Columbia Limited Duration Credit Fund A transparent approach to short-term investing

Transcription

1 Columbia Limited Duration Credit Fund A transparent approach to short-term investing Class A ALDAX Class C RDCLX Class R4 CDLRX Class R5 CTLRX Class Z CLDZX

2 Columbia Limited Duration Credit Fund is a pure corporate bond fund dedicated to identifying attractive opportunities within short-term bonds aiming to generate competitive returns with less volatility.

3 Columbia Limited Duration Credit Fund High-quality, conservative approach to corporate bond investing Today, many U.S. corporations are in their best financial condition in years. Following the financial crisis, management teams became more conservative by cutting costs and streamlining operations, resulting in lower debt levels and better cash positions. Columbia Limited Duration Credit Fund aims to capitalize on this trend by investing in short-term bonds issued by high-quality companies. We believe these investments offer investors the potential to earn additional yield over U.S. Treasuries and cash without taking on considerably more interest rate risk. The fund s managers take a conservative approach to credit selection, using an intensive research process to identify value and deliver to investors a competitive yield. Greater yield potential with less interest rate risk. In an environment of low interest rates, corporate bonds can offer investors a higher yielding alternative. The fund focuses on short-term corporate bonds (primarily investment grade but up to 15% below investment grade), which are less sensitive to price volatility when interest rates change. Conservative credit selection. The fund s managers are biased toward investing in bonds issued by asset-rich companies with strong cash fl ow generating capabilities and transparent business models in non-cyclical businesses. They prefer seniority in the capital structure where its investments are in closer proximity to the underlying assets, resulting in a relatively conservative risk profile. Experienced management supported by extensive research. Fund managers Tom Murphy, CFA; Tim Doubek, CFA; and Royce Wilson, CFA bring an average of 22 years of investment industry experience spanning multiple market cycles in the corporate bond sector. They work collaboratively with nine investment-grade credit research partners to review investment opportunities and construct the portfolio Low volatility 1 from a focus on short-term, high-quality corporate bonds Fundamental credit research that offers an information advantage used to better understand our companies and industries Conservative credit selection favoring companies with strong balance sheets, predictable cash fl ows and transparent business models A word about risk There are risks associated with an investment in this fund, including credit risk, market risk, interest rate risk and prepayment and extension risk. See the fund s prospectus for information on these and other risks associated with the fund. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer term securities. International investing involves increased risk and volatility due to potential political and economic instability, currency fl uctuations, and differences in fi nancial reporting and accounting standards and oversight. Risks are particularly signifi cant in emerging markets. Due to its active management, the fund could underperform its benchmark index and/or other funds with a similar investment objective or may fail to achieve its investment objective and you may lose money. 1 A type of risk associated with investing, particularly in stocks or the stock market in general. Volatility refers to the fact that security prices will rise or fall over short periods of time. This brochure is updated annually and must be accompanied by the most recent fund story or fund fact sheet. A transparent approach to short-term investing 3

4 Our approach Rely on independent research and internal expertise Portfolio management process anchored by rigorous fundamental credit research Investable universe: Barclays U.S. 1-5 Year Corporate Index 1,600 issues and 550 issuers Research universe: Begin with top 125 issuers in the index Filter out issuers with poor business models and/or management and issuers we believe will fall below investment grade Add smaller or out-of-index issuers that offer potential relative value opportunities Each analyst covers companies grouped by industry Portfolio: Diversifi ed across issues with multiple sources of potential alpha Columbia Limited Duration Credit Fund offers the advantage of an extensive in-house research staff using a sophisticated, proprietary rating system to independently evaluate corporate bond issuers. Disciplined, repeatable investment process. The primary cause of volatility, and ultimately loss, in a corporate bond portfolio is issuer risk. To address this, we built our investment process around rigorous, bottom-up fundamental credit research that seeks to ensure conservative underwriting and adequate downside protection. Independent, proprietary credit research, combined with a framework for discerning risk/return tradeoffs and sizing positioning appropriately, is the bedrock of our operating model. Dedicated research team. We believe strong investment performance is driven by rigorous, in-house, proprietary research. Our research effort includes nine credit analysts exclusively dedicated to investment-grade credit who average 15 years of industry experience and nine years of tenure with Columbia Management. In addition, we leverage the work conducted by the high-yield team, which is composed of eight portfolio managers and 12 credit research analysts. Experienced investment team Tom W. Murphy, CFA Portfolio Manager Industry experience since 1986 Tim J. Doubek, CFA Portfolio Manager Industry experience since 1987 Royce D. Wilson, CFA Portfolio Manager Industry experience since

