N-CSR 1 a16-1229_2ncsr.htm N-CSR

 

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

811-01829

 

Columbia Acorn Trust

(Exact name of registrant as specified in charter)

 

227 W. Monroe Street
Suite 3000
Chicago, IL

 

60606

(Address of principal executive offices)

 

(Zip code)

 

Mary C. Moynihan
Perkins Coie LLP
700 13
th Street, NW
Suite 600
Washington, DC 20005

 

Paul B. Goucher, Esq

Columbia Management Investment Advisers, LLC

100 Park Avenue

New York, New York 10017

 

P. Zachary Egan

Columbia Acorn Trust

227 West Monroe Street

Suite 3000

Chicago, Illinois 60606

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

(312) 634-9200

 

 

Date of fiscal year end:

December 31

 

 

Date of reporting period:

December 31, 2015

 

 

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

December 31, 2015

COLUMBIA ACORN FAMILY OF FUNDS

Class A, B, C, I, R, R4, R5, Y and Z Shares
Managed by Columbia Wanger Asset Management, LLC

Columbia Acorn® Fund

Columbia Acorn International®

Columbia Acorn USA®

Columbia Acorn International SelectSM

Columbia Acorn SelectSM

Columbia Thermostat FundSM

Columbia Acorn Emerging Markets FundSM

Columbia Acorn European FundSM



COLUMBIA ACORN FAMILY OF FUNDS

>NET ASSET VALUE PER SHARE as of 12/31/15

  Columbia
Acorn Fund®
  Columbia
Acorn
International®
  Columbia
Acorn
USA®
  Columbia
Acorn
International
SelectSM
  Columbia
Acorn
SelectSM
  Columbia
Thermostat
FundSM
  Columbia
Acorn
Emerging
Markets
FundSM
  Columbia
Acorn
European
FundSM
 

Class A

 

$

17.63

   

$

39.08

   

$

20.25

   

$

21.33

   

$

13.94

   

$

14.31

   

$

10.24

   

$

14.75

   

Class B

 

$

13.70

   

$

37.80

   

$

16.05

   

$

20.09

   

$

10.82

   

$

14.42

     

N/A

     

N/A

   

Class C

 

$

13.16

   

$

37.65

   

$

16.00

   

$

19.96

   

$

10.51

   

$

14.41

   

$

10.20

   

$

14.63

   

Class I

 

$

19.43

   

$

39.15

   

$

22.40

   

$

21.57

   

$

15.36

     

N/A

   

$

10.26

   

$

14.74

   

Class R

   

N/A

   

$

39.07

     

N/A

     

N/A

     

N/A

     

N/A

     

N/A

     

N/A

   

Class R4

 

$

19.84

   

$

39.41

   

$

22.85

   

$

21.74

   

$

15.69

   

$

14.19

   

$

10.32

   

$

14.82

   

Class R5

 

$

19.92

   

$

39.10

   

$

22.90

   

$

21.72

   

$

15.74

   

$

14.20

   

$

10.32

   

$

14.89

   

Class Y

 

$

20.00

   

$

39.41

   

$

22.99

   

$

21.71

   

$

15.83

   

$

14.18

   

$

10.23

     

N/A

   

Class Z

 

$

19.34

   

$

39.12

   

$

22.19

   

$

21.58

   

$

15.24

   

$

14.12

   

$

10.26

   

$

14.75

   

                

Class I shares are available only to the Columbia funds, such as Columbia Thermostat Fund, and are not available to individual investors. Class R, R4, R5, Y and Z shares are sold at net asset value and have limited eligibility. Please see the Funds' prospectuses for details. The Columbia Acorn Family of Funds offer multiple share classes, not all necessarily available through all financial intermediaries, and the ratings assigned to the various share classes by mutual fund rating agencies may vary. Contact us for details.

The views expressed in the report commentaries reflect the current views of the respective authors. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective authors disclaim any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for a Columbia Acorn Fund are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any particular Columbia Acorn Fund. References to a specific company's securities should not be construed as a recommendation or investment advice and there can be no assurance that as of the date of publication of this report, the securities mentioned in each Fund's portfolio are still held or that the securities sold have not been repurchased.

Acorn®, Acorn USA® and Acorn International® are service marks owned and registered by Columbia Acorn Trust.




LETTER TO SHAREHOLDERS FROM THE
COLUMBIA ACORN TRUST BOARD OF TRUSTEES

2015 proved to be a challenging year for the domestic and global equity markets. Concerns around global growth, the continued weakness in energy and other commodity prices, a strengthening U.S. dollar, the U.S. Federal Reserve raising interest rates and declining growth in China were among the themes adversely affecting equity prices. Our Funds' primary goal is to provide shareholders with returns above their respective benchmarks, regardless of market conditions, over the long term. We are pleased that the domestic Funds outperformed their respective benchmarks for the one-year period in 2015, although the international Funds did not.

The Columbia Acorn Funds' Board of Trustees ("Board") has been particularly focused on monitoring the steps the Funds' adviser, Columbia Wanger Asset Management, LLC ("CWAM"), has taken throughout 2015 to enhance its investment process and performance in this dynamic and changing marketplace. CWAM worked hard to reposition the domestic Funds' portfolios, added investment talent to the firm and allocated additional resources to critical support teams.

With respect to new talent, the Board looks forward to their contributions in 2016. Matthew Litfin is an important addition to the domestic team. He joined CWAM in December, bringing a strong long-term performance record managing global small- and mid-cap growth strategies. Matt's experience also includes a focus on performance and risk analytics that the Board believes will serve the Funds well. Effective January 1, 2016, Matt became a co-manager of our largest Fund, Columbia Acorn Fund, along with current co-managers, P. Zachary Egan and Fritz Kaegi, and commenced service as the lead portfolio manager of Columbia Acorn USA, which is co-managed by William Doyle. Matt has also assumed the position of domestic director of research at CWAM. The Board believes Columbia Acorn Fund and Columbia Acorn USA will be in good hands with Matt and the other members of the CWAM investment team. Other additions at CWAM include a seasoned international investment analyst focused on Europe, the United Kingdom and banks; an experienced professional who the Board believes will bolster the Investment Performance and Risk Analytics Team; and finally, a new Chief Operating Officer.

The Board monitors fees on an ongoing basis to ensure they are competitive in the marketplace for each Fund. This year, we sought and obtained a 20 basis point waiver of investment advisory fees for Columbia Acorn Select, which took effect in May 2015. This waiver is designed to help improve shareholder returns in the same magnitude. We are pleased to report that Columbia Acorn

Select's one-year returns were ahead of its benchmark at year end.

While the uptick in domestic Fund performance is good news, the international Funds' returns for the one-year period were below benchmark during 2015. We believe that the international Funds' portfolio managers understand the reasons for the recent underperformance and have taken steps to improve returns, including adding more investment resources to the Funds. The Board has confidence in CWAM's plans to improve the performance of the international Funds and hopes to see better results for them in 2016.

Oversight over cybersecurity risk management has become a core responsibility of mutual fund boards in the past several years and is currently an active area of SEC scrutiny. The Board formed an Ad Hoc IT/Data Security Committee in 2014 to address cybersecurity issues. The Committee has met regularly since that time and requested and received from CWAM and its parent company a regular reporting scheme covering a host of IT-related issues, including but not limited to vendor management, identity access and management, disaster recovery and business continuity and threat and vulnerability management. We cannot eliminate or prevent cyber attacks, but the Board has actively sought to ensure that CWAM and the Funds' other service providers are working to identify, understand, manage and mitigate the risks of such attacks through appropriate policies and procedures that seek to protect fund and shareholder data.

Finally, the Board wishes to thank Robert Mohn, who retired on October 1, for his many years of distinguished service to the Columbia Acorn Funds. Rob served as lead manager and co-manager of Columbia Acorn Fund and Columbia Acorn USA. We were also saddened by the passing in November of Robert Chalupnik, who served with dedication as a lead manager of Columbia Acorn Select.

The Board will remain vigilant in 2016 in monitoring CWAM's investment process and Fund performance, and appreciates your continued support and confidence in the Columbia Acorn Funds.

Laura Born
Independent Chair, Board of Trustees
Columbia Acorn Trust



COLUMBIA ACORN FAMILY OF FUNDS

TABLE OF CONTENTS

Description of Indexes

   

1

   

Share Class Performance

   

2

   

Fund Performance vs. Benchmarks

   

3

   

Columbia Acorn® Fund

 

In a Nutshell

   

4

   

At a Glance

   

5

   

Major Portfolio Changes

   

28

   

Statement of Investments

   

30

   

Columbia Acorn International®

 

In a Nutshell

   

6

   

At a Glance

   

7

   

Major Portfolio Changes

   

38

   

Statement of Investments

   

41

   

Portfolio Diversification

   

48

   

Columbia Acorn USA®

 

In a Nutshell

   

8

   

At a Glance

   

9

   

Major Portfolio Changes

   

49

   

Statement of Investments

   

51

   

Columbia Acorn International SelectSM

 

In a Nutshell

   

10

   

At a Glance

   

11

   

Major Portfolio Changes

   

57

   

Statement of Investments

   

58

   

Portfolio Diversification

   

62

   

Columbia Acorn SelectSM

 

In a Nutshell

   

12

   

At a Glance

   

13

   

Major Portfolio Changes

   

63

   

Statement of Investments

   

64

   

Columbia Thermostat FundSM

 

In a Nutshell

   

14

   

At a Glance

   

15

   

Statement of Investments

   

68

   

Columbia Acorn Emerging Markets FundSM

 

In a Nutshell

   

16

   

At a Glance

   

17

   

Major Portfolio Changes

   

70

   

Statement of Investments

   

72

   

Portfolio Diversification

   

77

   

Columbia Acorn European FundSM

 

In a Nutshell

   

18

   

At a Glance

   

19

   

Major Portfolio Changes

   

78

   

Statement of Investments

   

80

   

Portfolio Diversification

   

84

   

Squirrel Chatter: Behavioral Economics

   

20

   

2015 Year-End Distributions

   

23

   

Understanding Your Expenses

   

25

   

Columbia Acorn Family of Funds

 

Statements of Assets and Liabilities

   

86

   

Statements of Operations

   

88

   

Statements of Changes in Net Assets

   

90

   

Financial Highlights

   

96

   

Notes to Financial Statements

   

112

   
Report of Independent Registered Public
Accounting Firm
   

125

   

Federal Income Tax Information (Unaudited)

   

126

   

Board of Trustees and Management

   

127

   

Expense Information

   

130

   


COLUMBIA ACORN FAMILY OF FUNDS

DESCRIPTIONS OF INDEXES INCLUDED IN THIS REPORT

•  50/50 Blended Benchmark, established by the Fund's investment manager, is an equally weighted custom composite of Columbia Thermostat Fund's primary equity and primary debt benchmarks, the S&P 500® Index and the Barclays U.S. Aggregate Bond Index, respectively. The percentage of the Fund's assets allocated to underlying stock and bond portfolio funds will vary, and accordingly the composition of the Fund's portfolio will not always reflect the composition of the 50/50 Blended Benchmark.

•  Barclays U.S. Aggregate Bond Index is a market value-weighted index that tracks the daily price, coupon, pay-downs and total return performance of fixed-rate, publicly placed, dollar-denominated and non-convertible investment grade debt issues with at least $250 million par amount outstanding and with at least one year to final maturity.

•  Euromoney Smaller European Companies (inc. UK) Index is an index of smaller companies in Europe including the UK market. The Euromoney Smaller European Companies Index covers companies of small- and mid-cap market capitalization in Europe's developed markets. The index is rebalanced on a quarterly basis.

•  Lipper Indexes are composed of the 10 or 30 largest funds in the Lipper investment objective grouping. Lipper Mid-Cap Growth Funds Index, 30 largest mid-cap growth funds, including Columbia Acorn Fund; Lipper International Small/Mid Growth Funds Index, 10 largest non-U.S. small/mid growth funds, including Columbia Acorn International and Columbia Acorn International Select; Lipper Small-Cap Growth Funds Index, 30 largest small-cap growth funds, including Columbia Acorn USA; Lipper Mid-Cap Core Funds Index, 30 largest mid-cap core funds; Lipper Flexible Portfolio Funds Index, an equal-weighted index of the 30 largest mutual funds within the Flexible Portfolio fund classification, as defined by Lipper; Lipper Emerging Markets Index, 30 largest emerging markets funds; Lipper European Region Index, 10 largest European funds.

•  MSCI AC Europe Small Cap Index (Net) captures a small-cap representation across 21 markets in Europe. The index covers approximately 14% of the free float-adjusted market capitalization across each market country in Europe.

•  MSCI ACWI ex USA Index (Net) captures a large- and mid-cap representation across 22 of 23 developed market countries (excluding the U.S.) and 23 emerging market countries. The index covers approximately 85% of the global equity opportunity set outside the United States.

•  MSCI ACWI ex USA SMID Cap Index (Net) captures a mid- and small-cap representation across 22 of 23 developed market countries (excluding the U.S.) and 23 emerging market countries. The index covers approximately 28% of the free float-adjusted market capitalization in each country.

•  MSCI Emerging Markets SMID Cap Index (Net) captures a mid- and small-cap representation across 23 emerging market countries. The index covers approximately 29% of the free float-adjusted market capitalization in each country.

