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 811-04367
Columbia Funds Series Trust I
(Exact name of registrant as specified in charter)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip code)
Ryan Larrenaga
c/o Columbia Management Investment Advisers, LLC
225 Franklin Street
Boston, MA 02110
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 345-6611
Date of fiscal year end: January 31
Date of reporting period: January 31, 2017
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, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
Annual Report
January 31, 2017
Columbia Diversified Real Return Fund
Not FDIC Insured • No bank guarantee • May lose value
Dear Shareholders,
While emotions have run high following the outcome of the U.S. Presidential election, it remains unclear how the Trump presidency will unfold in terms of policy. We have a sense of the priorities espoused by the President over the past eighteen months, but campaign priorities are not always realized and are often never pursued. What seems certain is that, while some investors have already priced expectations into the market, others have retreated, preferring instead a wait and see approach. The outcome of such behaviors appears to have created conditions ripe for ongoing market volatility.
While volatility in the financial markets can be stressful, volatility itself is not a new phenomenon. Other factors that have been at the root cause of recent volatility include uncertainty following the United Kingdom’s vote to exit the European Union (Brexit), speculation around the Federal Reserve’s decision to increase interest rates, divergent central bank policy and geopolitical unrest. The point is, financial markets have fluctuated for years and may be expected to continue to fluctuate — sometimes wildly. If anything, such volatility seems to be the new normal, perhaps exacerbated by access to information and development of technological tools which have enabled investors to react rapidly to real and perceived change. So what can you do?
Position your portfolio for the reality of market volatility
That there is a historical precedent for market volatility, or even an acceptance that it may persist, offers little comfort. A measured and strategic approach remains the best strategy for investors to stay on track in achieving their investment goals.
Step 1: Review your investment goals
Take this opportunity to review your investment goals and the strategies you are pursuing to achieve those goals in order to remain focused on what’s important to you. It is entirely possible that your goals have changed in response either to your life situation or to changes in the market. Accept what you can’t control — volatility, and focus on what you can — your investment goals and strategies.
Step 2: Reassess your risk tolerance
Sit down with your financial advisor to discuss your investment goals and strategies, as well as any changes to your tolerance for risk. Consider your investment horizon. Increased market volatility and a new investment horizon may impact the strategies that can best help you achieve your investment goals. Remember, achieving your investment goals may require a certain amount of risk. Ultimately, you must maintain vigilance in reassessing your risk tolerance and the strategies you have selected in pursuit of your investment goals, and awareness of how those strategies may react to market volatility.
Step 3: Remain calm and focus on your long-term plan
Remember, investing is about the long game. Short term events are not necessarily evidence of a longer term reality. Investors who attempt to time the market too often end up reacting to a down turn by selling low and then compounding the problem by waiting on the sidelines, ultimately missing the right opportunity to reinvest.
Columbia Diversified Real Return Fund | Annual Report 2017
President’s Message (continued)
As long as there is a market, there will be volatility. How you respond to that volatility can make a big difference in the measure of your success as an investor. Talk to your financial advisor about how working with Columbia Threadneedle Investments may help you position your portfolio for the reality of ongoing volatility and, perhaps, even turn such volatility into investment opportunity.
Sincerely,
Christopher O. Petersen
President, Columbia Funds
Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus and summary prospectus, which contains this and other important information about a fund, visit investor.columbiathreadneedleus.com. The prospectus should be read carefully before investing.
Columbia Funds are distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
© 2017 Columbia Management Investment Advisers, LLC. All rights reserved.
Columbia Diversified Real Return Fund | Annual Report 2017
Columbia Diversified Real Return Fund | Annual Report 2017
Investment objective
Columbia Diversified Real Return Fund (the Fund) seeks to provide shareholders with total return that exceeds the rate of inflation over the long term.
Portfolio management
Jeffrey Knight, CFA
Co-manager
Managed Fund since 2014
Anwiti Bahuguna, Ph.D.*
Co-manager
Managed Fund since January 2017
Joshua Kutin, CFA*
Co-manager
Managed Fund since January 2017
Dan Boncarosky, CFA*
Co-manager
Managed Fund since January 2017
*Effective January 2017, Orhan Imer no longer serves as a portfolio manager of the Fund. On the same day, Ms. Bahuguna and Messrs. Kutin and Boncarosky were added as portfolio managers to the Fund.
| Average annual total returns (%) (for the period ended January 31, 2017) |
| | | Inception | 1 Year | Life |
| Class A | Excluding sales charges | 03/11/14 | 12.75 | 0.81 |
| | Including sales charges | | 7.40 | -0.87 |
| Class C | Excluding sales charges | 03/11/14 | 11.90 | 0.10 |
| | Including sales charges | | 10.90 | 0.10 |
| Class R4 | 03/11/14 | 13.16 | 1.11 |
| Class R5 | 03/11/14 | 13.00 | 1.06 |
| Class W * | 06/25/14 | 12.78 | 0.83 |
| Class Z | 03/11/14 | 13.04 | 1.11 |
| Blended Benchmark | | 8.77 | 1.22 |
| Citi Three-Month U.S. Treasury Bill Index | | 0.30 | 0.12 |
Returns for Class A are shown with and without the maximum initial sales charge of 4.75%. Returns for Class C are shown with and without the 1.00% CDSC for the first year only. Prior to March 27, 2017, Class W shares were sold without a sales charge and, therefore, the returns shown for Class W shares do not reflect any sales charge. Effective March 27, 2017, Class W shares are renamed and re-designated as Class T shares. Class T shares are subject to a maximum front-end sales charge of 2.50% per transaction. The Fund’s other classes are not subject to sales charges and have limited eligibility. Please see the Fund’s prospectus for details. Performance for different share classes will vary based on differences in sales charges and fees associated with each class. All results shown assume reinvestment of distributions during the period. Returns do not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the redemption of Fund shares. Performance results reflect the effect of any fee waivers or reimbursements of Fund expenses by Columbia Management Investment Advisers, LLC and/or any of its affiliates. Absent these fee waivers or expense reimbursement arrangements, performance results would have been lower.
The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting investor.columbiathreadneedleus.com or calling 800.345.6611.
| * | The returns shown for periods prior to the share class inception date (including returns for the Life of the Fund, if shown, which are since Fund inception) include the returns of the Fund’s oldest share class. Since the Fund launched more than one share class at its inception, Class A shares were used. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit investor.columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information. |
The Blended Benchmark consists of 35% Bloomberg Barclays Global Inflation-Linked Index (Hedged), 30% Credit Suisse Leveraged Loan Index, 20% Bloomberg Barclays U.S. Dollar Floating Rate Note (FRN) Index and 15% Bloomberg Commodity Index Total Return.
The Citi Three-Month U.S. Treasury Bill Index, an unmanaged index, is representative of the performance of three-month Treasury bills.
Indices are not available for investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the Fund may not match those in an index.
Columbia Diversified Real Return Fund | Annual Report 2017
| 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (March 11, 2014 — January 31, 2017)
The chart above shows the change in value of a hypothetical $10,000 investment in Class A shares of Columbia Diversified Real Return Fund during the stated time period, and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or on the redemption of Fund shares.
| Portfolio breakdown (%) (at January 31, 2017) |
| Alternative Investment Funds | 19.8 |
| Exchange-Traded Funds | 1.7 |
| Fixed-Income Funds | 58.9 |
| Inflation-Indexed Bonds | 2.0 |
| Money Market Funds | 17.6 |
| Total | 100.0 |
Percentages indicated are based upon total investments. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Manager Discussion of Fund Performance
For the 12-month period that ended January 31, 2017, the Fund’s Class A shares returned 12.75% excluding sales charges. The Fund outperformed its Blended Benchmark, which returned 8.77% for the same time period. To compare, the Citi Three-Month U.S. Treasury Bill Index returned 0.30% for the same period. The Fund’s outperformance of its Blended Benchmark during the period can be attributed primarily to underlying fund performance and active allocation decisions, which more than offset the dampening effect of duration positioning.