5 Proprietary rating system. In our view, public agency ratings are incomplete, and often misleading, indicators of risk. Instead, we believe the best way to uncover relative value within corporate bonds is through extensive, forward-looking research that focuses on traditional inputs such as business strategy, management strength, competitive position and various financial metrics. Our internally developed, three-tier rating system includes: 1. Risk rating assigned at the issue level based on a longer term view of the company 2. Internal credit rating similar to agency rating scales but based on our own analytic review 3. Relative value recommendation representing the expected performance of the issuer relative to its industry peers High-yield allocation. By prospectus, the fund may invest up to 15% of assets in high-yield corporate bonds. We generally focus on higher quality high-yield bonds, specifi cally those rated BB and B in shorter maturities that boost the fund s yield without adding much incremental credit risk. Our internally developed, three-tier rating system includes: 1: Risk rating Risk rating assigned at the issue level based on a longer term view of the credit 2: Internal credit rating Internal credit rating similar to agency rating scales but based on our own analytic review 3: Relative value recommendation Relative value recommendation representing the expected return of the issue relative to industry peers Low interest-rate sensitivity. We target the fund s duration 2 within one year of its benchmark index, which is typically 2.5 to 3 years. 2 Duration measures the sensitivity of bond prices to changes in interest rates. The greater the duration of a bond, the more sensitive it will be to changes in interest rates. A transparent approach to short-term investing 5

6 Benefits for you A pure corporate component for your portfolio Investor spotlight Columbia Limited Duration Credit Fund offers investors: Access to a pure corporate bond fund. Investors can use the fund to add a strict short-term corporate bond component to their overall asset allocation. Of the three balance sheets investors can invest in corporate, government and consumer the corporate balance sheet appears to be the most attractive. A conservative approach with focus on quality. The fund focuses on bonds issued by high-quality, asset-rich companies with transparent business models. Such companies have historically exhibited a low occurrence of default. Columbia Limited Duration Credit Fund is a high-quality, conservative short-term bond fund focused on investmentgrade corporate bonds. Its shorter duration profile makes the fund less sensitive to interest rate changes and may be appropriate for investors seeking higher yields in a lower interest rate environment. Diversification. 3 The fund managers diversify the portfolio across industries and issuers, incorporating the best ideas from our credit research team. Typically, the fund holds more than investment-grade and high-yield securities. Relatively low volatility. In a low and rising interest rate environment, this fund s short duration profile can offer a degree of price stability compared with longer duration alternatives. Average annual total returns, Class A (%) as of 12/31/13 3-mo. (cum.) YTD (cum.) 1 year 3 year 5 year 10 year Since incep. 4 Expense ratio 5 Gross Net Without sales charge With 3.00% maximum sales charge With a high-quality, conservative approach to corporate bond investing, consider Columbia Limited Duration Credit Fund as a core fi xed-income holding in your portfolio. For more information about this fund, contact your fi nancial professional today. Performance data shown represents past performance and is not a guarantee of future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data shown. Please visit columbiamanagement.com for performance data current to the most recent month end. 3 Diversification does not guarantee a profit or ensure against loss. 4 Inception date 06/19/03. 5 Expense ratios generally are based on the fund s most recently completed fiscal year and are not adjusted for current asset levels. In general, expense ratios increase as net assets decrease. Please see the fund s prospectus for additional details. The investment manager and certain of its affiliates have contractually (for at least 12 months after the date of the fund prospectus) and/or voluntarily agreed to waive certain fees and/or to reimburse certain expenses of the fund. Voluntary waivers/reimbursement arrangements, if any, may be discontinued at any time. 6

