (with certain
exceptions) are generally in line with the current “pricing philosophy” such that Fund total expense ratios, in general, approximate or are lower than the median expense ratios of funds in the same Lipper
comparison universe. The Board took into account that the Fund’s total expense ratio (after considering proposed expense caps/waivers) approximated the peer universe’s median expense ratio.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the levels of management fees and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
The Board also considered the
profitability of the Investment Manager and its affiliates in connection with the Investment Manager providing management services to the Fund. With respect to the profitability of the Investment Manager and its
affiliates, the Independent Trustees referred to information discussing the profitability to the Investment Manager and Ameriprise Financial from managing, operating and distributing the Funds. The Board considered
that the profitability generated by the Investment Manager in 2022 had declined from 2021 levels, due to a variety of factors, including the decreased assets under management of the Funds. It also took into account
the indirect economic benefits flowing to the Investment Manager or its affiliates in connection with managing or distributing the Funds, such as the enhanced ability to offer various other financial products to
Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Fund should permit the Investment Manager to offer competitive compensation to its
personnel, make necessary investments in its business and earn an appropriate profit. After reviewing these and related factors, the Board concluded, within the context of their overall conclusions, that the costs of
services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Board considered the
potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, and whether those economies of scale were shared with the Fund through breakpoints in investment management
fees or other means, such as expense limitation arrangements and additional investments by the Investment Manager in investment, trading, compliance and other resources. The Board considered the economies of scale
that might be realized as the Fund’s net asset level grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board took into account that management
fees decline as Fund assets exceed various breakpoints, all of which have not been surpassed. The Board observed that the Management Agreement provided for breakpoints in the management fee rate schedule that allow
opportunities for shareholders to realize lower fees as Fund assets grow and that there are additional opportunities through other means for sharing economies of scale with shareholders.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the continuation of the Management Agreement. In reaching its conclusions, no single factor was determinative.
| Columbia Strategic Municipal Income Fund | Annual Report 2023 | 61 |
Approval of Management Agreement (continued)
(Unaudited)
On June 22, 2023, the Board, including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the Management Agreement.
(Unaudited)
On June 22, 2023, the Board, including all of the Independent Trustees, determined that fees payable under the Management Agreement were fair and reasonable in light of the extent and quality of services provided and approved the renewal of the Management Agreement.
| 62 | Columbia Strategic Municipal 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/
ANN118_07_N01_(09/23)
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 July 31, 2023 and July 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$371,800 |
$364,500 |
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 July 31, 2023 and July 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$0 |
$0 |
Audit-Related Fees, if any, 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 July 31, 2023 and July 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 July 31, 2023 and July 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$138,400 |
$159,400 |
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. Fiscal years 2022 and 2023 also include Tax Fees for foreign tax filings.
During the fiscal years ended July 31, 2023 and July 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 July 31, 2023 and July 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 July 31, 2023 and July 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 July 31, 2023 and July 31, 2022 are approximately as follows:
|
2023 |
2022 |
|
$695,400 |
$694,400 |
(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 |
September 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 |
September 21, 2023 |
|
By (Signature and Title) |
/s/ Michael G. Clarke |
|
|
Michael G. Clarke, Chief Financial Officer, |
|
|
Principal Financial Officer and Senior Vice President |
|
|
|
|
Date |
September 21, 2023 |
|
By (Signature and Title) |
/s/ Joseph Beranek |
|
|
Joseph Beranek, Treasurer, Chief Accounting |
|
|
Officer and Principal Financial Officer |
|
|
|
|
Date |
September 21, 2023 |