Rise in energy prices drove U.S. inflation higher
Inflation in the U.S. rose during the period. Headline inflation, as measured by the Consumer Price Index (CPI) registered an annual growth rate of 2.5%, the largest 12-month increase since March 2012. Core CPI, which excludes energy and food prices, posted a year-over-year growth rate of 2.3%. On a calendar year basis, headline CPI rose 2.1% in 2016, compared to 0.7% in 2015 and 0.8% in 2014. The 2016 inflation rate was also greater than the 1.8% average annual increase over the past 10 years.
At the start of the period, headline CPI was increasing at an annualized rate of approximately 1.4%. Much of the increase in CPI as the period progressed was driven by the rise in commodity prices, especially energy prices, relative to their depressed levels seen in the early part of 2016, when oil prices had plunged. Indeed, energy prices increased 10.8% during the period, the largest 12-month increase since November 2011. Medical care and shelter prices also rose. In contrast, food prices declined 0.2% during the 12 months ended January 31, 2017. Inflation indices for used cars and trucks, airline fares and communication also declined during the period.
Underlying fund performance and positioning overall boosted relative results
Overall, underlying fund performance and active allocation decisions boosted the Fund’s results relative to its Blended Benchmark, more than offsetting the detracting effect of its duration positioning during the period.
On an absolute basis, commodities posted double-digit positive returns during the period. In turn, having an overweight allocation to commodities benefited the Fund’s relative results. An investment in underlying fund Columbia Commodity Strategy Fund also contributed positively, as it outperformed its benchmark index. An investment in underlying fund Columbia Inflation Protected Securities Fund, which focused on U.S. inflation-linked bonds, also boosted the Fund’s relative results, as it significantly outpaced its benchmark index during the period. Several opportunistic positions that were not components of the Blended Benchmark also proved beneficial, including those in equities, high-yield corporate debt and investment-grade corporate debt. Partially offsetting these positive contributors was the Fund’s underweight to floating rate loans, which detracted, as floating rate loans generated double-digit positive absolute returns during the period. Underlying fund performance in this asset class also hurt, as underlying fund Columbia Floating Rate Fund did not keep pace with the Credit Suisse Leveraged Loan Index during the period. Allocations to securitized bonds and emerging market debt, neither a component of the Blended Benchmark and each of which lagged the Blended Benchmark, also dampened relative results.
The Fund’s duration positioning versus that of the Blended Benchmark hurt. Overall, the Fund maintained a shorter duration than that of the Blended Benchmark, which detracted as yields on Treasury inflation-protected securities (TIPS) rose during the period. The Fund’s duration positioning reflected our view for better real economic growth ahead as well as a continued rise in inflation, a view we maintained at the end of the period. (Real economic growth measure economic growth adjusted for inflation.)
Market dynamics and portfolio manager change drove portfolio positioning
We modestly increased the Fund’s exposure to commodities, as momentum and dynamics remained favorable, in our view. We also believed commodities offered potential for a tactical “catch-up” within the Fund’s risk asset holdings. Some of the other most significant changes in the Fund came toward the end of the period with the changes in the portfolio management team effective January 27, 2017. For example, the Fund’s cash position stood at approximately 17% of total net assets at the end of the period compared to less than 1% at the start of the annual period. The increase in the cash position was a result of reviewing and selling positions in which the newly-formed team did not have strong conviction. Many of these positions were securitized bonds, investment-grade corporate bonds and emerging market debt securities that did not align with the portfolio management team’s views about headline inflation and inflation expectations.
Columbia Diversified Real Return Fund | Annual Report 2017
| 5 |
Manager Discussion of Fund Performance (continued)
At the end of the period, the Fund was overweight in commodities, underweight in global inflation-linked securities and modestly underweight in floating rate loans, each relative to its Blended Benchmark. The Fund also maintained some opportunistic out-of-Blended Benchmark positions in high-yield corporate bonds and equities as well as a position in cash at the end of the period. The Fund maintained a shorter duration than that of its Blended Benchmark at the end of the period.
Market risk may impact a single issuer, sector of the economy, industry or the market as a whole. Fixed-income securities and loan investments present issuer default risk. Risks are enhanced for sovereign debt issuers. 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. Interest payments on inflation-protected securities may be more volatile than interest paid on ordinary bonds. In periods of deflation, these securities may provide no income. Commodities investments may be affected by the overall market and industry- and commodity-specific factors and may be more volatile and less liquid than other investments. Investing in derivatives is a specialized activity that involves special risks that subject the Fund to significant loss potential, including when used as leverage, and may result in greater fluctuation in fund value. Non-investment-grade (high-yield or junk) securities present greater price volatility and more risk to principal and income than higher rated securities. International investing involves certain risks and volatility due to potential political, economic or currency instabilities and different financial and accounting standards. Risks are enhanced for emerging market issuers. Asset allocation does not assure a profit or protect against loss. The Fund’s investment in other funds subjects it to the investment performance (positive or negative), risks and expenses of these underlying funds. See the Fund’s prospectus for more information on these and other risks.
| 6 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Understanding Your Fund’s Expenses
(Unaudited)
As an investor, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption fees. There are also ongoing 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 $1,000 = 8.6), then multiply the results by the expenses paid during the period under the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as sales charges, or redemption or exchange fees. Therefore, the hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If transaction costs were included in these calculations, your costs would be higher.
| August 1, 2016 — January 31, 2017 |
| | Account value at the
beginning of the
period ($) | Account value at the
end of the
period ($) | Expenses paid during
the period ($) | Fund’s annualized
expense ratio (%) |
| | Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual |
| Class A | 1,000.00 | 1,000.00 | 1,020.20 | 1,022.36 | 3.08 | 3.08 | 0.60 |
| Class C | 1,000.00 | 1,000.00 | 1,017.40 | 1,018.55 | 6.92 | 6.92 | 1.35 |
| Class R4 | 1,000.00 | 1,000.00 | 1,022.60 | 1,023.63 | 1.80 | 1.80 | 0.35 |
| Class R5 | 1,000.00 | 1,000.00 | 1,022.40 | 1,023.43 | 2.00 | 2.01 | 0.39 |
| Class W | 1,000.00 | 1,000.00 | 1,020.30 | 1,022.36 | 3.08 | 3.08 | 0.60 |
| Class Z | 1,000.00 | 1,000.00 | 1,021.60 | 1,023.63 | 1.80 | 1.80 | 0.35 |
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 366.
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 Diversified Real Return Fund | Annual Report 2017
| 7 |
Portfolio of Investments
January 31, 2017
(Percentages represent value of investments compared to net assets)
| Alternative Investment Funds 20.1% |
| | Shares | Value ($) |
| Columbia Commodity Strategy Fund, Class I Shares(a),(b) | 39,125 | 221,056 |
Total Alternative Investment Funds
(Cost $186,028) | 221,056 |
|
| Exchange-Traded Funds 1.7% |
| | |
| iShares U.S. Energy ETF | 402 | 16,136 |
| iShares US Real Estate ETF | 36 | 2,774 |
Total Exchange-Traded Funds
(Cost $16,098) | 18,910 |
|
| Fixed-Income Funds 59.5% |
| | |
| Floating Rate 29.5% |
| Columbia Floating Rate Fund, Class I Shares(a) | 35,904 | 325,289 |
| High Yield 5.1% |
| Columbia High Yield Bond Fund, Class I Shares(a) | 9,493 | 27,813 |
| Columbia Income Opportunities Fund, Class I Shares(a) | 2,944 | 29,028 |
| Total | 56,841 |
| Inflation Protected Securities 24.9% |
| Columbia Inflation Protected Securities Fund, Class I Shares(a),(b) | 29,069 | 274,415 |
Total Fixed-Income Funds
(Cost $622,497) | 656,545 |
| Inflation-Indexed Bonds(c) 2.0% |
| Issuer | Coupon
Rate | | Principal
Amount ($) | Value ($) |
| Italy 0.6% |
| Italy Buoni Poliennali Del Tesoro(d) |
| 09/15/41 | 2.550% | EUR | 5,460 | 6,936 |
| United States 1.4% |
| U.S. Treasury Inflation-Indexed Bond |
| 02/15/42 | 0.750% | | 16,022 | 15,360 |
Total Inflation-Indexed Bonds
(Cost $22,321) | 22,296 |
| Money Market Funds 17.8% |
| | Shares | Value ($) |
| Columbia Short-Term Cash Fund, 0.662%(a),(e) | 196,006 | 196,006 |
Total Money Market Funds
(Cost $196,006) | 196,006 |
Total Investments
(Cost: $1,042,950) | 1,114,813 |
| Other Assets & Liabilities, Net | | (11,886) |
| Net Assets | 1,102,927 |
At January 31, 2017, securities and/or cash totaling $2,159 were pledged as collateral.