•  MSCI Emerging Markets Small Cap Index (Net), a widely recognized international benchmark, is a free float-adjusted market capitalization index that is designed to measure small-cap emerging market equity performance in 23 emerging market countries, as determined by MSCI. The MSCI Emerging Markets Small Cap Index (Net) currently consists of the following emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.

•  MSCI Europe, Australasia and Far East (EAFE) Index (Net) is a capitalization-weighted index that tracks the total return of common stocks in 21 developed-market countries within Europe, Australasia and the Far East. The returns of the MSCI EAFE Index (Net) are presented net of the withholding tax rate applicable to foreign non-resident institutional investors in the foreign companies included in the index who do not benefit from double taxation treaties.

•  Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

•  Russell 2500 Index measures the performance of the 2,500 smallest companies in the Russell 3000 Index, which represents approximately 17% of the total market capitalization of the Russell 3000 Index.

•  Standard & Poor's (S&P) 500® Index tracks the performance of 500 widely held, large-capitalization U.S. stocks.

•  S&P Developed Ex-U.S. Between $2B and $10B® Index is a subset of the broad market selected by the index sponsor that represents the mid-cap developed market, excluding the United States.

•  S&P Emerging Markets Between $500M and $5B® Index represents the institutionally investable capital of 22 emerging market countries, as determined by S&P, with market caps ranging between $500 million to $5 billion. The index currently consists of the following emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.

•  S&P Europe Between $500M and $5B® Index represents the institutionally investable capital of 16 European countries, as determined by S&P, with market caps ranging between $500 million to $5 billion. The index consists of the following European countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

•  S&P Global Ex-U.S. SmallCap® Index consists of the bottom 20% of institutionally investable capital of developed and emerging countries, excluding the United States.

•  S&P Global Ex-U.S. Between $500M and $5B® Index is a subset of the broad market selected by the index sponsor that represents the mid- and small-cap developed and emerging markets, excluding the United States.

•  S&P MidCap 400® Index is a market value-weighted index that tracks the performance of 400 mid-cap U.S. companies.

Unlike mutual funds, indexes are not managed and do not incur fees or expenses. It is not possible to invest directly in an index.


1



COLUMBIA ACORN FAMILY OF FUNDS

SHARE CLASS PERFORMANCE Average Annual Total Returns Through 12/31/15

   

Class A

 

Class B

 

Class C

 

Class I

 

Class R

 

Class R4

 

Class R5

 

Class Y

 

Class Z

 

  Without
Sales
Charge
  With
Sales
Charge*
  Without
Sales
Charge
  With
Sales
Charge*
  Without
Sales
Charge
  With
Sales
Charge*
                     

 

Columbia Acorn Fund

 
1 year    

-1.87

%

   

-7.52

%

   

-2.81

%

   

-5.39

%

   

-2.57

%

   

-3.07

%

   

-1.53

%

   

N/A

     

-1.75

%

   

-1.60

%

   

-1.54

%

   

-1.57

%

 
5 years    

7.57

%

   

6.31

%

   

6.85

%

   

6.70

%

   

6.79

%

   

6.79

%

   

7.95

%

   

N/A

     

7.83

%

   

7.90

%

   

7.94

%

   

7.88

%

 
10 years    

6.58

%

   

5.96

%

   

5.90

%

   

5.90

%

   

5.78

%

   

5.78

%

   

6.93

%

   

N/A

     

6.87

%

   

6.90

%

   

6.92

%

   

6.89

%

 

Columbia Acorn International

 
1 year    

-1.59

%

   

-7.25

%

   

-2.53

%

   

-7.21

%

   

-2.33

%

   

-3.27

%

   

-1.23

%

   

-1.98

%

   

-1.41

%

   

-1.29

%

   

-1.23

%

   

-1.33

%

 
5 years    

3.52

%

   

2.31

%

   

2.73

%

   

2.39

%

   

2.75

%

   

2.75

%

   

3.92

%

   

3.16

%

   

3.79

%

   

3.87

%

   

3.89

%

   

3.84

%

 
10 years    

6.33

%

   

5.70

%

   

5.60

%

   

5.60

%

   

5.53

%

   

5.53

%

   

6.73

%

   

6.00

%

   

6.66

%

   

6.69

%

   

6.71

%

   

6.68

%

 

Columbia Acorn USA

 
1 year    

-1.60

%

   

-7.26

%

   

-3.29

%

   

-6.46

%

   

-2.28

%

   

-2.92

%

   

-1.19

%

   

N/A

     

-1.36

%

   

-1.23

%

   

-1.23

%

   

-1.36

%

 
5 years    

8.65

%

   

7.37

%

   

7.64

%

   

7.45

%

   

7.89

%

   

7.89

%

   

9.08

%

   

N/A

     

8.94

%

   

8.99

%

   

9.02

%

   

8.93

%

 
10 years    

5.88

%

   

5.26

%

   

5.05

%

   

5.05

%

   

5.10

%

   

5.10

%

   

6.24

%

   

N/A

     

6.18

%

   

6.20

%

   

6.21

%

   

6.17

%

 

Columbia Acorn International Select

 
1 year    

-1.30

%

   

-6.96

%

   

-1.94

%

   

-6.80

%

   

-2.05

%

   

-3.02

%

   

-0.97

%

   

N/A

     

-1.00

%

   

-0.94

%

   

-0.89

%

   

-1.03

%

 
5 years    

2.86

%

   

1.65

%

   

2.20

%

   

1.92

%

   

2.06

%

   

2.06

%

   

3.25

%

   

N/A

     

3.16

%

   

3.20

%

   

3.24

%

   

3.18

%

 
10 years    

5.73

%

   

5.11

%

   

5.04

%

   

5.04

%

   

4.90

%

   

4.90

%

   

6.10

%

   

N/A

     

6.06

%

   

6.08

%

   

6.10

%

   

6.07

%

 

Columbia Acorn Select

 
1 year    

-0.73

%

   

-6.43

%

   

-1.58

%

   

-4.58

%

   

-1.41

%

   

-2.01

%

   

-0.34

%

   

N/A

     

-0.53

%

   

-0.44

%

   

-0.39

%

   

-0.44

%

 
5 years    

5.74

%

   

4.49

%

   

4.98

%

   

4.84

%

   

4.96

%

   

4.96

%

   

6.14

%

   

N/A

     

6.00

%

   

6.06

%

   

6.09

%

   

6.04

%

 
10 years    

5.86

%

   

5.23

%

   

5.13

%

   

5.13

%

   

5.04

%

   

5.04

%

   

6.22

%

   

N/A

     

6.14

%

   

6.17

%

   

6.19

%

   

6.16

%

 

Columbia Thermostat Fund

 
1 year    

0.07

%

   

-5.70

%

   

-0.43

%

   

-5.25

%

   

-0.68

%

   

-1.65

%

   

N/A

     

N/A

     

0.33

%

   

0.33

%

   

0.32

%

   

0.33

%

 
5 years    

6.39

%

   

5.13

%

   

5.88

%

   

5.56

%

   

5.59

%

   

5.59

%

   

N/A

     

N/A

     

6.65

%

   

6.67

%

   

6.69

%

   

6.66

%

 
10 years    

5.75

%

   

5.13

%

   

5.22

%

   

5.22

%

   

4.96

%

   

4.96

%

   

N/A

     

N/A

     

6.01

%

   

6.02

%

   

6.04

%

   

6.02

%

 

Columbia Acorn Emerging Markets Fund

 
1 year    

-18.25

%

   

-22.98

%

   

N/A

     

N/A

     

-18.83

%

   

-19.64

%

   

-17.95

%

   

N/A

     

-18.04

%

   

-17.96

%

   

-17.90

%

   

-17.98

%

 

Life of Fund

   

1.33

%

   

-0.03

%

   

N/A

     

N/A

     

0.61

%

   

0.61

%

   

1.72

%

   

N/A

     

1.66

%

   

1.69

%

   

1.72

%

   

1.62

%

 

Columbia Acorn European Fund

 
1 year    

4.17

%

   

-1.79

%

   

N/A

     

N/A

     

3.41

%

   

2.41

%

   

4.50

%

   

N/A

     

4.48

%

   

4.48

%

   

N/A

     

4.43

%

 

Life of Fund

   

10.23

%

   

8.75

%

   

N/A

     

N/A

     

9.43

%

   

9.43

%

   

10.56

%

   

N/A

     

10.54

%

   

10.53

%

   

N/A

     

10.52

%

 

*Unaudited.

Returns for Class A shares are shown with and without the maximum initial sales charge of 5.75%. Returns for Class B shares are shown with and without the applicable contingent deferred sales charge (CDSC) of 5.00% in the first year, declining to 1.00% in the sixth year and eliminated thereafter. Returns for Class C shares are shown with and without the maximum CDSC of 1.00% for the first year after purchase. The Funds' other classes are not subject to sales charges and have limited eligibility. Please see the Funds' prospectuses for details. Performance for different share classes will vary based on differences in sales charges and certain 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 may reflect the effect of any fee waivers or reimbursements of Fund expenses by the investment manager and/or any of its affiliates. Absent these fee waivers and/or expense reimbursement arrangements, performance results may have been lower. Please see Page 130 of this report for information on contractual fee waiver and expense reimbursement agreements in place on December 31, 2015 for Columbia Acorn Select, Columbia Thermostat Fund, Columbia Acorn Emerging Markets Fund and Columbia Acorn European Fund and voluntary fee waiver and expense reimbursement arrangements in place for Columbia Acorn International, Columbia Acorn International Select and Columbia Acorn Select.

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 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. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, visiting columbiathreadneedle.com/us or calling 800.922.6769.

The returns shown include the returns of each Fund's Class Z shares, each Fund's oldest share class, in cases where the inception date of the Fund is earlier than the inception date of the particular share class or where a period shown is dated before the inception date of the share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information.

Continued on Page 3.


2



FUND PERFORMANCE VS. BENCHMARKS Class Z Average Annual Total Returns through 12/31/15

Class Z Shares   4th
quarter*
 

1 year

 

5 years

 

10 years

  Life of
Fund
 
Columbia Acorn® Fund (ACRNX) (6/10/70)    

2.32

%

   

-1.57

%

   

7.88

%

   

6.89

%

   

14.21

%

 

Russell 2500 Index

   

3.28

%

   

-2.90

%

   

10.32

%

   

7.56

%

   

N/A

   

S&P 500 Index**

   

7.04

%

   

1.38

%

   

12.57

%

   

7.31

%

   

10.83

%

 

Russell 2000 Index

   

3.59

%

   

-4.41

%

   

9.19

%

   

6.80

%

   

N/A

   

Lipper Mid-Cap Growth Funds Index

   

3.40

%

   

-0.96

%

   

9.38

%

   

7.79

%

   

N/A

   
Columbia Acorn International® (ACINX) (9/23/92)    

4.28

%

   

-1.33

%

   

3.84

%

   

6.68

%

   

10.32

%

 

S&P Global Ex-U.S. Between $500M and $5B Index

   

4.87

%

   

0.21

%

   

2.63

%

   

5.36

%

   

7.95

%

 

S&P Global Ex-U.S. SmallCap Index

   

5.30

%

   

3.09

%

   

3.69

%

   

5.47

%

   

7.55

%

 

MSCI EAFE Index (Net)

   

4.71

%

   

-0.81

%

   

3.60

%

   

3.03

%

   

5.67

%

 

Lipper International Small/Mid Growth Funds Index

   

5.62

%

   

7.97

%

   

6.60

%

   

6.47

%

   

N/A

   
Columbia Acorn USA® (AUSAX) (9/4/96)    

2.52

%

   

-1.36

%

   

8.93

%

   

6.17

%

   

10.15

%

 

Russell 2000 Index

   

3.59

%

   

-4.41

%

   

9.19

%

   

6.80

%

   

7.97

%

 

Lipper Small-Cap Growth Funds Index

   

3.51

%

   

-1.15

%

   

9.55

%

   

6.70

%

   

6.77

%

 
Columbia Acorn Int'l SelectSM (ACFFX) (11/23/98)    

5.27

%

   

-1.03

%

   

3.18

%

   

6.07

%

   

8.19

%

 

S&P Developed Ex-U.S. Between $2B and $10B Index

   

5.52

%

   

3.96

%

   

4.46

%

   

4.71

%

   

7.21

%

 

MSCI EAFE Index (Net)

   

4.71

%

   

-0.81

%

   

3.60

%

   

3.03

%

   

3.86

%

 

Lipper International Small/Mid Growth Funds Index

   

5.62

%

   

7.97

%

   

6.60

%

   

6.47

%

   

9.91

%

 
Columbia Acorn SelectSM (ACTWX) (11/23/98)    

3.10

%

   

-0.44

%

   

6.04

%

   

6.16

%

   

9.63

%

 

S&P MidCap 400 Index

   

2.60

%

   

-2.18

%

   

10.68

%

   

8.18

%

   

9.82

%

 

S&P 500 Index**

   

7.04

%

   

1.38

%

   

12.57

%

   

7.31

%

   

5.31

%

 

Lipper Mid-Cap Core Funds Index

   

2.77

%

   

-3.61

%

   

9.22

%

   

7.13

%

   

8.42

%

 
Columbia Thermostat FundSM (COTZX) (9/25/02)    

1.41

%

   