7 More yield per unit of interest rate risk Short corporate bonds provide more attractive yields with similar interest rate risk as compared with other short-term alternatives. 1.5 Yield per unit of interest rate risk Columbia Limited Duration Credit Fund Barclays U.S. 1 5 Year Corporate Index 7 5 Year Treasury Barclays U.S. 1 3 Year Gov/Credit Index 7 Sources: Columbia Management and Barclays POINT as of 12/31/13 Short-term bonds have consistently posted positive long-term results The Barclays U.S. 1 5 Year Corporate Index has generated positive annualized returns during all two-year rolling periods dating back to at least Columbia Limited Duration Credit Fund uses this benchmark as its starting point and then adds active management in an effort to add value above the index. Barclays U.S. 1-5 Year Corporate Index Two-year rolling annualized returns (%) Source: Barclays POINT as of 12/31/13 Past performance is not a guarantee of future results. It is not possible to invest directly in an index. 6 Interest rate risk refers to duration, which measures the sensitivity of bond prices to changes in interest rates. Yield per unit of interest rate risk is calculated as yield to maturity divided by effective duration. 30-day SEC yield %, Class A: 1.39% subsidized; 1.34% unsubsidized as of 12/31/ day SEC yield: The SEC yield should be regarded as an estimate of the fund s rate of investment income refl ecting an estimated yield to maturity (assuming all current portfolio holdings are held to maturity), and it may not equal the fund s actual income distribution rate or the income paid to a shareholder s account. The yield shown refl ects fee waivers in effect, if any. In the absence of such waivers, yields would be reduced. The fund may own treasury infl ation-protected securities (TIPS) or other infl ation indexed securities. If so, the yield will refl ect an infl ation adjustment that is attributable to these securities. This adjustment and the resulting yield can be positive (in the case of infl ation) or negative (in the case of defl ation) during the period shown. Unsubsidized 30-day SEC yield: The unsubsidized yield shown is the SEC yield adjusted to refl ect the gross expense ratio applicable to the class of shares shown and without regard to the contractual reimbursements and fee waivers required of the fund s investment manager and affi liates. The 30-day yields may appear to be the same due to rounding. 7 The Barclays U.S. 1 5 Year Corporate Index includes U.S. dollar-denominated, investment-grade, fi xed-rate, taxable securities issued by industrial, utility and fi nancial companies with maturities between one and fi ve years. The Barclays U.S. 1 3 Year Government/Credit Index is an unmanaged index consisting of Treasury or government agency securities and investment-grade corporate debt securities with maturities of one to three years. It is not possible to invest directly in an index. A transparent approach to short-term investing 7

8 About Columbia Management Backed by more than 100 years of experience, Columbia Management is one of the nation s largest asset managers. At the heart of our success and, most importantly, that of our investors are some of the most talented professionals in the industry, brought together by a unique way of working. It starts with carefully selected, specialized investment teams. While each team brings a diverse and innovative range of skills, all are grounded by a common set of core beliefs. All possess a solid conviction in the power of proprietary, bottom-up research. All look not only at generating returns, but also at the likely consistency of those returns and the risks required to achieve them. And while our culture encourages teams to operate independently and question established thinking, a rigorous investment oversight process ensures that each team stays true to its clearly articulated investment process. At Columbia Management, reaching our performance goals matters, and the way we reach them matters just as much. Columbia Management Investment Distributors, Inc. 225 Franklin Street Boston, MA columbiamanagement.com blog.columbiamanagement.com Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus and, if available, a summary prospectus, which contains this and other important information about the funds, visit columbiamanagement.com. Read the prospectus carefully before investing. Columbia Funds are distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC Columbia Management Investment Advisers, LLC. All rights reserved. Class A ALDAX Class C RDCLX Class R4 CDLRX Class R5 CTLRX Class Z CLDZX CM-MK/ D (03/14) 4384/815497