Investments in derivatives
| Cleared interest rate swaps contracts outstanding at January 31, 2017 |
| Counterparty | Fund receives | Fund pays | Expiration
date | Notional
currency | Notional
amount ($) | Unrealized
appreciation ($) | Unrealized
depreciation ($) |
| Morgan Stanley International | Fixed rate of 1.991% | 6-Month GBP LIBOR-BBA | 5/14/2019 | GBP | 250,000 | 9,803 | — |
Notes to Portfolio of Investments
| (a) | As defined in the Investment Company Act of 1940, 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. Holdings and transactions in these affiliated companies during the year ended January 31, 2017 are as follows: |
| Issuer | Beginning
shares | Shares
purchased | Shares
sold | Ending
shares | Realized gain
(loss) ($) | Dividends —
affiliated
issuers($) | Value ($) |
| Columbia Commodity Strategy Fund, Class I Shares | 157,571 | 2,243 | (120,689) | 39,125 | 131,552 | — | 221,056 |
| Columbia Floating Rate Fund, Class I Shares | 139,014 | 4,478 | (107,588) | 35,904 | (45,187) | 27,400 | 325,289 |
| Columbia High Yield Bond Fund, Class I Shares | 46,761 | 1,193 | (38,461) | 9,493 | (6,154) | 3,382 | 27,813 |
| Columbia Income Opportunities Fund, Class I Shares | 11,483 | 306 | (8,845) | 2,944 | (5,130) | 2,921 | 29,028 |
| Columbia Inflation Protected Securities Fund, Class I Shares | 129,005 | 653 | (100,589) | 29,069 | 63,834 | — | 274,415 |
| Columbia Short-Term Cash Fund, 0.662% | 10,608 | 3,932,756 | (3,747,358) | 196,006 | — | 596 | 196,006 |
| Total | 494,442 | 3,941,629 | (4,123,530) | 312,541 | 138,915 | 34,299 | 1,073,607 |
The accompanying Notes to Financial Statements are an integral part of this statement.
| 8 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Portfolio of Investments (continued)
January 31, 2017
Notes to Portfolio of Investments (continued)
| (b) | Non-income producing investment. |
| (c) | Principal amounts are denominated in United States Dollars unless otherwise noted. |
| (d) | Represents privately placed and other securities and instruments exempt from SEC registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. The Fund may invest in private placements determined to be liquid as well as those determined to be illiquid. Private placements may be determined to be liquid under guidelines established by the Fund’s Board of Trustees. At January 31, 2017, the value of these securities amounted to $6,936 or 0.63% of net assets. |
| (e) | The rate shown is the seven-day current annualized yield at January 31, 2017. |
Currency Legend
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 (including NAV for open-end mutual funds). 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.
Certain investments that have been measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair value hierarchy to the amounts presented in the Portfolio of Investments. The Columbia Short-Term Cash Fund seeks to provide shareholders with maximum current income consistent with liquidity and stability of principal. Columbia Short-Term Cash Fund prices its shares with a floating NAV and no longer seeks to maintain a stable NAV.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
For investments categorized as Level 3, the Committee monitors information similar to that described above, which may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions or internal models used to value those securities and changes in fair value. This data is also used to corroborate, when available, information received from approved pricing vendors and brokers. Various factors impact the frequency of monitoring this information (which may occur as often as daily). However, the Committee may determine that changes to inputs, assumptions and models are not required as a result of the monitoring procedures performed.
The following table is a summary of the inputs used to value the Fund’s investments at January 31, 2017:
The accompanying Notes to Financial Statements are an integral part of this statement.
Columbia Diversified Real Return Fund | Annual Report 2017
| 9 |
Portfolio of Investments (continued)
January 31, 2017
Fair value measurements (continued)
| | Level 1
quoted prices
in active
markets for
identical
assets ($) | Level 2
other
significant
observable
inputs ($) | Level 3
significant
unobservable
inputs ($) | Investments
measured at
net asset
value ($) | Total ($) |
| Investments | | | | | |
| Alternative Investment Funds | 221,056 | — | — | — | 221,056 |
| Exchange-Traded Funds | 18,910 | — | — | — | 18,910 |
| Fixed-Income Funds | 656,545 | — | — | — | 656,545 |
| Inflation-Indexed Bonds | — | 22,296 | — | — | 22,296 |
| Money Market Funds | — | — | — | 196,006 | 196,006 |
| Total Investments | 896,511 | 22,296 | — | 196,006 | 1,114,813 |
| Derivatives | | | | | |
| Asset | | | | | |
| Swap Contracts | — | 9,803 | — | — | 9,803 |
| Total | 896,511 | 32,099 | — | 196,006 | 1,124,616 |
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).
There were no transfers of financial assets between levels during the period.
The accompanying Notes to Financial Statements are an integral part of this statement.
| 10 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Statement of Assets and Liabilities
January 31, 2017
| Assets | |
| Investments, at cost | |
| Unaffiliated issuers, at cost | $38,419 |
| Affiliated issuers, at cost | 1,004,531 |
| Total investments, at cost | 1,042,950 |
| Investments, at value | |
| Unaffiliated issuers, at value | 41,206 |
| Affiliated issuers, at value | 1,073,607 |
| Total investments, at value | 1,114,813 |
| Foreign currency (identified cost $79) | 76 |
| Margin deposits | 2,159 |
| Receivable for: | |
| Investments sold | 5,254 |
| Dividends | 1,396 |
| Interest | 106 |
| Foreign tax reclaims | 7 |
| Variation margin | 106 |
| Expense reimbursement due from Investment Manager | 507 |
| Prepaid expenses | 11 |
| Trustees’ deferred compensation plan | 8,240 |
| Other assets | 2,925 |
| Total assets | 1,135,600 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 1,325 |
| Management services fees | 5 |
| Distribution and/or service fees | 2 |
| Transfer agent fees | 19 |
| Audit fees | 19,675 |
| Custodian fees | 3,407 |
| Trustees’ deferred compensation plan | 8,240 |
| Total liabilities | 32,673 |
| Net assets applicable to outstanding capital stock | $1,102,927 |
| Represented by | |
| Paid in capital | 2,128,631 |
| Excess of distributions over net investment income | (11,449) |
| Accumulated net realized loss | (1,095,928) |
| Unrealized appreciation (depreciation) on: | |
| Investments - unaffiliated issuers | 2,787 |
| Investments - affiliated issuers | 69,076 |
| Foreign currency translations | 7 |
| Swap contracts | 9,803 |
| Total - representing net assets applicable to outstanding capital stock | $1,102,927 |
The accompanying Notes to Financial Statements are an integral part of this statement.