0.33

%

   

6.66

%

   

6.02

%

   

7.39

%

 

S&P 500 Index

   

7.04

%

   

1.38

%

   

12.57

%

   

7.31

%

   

9.34

%

 

Barclays U.S. Aggregate Bond Index

   

-0.57

%

   

0.55

%

   

3.25

%

   

4.51

%

   

4.36

%

 

Lipper Flexible Portfolio Funds Index

   

2.69

%

   

-2.53

%

   

5.65

%

   

5.20

%

   

7.20

%

 

50/50 Blended Benchmark

   

3.25

%

   

1.21

%

   

8.02

%

   

6.22

%

   

7.11

%

 
Columbia Acorn Emerging Markets FundSM (CEFZX) (8/19/11)    

1.95

%

   

-17.98

%

   

     

     

1.62

%

 

S&P Emerging Markets Between $500M and $5B Index

   

2.59

%

   

-13.15

%

   

     

     

-0.71

%

 

MSCI Emerging Markets Small Cap Index

   

3.27

%

   

-6.85

%

   

     

     

-0.73

%

 

Lipper Emerging Markets Index

   

0.92

%

   

-14.50

%

   

     

     

-1.90

%

 
Columbia Acorn European FundSM (CAEZX) (8/19/11)    

3.84

%

   

4.43

%

   

     

     

10.52

%

 

S&P Europe Between $500M and $5B Index

   

4.90

%

   

9.85

%

   

     

     

12.88

%

 

Euromoney Smaller European Companies Index

   

4.62

%

   

9.28

%

   

     

     

11.16

%

 

Lipper European Region Index

   

3.48

%

   

2.11

%

   

     

     

9.73

%

 

The inception dates for Class A, B and C shares (if offered) are as follows: Columbia Acorn Fund, Columbia Acorn International, Columbia Acorn USA, Columbia Acorn International Select and Columbia Acorn Select, 10/16/00; Columbia Thermostat Fund, 3/3/03; Columbia Acorn Emerging Markets Fund and Columbia Acorn European Fund, 8/19/11. The inception dates for Class I shares are as follows: Columbia Acorn Fund, Columbia Acorn International, Columbia Acorn USA, Columbia Acorn International Select and Columbia Acorn Select, 9/27/10; Columbia Acorn Emerging Markets Fund and Columbia Acorn European Fund, 8/19/11. The inception date for Class R shares for Columbia Acorn International is 8/2/11. The inception date for Class R4, R5 and Y shares (if offered) is as follows: Columbia Acorn Fund, Columbia Acorn USA, Columbia Acorn International Select, Columbia Acorn Select, Columbia Thermostat Fund, Columbia Acorn Emerging Markets Fund and Columbia Acorn European Fund, 11/8/12, except that Class Y shares of Columbia Acorn Emerging Markets Fund commenced operations on 6/13/13 and Class R4 shares of Columbia Acorn European Fund commenced operations on 6/25/14. The inception date for Class R5 shares of Columbia Acorn International is 8/2/11. The inception date for Class R4 and Y shares of Columbia Acorn International is 11/8/12. The inception date for Class Z shares is as follows: Columbia Acorn Fund, 6/10/70; Columbia Acorn International, 9/23/92; Columbia Acorn USA, 9/4/96; Columbia Acorn International Select and Columbia Acorn Select, 11/23/98; Columbia Thermostat Fund, 9/25/02; Columbia Acorn Emerging Markets Fund and Columbia Acorn European Fund, 8/19/11.

*Not annualized.

**Although the Fund typically invests in small- and mid-sized companies, the comparison to the S&P 500® Index is presented to show performance against a widely recognized market index over the life of the Fund.

Please see Page 1 for a description of the indexes listed above.


3




COLUMBIA ACORN® FUND

IN A NUTSHELL

 

 
P. Zachary Egan
Co-Portfolio Manager
  Fritz Kaegi
Co-Portfolio Manager
 

 
Matthew A. Litfin
Co-Portfolio Manager*
 

Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies. Foreign investments subject the Fund to political, economic, market, social and other risks within a particular country, as well as to potential currency instabilities and less stringent financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector.

Small- and mid-cap stocks recovered somewhat from a challenging third quarter in the final quarter of 2015. Columbia Acorn Fund Class Z shares gained 2.32% in the fourth quarter, trailing the Fund's primary benchmark, the Russell 2500 Index, which gained 3.28%. The Fund topped the benchmark for the annual period, declining 1.57% versus a 2.90% drop for the benchmark.

Strong stock selection in the information technology and health care sectors, specifically in biotechs, contributed to the Fund's relative outperformance for the year. Acquisition activity within these sectors was also a benefit to performance. Columbia Acorn Fund had 17 stocks that were acquired in 2015. While not all of these transactions were at large premiums, their combined contribution to Fund annual performance was 3%. We view acquisition activity as confirmation both of our strategy to own strategically important players within industries, and of our valuation discipline, which considers how industry participants value assets. Synageva BioPharma, a biotech focused on orphan diseases, was acquired in the second quarter and ended the year as the Fund's top contributor, with a 119% gain. In the fourth quarter, Airgas, an industrial gas distributor, announced it was to be acquired by French industrial gas company Air Liquide. Airgas gained 54% on the news and was the Fund's top contributor in the quarter. Also benefiting from acquisition news in the quarter, HomeAway, a vacation rental online marketplace, gained 32% after announcing that it would be acquired by Expedia.

During the fourth quarter, we increased the weightings of some of our higher-conviction names. Align Technology was the Fund's largest position on December 31. Align's Invisalign clear aligners, which are used to shift and straighten teeth, were first marketed to adults. Align Technology is now targeting the much larger and underpenetrated teen market, currently dominated by wire brackets, and taking market share, while achieving above-average returns on invested capital. Vail Resorts was also among the Fund's top 10 positions at the end of the reporting period. Vail operates a collection of industry-leading ski resorts in the U.S. and Australia. Scarcity of premium ski resorts (the last new major ski resort in the U.S. was built in 1980) and the company's strategy of bundling these trophy assets into one unlimited season-long lift ticket pass, thereby creating a valuable network effect, set Vail apart from its local competitors. International freight forwarder Expeditors International of Washington returned to a top 10 weighting in the fourth quarter after we added to the position. New management has reinvigorated the company, causing Expeditors to exceed Wall Street expectations each of the last four

quarters. Such high-quality businesses hold leading positions in their respective industries and are the types of stocks that we seek to own in Columbia Acorn Fund.

Since selling securities exerts downward pressure on prices, trading required to meet year-end distributions dampened Fund relative returns in the quarter. This trading also drove some further consolidation of the portfolio; at December 31, 2015, the Fund had 165 holdings. Air filtration company Donaldson was the Fund's largest detractor for the annual period, falling 24%, although the stock did regain some ground in the fourth quarter. The strong U.S. dollar has weakened the competitiveness of U.S. producers of tradable goods. We have been reducing the Fund's weighting in capital goods names like Donaldson, which has, in turn, brought down the Fund's weighting in industrials.

Other detractors included Cepheid, a provider of molecular diagnostic supplies, which was down 19% for the quarter and 33% for the year on softer-than-expected quarterly results and reduced 2015 financial guidance. Car rental companies Avis Budget Group and Hertz were also among the laggards, falling over 40% each for the year, as overcapacity negatively impacted pricing. Hurt by declining sales and buzz around wearable technology, watch designer and retailer Fossil ended the quarter and year down 34% and 67%, respectively. We continue to monitor and evaluate the long-term prospects for these companies.

Small-cap stocks underperformed large caps in three of the last five years. Small caps today are as inexpensive as they have been relative to large caps in the last decade. With slowing growth in China and global oil prices depressed, we would expect 2016 to be a year in which informed stock picking can create substantial relative value. No matter the environment, we seek to invest in high-quality companies with industry-leading positions and strong balance sheets that are underpriced relative to our view of their true value, and that we believe will fare well in 2016 relative to the broader small- and mid-cap market.

†Small cap versus large cap data based on Russell 2000 Index and S&P 500 Index performance.

*Effective January 1, 2016, Matthew A. Litfin was named co-portfolio manager of Columbia Acorn Fund. Mr. Frank stepped off the Fund to focus on co-managing Columbia Acorn Select. Mr. Litfin joined Columbia Wanger Asset Management in December 2015 and also serves as the firm's Domestic Director of Research. He brings more than 20 years of investment experience to the Fund. Mr. Litfin did not serve as a portfolio manager of the Fund during 2015.

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.


4



COLUMBIA ACORN® FUND

AT A GLANCE

Total Net Assets of the Fund:
$7.2 billion

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Acorn® Fund Class Z Shares

June 10, 1970 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period. A $10,000 investment in Columbia Acorn Fund at inception appreciated to $31,777 on December 31, 1978, the inception date of the Russell 2500 Index. For comparison with the Russell 2500 Index, we assigned the index the same value as the Fund at index inception. Although the Fund typically invests in small- and mid-sized companies, the comparison to the S&P 500 Index is presented to show performance against a widely recognized market index over the life of the Fund.

Average Annual Total Returns for period ended December 31, 2015

 

4th quarter

 

1 year

 

5 years

 

10 years

 

Life of Fund

 
Class Z (6/10/70 inception)    

2.32

%

   

-1.57

%

   

7.88

%

   

6.89

%

   

14.21

%

 
Class A (10/16/00 inception)  

without sales charge

   

2.27

     

-1.87

     

7.57

     

6.58

     

13.84

   

with sales charge

   

-3.60

     

-7.52

     

6.31

     

5.96

     

13.69

   

Russell 2500 Index*

   

3.28

     

-2.90

     

10.32

     

7.56

     

N/A

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmark. Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 0.79% for Class Z shares and 1.08% for Class A shares. The returns shown for periods prior to the inception of the Fund's Class A shares append the returns of the Fund's Class Z shares, the Fund's oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information.

Portfolio Diversification

as a percentage of net assets, as of 12/31/15

Top 10 Holdings

as a percentage of net assets, as of 12/31/15

1.   Align Technology
Invisalign System to Correct Malocclusion
(Crooked Teeth)
  2.2
%  
2.   LKQ
Alternative Auto Parts Distribution
  2.0
%  
3.   Cepheid
Molecular Diagnostics
  1.8
%  
4.   Donaldson
Industrial Air Filtration
  1.7
%  
5.   Ametek
Aerospace/Industrial Instruments
  1.6
%  
6.   Amphenol
Electronic Connectors
  1.5
%  
7.   Robert Half International
Temporary & Permanent Staffing in Finance,
Accounting & other Professions
  1.4
%  
8.   Vail Resorts
Ski Resort Operator & Developer
  1.3
%  
9.   Bankrate
Internet Advertising for the Insurance,
Credit Card & Banking Markets
  1.3
%  
10.   Expeditors International of Washington
International Freight Forwarder
  1.2
%  

The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.


5



COLUMBIA ACORN INTERNATIONAL®

IN A NUTSHELL

 

 
P. Zachary Egan
Co-Portfolio Manager
  Louis J. Mendes
Co-Portfolio Manager
 

Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. International investing involves certain risks and volatility due to potential political, economic or currency instabilities and different, potentially less stringent, financial and accounting standards than those generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies.

Columbia Acorn International Class Z shares ended the fourth quarter up 4.28%, slightly behind the 4.87% gain of the Fund's primary benchmark, the S&P Global ex-U.S. Between $500M and $5B® Index. For the annual period, the Fund fell 1.33%, underperforming the 0.21% gain of its benchmark.

Looking back on 2015, one of the major changes to the portfolio was the movement of assets from some emerging markets to Europe. At December 31, 2015, the Fund had a 29% exposure to Europe (excluding the UK), up about 10 percentage points from the end of 2014. Meanwhile, the Fund's emerging markets exposure was scaled back from 23% to 13%. There were several considerations behind these moves: European gross domestic product (GDP) growth remains positive, if anemic, while certain emerging markets, such as Brazil, are experiencing contraction and credit rating downgrades. Moreover, ongoing monetary easing policies in Europe support both credit expansion and equity valuations, which are above long-term historical levels, but that we believe are warranted by the long-term outlook for interest rates. Emerging market countries that export commodities, on the other hand, are suffering from slumping commodity prices, which is exerting pressure on their fiscal situations and currencies, with the latter effect raising borrowing costs for companies that fund themselves in U.S. dollars.

Notwithstanding the Fund's general reduction in emerging markets exposure, this is a heterogeneous space and, over the last year, the Fund has maintained its weight in India and increased its weight in China. India remains largely insulated from commodity price turmoil and is a beneficiary of cheap oil, which was previously stressing both its current account and, through consumer fuel subsidies, its fiscal position. While we have concerns about China's slowdown and its impact on the global economy, we now see a reasonably clear policy framework in China that we believe is supportive of companies addressing the energy and environmental challenges that have accompanied the country's rise to a US$10 trillion economy, as well as companies addressing increasing demand for health care. Our increased exposure to China is focused in these sectors.

Stock selection in Europe was positive in both the quarter and year. SimCorp, a Danish company that produces software for the financial services sector, and the Fund's largest position at the end of the year, was a top contributor to performance in an environment of improving demand from large asset managers. An investment initiated in 2010, SimCorp fits into our "regulation" theme. Under this theme, we have worked to identify companies

benefiting from increasingly stringent regulatory standards, typically around health, safety and the environment, but extending to the financial realm in the wake of the 2008 financial crisis. SimCorp's products help investment managers meet new compliance requirements in a cost effective way. Its stock gained 117% for the year and was up 12% in the fourth quarter.