9 4Q 2014 Fixed Income COLUMBIA LIMITED DURATION CREDIT FUND CLASS A ALDAX CLASS R5 CTLRX CLASS C RDCLX CLASS R4 CDLRX CLASS Z CLDZX A transparent approach to short-term bond investing Columbia Limited Duration Credit Fund is a high-quality, conservative short-term bond fund focused on investment-grade corporate bonds. The shorter duration 1 of the bonds makes the fund less sensitive to interest rate changes and may be appropriate for investors seeking yield above U.S. Treasuries in a lower interest rate environment. Greater yield potential with less interest rate risk In a low interest rate environment, corporate bonds can offer investors a higher yielding alternative. The fund focuses on short-term corporate bonds, which are less sensitive to price volatility when interest rates change. Conservative credit selection The fund s managers are biased toward investing in bonds issued by companies with strong cash-flow-generating capabilities and transparent business models in noncyclical businesses. This approach results in a relatively conservative risk profile. Experienced management supported by extensive research The management team brings an average of 20+ years of industry experience spanning multiple market cycles in the corporate sector. They work collaboratively with 8 investment-grade credit research partners to review investment opportunities and construct the portfolio. A solid long-term track record for short-term bonds The Barclays U.S. 1-5 Year Corporate Index has generated positive annualized returns during all two-year rolling periods dating back to Columbia Limited Duration Credit Fund references this benchmark as its starting point and uses active management in an effort to add value above the index. 2-year rolling annualized returns (%) Barclays U.S. 1-5 Year Corporate Index Source: FactSet Research as of 12/31/14. 1 Duration measures the sensitivity of bond prices to changes in interest rates. Bonds with a higher duration experience greater price volatility from interest rate movements. Past performance is no guarantee of future results. Performance shown is not representative of the performance of any particular investment. It is not possible to invest directly in an index. Investment risks Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Fixed-income securities present issuer default risk. A rise in interest rates may result in a price decline of fixed-income securities held by the fund. Falling rates may result in the fund investing in lower yielding securities, lowering the fund s income and yield. Non-investmentgrade securities (high-yield or junk bonds) are volatile and carry more risk to principal and income than investment-grade securities. Prepayment and extension risk exists as a loan, bond or other investment may be called, prepaid or redeemed before maturity and that similar yielding investments may not be available for purchase. As a non-diversified fund, fewer investments could have a greater effect on performance. Foreign investments subject the fund to risks, including political, economic, market, social and others within a particular country, as well as to currency instabilities and less stringent financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. Liquidity risk is associated with the difficulty of selling underlying investments at a desirable time or price. Returns shown assume reinvestment of distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Not all products and share classes are available through all firms. Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus and, if available, a summary prospectus which contains this and other important information about the funds, visit columbiamanagement.com. Read the prospectus carefully before investing. Columbia Funds are distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC

10 More yield per unit of interest rate risk Using the fund s primary benchmark as a proxy demonstrates that short corporate bonds may carry similar interest rate risk as other short-term alternatives, while also offering a more attractive yield. Yield per unit of interest rate risk* Barclays US 1-5 Year Corporate Index Source: BlackRock Aladdin as of 12/31/14 *Yield to Maturity/Effective Duration. Average Annual Total Returns, Class A (%) Barclays US 1-3 Year Aggregate Index YTD (cum.) Barclays US 1-3 Year Gov/Credit Index 1- year 3- year 5- year 5-Year Treasury Columbia Limited Duration Credit Fund All data shown is as of 12/31/14, unless otherwise noted. Performance data shown represents past performance and is not a guarantee of future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data shown. Please visit columbiamanagement.com for performance data current to the most recent month end. Class Z shares are sold at net asset value and have limited eligibility. Columbia Management offers multiple share classes, not all necessarily available through all firms, and the share class ratings may vary. Contact us for details. The fund s expense ratio is from the most recent prospectus. The investment manager and certain of its affiliates have contractually (for at least twelve months after the date of the fund prospectus) and/or voluntarily agreed to waive certain fees and/or to reimburse certain expenses of the fund. Voluntary waivers/reimbursement arrangements, if any, may be discontinued at any time. 2 Bond ratings apply to the underlying holdings of the fund and not the fund itself and are divided into categories ranging from AAA (highest) to D (lowest), and are subject to change. The ratings shown are determined by using the middle ratings of Moody s, S&P, and Fitch after dropping the highest and lowest available ratings. When a rating from only two agencies is available, the lower rating is used. When a rating from only one agency is available, that rating is used. When a bond is not rated by one of these agencies, it is designated as Not Rated. Holdings of the fund other than bonds are categorized under Other. Credit ratings are subjective opinions and are not statements of fact. The Barclays U.S. 1-5 Year Corporate Index includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by industrial, utility, and financial companies with maturities between one and five years. The Barclays U.S. 1-3 Year Aggregate Index is an unmanaged index of publicly issued investment grade corporate, U.S. Treasury and government agency securities with remaining maturities of one to three years. The Barclays U.S. 1-3 Year Government/Credit Index an unmanaged index consisting of Treasury or government agency securities and investment grade corporate debt securities with maturities of one to three years. It is not possible to invest directly in an index. 10- year Since inception Without sales charge With 3.00% maximum sales charge Overall Morningstar rating TM Class A Class Z Ratings out of 435 funds Category: Short-Term Bond 1-year year year year Out of 524 total funds. Percentile ranking Class A Class Z Out of 3-year year year 271 Columbia Management Investment Distributors, Inc. 225 Franklin Street Boston, MA columbiamanagement.com blog.columbiamanagement.com Portfolio Management Tom W. Murphy, CFA 28 years of industry experience Tim J. Doubek, CFA 27 years of industry experience Royce D. Wilson, CFA 12 years of industry experience Credit Ratings (% of net assets) 2 Fund Treasury 0.3 A 9.2 BBB 76.3 BB 4.8 B 2.2 CCC 0.7 Cash and Cash Equivalents 6.5 Sector Allocation (% of net assets) Fund Investment-Grade Corporates 85.3 High-Yield Corporates 6.7 Cash and Cash Equivalents 6.5 Global Govt Related 1.2 U.S. Treasuries/Agencies/TIPS 0.3 Asset Allocation (% of net assets) Fund Domestic Bonds 77.1 Foreign Bonds 16.4 Cash and Cash Equivalents 6.5 Average Life Distribution (% of net assets) Fund 0-1 Year Years Years Years 25.9 Duration (years) 1 Average effective duration 1.80 Expense Ratio Gross Net Class A 0.87 Inception Date Date Fund 06/19/03 Class A 06/19/03 Foreign Bonds are all U.S. dollar-denominated. Percentages may not add up to 100 due to rounding Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating TM based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund s monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages) The Morningstar Rating TM is for class A and class Z shares only; other classes may have different performance characteristics and may have different ratings. The Overall Morningstar Rating TM for a fund is derived from a weighted average for the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. Morningstar Percentile Rankings are based on the average annual total returns of the funds in the category for the periods stated and do not include any sales charges or redemption fees, but do include 12b-1 fees and the reinvestment of dividends and capital gains distributions. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. Rankings for each share class will vary due to different expenses. Had sales charges or redemption fees been included, total returns would be lower Columbia Management Investment Advisers, LLC. All rights reserved. FSS33064 J Q