Columbia Diversified Real Return Fund | Annual Report 2017
| 11 |
Statement of Assets and Liabilities (continued)
January 31, 2017
| Class A | |
| Net assets | $77,723 |
| Shares outstanding | 8,160 |
| Net asset value per share | $9.52 |
| Maximum offering price per share(a) | $9.99 |
| Class C | |
| Net assets | $57,686 |
| Shares outstanding | 6,054 |
| Net asset value per share | $9.53 |
| Class R4 | |
| Net assets | $9,527 |
| Shares outstanding | 1,000 |
| Net asset value per share | $9.53 |
| Class R5 | |
| Net assets | $9,519 |
| Shares outstanding | 1,000 |
| Net asset value per share | $9.52 |
| Class W | |
| Net assets | $9,351 |
| Shares outstanding | 983 |
| Net asset value per share | $9.51 |
| Class Z | |
| Net assets | $939,121 |
| Shares outstanding | 98,520 |
| Net asset value per share | $9.53 |
| (a) | The maximum offering price per share is calculated by dividing the net asset value per share by 1.0 minus the maximum sales charge of 4.75%. |
The accompanying Notes to Financial Statements are an integral part of this statement.
| 12 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Statement of Operations
Year Ended January 31, 2017
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,822 |
| Dividends — affiliated issuers | 34,299 |
| Interest | 11,454 |
| Total income | 47,575 |
| Expenses: | |
| Management services fees | 4,430 |
| Distribution and/or service fees | |
| Class A | 162 |
| Class C | 415 |
| Class W | 22 |
| Transfer agent fees | |
| Class A | 30 |
| Class C | 18 |
| Class R4 | 4 |
| Class R5 | 5 |
| Class W | 3 |
| Class Z | 517 |
| Compensation of board members | 15,688 |
| Custodian fees | 13,731 |
| Printing and postage fees | 20,243 |
| Registration fees | 55,311 |
| Audit fees | 20,593 |
| Legal fees | 54 |
| Miscellaneous expenses | 9,776 |
| Compensation of chief compliance officer | 1 |
| Other | 1,232 |
| Total expenses | 142,235 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (135,013) |
| Total net expenses | 7,222 |
| Net investment income | 40,353 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 25,918 |
| Investments — affiliated issuers | 138,915 |
| Foreign currency translations | (415) |
| Futures contracts | (545) |
| Swap contracts | 4,264 |
| Net realized gain | 168,137 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 72,557 |
| Investments — affiliated issuers | 148,273 |
| Foreign currency translations | 186 |
| Futures contracts | 2,208 |
| Swap contracts | (3,166) |
| Net change in unrealized appreciation (depreciation) | 220,058 |
| Net realized and unrealized gain | 388,195 |
| Net increase in net assets resulting from operations | $428,548 |
The accompanying Notes to Financial Statements are an integral part of this statement.
Columbia Diversified Real Return Fund | Annual Report 2017
| 13 |
Statement of Changes in Net Assets
| | Year Ended
January 31, 2017 | Year Ended
January 31, 2016 |
| Operations | | |
| Net investment income | $40,353 | $225,088 |
| Net realized gain (loss) | 168,137 | (1,203,803) |
| Net change in unrealized appreciation (depreciation) | 220,058 | 341,688 |
| Net increase (decrease) in net assets resulting from operations | 428,548 | (637,027) |
| Distributions to shareholders | | |
| Net investment income | | |
| Class A | (1,444) | (589) |
| Class C | (598) | (316) |
| Class R4 | (261) | (298) |
| Class R5 | (223) | (235) |
| Class W | (201) | (213) |
| Class Z | (48,851) | (238,499) |
| Total distributions to shareholders | (51,578) | (240,150) |
| Decrease in net assets from capital stock activity | (3,456,569) | (4,431,497) |
| Total decrease in net assets | (3,079,599) | (5,308,674) |
| Net assets at beginning of year | 4,182,526 | 9,491,200 |
| Net assets at end of year | $1,102,927 | $4,182,526 |
| Excess of distributions over net investment income | $(11,449) | $(5,868) |
The accompanying Notes to Financial Statements are an integral part of this statement.
| 14 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Statement of Changes in Net Assets (continued)
| | Year Ended | Year Ended |
| | January 31, 2017 | January 31, 2016 |
| | Shares | Dollars ($) | Shares | Dollars ($) |
| Capital stock activity |
| Class A | | | | |
| Subscriptions | 3,807 | 35,785 | 3,943 | 35,004 |
| Distributions reinvested | 133 | 1,241 | 41 | 372 |
| Redemptions | (759) | (7,186) | (496) | (4,694) |
| Net increase | 3,181 | 29,840 | 3,488 | 30,682 |
| Class C | | | | |
| Subscriptions | 1,673 | 16,000 | 3,315 | 30,000 |
| Distributions reinvested | 50 | 464 | 19 | 168 |
| Redemptions | — | — | (207) | (1,865) |
| Net increase | 1,723 | 16,464 | 3,127 | 28,303 |
| Class R4 | | | | |
| Subscriptions | — | — | 308 | 2,904 |
| Distributions reinvested | 4 | 34 | 6 | 58 |
| Redemptions | (318) | (3,015) | — | — |
| Net increase (decrease) | (314) | (2,981) | 314 | 2,962 |
| Class Z | | | | |
| Subscriptions | 542 | 5,000 | 717 | 6,500 |
| Distributions reinvested | 24 | 223 | 6 | 56 |
| Redemptions | (373,682) | (3,505,115) | (525,087) | (4,500,000) |
| Net decrease | (373,116) | (3,499,892) | (524,364) | (4,493,444) |
| Total net decrease | (368,526) | (3,456,569) | (517,435) | (4,431,497) |
The accompanying Notes to Financial Statements are an integral part of this statement.
Columbia Diversified Real Return Fund | Annual Report 2017
| 15 |
The following table is intended to help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect payment of sales charges, if any. Total return and portfolio turnover are not annualized for periods of less than one year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio turnover rate may be higher.
| Year ended | Net asset value,
beginning of
period | Net
investment
income | Net
realized
and
unrealized
gain (loss) | Total from
investment
operations | Distributions
from net
investment
income |
| Class A |
| 1/31/2017 | $8.63 | 0.13 | 0.96 | 1.09 | (0.20) |
| 1/31/2016 | $9.48 | 0.20 | (0.83) | (0.63) | (0.22) |
| 1/31/2015 (c) | $10.00 | 0.24 | (0.49) | (0.25) | (0.27) |
| Class C |
| 1/31/2017 | $8.64 | 0.07 | 0.95 | 1.02 | (0.13) |
| 1/31/2016 | $9.48 | 0.14 | (0.83) | (0.69) | (0.15) |
| 1/31/2015 (e) | $10.00 | 0.18 | (0.50) | (0.32) | (0.20) |
| Class R4 |
| 1/31/2017 | $8.63 | 0.16 | 0.97 | 1.13 | (0.23) |
| 1/31/2016 | $9.48 | 0.22 | (0.83) | (0.61) | (0.24) |
| 1/31/2015 (f) | $10.00 | 0.27 | (0.50) | (0.23) | (0.29) |
| Class R5 |
| 1/31/2017 | $8.63 | 0.16 | 0.95 | 1.11 | (0.22) |
| 1/31/2016 | $9.47 | 0.22 | (0.82) | (0.60) | (0.24) |
| 1/31/2015 (g) | $10.00 | 0.26 | (0.50) | (0.24) | (0.29) |
| Class W |
| 1/31/2017 | $8.62 | 0.14 | 0.95 | 1.09 | (0.20) |
| 1/31/2016 | $9.46 | 0.20 | (0.82) | (0.62) | (0.22) |
| 1/31/2015 (h) | $10.17 | 0.19 | (0.66) | (0.47) | (0.24) |
| Class Z |
| 1/31/2017 | $8.64 | 0.17 | 0.95 | 1.12 | (0.23) |
| 1/31/2016 | $9.48 | 0.22 | (0.82) | (0.60) | (0.24) |
| 1/31/2015 (i) | $10.00 | 0.27 | (0.50) | (0.23) | (0.29) |
| 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) | Class A shares commenced operations on March 11, 2014. Per share data and total return reflect activity from that date. |
| (d) | Annualized. |
| (e) | Class C shares commenced operations on March 11, 2014. Per share data and total return reflect activity from that date. |
| (f) | Class R4 shares commenced operations on March 11, 2014. Per share data and total return reflect activity from that date. |
| (g) | Class R5 shares commenced operations on March 11, 2014. Per share data and total return reflect activity from that date. |
| (h) | Class W shares commenced operations on June 25, 2014. Per share data and total return reflect activity from that date. |
| (i) | Class Z shares commenced operations on March 11, 2014. Per share data and total return reflect activity from that date. |
The accompanying Notes to Financial Statements are an integral part of this statement.