The Fund's single largest country weight at year-end was Japan. At 22% of assets, this weighting is up slightly year over year. As with Europe, loose Japanese monetary policy is supportive of valuations, and we are encouraged by increasing sensitivity among corporates in general toward capital efficiency, which is underpinned by explicit financial sector regulation. Ariake Japan, a maker of commercial soup and sauce extracts, was a top contributor in both the fourth quarter and year, ending the latter up 130%.

As part of our repositioning of the Fund regionally, we have taken the opportunity to reduce the number of names in the portfolio in order to ensure that our highest conviction ideas have a meaningful impact on returns. At the end of 2015, Columbia Acorn International had 179 positions, down from 240 positions at the end of 2014.

Detractors for both the quarter and the year included South African fund manager Coronation Fund Managers, down 26% for the quarter and 64% for the year. Poor performance and asset outflows significantly reduced the firm's performance-based fees and drove down Coronation's stock. Spotless, an Australian facility management and catering company, was negatively impacted by an earnings downgrade, falling over 45% for the quarter and the year, as integration of new acquisitions has taken longer than expected and new business growth has slowed.

2015 was a challenging year for international investors. The bifurcation of performance between developed and emerging markets was more pronounced than it has been in recent years, and was compounded by currency weakness against the strong U.S. dollar. As the second-largest economy in the world and with a contribution to global GDP of around 15%, China's slowdown raised concerns and cast a shadow over many emerging economies. In developed markets, investors were willing to pay more for companies showing growth in anticipation of higher earnings in the future. But these names were few and far between.

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.


6



COLUMBIA ACORN INTERNATIONAL®

AT A GLANCE

Total Net Assets of the Fund:
$6.7 billion

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Acorn International® Class Z Shares

September 23, 1992 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period.

Average Annual Total Returns for period ended December 31, 2015

 

4th quarter

 

1 year

 

5 years

 

10 years

 

Life of Fund

 
Class Z (9/23/92 inception)    

4.28

%

   

-1.33

%

   

3.84

%

   

6.68

%

   

10.32

%

 
Class A (10/16/00 inception)  

without sales charge

   

4.22

     

-1.59

     

3.52

     

6.33

     

9.91

   

with sales charge

   

-1.77

     

-7.25

     

2.31

     

5.70

     

9.63

   
S&P Global Ex-U.S.
Between $500M® and $5B*
   

4.87

     

0.21

     

2.63

     

5.36

     

7.95

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmark as of December 31, 2015. Effective January 1, 2016, the primary benchmark for Columbia Acorn International was changed to the MSCI ACWI Ex USA SMID Cap Index (Net). Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 0.93% for Class Z shares and 1.26% for Class A shares. The returns shown for periods prior to the inception of the Fund's Class A shares append the returns of the Fund's Class Z shares, the Fund's oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information.

Portfolio Diversification

as a percentage of net assets, as of 12/31/15

Top 10 Holdings

as a percentage of net assets, as of 12/31/15

1.   SimCorp (Denmark)
Software for Investment Managers
  1.6
%  
2.   Wirecard (Germany)
Online Payment Processing & Risk Management
  1.6
%  
3.   CCL Industries (Canada)
Global Label Converter
  1.5
%  
4.   Distribuidora Internacional de
Alimentación (Spain)
Discount Retailer in Spain & Latin America
  1.5
%  
5.   Unibet (Sweden)
European Online Gaming Operator
  1.4
%  
6.   Domino's Pizza Enterprises (Australia)
Domino's Pizza Operator in Australia &
New Zealand
  1.4
%  
7.   Rightmove (United Kingdom)
Internet Real Estate Listings
  1.3
%  
8.   Partners Group (Switzerland)
Private Markets Asset Management
  1.3
%  
9.   Zee Entertainment Enterprises (India)
Indian Programmer of Pay Television Content
  1.3
%  
10.   Novozymes (Denmark)
Industrial Enzymes
  1.2
%  

The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.


7



COLUMBIA ACORN USA®

IN A NUTSHELL

 

 
Matthew A. Litfin
Lead Portfolio Manager*
  William J. Doyle
Co-Portfolio Manager
 

Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector.

Columbia Acorn USA Class Z shares gained 2.52% in the fourth quarter, underperforming the Russell 2000 Index, its primary benchmark, which gained 3.59%. The Fund ended the year 305 basis points ahead of the Russell 2000 Index. While the benchmark declined 4.41%, the Fund was down 1.36%. Columbia Acorn USA's financial and industrial stock selection dampened relative performance in the quarter; for the annual period, however, financial stocks contributed to the Fund's relative outperformance, as did strong stock selection in the health care sector.

Increased acquisition activity also boosted Fund performance in 2015. In the fourth quarter, HomeAway, a vacation rental online marketplace, announced that it was being acquired by Expedia, making it the twelfth Fund holding acquired during the year. We sold HomeAway on the news, capturing an 18% gain for the annual period. This increase in acquisitions contributed to the Fund's outperformance in the health care sector as well, as biotech Synageva BioPharma's mid-year takeout announcement drove a 120% gain in its stock.

During the fourth quarter, we reduced the Fund's exposure to the industrial sector, although we maintained an overweight position relative to the benchmark. The strong U.S. dollar has created a headwind for global industrials, and falling oil prices have hurt companies tied to the energy market. We reduced the number of shares we hold in underperforming global names like Donaldson, a manufacturer of industrial air filtration equipment, and Nordson, a provider of dispensing systems for adhesives and coatings. We focused the majority of the Fund's industrial weighting in more U.S.-oriented companies that we believe are well-positioned in the current economic environment. HEICO, a manufacturer of aircraft replacement parts, was the Fund's largest position at year end. HEICO's replacement part business is less economically sensitive, and its management has been a creator of value over a multi-year period. Benefiting from a continued recovery in demand for recreational vehicles, Drew Industries, a provider of RV and manufactured home components, was a top contributor to Fund performance in the quarter and year.

Other winners included orphan drug developers Ultragenyx Pharmaceutical and Sarepta Therapeutics, which gained over 150% each in Columbia Acorn USA for the year. As a real estate investment trust, the strong performance of Extra Space Storage contributed to the Fund's relative outperformance in the financial sector for the year. Extra Space's same-store operating income growth was driven

by limited new storage space development across the industry, record occupancies and increasing rents.

Car rental companies Avis Budget Group and Hertz were among the Fund's largest detractors for both periods, falling as overcapacity negatively impacted pricing. Cepheid, a provider of molecular diagnostic supplies, was down for the quarter and the year on softer-than-expected quarterly results and reduced 2015 financial guidance.

Profitable growth has been harder to find throughout the world, even in the United States. We will continue to focus on what we believe to be high-quality, small-cap growth stocks that have the potential to grow even in an uncertain environment. We believe high-quality companies, with industry-leading positions and strong balance sheets that are underpriced compared to our view of their true value, will likely fare well relative to the broader small-cap market in 2016.

*Effective January 1, 2016, Matthew A. Litfin was named lead portfolio manager of Columbia Acorn USA. Mr. Doyle continues in his role as co-portfolio manager of the Fund. Mr. Litfin joined CWAM in December 2015 and also serves as the firm's Domestic Director of Research. He brings more than 20 years of investment experience to the Fund. Mr. Litfin did not serve as a portfolio manager of the Fund during 2015.

†A basis point is 1/100 of a percent.

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.


8



COLUMBIA ACORN USA®

AT A GLANCE

Total Net Assets of the Fund:
$958.0 million

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Acorn USA® Class Z Shares

September 4, 1996 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period.

Average Annual Total Returns for period ended December 31, 2015

 

4th quarter

 

1 year

 

5 years

 

10 years

 

Life of Fund

 
Class Z (9/4/96 inception)    

2.52

%

   

-1.36

%

   

8.93

%

   

6.17

%

   

10.15

%

 
Class A (10/16/00 inception)  

without sales charge

   

2.47

     

-1.60

     

8.65

     

5.88

     

9.78

   

with sales charge

   

-3.42

     

-7.26

     

7.37

     

5.26

     

9.45

   

Russell 2000 Index*

   

3.59

     

-4.41

     

9.19

     

6.80

     

7.97

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmark. Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 1.08% for Class Z shares and 1.34% for Class A shares. The returns shown for periods prior to the inception of the Fund's Class A shares append the returns of the Fund's Class Z shares, the Fund's oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information.

Portfolio Diversification

as a percentage of net assets, as of 12/31/15

Top 10 Holdings

as a percentage of net assets, as of 12/31/15

1.   HEICO
FAA-approved Aircraft Replacement Parts
  2.9
%  
2.   Ametek
Aerospace/Industrial Instruments
  2.5
%  
3.   Extra Space Storage
Self Storage Facilities
  2.4
%  
4.   Drew Industries
RV & Manufactured Home Components
  2.4
%  
5.   Nordson
Dispensing Systems for Adhesives & Coatings
  2.3
%  
6.   Ansys
Simulation Software for Engineers & Designers
  2.3
%  
7.   Cepheid
Molecular Diagnostics
  1.9
%  
8.   MB Financial
Chicago Bank
  1.9
%  
9.   Toro
Turf Maintenance Equipment
  1.8
%  
10.   IPG Photonics
Fiber Lasers
  1.7
%  

The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.


9



COLUMBIA ACORN INTERNATIONAL SELECTSM

IN A NUTSHELL

 

 
Stephen Kusmierczak
Co-Portfolio Manager*
  Andreas Waldburg-Wolfegg
Co-Portfolio Manager
 

Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Foreign investments subject the Fund to political, economic, market, social and other risks within a particular country, as well as to potential currency instabilities and less stringent financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector.

Columbia Acorn International Select Class Z shares ended the fourth quarter of 2015 up 5.27%, which compares to a 5.52% gain of the Fund's primary benchmark, the S&P Developed Ex-U.S. Between $2B and $10B® Index. For the year ended December 31, 2015, the Fund was down 1.03% versus a benchmark gain of 3.96%. Fund underperformance for the annual period was largely due to poor relative performance in the financials and materials sectors. Over the course of the year, we reduced Fund exposure in each sector.

In the first quarter of 2015, we discussed the Fund's ongoing repositioning to a more mid-cap oriented strategy, and we continued to reposition the Fund to increase its market cap throughout the year. As we reviewed Fund holdings and considered new positions for the Fund, we focused on names that have market capitalizations of $5 billion or more. While there is overlap between the Fund's holdings and Columbia Acorn International's mid-cap companies, Columbia Acorn International Select holds substantially fewer names and is concentrated in our analyst team's highest-conviction names.

We also added unique names to the Fund that had outgrown Columbia Acorn International's target market capitalization, but that we believe have additional growth potential. For example, Essilor International, a French manufacturer of eyeglass lenses, was added to Columbia Acorn International Select in September. When Columbia Acorn International sold Essilor in 2006, it had a market cap of roughly $10 billion. We have continued to follow the stock and like its exposure to growing multifocal lens wearers in developed markets, where populations are aging, and to the growing middle class in emerging markets. At a roughly $25 billion market cap, Essilor is too big for Columbia Acorn International but is a good fit for Columbia Acorn International Select. The other area of focus as we have repositioned the Fund has been on new names that are peers or competitors of names we own in Columbia Acorn International. Including Essilor, at year end we held six new names that were added to the Fund this year and that are not held in other Funds managed by CWAM.

Looking at top-contributing stocks for the quarter and the year, three Japanese stocks ranked among the top performers. Japanese markets outperformed most world markets, as loosening monetary policy and improving corporate governance proved relatively attractive amidst a slowing global economy. KDDI, a mobile and fixed-line communication service provider, gained 16% in the quarter and was up 27% for the year. Secom, a provider of security services, gained 13% in the fourth quarter and was up 20% for the year. Both KDDI and Secom have

enjoyed steady growth, as their businesses are not affected by the global economic slowdown. Japan Tobacco, a maker of cigarettes, gained 21% in the fourth quarter to end the year with a 37% gain. Japan Tobacco's profit growth exceeded expectations, as strong pricing power offset market fears of volume contraction.

On the downside, laggards for both the quarter and year came largely from the materials, energy and financial sectors. Weak gold and oil prices were to blame for the material and energy sector declines. Gold miners Tahoe Resources and Goldcorp were sold in the third quarter but ranked among the Fund's largest detractors for the annual period with losses of 41% and 31%, respectively. Oil exploration and production companies Vermillion Energy and Anadarko Petroleum were added to the Fund in the year and both traded down with the dramatic fall in oil prices, ending the year and quarter among the Fund's largest detractors. We bought these stocks because we believe they are well-positioned to benefit when oil prices return to levels closer to their long-term averages and the world's cost of production. In the financial sector, we sold the Fund's position in Coronation Fund Managers, a South African investment manager, as poor performance and asset outflows significantly reduced the firm's performance-based fees. Down 47%, its stock was a top detractor for the year.

We expect some repositioning of the Fund to continue into 2016 but most of that effort is now behind us. As we face the likelihood of continued market volatility ahead, we feel that the Fund is well-diversified across geographies and sectors. Many of the Fund's portfolio companies are long-term holdings and well-known to us. Our goal as your managers is to provide good risk-adjusted returns to our shareholders.