| 16 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Total
distributions to
shareholders | 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) |
| |
| (0.20) | $9.52 | 12.75% | 6.40% | 0.58% | 1.42% | 8% | $78 |
| (0.22) | $8.63 | (6.79%) | 2.17% | 0.51% | 2.27% | 32% | $43 |
| (0.27) | $9.48 | (2.58%) | 2.44% (d) | 0.55% (d) | 2.75% (d) | 17% | $14 |
| |
| (0.13) | $9.53 | 11.90% | 7.15% | 1.32% | 0.71% | 8% | $58 |
| (0.15) | $8.64 | (7.39%) | 2.89% | 1.25% | 1.53% | 32% | $37 |
| (0.20) | $9.48 | (3.24%) | 3.21% (d) | 1.31% (d) | 1.99% (d) | 17% | $11 |
| |
| (0.23) | $9.53 | 13.16% | 6.15% | 0.31% | 1.75% | 8% | $10 |
| (0.24) | $8.63 | (6.56%) | 1.91% | 0.26% | 2.46% | 32% | $11 |
| (0.29) | $9.48 | (2.37%) | 2.19% (d) | 0.30% (d) | 3.03% (d) | 17% | $9 |
| |
| (0.22) | $9.52 | 13.00% | 6.18% | 0.36% | 1.66% | 8% | $10 |
| (0.24) | $8.63 | (6.50%) | 1.99% | 0.31% | 2.42% | 32% | $9 |
| (0.29) | $9.47 | (2.42%) | 2.24% (d) | 0.35% (d) | 2.97% (d) | 17% | $9 |
| |
| (0.20) | $9.51 | 12.78% | 6.40% | 0.57% | 1.47% | 8% | $9 |
| (0.22) | $8.62 | (6.70%) | 2.19% | 0.51% | 2.22% | 32% | $8 |
| (0.24) | $9.46 | (4.67%) | 2.45% (d) | 0.55% (d) | 3.27% (d) | 17% | $9 |
| |
| (0.23) | $9.53 | 13.04% | 6.15% | 0.29% | 1.79% | 8% | $939 |
| (0.24) | $8.64 | (6.45%) | 1.94% | 0.26% | 2.45% | 32% | $4,074 |
| (0.29) | $9.48 | (2.37%) | 2.20% (d) | 0.30% (d) | 3.02% (d) | 17% | $9,437 |
Columbia Diversified Real Return Fund | Annual Report 2017
| 17 |
Notes to Financial Statements
January 31, 2017
Note 1. Organization
Columbia Diversified Real Return Fund (the Fund), a series of Columbia Funds Series Trust I (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a “fund-of-funds”, investing significantly in funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), or its affiliates (Underlying Funds).
For information on the Underlying Funds, please refer to the Fund’s current prospectus and the prospectuses of the Underlying Funds, which are available, free of charge, from the Securities and Exchange Commission website, www.sec.gov.
Fund shares
The Trust may issue an unlimited number of shares (without par value). 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. Different share classes pay different distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be proportional to the net asset value of each share class. Each share class has its own expense and sales charge structure. The Fund offers each of the share classes identified below.
Class A shares are subject to a maximum front-end sales charge of 4.75% based on the initial investment amount. Class A shares purchased without an initial sales charge in accounts aggregating $1 million to $50 million at the time of purchase are subject to a contingent deferred sales charge (CDSC) if the shares are sold within 18 months after purchase, charged as follows: 1.00% CDSC if redeemed within 12 months after purchase, and 0.50% CDSC if redeemed more than 12, but less than 18, months after purchase.
Class C shares are subject to a 1.00% CDSC on shares redeemed within 12 months after purchase.
Class R4 shares are not subject to sales charges and are generally available only to omnibus retirement plans and certain investors as described in the Fund’s prospectus.
Class R5 shares are not subject to sales charges and are generally available only to investors purchasing through authorized investment professionals and omnibus retirement plans.
Effective March 27, 2017, Class W shares are no longer offered for sale. Class W shares, when available, were not subject to sales charges and were generally available only to investors purchasing through authorized investment programs managed by investment professionals, including discretionary managed account programs. Effective March 27, 2017, Class W shares were renamed and re-designated as Class T shares. Class T shares are subject to a maximum front-end sales charge of 2.50% per transaction and must be purchased through financial intermediaries that, by written agreement with Columbia Management Investment Distributors, Inc., are specifically authorized to sell Class T shares.
Class Y shares are not subject to sales charges or distribution and service (12b-1) fees, and are available to institutional and certain other investors as described in the Fund’s prospectus. Class Y shares commenced operations on March 1, 2017.
Class Z shares are not subject to sales charges and are generally available only to eligible investors, which are subject to different investment minimums as 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
| 18 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Notes to Financial Statements (continued)
January 31, 2017
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
All equity securities and exchange-traded funds are valued at the close of business of the New York Stock Exchange. Equity securities and exchange-traded funds are valued at the last quoted sales price on the principal exchange or market on which they trade, except for securities traded on the NASDAQ Stock Market, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets.
Debt securities generally are valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized cost value, unless this method results in a valuation that management believes does not approximate market value.
Investments in open-end investment companies, including money market funds, are valued at their latest net asset value.
Investments in the Underlying Funds are valued at the net asset value of the applicable class of the Underlying Fund determined as of the close of the New York Stock Exchange on the valuation date.
Swap transactions are valued through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published price for the security.
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 Diversified Real Return Fund | Annual Report 2017
| 19 |
Notes to Financial Statements (continued)
January 31, 2017
Derivative instruments
The Fund invests in certain derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract; therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin that is held in a broker’s customer account. While brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the 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 contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain circumstances. Collateral terms are contract specific for over-the-counter derivatives. 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 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
| 20 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Notes to Financial Statements (continued)
January 31, 2017
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 addition to considering counterparty credit risk, the Fund would consider terminating the derivatives contracts based on whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund 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.
Swap contracts
Swap contracts are negotiated in the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap contract, 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, it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Interest rate swap contracts
The Fund entered into interest rate swap transactions which may include inflation rate swap contracts to manage interest rate and market risk exposure to produce incremental earnings. These instruments may be used for other purposes in future periods. An interest rate swap is an agreement between two parties where there are two flows and payments are made between the two counterparties and the payments are dependent upon changes in an interest rate, inflation rate or inflation index calculated on a nominal amount. Interest rate swaps are agreements between two parties that involve the exchange of
Columbia Diversified Real Return Fund | Annual Report 2017
| 21 |
Notes to Financial Statements (continued)
January 31, 2017
one type of interest rate for another type of interest rate cash flow on specified dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby the accrual for the exchange of cash flows does not begin until a specified date in the future. The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate versus a fixed interest rate.
Interest rate swaps are valued daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated.
Effects of derivative transactions in the financial statements
The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at January 31, 2017:
| | Asset derivatives | |
Risk exposure
category | Statement
of assets and liabilities
location | Fair value ($) |
| Interest rate risk | Net assets — unrealized appreciation on swap contracts | 9,803* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended January 31, 2017:
| Amount of realized gain (loss) on derivatives recognized in income |
Risk
exposure
category | Futures
contracts
($) | Swap
contracts
($) | Total
($) |
| Interest rate risk | (545) | 4,264 | 3,719 |
| |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income |
| Risk exposure category | Futures
contracts
($) | Swap
contracts
($) | Total
($) |
| Interest rate risk | 2,208 | (3,166) | (958) |
The following table is a summary of the average outstanding volume by derivative instrument for the year ended January 31, 2017:
| Derivative instrument | Average notional
amounts ($)* |
| Futures contracts — long | 24,546 |
| Futures contracts — short | 9,286 |
| Derivative instrument | Average unrealized
appreciation ($)** | Average unrealized
depreciation ($)** |
| Interest rate swap contracts | 12,402 | — |
| * | Based on the ending daily outstanding amounts for the year ended January 31, 2017. |
| ** | Based on the ending quarterly outstanding amounts for the year ended January 31, 2017. |
| 22 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Notes to Financial Statements (continued)
January 31, 2017
Treasury inflation protected securities
The Fund may invest in treasury inflation protected securities (TIPS). The principal amount of TIPS is adjusted periodically and is increased for inflation or decreased for deflation based on a monthly published index. These adjustments are recorded as interest income in the Statement of Operations. Coupon payments are based on the adjusted principal at the time the interest is paid.