*Effective January 1, 2016, Stephen Kusmierczak replaced Christopher J. Olson as co-portfolio manager of Columbia Acorn International Select. Mr. Waldburg-Wolfegg continues in his role as co-portfolio manager of the Fund. Mr. Kusmierczak did not serve as a portfolio manager of the Fund during 2015.

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.


10



COLUMBIA ACORN INTERNATIONAL SELECTSM

AT A GLANCE

Total Net Assets of the Fund:
$139.3 million

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Acorn International SelectSM Class Z Shares

November 23, 1998 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period.

Average Annual Total Returns for period ended December 31, 2015

   

4th quarter

 

1 year

 

5 years

 

10 years

 

Life of Fund

 
Class Z (11/23/98 inception)    

5.27

%

   

-1.03

%

   

3.18

%

   

6.07

%

   

8.19

%

 
Class A (10/16/00 inception)  

without sales charge

   

5.21

     

-1.30

     

2.86

     

5.73

     

7.84

   

with sales charge

   

-0.86

     

-6.96

     

1.65

     

5.11

     

7.47

   
S&P Developed Ex-U.S.
Between $2B and $10B® Index*
   

5.52

     

3.96

     

4.46

     

4.71

     

7.21

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmark as of December 31, 2015. Effective January 1, 2016, the primary benchmark for Columbia Acorn International Select was changed to the MSCI ACWI Ex USA Index (Net). Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 1.18% for Class Z shares and 1.47% for Class A shares. The returns shown for periods prior to the inception of the Fund's Class A shares append the returns of the Fund's Class Z shares, the Fund's oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information.

Portfolio Diversification

as a percentage of net assets, as of 12/31/15

Top 10 Holdings

as a percentage of net assets, as of 12/31/15

1.   CCL Industries (Canada)
Global Label Converter
  4.7
%  
2.   Partners Group (Switzerland)
Private Markets Asset Management
  4.0
%  
3.   Novozymes (Denmark)
Industrial Enzymes
  3.8
%  
4.   Sony Financial Holdings (Japan)
Life Insurance, Assurance & Internet Banking
  3.5
%  
5.   Distribuidora Internacional
de Alimentación (Spain)
Discount Retailer in Spain & Latin America
  3.3
%  
6.   Wirecard (Germany)
Online Payment Processing & Risk Management
  3.2
%  
7.   Telefonica Deutschland (Germany)
Mobile & Fixed-line Communications in Germany
  3.0
%  
8.   Swedish Match (Sweden)
Swedish Snus
  2.5
%  
9.   Recruit Holdings (Japan)
Recruitment & Media Services
  2.5
%  
10.   Eutelsat (France)
Fixed Satellite Services
  2.4
%  

The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.


11



COLUMBIA ACORN SELECTSM

IN A NUTSHELL

 

 
David L. Frank
Co-Portfolio Manager*
  Matthew S. Szafranski
Co-Portfolio Manager
 

Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies. Foreign investments subject the Fund to risks, including political, economic, market, social and other risks, within a particular country, as well as to potential currency instabilities and less stringent financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. The Fund may invest significantly in issuers within a particular sector, which may be negatively affected by market, economic or other conditions, making the Fund more vulnerable to unfavorable developments in the sector.

Columbia Acorn Select Class Z shares ended the fourth quarter of 2015 up 3.10%, outperforming the 2.60% gain of the Fund's primary benchmark, the S&P MidCap 400 Index. The Fund also outperformed for the annual period, declining 0.44% versus a 2.18% drop in the benchmark. An increase in takeout activity contributed to Fund performance, driving the Fund's relative outperformance in the materials sector in the fourth quarter, and its strong gains in the health care sector for the year.

Seven of the Fund's holdings were acquired during the year, equal to roughly 18% of the number of holdings in the portfolio at year end. These acquisitions contributed 4% to Fund performance in 2015. In the fourth quarter, industrial gas distributor Airgas was added to the list of acquisitions after announcing that it was being acquired by Air Liquide. We sold the position on the news, capturing a 54% gain in the fourth quarter and a 21% return for the annual period.

Other winners in the fourth quarter included Bankrate, a provider of Internet advertising for the insurance, credit card and banking markets. Up 28%, Bankrate reported strong earnings and announced the sale of its insurance business in a cash transaction that was viewed favorably by investors. Ski resort operator and developer Vail Resorts gained 24% in the quarter, benefiting from strong pass sales leading into the 2015-2016 ski season. The company's strategy of bundling its resorts into one unlimited season-long lift ticket (called EPIC pass) has set Vail apart from its competitors.

Top contributors in the health care sector for the annual period included orphan drug developers Synageva BioPharma and Ultragenyx Pharmaceutical, up 121% and 132%, respectively. Synageva gained on its acquisition announcement in the second quarter, and Ultragenyx reported favorable news for several of its pipeline drugs over the course of the year. We sold Synageva following its takeout announcement but continued to hold Ultragenyx at year end. Following the strong run in Fund health care names, we believed valuations were getting high, so we reduced the Fund's weighting in biotechnology and drug delivery names in the second half of the year.

Detractors for the year and quarter included watch designer and retailer Fossil. Off 54% for the year and 34% in the quarter, the company missed its earnings and lowered guidance, citing declines in overseas sales and a shift in interest toward wearable technology. Specialty food retailer The Fresh Market came back in the fourth quarter, gaining 3%, but was the top detractor from performance for the annual period, falling 46%. The company was negatively impacted by increased competition and lower

produce prices, but rebounded following reports that The Fresh Market's founder and chairman was considering a bid to take the company private. Cepheid, a provider of medical diagnostic supplies, was also a detractor for both the quarter and year, falling 32% during the year on disappointing quarterly results and reduced 2015 financial guidance. We took advantage of the downturn and added to the Fund's position in the stock. Union Agriculture Group, a farmland operator in Uruguay, was off 23% in the quarter and down 44% for the year, hurt by the slowdown in commodities and weakness in emerging markets, among other factors.

Across the portfolio, we have lowered Fund weightings in manufacturers of industrial goods and have further trimmed emerging market resource plays. Strategically, we reduced the number of holdings in the Fund to concentrate on our highest-conviction ideas. All of these moves are intended to bring the Fund back to its focus at inception: high quality, unique companies with good returns on capital and long-term secular growth drivers. We were pleased with the Fund's performance amid turbulent markets in 2015 and are working hard to continue that success in 2016.

It is with great sadness that we report the November 2015 death of the Fund's former lead portfolio manager, Robert Chalupnik. Rob's approach to investing included exhaustive research and detailed analysis that were driven by his strong work ethic and deep intellectual curiosity. He always acted with integrity, generosity and humility. Rob was an esteemed colleague, a highly successful investor and a cherished friend, and he is greatly missed by all of us at CWAM.

*Effective December 2, 2015, David L. Frank became a co-portfolio manager for the Fund, joining current co-portfolio manager Mr. Szafranski.

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.


12



COLUMBIA ACORN SELECTSM

AT A GLANCE

Total Net Assets of the Fund:
$399.2 million

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Acorn SelectSM Class Z Shares

November 23, 1998 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period.

Average Annual Total Returns for period ended December 31, 2015

   

4th quarter

 

1 year

 

5 years

 

10 years

 

Life of Fund

 
Class Z (11/23/98 inception)    

3.10

%

   

-0.44

%

   

6.04

%

   

6.16

%

   

9.63

%

 
Class A (10/16/00 inception)  

without sales charge

   

3.02

     

-0.73

     

5.74

     

5.86

     

9.28

   

with sales charge

   

-2.91

     

-6.43

     

4.49

     

5.23

     

8.90

   

S&P MidCap 400® Index*

   

2.60

     

-2.18

     

10.68

     

8.18

     

9.82

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmark. Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 0.84% for Class Z shares and 1.12% for Class A shares. The returns shown for periods prior to the inception of the Fund's Class A shares append the returns of the Fund's Class Z shares, the Fund's oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information.

Portfolio Diversification

as a percentage of net assets, as of 12/31/15

Top 10 Holdings

as a percentage of net assets, as of 12/31/15

1.   LKQ
Alternative Auto Parts Distribution
  5.2
%  
2.   Vail Resorts
Ski Resort Operator & Developer
  4.8
%  
3.   Ametek
Aerospace/Industrial Instruments
  4.1
%  
4.   Nordson
Dispensing Systems for Adhesives & Coatings
  3.9
%  
5.   Crown Castle International
Communications Towers
  3.7
%  
6.   EdR
Student Housing
  3.6
%  
7.   Align Technology
Invisalign System to Correct Malocclusion
(Crooked Teeth)
  3.4
%  
8.   Expeditors International of Washington
International Freight Forwarder
  3.3
%  
9.   Bankrate
Internet Advertising for the Insurance,
Credit Card & Banking Markets
  3.3
%  
10.   CNO Financial Group
Life, Long-term Care & Medical Supplement
Insurance
  3.2
%  

The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.


13



COLUMBIA THERMOSTAT FUNDSM

IN A NUTSHELL

 

 
Charles P. McQuaid
Lead Portfolio Manager
  Christopher J. Olson
Co-Portfolio Manager
 

A "fund of funds" bears its allocable share of the costs and expenses of the underlying funds in which it invests. Such funds are thus subject to two levels of fees and potentially higher expense ratios than would be associated with a fund that invests and trades directly in financial instruments under the direction of a single manager.

The value of an investment in the Fund is based primarily on the performance of the underlying funds in which it invests. The Fund is subject to the risk that the investment manager's decisions regarding asset classes and underlying funds will not anticipate market trends successfully, resulting in a failure to preserve capital or lower total return. The Investment Manager may prefer an underlying fund in the Columbia Acorn Family of Funds over alternative investments. There can be no assurance that the Columbia Acorn Funds will outperform similar funds managed by the Investment Manager's affiliates. This is not an offer of the shares of any other mutual fund mentioned herein.

Class Z shares of Columbia Thermostat Fund, our fund of funds, ended the fourth quarter of 2015 up 1.41%. This compares to a 7.04% gain of the Fund's primary equity benchmark, the S&P 500® Index, and a 0.57% loss for the Fund's primary debt benchmark, the Barclays U.S. Aggregate Bond Index. For the year ended December 31, 2015, the Fund was up 0.33%, while the S&P 500 Index gained 1.38% and the Barclay's benchmark gained 0.55%. The Fund's custom 50/50 Blended Benchmark gained 3.25% in the quarter and ended the year up 1.21%.

The Fund's equity portfolio had a weighted average gain of 6.10% in the fourth quarter, with Columbia Select Large Cap Growth Fund leading returns, up 9.80%. Columbia Acorn Fund was at the bottom of the performance list for the quarter, gaining 2.35%, as small- and mid-caps, in general, underperformed larger caps.

For the annual period, the Fund's equities had a weighted average gain of 1.25%, with Columbia Select Large Cap Growth Fund leading returns, up 8.07%. Columbia Acorn Fund's 1.53% decline made it the worst performer in the equity portfolio for the year.

The bond portion of the Fund had a slight loss in the fourth quarter, falling 0.38%. Columbia Income Opportunities Fund provided a modest gain, rising 0.21%, while the remaining three bond holdings were each down less than 1%.

For the annual period, the bond component provided a 0.38% weighted average gain. Columbia U.S. Government Mortgage Fund was the leader for the year, gaining 1.45%. Off 0.73%, Columbia Income Opportunities Fund was the only fund in the bond portfolio that had a decline.

Columbia Thermostat Fund's "buy low, sell high" strategy resulted in a reduction in equity exposure during the October rally. The Fund's equity weighting went from 35% to 20% during the month. As the markets cooled in December, the Fund added to equities, ending the year with a 25% exposure to stocks. Shareholders should not expect a return that matches the equity benchmark from Columbia Thermostat Fund when stocks are priced high, as we believe they were in 2015. Instead of attempting to achieve such a return from highly valued stocks, Columbia Thermostat was risk averse, mainly investing in short- and intermediate-term bonds and buying stocks on dips. As

mandated by its prospectus, the Fund increased its stock weight further in early 2016, and stands ready to buy additional equities should stocks drop more and become fundamentally cheap.