Offsetting of assets and liabilities
The following table presents the Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of January 31, 2017:
| | Morgan
Stanley
International ($) | Total ($) | | | | | | | |
| Assets | | | | | | | | | |
| Centrally cleared interest rate swap contracts (a) | 106 | 106 | | | | | | | |
| Total Financial and Derivative Net Assets | 106 | 106 | | | | | | | |
| Total collateral received (pledged) (b) | - | - | | | | | | | |
| Net Amount (c) | 106 | 106 | | | | | | | |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c ) | 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 may place a debt security on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend income are recorded on the ex-dividend date.
The Fund may receive distributions from holdings in equity securities, business development companies (BDCs), exchange-traded funds, other regulated investment companies (RICs), and real estate investment trusts (REITs), which report information on 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 the Fund’s management. Management’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.
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.
Columbia Diversified Real Return Fund | Annual Report 2017
| 23 |
Notes to Financial Statements (continued)
January 31, 2017
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 taxable income (including net short-term capital gains), if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to shareholders
Distributions from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed along with the income distribution. 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.
Investment company reporting modernization
In October 2016, the U.S. Securities and Exchange Commission adopted new rules and forms, and amendments to certain current rules and forms, to modernize reporting and disclosure of information by registered investment companies. The amendments to Regulation S-X will require standardized, enhanced disclosure about derivatives in investment company financial statements, and will also change the rules governing the form and content of such financial statements. The amendments to Regulation S-X take effect on August 1, 2017. At this time, management is assessing the anticipated impact of these regulatory developments.
Note 3. Fees and other transactions with affiliates
Management services fees and underlying fund fees
Effective June 1, 2016, the Fund 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) 0.020% on assets invested in Columbia proprietary funds, including exchange-traded funds and closed-end funds, that pay a management fee (or advisory fee, as applicable) to the Investment Manager and (ii) 0.760% on assets invested in exchange-traded funds and mutual funds that are not managed by the Investment Manager or its affiliates; and securities, instruments and other assets not described above, including other funds advised by the Investment Manager that do not pay a management fee, third-party closed-end funds, derivatives and individual securities. Prior to June 1, 2016, the Fund paid the Investment Manager an annual fee for advisory services under an Investment Management Services Agreement and a separate annual fee for administrative and accounting services under an Administrative Services Agreement. The effective management services fee rate for the year ended January 31, 2017 (reflecting all advisory and administrative services fees paid to the Investment Manager) was 0.193% of the Fund’s average daily net assets. For the period from February 1, 2016 through May 31, 2016, the investment advisory services fee paid to the Investment Manager was $2,260, and the administrative services fee paid to the Investment Manager was $420.
| 24 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Notes to Financial Statements (continued)
January 31, 2017
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 Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Subadvisory agreement
The Fund’s Board of Trustees has approved a subadvisory agreement between the Investment Manager and Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise Financial. As of January 31, 2017, Threadneedle is not providing services to the Fund pursuant to the subadvisory agreement.
Compensation of board members
Members of the Board of Trustees, who are not officers or employees of the Investment Manager or Ameriprise Financial, are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees may participate in a Deferred Compensation Plan (the Plan) which may be terminated at any time. Obligations of the Plan will be paid solely out of the Fund’s assets, and all amounts payable under the Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance Officer
The Board of Trustees has appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. A portion of the Chief Compliance Officer’s total compensation is allocated to the Fund, along with other affiliated funds governed by the Board of Trustees, based on relative net assets. The total amount allocated to all affiliated funds governed by the Board of Trustees will not exceed $40,000 annually.
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 Boston Financial Data Services (BFDS) to serve as sub-transfer agent. The Transfer Agent pays the fees of BFDS for services as sub-transfer agent and BFDS 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, prior to October 1, 2016, the Transfer Agent also received sub-transfer agency fees based on a percentage of the average aggregate value of the Fund’s shares maintained in omnibus accounts (other than omnibus accounts for which American Enterprise Investment Services Inc. is the broker of record or accounts where the beneficial shareholder is a customer of Ameriprise Financial Services, Inc., for which the Transfer Agent receives a per account fee). Effective October 1, 2016, 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 servicing agent 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. Effective January 1, 2017, total transfer agency fees for Class R5 shares are subject to an annual limitation of not more than 0.075% of the average daily net assets attributable to Class R5 shares. Prior to January 1, 2017, total transfer agency fees for Class R5 shares were subject to an annual limitation of not more than 0.05% of the average daily net assets attributable to Class R5 shares.
Columbia Diversified Real Return Fund | Annual Report 2017
| 25 |
Notes to Financial Statements (continued)
January 31, 2017
For the year ended January 31, 2017, the Fund’s effective transfer agency fee rates as a percentage of average daily net assets of each class were as follows:
| Class A | 0.02% |
| Class C | 0.02 |
| Class R4 | 0.02 |
| Class R5 | 0.05 |
| Class W | 0.02 |
| Class Z | 0.02 |
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 January 31, 2017, no minimum account balance fees were charged by the Fund.
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 Board of Trustees has approved, and the Fund has adopted, distribution and shareholder service plans (the Plans) applicable to certain share classes, which set the distribution and service fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor and/or eligible selling and/or servicing agents for selling shares of the Fund and providing services to investors.
Under the Plans, the Fund pays a monthly service fee to the Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class A, Class C and Class W shares of the Fund. Also under the Plans, the Fund pays a monthly distribution fee to the Distributor at the maximum annual rates of 0.75% and 0.25% of the average daily net assets attributable to Class C and Class W shares of the Fund, respectively.
Although the Fund may pay a distribution fee up to 0.25% of the Fund’s average daily net assets attributable to Class W shares and a service fee of up to 0.25% of the Fund’s average daily net assets attributable to Class W shares, the aggregate fee shall not exceed 0.25% of the Fund’s average daily net assets attributable to Class W shares.
Sales charges (unaudited)
Sales charges, including front-end charges and CDSCs, received by the Distributor for distributing Fund shares for the year ended January 31, 2017, if any, are listed below:
| 26 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Notes to Financial Statements (continued)
January 31, 2017
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 periods 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 rates as a percentage of the class’ average daily net assets:
| | June 1, 2016
through
May 31, 2017 | Prior to
June 1, 2016 |
| Class A | 0.60% | 0.60% |
| Class C | 1.35 | 1.35 |
| Class R4 | 0.35 | 0.35 |
| Class R5 | 0.39 | 0.29 |
| Class W | 0.60 | 0.60 |
| Class Z | 0.35 | 0.35 |
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 and interest expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At January 31, 2017, these differences are primarily due to differing treatment for deferral/reversal of wash sale losses, re-characterization of distributions for investments, swap investments, capital loss carryforwards, trustees’ deferred compensation, principal and/or interest from fixed income securities, foreign currency transactions and swap reclassifications. To the extent these differences are permanent, reclassifications are made among the components of the Fund’s net assets in the Statement of Assets and Liabilities. Temporary differences do not require reclassifications.
In the Statement of Assets and Liabilities the following reclassifications were made:
Excess of distributions
over net investment
income ($) | Accumulated
net realized
(loss) ($) | Paid in
capital ($) |
| 5,644 | (5,644) | — |
Net investment income (loss) and net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by these reclassifications.
The tax character of distributions paid during the years indicated was as follows:
| January 31, 2017 | January 31, 2016 |
Ordinary
income ($) | Long-term
capital gains ($) | Total ($) | Ordinary
income (S) | Long-term
capital gains ($) | Total ($) |
| 51,578 | — | 51,578 | 240,150 | — | 240,150 |
Columbia Diversified Real Return Fund | Annual Report 2017
| 27 |
Notes to Financial Statements (continued)
January 31, 2017
Short-term capital gain distributions, if any, are considered ordinary income distributions for tax purposes.
At January 31, 2017, the components of distributable earnings on a tax basis were as follows:
Undistributed
ordinary income ($) | Undistributed
long-term
capital gains ($) | Capital loss
carryforwards ($) | Net unrealized
appreciation ($) |
| 1,769 | — | (1,027,662) | 3,597 |
At January 31, 2017, the cost of investments for federal income tax purposes was $1,111,216 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Federal
tax cost ($) | Gross unrealized
appreciation ($) | Gross unrealized
(depreciation) ($) | Net unrealized
appreciation ($) |
| 1,111,216 | 3,926 | (329) | 3,597 |
The following capital loss carryforwards, determined at January 31, 2017, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
| 2017 ($) | 2018 ($) | 2019 ($) | No expiration
short-term ($) | No expiration
long-term ($) | Total ($) | Utilized ($) | Expired ($) | Permanently
lost ($) |
| — | — | — | — | 1,027,662 | 1,027,662 | — | — | — |
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 $171,817 and $3,825,434, respectively, for the year ended January 31, 2017, of which $25,450 and $60,341, 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. Effective October 1, 2016, the Affiliated MMF prices its shares with a floating net asset value (NAV) and no longer seeks to maintain a stable NAV. 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. Line of credit
The Fund has access to a revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager, severally and not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the overnight federal funds rate plus 1.00% or (ii) the one-month LIBOR rate plus 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 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.
| 28 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Notes to Financial Statements (continued)
January 31, 2017
The Fund had no borrowings during the year ended January 31, 2017.
Note 8. Significant risks
Derivatives risk
Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), commodity, currency or index or other instrument or asset may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging risk, leverage risk and liquidity risk.
Shareholder concentration risk
At January 31, 2017, affiliated shareholders of record owned 88.8% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid or more liquid positions, resulting in Fund losses and the Fund holding a higher percentage of less liquid or illiquid securities. 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. Other than as noted in Note 1 above, there were 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 have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the 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 Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
Columbia Diversified Real Return Fund | Annual Report 2017
| 29 |
Report of Independent Registered Public Accounting Firm
To the Trustees of Columbia Funds Series Trust I and the Shareholders of Columbia Diversified Real Return Fund
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Columbia Diversified Real Return Fund (the "Fund," a series of Columbia Funds Series Trust I) as of January 31, 2017, 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 then ended and the financial highlights for each of the two years in the period then ended and for the period March 11, 2014 (commencement of operations) through January 31, 2015, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of January 31, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Minneapolis, MN
March 24, 2017
| 30 | Columbia Diversified Real Return Fund | Annual Report 2017 |
Federal Income Tax Information
(Unaudited)
The Fund hereby designates the following tax attributes for the fiscal year ended January 31, 2017. Shareholders will be notified in early 2018 of the amounts for use in preparing 2017 income tax returns.
Qualified
dividend
income | Dividends
received
deduction |
| 1.62% | 1.01% |
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.
Columbia Diversified Real Return Fund | Annual Report 2017
| 31 |
Shareholders elect the Board that oversees the Fund’s operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, members serve terms of indefinite duration.
Independent trustees
| Name, address, year of birth | Position held with the Trust and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Fund Complex overseen | Other directorships held by Trustee during the past five years |
Janet Langford Carrig
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Stree
Mail Drop BX32 05228
Boston, MA 02110
1957 | Trustee
1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company) since September 2007 | 59 | None |
Douglas A. Hacker
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Mail Drop BX32 05228
Boston, MA 02110
1955 | Trustee and Chairman of the Board
1996 | Independent business executive since May 2006; Executive Vice President — Strategy of United Airlines from December 2002 to May 2006; President of UAL Loyalty Services (airline marketing company) from September 2001 to December 2002; Executive Vice President and Chief Financial Officer of United Airlines from July 1999 to September 2001 | 59 | Spartan Nash Company, (food distributor); Nash Finch Company (food distributor) from 2005 to 2013; Aircastle Limited (aircraft leasing); SeaCube Container Leasing Ltd. (container leasing) from 2010 to 2013; and Travelport Worldwide Limited (travel information technology) |
Nancy T. Lukitsh
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Mail Drop BX32 05228
Boaston, MA 02110
1956 | Trustee
2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser) from 1997 to 2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools) from 2007 to 2010; Director, Wellington Trust Company, NA and other Wellington affiliates from 1997 to 2010 | 59 | None |
David M. Moffett
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Mail Drop BX32 05228
Boaston, MA 02110
1952 | Trustee
2011 | Retired. Consultant to Bridgewater and Associates | 59 | Director, CSX Corporation; Genworth Financial, Inc. (financial and insurance products and services); Paypal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| 32 | Columbia Diversified Real Return Fund | Annual Report 2017 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Trust and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Fund Complex overseen | Other directorships held by Trustee during the past five years |
Charles R. Nelson
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Mail Drop BX32 05228
Boaston, MA 02110
1942 | Trustee
1981 | Retired. Professor Emeritus, University of Washington since 2011; Professor of Economics, University of Washington from 1976 to 2011; Ford and Louisa Van Voorhis Professor of Political Economy, University of Washington from 1993 to 2011; Adjunct Professor of Statistics, University of Washington from 1980 to 2011; Associate Editor, Journal of Money, Credit and Banking from September 1993 to 2008; consultant on econometric and statistical matters | 59 | None |
John J. Neuhauser
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Mail Drop BX32 05228
Boaston, MA 02110
1943 | Trustee
1984 | President, Saint Michael’s College since August 2007; Director or Trustee of several non-profit organizations, including University of Vermont Medical Center; Academic Vice President and Dean of Faculties, Boston College from August 1999 to October 2005; University Professor, Boston College from November 2005 to August 2007 | 59 | Liberty All-Star Equity Fund and Liberty All- Star Growth Fund (closed-end funds) |
Patrick J. Simpson
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Mail Drop BX32 05228
Boaston, MA 02110
1944 | Trustee
2000 | Of Counsel, Perkins Coie LLP (law firm) since 2015; Partner, Perkins Coie LLP from 1988 to 2014 | 59 | None |
Anne-Lee Verville
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Mail Drop BX32 05228
Boaston, MA 02110
1945 | Trustee
1998 | Retired. General Manager, Global Education Industry from 1994 to 1997, President – Application Systems Division from 1991 to 1994, Chief Financial Officer – US Marketing & Services from 1988 to 1991, and Chief Information Officer from 1987 to 1988, IBM Corporation (computer and technology) | 59 | Enesco Group, Inc. (producer of giftware and home and garden decor products) from 2001 to 2006 |
Columbia Diversified Real Return Fund | Annual Report 2017
| 33 |
TRUSTEES AND OFFICERS (continued)
Consultants to the Independent Trustees*
| Name, address, year of birth | Position held with the Trust and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds complex overseen | Other directorships held by Trustee during the past five years |
J. Kevin Connaughton
c/o Columbia
Management Investment
Advisers, LLC,
225 Franklin Street
Mail Drop BX32 05228,
Boston, MA 02110
1964 | Independent Trustee Consultant
2016 | Independent Trustee Consultant, Columbia Funds since March 2016; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC from May 2010 to February 2015; President, Columbia Funds from 2009 to 2015; and senior officer of Columbia Funds and affiliated funds from 2003 to 2015 | 59 | Board of Governors, Gateway Healthcare since January 2016; Trustee, New Century Portfolios since March 2015; and Director, The Autism Project since March 2015 |
Natalie A. Trunow
c/o Columbia
Management Investment
Advisers, LLC,
225 Franklin Street
Mail Drop BX32 05228,
Boston, MA 02110
1967 | Independent Trustee Consultant
2016 | Independent Trustee Consultant, Columbia Funds since September 2016; Chief Executive Officer, Millennial Partners (investment consulting services to institutions) since January 2016; Director of Investments, Casey Family Programs from April 2016 to September 2016; Senior Vice President and Chief Investment Officer, Calvert Investments from August 2008 to January 2016; Section Head and Portfolio Manager, General Motors Asset Management from June 1997 to August 2008 | 59 | Healthcare Services for Children with Special Needs |
| * | J. Kevin Connaughton was appointed consultant to the Independent Trustees effective March 1, 2016. Natalie A. Trunow was appointed consultant to the Independent Trustees effective September 1, 2016. Shareholders of the Funds are expected to be asked to elect each of Mr. Connaughton and Ms. Trunow as a Trustee at a future shareholder meeting. |
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Trust and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
William F. Truscott
c/o Columbia Management
Investment Advisers, LLC
225 Franklin Street
Boston, MA 02110
1960 | Trustee
2012 | Chairman of the Board and President, Columbia Management Investment Advisers, LLC since May 2010 and February 2012, respectively; Chief Executive Officer, Global Asset Management, Ameriprise Financial, Inc. since September 2012 (previously Chief Executive Officer, U.S. Asset Management & President, Annuities, May 2010-September 2012); Director and Chief Executive Officer, Columbia Management Investment Distributors, Inc. since May 2010 and February 2012, respectively;Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006; Director, Threadneedle Asset Management Holdings, SARL since 2014; President and Chief Executive Officer, Ameriprise Certificate Company, 2006-August 2012 | 185 | Chairman of the Board, Columbia Management Investment Advisers, LLC since May 2010; Director, Columbia Management Investment Distributors, Inc. since May 2010; former Director, Ameriprise Certificate Company, 2006 - January 2013 |
| * | 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; contacting your financial intermediary; or visiting
investor.columbiathreadneedleus.com.