Results of the Funds Owned in Columbia Thermostat Fund

as of December 31, 2015

Stock Funds

Fund

  Weightings
in category
  4th quarter
performance
  1 year
performance
 
Columbia Acorn
International, Class I
   

20

%

   

4.30

%

   

-1.23

%

 
Columbia Contrarian
Core Fund, Class I
   

20

%

   

7.85

%

   

3.21

%

 
Columbia Dividend
Income Fund, Class I
   

20

%

   

7.51

%

   

0.80

%

 
Columbia Acorn Fund,
Class I
   

10

%

   

2.35

%

   

-1.53

%

 
Columbia Acorn Select,
Class I
   

10

%

   

3.14

%

   

-0.34

%

 
Columbia Large Cap
Enhanced Core Fund,
Class I
   

10

%

   

6.41

%

   

0.03

%

 
Columbia Select
Large Cap Growth Fund,
Class I
   

10

%

   

9.80

%

   

8.07

%

 
Weighted Average
Equity Gain
   

100

%

   

6.10

%

   

1.25

%

 

Bond Funds

Fund

  Weightings
in category
  4th quarter
performance
  1 year
performance
 
Columbia Short Term
Bond Fund, Class I
   

40

%

   

-0.49

%

   

0.38

%

 
Columbia Intermediate
Bond Fund, Class I
   

20

%

   

-0.94

%

   

0.37

%

 
Columbia Income
Opportunities Fund, Class I
   

20

%

   

0.21

%

   

-0.73

%

 
Columbia U.S. Government
Mortgage Fund, Class I
   

20

%

   

-0.25

%

   

1.45

%

 
Weighted Average
Income Gain/Loss
   

100

%

   

-0.38

%

   

0.38

%

 

Columbia Thermostat Fund Rebalancing in the Fourth Quarter

October 5, 2015

 

30% stocks, 70% bonds

 

October 9, 2015

 

25% stocks, 75% bonds

 

October 26, 2015

 

20% stocks, 80% bonds

 

December 4, 2015

 

25% stocks, 75% bonds

 

The Fund's investments in the underlying funds may present certain risks, including the following. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The Fund's investment in other funds subjects it to the investment performance (positive or negative), risks and expenses of these underlying funds. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than in investments in larger, more established companies. There are risks associated with fixed income investments, including credit risk, market risk, interest rate risk and prepayment and extension risk. In general, bond prices fall when interest rates rise and vice versa. This effect is more pronounced for longer term securities. Non-investment-grade (high-yield or junk) securities present greater price volatility and more risk to principal and income than higher rated securities. Foreign investments subject the Fund to political, economic, market, social and other risks within a particular country, as well as to potential currency instabilities and less stringent financial and accounting standards generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers.


14



COLUMBIA THERMOSTAT FUNDSM

AT A GLANCE

Total Net Assets of the Fund:
$1.1 billion

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Thermostat FundSM Class Z Shares

September 25, 2002 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period.

Average Annual Total Returns for period ended December 31, 2015

 

4th quarter

 

1 year

 

5 years

 

10 years

 

Life of Fund

 
Class Z (9/25/02 inception)    

1.41

%

   

0.33

%

   

6.66

%

   

6.02

%

   

7.39

%

 
Class A (3/3/03 inception)  

without sales charge

   

1.34

     

0.07

     

6.39

     

5.75

     

7.12

   

with sales charge

   

-4.50

     

-5.70

     

5.13

     

5.13

     

6.64

   

S&P 500® Index*

   

7.04

     

1.38

     

12.57

     

7.31

     

9.34

   

Barclays U.S. Aggregate Bond Index*

   

-0.57

     

0.55

     

3.25

     

4.51

     

4.36

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmarks. Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 0.77% for Class Z shares and 1.02% for Class A shares. The returns shown for periods prior to the inception of the Fund's Class A shares append the returns of the Fund's Class Z shares, the Fund's oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit columbiathreadneedleus.com/investment-products/mutual-funds/appended-performance for more information.

Asset Allocation

as a percentage of net assets, as of 12/31/15

Portfolio Weightings

as a percentage of assets in each investment category, as of 12/31/15

Stock Mutual Funds

Columbia Acorn International, Class I

   

20

%  

Columbia Contrarian Core Fund, Class I

   

20

%  

Columbia Dividend Income Fund, Class I

   

20

%  

Columbia Acorn Fund, Class I

   

10

%  

Columbia Acorn Select, Class I

   

10

%  
Columbia Large Cap Enhanced Core Fund,
Class I
   

10

%  
Columbia Select Large Cap Growth Fund,
Class I
   

10

%  

Bond Mutual Funds

Columbia Short Term Bond Fund, Class I

   

40

%  

Columbia Intermediate Bond Fund, Class I

   

20

%  
Columbia Income Opportunities Fund,
Class I
   

20

%  
Columbia U.S. Government Mortgage
Fund, Class I
   

20

%

 


15



COLUMBIA ACORN EMERGING MARKETS FUNDSM

IN A NUTSHELL

 

 
Fritz Kaegi
Co-Portfolio Manager
  Stephen Kusmierczak
Co-Portfolio Manager
 

 

 
Louis J. Mendes
Co-Portfolio Manager
  Satoshi Matsunaga
Co-Portfolio Manager
 

Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. International investing involves certain risks and volatility due to potential political, economic or currency instabilities and different, potentially less stringent, financial and accounting standards than those generally applicable to U.S. issuers. Risks are enhanced for emerging and frontier market issuers. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies.

Columbia Acorn Emerging Markets Fund Class Z shares gained 1.95% in the fourth quarter of 2015, falling short of the 2.59% gain of the Fund's primary benchmark, the S&P Emerging Markets Between $500M and $5B® Index. For the year ended December 31, 2015, the Fund was down 17.98%, while the benchmark fell 13.15%.

In the last quarter of the year, Chinese stocks rallied but emerging market economies in general struggled against adverse capital flows, as slower-than-expected growth in China continued to weigh heavily on demand for raw materials and commodities. The Fund's Chinese holdings failed to keep up with the rally, hurting relative performance for the quarter. Fund positioning in China was also a detractor for the annual period.

While the focus of the broader market throughout 2015 has been on China, we believe there are attractive opportunities for small-cap investors to be found in other emerging markets. In countries like India and Korea, the political and economic environments are fairly stable. Furthermore, the companies operating within these markets are less commodity-driven.

We consider India to be one of the more attractive emerging markets, as government reforms and new programs are having a positive impact on the economy and financial markets. As a large importer of oil, lower crude prices are also a positive for the Indian economy. When selecting investments within this market, we are focusing on companies that will benefit from its expanding consumer class. Zee Entertainment Enterprises, an Indian programmer of pay television content, was the Fund's largest position at quarter end, and a top contributor for the quarter and the year, gaining 10% for both periods.

Korea is the fourth largest economy in Asia, and is heavily influenced by global economic growth because of its high exposure to technology and the automotive industry. Korea offers investors a relatively stable currency, moderate GDP growth and economic policies that would allow for both monetary and fiscal stimulus if the country faced a downturn. We selectively added new Korean names to the Fund during the second half of the year (Nongshim and KCC) that we believe have unique growth drivers within the Korean domestic economy. At December 31, the Fund had nearly 9% of its net assets invested in this market, up from 3% at the end of the third quarter. Koh Young Technology, a provider of inspection systems for printed circuit boards, was the third largest position in the Fund at the end of the year, and was among the Fund's top contributors in the fourth quarter, up 13%. Despite weak capital expenditure trends in Asia,

demand for Koh Young's products remains robust because of their positive impact on productivity.

China was a challenging market for investors in 2015. While growth has slowed in China, its economy is still growing more quickly than most countries. Stock valuations look cheap on a relative and absolute basis in China, and appear to be pricing in a continued slowdown in economic growth and a devaluation of the renminbi. For these reasons, China continues to be a large weighting within the Fund. Looking forward, we believe that China needs to transform its economic growth model from being export-oriented/fixed-investment led to consumption-led to sustain economic growth. With this in mind, our focus in China remains on companies benefiting from a growing middle class and from the transformation of the Chinese domestic economy. Our core holdings have government policy support and complement domestic needs in areas like environmental improvement. As part of our focus on the growing middle class consumer, we hold BitAuto, an automotive information website operator in China. BitAuto has benefited from a significant shift in favor of online car sales in China, but the company was negatively impacted by reduced demand for automobiles and ended the year down 60%.

Coronation Fund Managers, a South African investment manager, was a top detractor for the quarter and year, as poor performance and asset outflows significantly reduced the firm's performance-based fees. Its stock was down 26% for the quarter and 64% for the year. Melco Crown (Philippines) Resorts, an integrated resort operator in Manila, was another large detractor, falling 38% in the quarter and 84% for the year. Falling valuations in Asian casino operators and negative trends in gaming in Southeast Asia drove the declines, but Melco Crown has gained share in the Philippines market, where overall gaming revenue keeps growing due to robust local demand.

While we are always stock pickers first, looking at the big picture is an important part of emerging market investing. Recent volatility has created a significant headwind in markets like Brazil, Malaysia and South Africa, which have been hurt by falling commodity prices and weak currencies. As we did throughout 2015, we will continue to have less emphasis on these countries going forward unless improvements in valuations and fundamentals compel us to increase exposure. We anticipate volatility will continue in most emerging markets in the near term, but we are looking for and finding opportunities to take advantage of recent declines and increase Fund exposure to quality companies with good growth prospects that are available at reasonable valuations. Given the full valuations found in most other areas of the world, we consider this a unique advantage for the emerging market investor.

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.


16



COLUMBIA ACORN EMERGING MARKETS FUNDSM

AT A GLANCE

Total Net Assets of the Fund:
$275.3 million

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Acorn Emerging Markets FundSM Class Z Shares

August 19, 2011 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period.

Average Annual Total Returns for period ended December 31, 2015

 

4th quarter

 

1 year

 

Life of Fund

 
Class Z (8/19/11 inception)    

1.95

%

   

-17.98

%

   

1.62

%

 
Class A (8/19/11 inception)  

without sales charge

   

1.84

     

-18.25

     

1.33

   

with sales charge

   

-3.99

     

-22.98

     

-0.03

   
S&P Emerging Markets Between
$500M and $5B® Index*
   

2.59

     

-13.15

     

-0.71

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmark as of December 31, 2015. Effective January 1, 2016, the primary benchmark for Columbia Acorn Emerging Markets Fund was changed to the MSCI Emerging Markets SMID Cap Index (Net). Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 1.33% for Class Z shares and 1.57% for Class A shares.

Portfolio Diversification

as a percentage of net assets, as of 12/31/15

Top 10 Holdings

as a percentage of net assets, as of 12/31/15

1.   Zee Entertainment Enterprises (India)
Indian Programmer of Pay Television Content
  4.9
%  
2.   Far EasTone Telecom (Taiwan)
Mobile Operator in Taiwan
  3.3
%  
3.   Koh Young Technology (Korea)
Inspection Systems for Printed Circuit Boards
  2.9
%  
4.   Hoteles City Express (Mexico)
Budget Hotel Operator in Mexico
  2.4
%  
5.   Nongshim Holdings (Korea)
Holding Company of Food Conglomerate
  2.4
%  
6.   Link Net (Indonesia)
Fixed Broadband & Cable TV Service Provider
  2.3
%  
7.   Tikkurila (Finland)
Decorative & Industrial Paint in Scandinavia,
Central & Eastern Europe
  2.3
%  
8.   Commercial International Bank of
Egypt (Egypt)
Private Universal Bank in Egypt
  2.2
%  
9.   MNC Sky Vision (Indonesia)
Satellite Pay TV Operator in Indonesia
  2.1
%  
10.   KCC (Korea)
Paint & Housing Material Manufacturer
  2.0
%  

The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.


17



COLUMBIA ACORN EUROPEAN FUNDSM

IN A NUTSHELL

 

 
Andreas Waldburg-Wolfegg
Co-Portfolio Manager
  Stephen
Kusmierczak
Co-Portfolio Manager
 

Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. International investing involves certain risks and volatility due to potential political, economic or currency instabilities and different, potentially less stringent, financial and accounting standards than those generally applicable to U.S. issuers. Risks are enhanced for emerging market issuers. Investments in small- and mid-cap companies involve risks and volatility and possible illiquidity greater than investments in larger, more established companies.

Columbia Acorn European Fund Class Z shares gained 3.84% in the fourth quarter of 2015, underperforming the 4.90% gain of the Fund's primary benchmark, the S&P Europe Between $500M and $5B® Index. For the year ended December 31, 2015, the Fund was up 4.43%, while the benchmark gained 9.85% for the same period. Most European markets staged a relief rally early in the fourth quarter after a tough third quarter, and we were pleased to see some of the Fund's larger positions rebound with the markets.

For the quarter and the annual period, Fund performance relative to the benchmark was negatively impacted by poor performance of the Fund's holdings in the Mediterranean region. Falling 53% and 66%, respectively, for the year, French stocks Neopost and Hi-Media were largely to blame for the regional lag. We noted last quarter that we were reducing the Fund's position in postage machine manufacturer Neopost, and we opted to sell out of the stock completely in the fourth quarter. We also noted last quarter that we sold out of the Fund's position in online advertiser Hi-Media, but it remained a significant detractor for the annual period. Active selling and underperformance have caused the Fund's weighting in the Mediterranean region to decline from roughly 21% at year-end 2014, to 16% at the end of 2015.

The Nordic region provided the Fund's top two contributors for the annual period. SimCorp, a Danish developer of software for investment managers, ended the year up 120%, gaining 12% in the fourth quarter, as strong new license sales continue to drive company growth. Sweden's Unibet, a European online gaming operator, has strongly grown mobile revenues in its sports betting platform and boosted margins. Its stock was up 68% for the year and gained 22% in the fourth quarter. The Fund's overweight exposure to this region was a relative positive for both the quarter and the year.

In Northern and Central Europe, the Fund's weight remained largely the same over the course of the year and was in line with the benchmark. Good stock selection, most notably in some of our German names, drove some relative outperformance in the region. Up 43% for the year, Aurelius is a European turnaround investor and its stock has been boosted by high deal activity. In the quarter, MTU Aero Engines, a German manufacturer of airplane engine components and services, gained 17% on solid new engine demand and growing maintenance and repair revenues.