| 34 | Columbia Diversified Real Return Fund | Annual Report 2017 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Truscott, who is Senior Vice President, the Fund’s other officers are:
Fund officers
Name,
address and
year of birth | Position and year
first appointed to
position for any Fund
in the Columbia
Funds complex or a
predecessor thereof | Principal occupation(s) during past five years |
Christopher O. Petersen
5228 Ameriprise
Financial Center
Minneapolis, MN 55474
Born 1970 | President and Principal Executive Officer (2015) | Vice President and Lead Chief Counsel, Ameriprise Financial, Inc. since January 2015 (previously, Vice President and Chief Counsel, January 2010 - December 2014; officer of Columbia Funds and affiliated funds since 2007. |
Michael G. Clarke
225 Franklin Street
Boston, MA 02110
Born 1969 | Treasurer (2011), Chief Financial Officer (2009) and Chief Accounting Officer (2015) | Vice President — Mutual Fund Administration, Columbia Management Investment Advisers, LLC, since May 2010; senior officer of Columbia Funds and affiliated funds since 2002. |
Paul B. Goucher
100 Park Avenue
New York, NY 10017
Born 1968 | Senior Vice President (2011), Chief Legal Officer (2015) and Assistant Secretary (2008) | Senior Vice President and Assistant General Counsel, Ameriprise Financial, Inc. since January 2017 (previously Vice President and Lead Chief Counsel, November 2008 - January 2017 and January 2013 - January 2017, respectively and Chief Counsel, January 2010 - January 2013); Vice President, Chief Legal Officer and Assitant Secretary, Columbia Management Investment Advisers, LLC since May 2010. |
Thomas P. McGuire
225 Franklin Street
Boston, MA 02110
Born 1972 | Senior Vice President and Chief Compliance Officer (2012) | Vice President — Asset Management Compliance, Ameriprise Financial, Inc., since May 2010; Chief Compliance Officer, Ameriprise Certificate Company since September 2010. |
Colin Moore
225 Franklin Street
Boston, MA 02110
Born 1958 | Senior Vice President (2010) | Executive Vice President and Global Chief Investment Officer, Ameriprise Financial, Inc., since July 2013; Executive Vice President and Global Chief Investment Officer, Columbia Management Investment Advisers, LLC since July 2013 (previously Director and Global Chief Investment Officer, 2010 - 2013). |
Michael E. DeFao
225 Franklin Street
Boston, MA 02110
Born 1968 | Vice President (2011) and Assistant Secretary (2010) | Vice President and Chief Counsel, Ameriprise Financial, Inc. since May 2010. |
Amy Johnson
5228 Ameriprise
Financial Center
Minneapolis, MN 55474
Born 1965 | Vice President (2006) | Managing Director and Global Head of Operations, Columbia Management Investment Advisers, LLC since April 2016 (previously Managing Director and Chief Operatiing Officer, 2010 - 2016).). |
Lyn Kephart-Strong
5228 Ameriprise
Financial Center
Minneapolis, MN 55474
Born 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Ryan C. Larrenaga
225 Franklin Street
Boston, MA 02110
Born 1970 | Vice President and Secretary (2015) | Vice President and Group Counsel, Ameriprise Financial, Inc. since August 2011; officer of Columbia Funds and affiliated funds since 2005. |
Columbia Diversified Real Return Fund | Annual Report 2017
| 35 |
The Fund mails one shareholder report to each shareholder address. If you would like more than one report, 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 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 investor.columbiathreadneedleus.com; 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 investor.columbiathreadneedleus.com, 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-Q. The Fund’s Form N-Q is available on the SEC’s website at sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
For more information about the Fund, please visit investor.columbiathreadneedleus.com 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
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors, Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 8081
Boston, MA 02266-8081
| 36 | Columbia Diversified Real Return Fund | Annual Report 2017 |
[THIS PAGE INTENTIONALLY LEFT BLANK]
Columbia Diversified Real Return Fund
P.O. Box 8081
Boston, MA 02266-8081
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
investor.columbiathreadneedleus.com. 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. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA 02110-2804
© 2017 Columbia Management Investment Advisers, LLC.
investor.columbiathreadneedleus.com
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 adopted in 2(a) above. |
| | (c) | During the period covered by this report, there were no waivers, including any implicit waivers, from a provision of the code of ethics described in 2(a) above that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Trustees has determined that Douglas A. Hacker, David M. Moffett and Anne-Lee Verville, each of whom are members of the registrant’s Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Moffett and Ms. Verville 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 one 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 January 31, 2017 and January 31, 2016 are approximately as follows:
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 January 31, 2017 and January 31, 2016 are approximately as follows:
Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported in Audit Fees above. In fiscal years 2017 and 2016, Audit-Related Fees consist of agreed-upon procedures performed for semi-annual shareholder reports.
During the fiscal years ended January 31, 2017 and January 31, 2016, 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 January 31, 2017 and January 31, 2016 are approximately as follows:
Tax Fees include amounts for the review of annual tax returns, the review of required shareholder distribution calculations and typically include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning.
During the fiscal years ended January 31, 2017 and January 31, 2016, 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 January 31, 2017 and January 31, 2016 are approximately as follows:
All Other Fees 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 January 31, 2017 and January 31, 2016 are approximately as follows:
| | |
| 2017 | | 2016 |
| $225,000 | | $110,000 |
In fiscal years 2017 and 2016, 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) 100% of the services performed for items (b) through (d) above during 2017 and 2016 were pre-approved by the registrant’s Audit Committee.
(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 during the fiscal years ended January 31, 2017 and January 31, 2016 are approximately as follows:
| | |
| 2017 | | 2016 |
| $228,100 | | $113,500 |
(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. |
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 material information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant’s management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. |
| | (b) | There was no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
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 I | | |
| | | | |
| | |
| By (Signature and Title) | | /s/ Christopher O. Petersen | | |
| | Christopher O. Petersen, President and Principal Executive Officer |
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/ Christopher O. Petersen | | |
| | Christopher O. Petersen, President and Principal Executive Officer |
| | | | |
| | |
| By (Signature and Title) | | /s/ Michael G. Clarke | | |
| | Michael G. Clarke, Treasurer and Chief Financial Officer |