The Fund's underweight positions in the United Kingdom and Ireland were a positive for the quarter and the year, but stock performance relative to the benchmark in the

region fell short for both periods. Top contributors included Cable and Wireless, a UK telecommunications service provider operating in the Caribbean. Its stock rose 30% in the fourth quarter following news of an acquisition agreement with global media company Liberty Global. We sold the Fund's position in the stock on the news. Rightmove, a UK Internet site for real estate listings, gained 76% for the year, benefiting from its leading position in the market and strong revenue growth. On the downside, Cambian, a UK operator of mental health facilities, fell 52% in the fourth quarter after issuing a profit warning, ending the year down 35%. Also declining on profit warnings and concerns around management changes, Dialight, a UK provider of LED products for industrial environments, fell 20% in the fourth quarter and was off 37% for the year. We exited both Cambian and Dialight in the fourth quarter.

European small caps were one of the strongest-performing areas of the global equity markets during 2015. We are beginning to see the positive impact of changes driven by the financial crisis in Europe. European Central Bank control over individual banks has been tightened in places like Italy and Spain, and banking consolidation has been accelerated. The Spanish economy positively surprised in 2015, yet Italy remains challenged by a lack of investment and anemic household spending. While the U.S. Federal Reserve raised interest rates in the United States in the fourth quarter, the European Central Bank lowered its deposit rate and announced an extension of its quantitative easing at its December meeting. Ongoing monetary easing in Europe is supporting both credit expansion and equity valuations, which are above long-term historical levels, but which may be supported by the long-term outlook for interest rates. European gross domestic product growth is also positive, if somewhat weak. Concerns do remain, as the asylum crisis and possible border restrictions could threaten trade, and as anti-EU sentiment seems to be gaining steam. Crisis is not new to Europe, however, and we have been able to find what we believe to be very strong, small-cap companies to invest in during past periods of uncertainty. We remain focused on investing in companies with strong fundamentals, that are leaders in their industries, and that are good stewards of shareholder capital. We believe these companies should do better than the market in most economic environments.

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.


18



COLUMBIA ACORN EUROPEAN FUNDSM

AT A GLANCE

Total Net Assets of the Fund:
$61.9 million

Performance data shown below represents past performance, does not guarantee future results, assumes reinvestment of dividends and distributions and does not reflect the deduction of taxes that a shareholder may pay on Fund distributions or the redemption of Fund shares. 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. Performance data reflects fee waivers or reimbursements of Fund expenses, if any; in their absence, performance results would have been lower. Indexes are unmanaged; their results do not reflect the effect of expenses or sales charges. Securities in the Fund may not match those in an index. Please visit columbiathreadneedle.com/us for the most recent month-end performance data.

The Growth of a $10,000 Investment in Columbia Acorn European FundSM Class Z Shares

August 19, 2011 (Fund inception) through December 31, 2015

This chart shows the change in value of a hypothetical $10,000 investment in Class Z shares of the Fund during the stated time period.

Average Annual Total Returns for period ended December 31, 2015

 

4th quarter

 

1 year

 

Life of Fund

 
Class Z (8/19/11 inception)    

3.84

%

   

4.43

%

   

10.52

%

 
Class A (8/19/11 inception)  

without sales charge

   

3.80

     

4.17

     

10.23

   

with sales charge

   

-2.15

     

-1.79

     

8.75

   
S&P Europe Between $500M
and $5B® Index*
   

4.90

     

9.85

     

12.88

   

Results for other share classes can be found on Page 2.

*The Fund's primary benchmark as December 31, 2015. Effective January 1, 2016, the primary benchmark for Columbia Acorn European Fund was changed to the MSCI AC Europe Small Cap (Net). Please see Page 1 for index descriptions.

Returns for Class A shown with and without the maximum initial sales charge of 5.75%. As stated in the May 1, 2015, prospectus, the Fund's annual operating expense ratio is 1.50% for Class Z shares and 1.75% for Class A shares.

Portfolio Diversification

as a percentage of net assets, as of 12/31/15

Top 10 Holdings

as a percentage of net assets, as of 12/31/15

1.   Munksjo† (Finland)
Specialty Paper Maker
  3.2
%  
2.   Wirecard (Germany)
Online Payment Processing & Risk Management
  3.2
%  
3.   Rightmove (United Kingdom)
Internet Real Estate Listings
  3.1
%  
4.   Distribuidora Internacional
de Alimentación (Spain)
Discount Retailer in Spain & Latin America
  3.0
%  
5.   Unibet (Sweden)
European Online Gaming Operator
  2.7
%  
6.   Assura (United Kingdom)
UK Primary Health Care Property Developer
  2.6
%  
7.   SimCorp (Denmark)
Software for Investment Managers
  2.6
%  
8.   Partners Group (Switzerland)
Private Markets Asset Management
  2.6
%  
9.   Charles Taylor (United Kingdom)
Insurance Services
  2.5
%  
10.   Aurelius (Germany)
European Turnaround Investor
  2.3
%  

†The Fund holds shares traded on both the Swedish and Finnish exchanges.

The Fund's top 10 holdings and portfolio diversification vary with changes in portfolio investments. See the Statement of Investments for a complete list of the Fund's holdings.


19




SQUIRREL CHATTER: BEHAVIORAL ECONOMICS

People Occasionally Behave Irrationally

Economists have traditionally assumed that people rationally optimize in their own self-interest. A free-market economy dominated by "homo economicus" prospers as producers of goods and services trade with each other, as if driven by an invisible hand. In the past few decades, however, behavioral economics has emerged, refuting the rational optimization assumption. Nobel Prize winning Princeton professor Daniel Kahneman's book Thinking, Fast and Slow explains the habits and biases that cause people to make predictable errors.

Illustrating that people tend to make quick, intuitive decisions rather than well thought out ones, Kahneman asked Ivy League students the following question: A bat and a ball cost $1.10. The bat costs $1.00 more than the ball. How much does the ball cost? Over half of students answered $0.10, though the correct answer is $0.05.

Kahneman also points out that people generally have a confirmation bias.1 Good scientific method calls for people to test a hypothesis by attempting to refute it, but instead people seek data that confirms their beliefs. We would rather keep our beliefs than seriously analyze and challenge them.

Individuals also exhibit an anchoring effect. Kahneman and his associate Amos Tversky devised several experiments that first provided a high or low number (from a rigged "wheel of fortune" or in a text) and then asked for best-guess estimates for unrelated data. Subjects who were provided high numbers gave high estimates and vice versa. People tend to "anchor" on an initial number provided and then move toward an unbiased estimate. When the Exploratorium Museum in San Francisco polled visitors about contributing to a particular cause without providing a suggested contribution amount, visitors on average said they would donate $64. When $5 was suggested as a donation, the average response was $20, and when $400 was suggested, the average jumped to $143.2 It seems as though many charities understand the anchoring effect.

Kahneman identified an availability bias. People base their knowledge, opinions and actions on small samples of information readily available to them. Estimates of causes

of death are warped by media coverage. For example, strokes cause almost twice as many deaths as all accidents combined, but 80% of respondents said accidental deaths were more likely.3

Kahneman and Tversky did many behavioral studies, and their largest contribution to behavioral economics is their work on decision making in risky situations. Subjects were asked to make the following two choices concurrently:

Choose between:

A.  a sure gain of $240

B.  25% chance to win $1,000 and a 75% chance to gain nothing

Choose between:

C.  a sure loss of $750

D.  75% chance to lose $1,000 and a 25% chance to lose nothing

People are risk averse with respect to gains; 84% of subjects chose A, accepting a lower expected value than B.4 However, people are risk seeking with respect to losses. People hate to lose and will take a chance of a greater loss in exchange for a chance not to lose; 87% chose D.5

Despite the instructions, subjects appeared to make these choices sequentially rather than concurrently. They framed the exercise as two separate choices. Choosing A and D provides a net result of a 75% chance to lose $760 and a 25% chance of gaining $240. People solving the problems concurrently and rationally would have chosen C and B, which provides a net result of a 75% chance to lose $750 and a 25% chance to gain $250. Choosing C and B together results in the same odds, yet $10 more under either scenario.

Given our biases, how a choice is framed heavily influences our decisions. Would you accept a gamble that offers a 10% chance to win $95 and a 90% chance to lose $5? Would you pay $5 to participate in a lottery that offers a 10% chance to win $100 and a 90% chance to win nothing? Many more people accept the second opportunity than the first, even though the choices are identical. The first clearly frames the $5 as a loss, while the second suggests the $5 is a sunk cost.6


20



Kahneman and Tversky also did a study to determine values people assign to probabilities, what they called decision weights. People provided zero value to a zero probability and a value of 100 to a sure thing, but the values in between were interesting:7

Probability  1%  10%  50%  90%  99%

Decision Weight  5.5  18.6  42.1  71.2  91.2

What the data shows is that people are often willing to overpay for small probabilities, a tendency known as the possibility effect. That is why lotteries exist. Yet people underpay relatively more for large but not certain probabilities. To eliminate those last bits of uncertainty, people are willing to pay a lot, a tendency known as the certainty effect.

Richard Thaler, a University of Chicago professor of behavioral science and economics, worked with Kahneman and Tversky on several studies. Jointly, they defined the endowment effect, which states that once someone owns something, he tends to place an irrationally high value on it. Thaler and Kahneman experimented by giving some subjects coffee mugs decorated with university insignia. Participants were asked to provide the prices at which they would sell. Other subjects were not given mugs and were asked what prices they would bid for the mugs. The average selling price was about double the average buying price!8

Thaler agrees with Kahneman's findings that people are risk seeking with respect to losses, both prospectively and retrospectively. People who are losing money at a racetrack tend to bet on longshots for the last race of the day, hoping to recoup losses, effectively driving the expected return of the last race even more against them!9 Financial institutions need to watch losing traders very closely, as rogue traders repeatedly double down in hopes of recouping losses.

Thaler's work indicates that people create mental accounts, treating some money differently depending on its intended use. Cash accounts are for spending, other funds are for savings, and retirement accounts are sacrosanct.10 People may borrow at high interest rates on their charge cards while receiving low interest rates on savings, which appears irrational.

Thaler notes that Economics 101 classes typically teach that prices should rationally rise when there is an unanticipated increase in demand. I remember learning that

it would be rational for merchants to raise the price of snow shovels after a blizzard and plywood before a hurricane. The products would be rationed by price to those most in need and capable of paying, and additional revenues would induce costly special increases in supply. Thaler's work, however, indicates that most people would consider such increases as unfair price gouging, and would later penalize those merchants.

Policy Implications

Public policies are often impacted by people's emotional reaction under the availability bias. Former Administrator of the White House Office of Information and Regulatory Affairs, Cass Sunstein, has analyzed resulting regulations and notes that poor regulations waste time and money. Rational weighting of costs and benefits would result in better regulations and improved outcomes.11

Kahneman points out that as an extension of the possibility effect, people tend to be confounded by exceptionally small probabilities,12 and either ignore them or give them way too much attention. The precautionary principle, which prohibits any action that might cause harm, is the result. Sunstein believes that many innovations including airplanes, antibiotics, automobiles, chlorination, vaccinations and x-rays would not have passed strict interpretation of the precautionary principle.13

Thaler's work explains one of the reasons why policy makers prefer modest inflation. People consider outright wage cuts as unfair, even when unemployment is high and the employer is earning only a small profit. But a flat wage when there is inflation is not considered unfair, even though real wages drop.14 Therefore, the economy can more easily rationalize costs in a recession with some inflation rather than none.

Thaler devised a plan to induce people to contribute more to 401K plans called "Save More Tomorrow." Many people don't contribute to their 401K plan because that would mean an immediate take-home pay cut, frowned on by the endowment effect. Instead, the plan has people sign up now to contribute upon their next raise in pay. They then forgo some or the entire raise, but save for retirement without taking a pay cut. Employees of the first company that adopted the plan nearly quadrupled their savings rate after four annual raises.15


21



Thaler and Sunstein's book Nudge cites numerous ways that individuals can be "nudged" to make better decisions. For example, default options are considered standard and most people don't extend the effort to make a different choice. Germans need to opt in for organ donations, and only 12% do. Austrians need to opt out of organ donations, and 99% allow their organs to be donated.16

Investment Implications

Kahneman notes that experienced traders in financial markets tend to more rationally deal with risk aversion than individual investors. Most people weight losses twice as much as gains,17 and if each transaction is framed individually, irrational risk aversion results. By framing gains and losses over longer periods rather than individually, traders can accept individual rational risks. To mitigate this bias, Kahneman suggests that individual investors view the market prices of their investments less frequently.18

Thaler agrees, as he conducted an experiment simulating endowment management. Some subjects were shown results eight times per simulated calendar year, while others were shown results once per simulated year. Those seeing results more frequently chose to invest 41% in stocks and those seeing results just once a year had 70% in stocks.19 Myopic risk aversion helps explain why stocks provided a 7% premium compound rate of return over risk-free securities for the last two centuries,20 a huge premium that cannot be otherwise explained by economic theory.21

Individuals tend to be terrible stock traders. One study indicated that stocks sold by individuals outperformed stocks they bought by 3.2% per year, before transactions costs. Individual investors tend to sell winners even though recent winners on average outperform recent losers in the short term. Individuals tend to keep losers, as they are averse to taking losses and have anchored on purchase prices as target sale prices for losers.22 Losers on average underperform in the short term.23

Mental accounts result in the house money effect for gamblers and investors. People are more prone to lose their risk aversion on gains when they are ahead. This can result in gamblers not knowing when to quit, and investors creating bubbles.24

Humans, including many professional money managers, seem to be hard wired to invest poorly, to "buy high and sell low." Behavioral economics helps explain why.

One solution to offset this tendency is to own Columbia Thermostat Fund, which takes emotions out of investing and automatically invests more in stocks when the market drops and automatically sells stocks when the market rises.25

Charles P. McQuaid

Portfolio Manager, Analyst and Advisor
Columbia Wanger Asset Management, LLC

The information and data provided in this analysis are derived from sources that we deem to be reliable and accurate. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. The views/opinions expressed here are those of the author and not of the Columbia Acorn Trust Board of Trustees, are subject to change at any time based upon economic, market or other conditions, may differ from views expressed by other Columbia Management associates and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia Acorn Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Acorn Fund.

The author would like to thank Colin Moore, Global Chief Investment Officer of Columbia Threadneedle Investments, for suggesting Beyond Greed and Fear, which summarizes behavioral economics for investors. He would also like to thank recently retired Columbia Acorn Trust Chief Compliance Officer Robert Scales for suggesting Thinking, Fast and Slow.

1  Daniel Kahneman, Thinking, Fast and Slow (New York, Farrar, Straus and Giroux, 2011), p. 81.

2  Ibid., p. 125.

3  Ibid., p. 138.

4  Expected value is the sum of probabilities times dollars.

5  Kahneman, op. cit., p. 437.

6  Ibid., p. 364.

7  Ibid., p. 315.

8  Ibid., p. 295.

9  Richard H. Thaler, Misbehaving: The Making of Behavioral Economics (New York, W. W. Norton & Company, Inc., 2015), p. 80.

10  Ibid., p. 76.

11  Kahneman, op. cit., p. 141.

12  Somehow this one is not labelled as a particular bias or effect.

13  Kahneman, op. cit., p. 351.

14  Thaler, op. cit., p. 132.

15  Ibid., p. 318.

16  Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (New Haven, Connecticut, Yale University Press, 2008), p. 178-179.

17  Kahneman, op. cit., p. 349.

18  Ibid., p. 339.

19  Thaler, op. cit., p. 197.

20  Hersh Shefrin, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing (New York, Oxford University Press, 2002), p. 37.

21  Thaler, op. cit., p. 192.

22  In Beyond Greed and Fear, Shefrin labels this as "Get-evenitis."

23  Kahneman, op. cit., p. 213-214.

24  Thaler, op. cit., p. 83.

25  If interested, please see Columbia Thermostat Fund's prospectus, which can be found at columbiathreadneedle.com/us.


22



COLUMBIA ACORN FAMILY OF FUNDS

2015 YEAR-END DISTRIBUTIONS

The following table details the year-end distributions for the Columbia Acorn Funds. For all Funds except Columbia Thermostat Fund, the record date was December 8, 2015, and the ex-dividend and payable date was December 9, 2015. For Columbia Thermostat Fund, the record date was December 21, 2015, and the ex-dividend and payable date was December 22, 2015.

Fund

  Short-term
Capital
Gain
  Long-term
Capital
Gain
  Ordinary
Income
  Reinvestment
Price
 

Columbia Acorn® Fund

 

Class A

   

None

   

$

10.63665

     

None

   

$

17.68

   

Class B

   

None

   

$

10.63665

     

None

   

$

13.75

   

Class C

   

None

   

$

10.63665

     

None

   

$

13.20

   

Class I

   

None

   

$

10.63665

     

None

   

$

19.48

   

Class R4

   

None

   

$

10.63665

     

None

   

$

19.90

   

Class R5

   

None

   

$

10.63665

     

None

   

$

19.97

   

Class Y

   

None

   

$

10.63665

     

None

   

$

20.05

   

Class Z

   

None

   

$

10.63665

     

None

   

$

19.39

   

Columbia Acorn International®

 

Class A

   

None

   

$

1.18794

   

$

0.39825

   

$

39.08

   

Class B

   

None

   

$

1.18794

   

$

0.02288

   

$

37.83

   

Class C

   

None

   

$

1.18794

   

$

0.07833

   

$

37.67

   

Class I

   

None

   

$

1.18794

   

$

0.55607

   

$

39.14

   

Class R

   

None

   

$

1.18794

   

$

0.24042

   

$

39.09

   

Class R4

   

None

   

$

1.18794

   

$

0.47929

   

$

39.40

   

Class R5

   

None

   

$

1.18794

   

$

0.53475

   

$

39.09

   

Class Y

   

None

   

$

1.18794

   

$

0.55607

   

$

39.40

   

Class Z

   

None

   

$

1.18794

   

$

0.51768

   

$

39.11

   

Columbia Acorn USA®

 

Class A

   

None

   

$

7.67879

     

None

   

$

20.32

   

Class B

   

None

   

$

7.67879

     

None

   

$

16.14

   

Class C

   

None

   

$

7.67879

     

None

   

$

16.06

   

Class I

   

None

   

$

7.67879

     

None

   

$

22.47

   

Class R4

   

None

   

$

7.67879

     

None

   

$

22.92

   

Class R5

   

None

   

$

7.67879

     

None

   

$

22.97

   

Class Y

   

None

   

$

7.67879

     

None

   

$

23.06

   

Class Z

   

None

   

$

7.67879

     

None

   

$

22.26

   

Columbia Acorn International SelectSM

 

Class A

   

None

     

None

   

$

0.33336

   

$

21.36

   

Class B

   

None

     

None

   

$

0.18499

   

$

20.13

   

Class C

   

None

     

None

   

$

0.16026

   

$

20.00

   

Class I

   

None

     

None

   

$

0.41430

   

$

21.60

   

Class R4

   

None

     

None

   

$

0.39406

   

$

21.77

   

Class R5

   

None

     

None

   

$

0.40755

   

$

21.75

   

Class Y

   

None

     

None

   

$

0.42104

   

$

21.74

   

Class Z

   

None

     

None

   

$

0.40081

   

$

21.61

   


23



COLUMBIA ACORN FAMILY OF FUNDS

2015 YEAR-END DISTRIBUTIONS, CONTINUED

Fund

  Short-term
Capital
Gain
  Long-term
Capital
Gain
  Ordinary
Income
  Reinvestment
Price
 

Columbia Acorn SelectSM

 

Class A

 

$

0.81904

   

$

4.54092

     

None

   

$

14.14

   

Class B

 

$

0.81904

   

$

4.54092

     

None

   

$

10.98

   

Class C

 

$

0.81904

   

$

4.54092

     

None

   

$

10.66

   

Class I

 

$

0.81904

   

$

4.54092

     

None

   

$

15.57

   

Class R4

 

$

0.81904

   

$

4.54092

     

None

   

$

15.91

   

Class R5

 

$

0.81904

   

$

4.54092

     

None

   

$

15.96

   

Class Y

 

$

0.81904

   

$

4.54092

     

None

   

$

16.05

   

Class Z

 

$

0.81904

   

$

4.54092

     

None

   

$

15.45

   

Columbia Thermostat FundSM

 

Class A

   

None

     

None

   

$

0.26221

   

$

14.27

   

Class B

   

None

     

None

   

$

0.18821

   

$

14.38

   

Class C

   

None

     

None

   

$

0.15121

   

$

14.38

   

Class R4

   

None

     

None

   

$

0.29921

   

$

14.15

   

Class R5

   

None

     

None

   

$

0.30069

   

$

14.17

   

Class Y

   

None

     

None

   

$

0.30809

   

$

14.15

   

Class Z

   

None

     

None

   

$

0.29921

   

$

14.08

   

Columbia Acorn Emerging Markets FundSM

 

Class A

   

None

     

None

   

$

0.15732

   

$

10.19

   

Class C

   

None

     

None

   

$

0.06725

   

$

10.15

   

Class I

   

None

     

None

   

$

0.20056

   

$

10.21

   

Class R4

   

None

     

None

   

$

0.19455

   

$

10.27

   

Class R5

   

None

     

None

   

$

0.19696

   

$

10.26

   

Class Y

   

None

     

None

   

$

0.20416

   

$

10.17

   

Class Z

   

None

     

None

   

$

0.18855

   

$

10.20

   

Columbia Acorn European FundSM

 

Class A

   

None

     

None

   

$

0.12530

   

$

14.91

   

Class C

   

None

     

None

   

$

0.01246

   

$

14.80

   

Class I

   

None

     

None

   

$

0.17344

   

$

14.89

   

Class R4

   

None

     

None

   

$

0.16291

   

$

14.97

   

Class R5

   

None

     

None

   

$

0.16592

   

$

15.04

   

Class Z

   

None

     

None

   

$

0.16291

   

$

14.91

   


24



UNDERSTANDING YOUR EXPENSES

As a shareholder, 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 service (Rule 12b-1) 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 Class A, B, C, I, R, R4, R5, Y and Z shares of the Funds during the period. The actual and hypothetical information in the tables 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 Funds' 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 Funds' actual return) and then applies the Funds' 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.

In addition to the ongoing expenses which the Funds bear directly, Columbia Thermostat Fund's shareholders indirectly bear the Fund's allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the effective expenses paid during the period column in the "Fund of Funds" table.

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 Funds 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.

July 1, 2015 – December 31, 2015

  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

 

Columbia Acorn® Fund

 

Class A

   

1,000.00

     

1,000.00

     

921.90

     

1,019.76

     

5.23

     

5.50

     

1.08

   

Class B

   

1,000.00

     

1,000.00

     

916.60

     

1,014.47

     

10.29

     

10.82

     

2.13

   

Class C

   

1,000.00

     

1,000.00

     

918.60

     

1,016.03

     

8.80

     

9.25

     

1.82

   

Class I

   

1,000.00

     

1,000.00

     

923.40

     

1,021.48

     

3.59

     

3.77

     

0.74

   

Class R4

   

1,000.00

     

1,000.00

     

922.00

     

1,020.37

     

4.65

     

4.89

     

0.96

   

Class R5

   

1,000.00

     

1,000.00

     

923.20

     

1,021.22

     

3.83

     

4.02

     

0.79

   

Class Y

   

1,000.00

     

1,000.00

     

923.40

     

1,021.48

     

3.59

     

3.77

     

0.74

   

Class Z

   

1,000.00

     

1,000.00

     

923.20

     

1,021.17

     

3.88

     

4.08

     

0.80

   


25



UNDERSTANDING YOUR EXPENSES, continued

  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

 

Columbia Acorn International®

 

Class A

   

1,000.00

     

1,000.00

     

936.80

     

1,018.90

     

6.10

     

6.36

     

1.25

   

Class B

   

1,000.00

     

1,000.00

     

931.70

     

1,013.76

     

11.05

     

11.52

     

2.27

   

Class C

   

1,000.00

     

1,000.00

     

933.50

     

1,015.07

     

9.80

     

10.21

     

2.01

   

Class I

   

1,000.00

     

1,000.00

     

938.60

     

1,020.77

     

4.30

     

4.48

     

0.88

   

Class R

   

1,000.00

     

1,000.00

     

934.80

     

1,016.99

     

7.95

     

8.29

     

1.63

   

Class R4

   

1,000.00

     

1,000.00

     

937.80

     

1,019.81

     

5.23

     

5.45

     

1.07

   

Class R5

   

1,000.00

     

1,000.00

     

938.50

     

1,020.52

     

4.54

     

4.74

     

0.93

   

Class Y

   

1,000.00

     

1,000.00

     

938.50

     

1,020.77

     

4.30

     

4.48

     

0.88

   

Class Z

   

1,000.00

     

1,000.00

     

938.10

     

1,020.21

     

4.84

     

5.04

     

0.99

   

Columbia Acorn USA®

 

Class A

   

1,000.00

     

1,000.00

     

918.40

     

1,018.40

     

6.53

     

6.87

     

1.35

   

Class B

   

1,000.00

     

1,000.00

     

908.60

     

1,009.23

     

15.25

     

16.05

     

3.17

   

Class C

   

1,000.00

     

1,000.00

     

915.30

     

1,014.92

     

9.85

     

10.36

     

2.04

   

Class I

   

1,000.00

     

1,000.00

     

920.50

     

1,020.62

     

4.41

     

4.63

     

0.91

   

Class R4

   

1,000.00

     

1,000.00

     

919.70

     

1,019.41

     

5.56

     

5.85

     

1.15

   

Class R5

   

1,000.00

     

1,000.00

     

920.30

     

1,020.06

     

4.94

     

5.19

     

1.02

   

Class Y

   

1,000.00

     

1,000.00

     

920.30

     

1,020.27

     

4.74

     

4.99

     

0.98

   

Class Z

   

1,000.00

     

1,000.00

     

919.70

     

1,019.61

     

5.37

     

5.65

     

1.11

   

Columbia Acorn International SelectSM

 

Class A

   

1,000.00

     

1,000.00

     

951.80

     

1,017.24

     

7.77

     

8.03

     

1.58

   

Class B

   

1,000.00

     

1,000.00

     

948.70

     

1,014.12

     

10.81

     

11.17

     

2.20

   

Class C

   

1,000.00

     

1,000.00