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WHO KNEW? COOL INFORMATION IN YOUR SHAREHOLDER REPORT

Twice a year, mutual fund shareholders receive detailed information of how their investment is doing. The report that covers a six-month period is called a semiannual report. An annual report covers a 12-month period. By reading these shareholder reports carefully, a shareholder can learn a lot about the fund, as well as the stock market and the economy. Here are some of the key features in these reports that a shareholder won't want to miss.

President's Letter. Many reports often begin with a letter from the fund's president. This letter often gives the big picture for the period covered by the report - either six or 12 months. Sometimes the letter will highlight news about the stock market or the economy. Other times it will announce news about the fund itself.

Portfolio Managers' Report. This section is the heart of the story. It begins with information about how much money the fund made (or lost) during the reporting period. This number is called the fund's "total return."1 There is a total return for a broad-based index, which is also known as the fund's benchmark. Although an index may track the performance of different stocks than those owned by the fund, by comparing the total return for the index with the return for the fund, you can see how the fund did compared to a larger part of the stock market.

In their report, the portfolio managers may also list some of the stocks in the fund that helped to improve its return as well as investments that may have hurt the return. They may also discuss stocks that were bought or sold during the reporting period and why they made those trades.

Average annual total return. Want to know how the fund has performed over a longer period of time? This section is for you. Here there are two types of returns. There's the average annual total return, which is a percentage that represents the average yearly return for the following time periods: 1 year, 5 years and 10 years, if the fund has been around that long. If the fund hasn't existed for 10 years, the chart will also give the average annual total return for the fund since it began. This percentage may be labeled as "since inception" or "life of fund." In a semiannual report, this chart will also include a cumulative return for the six-month period. A cumulative return is the percentage by which the fund has grown or shrunk during that time. Cumulative returns are only reported for periods less than one year.

Performance of a $10,000 Investment. If you had invested $10,000 into the fund when it first started or 10 years ago, whichever is shorter, this graph shows what your investment might have been worth at the end of the reporting period. It also shows the growth of a $10,000 investment in the fund's benchmark over the same time period. By comparing the two examples, shareholders can see how the same investment did in the fund as well as in the broader stock market. This is another way to measure the fund's performance over the long term.

When you look at these figures, it is important to remember two things. First, a fund's past performance is not an indicator that the fund's investment returns will follow the same path in the future. Investment returns will go up and down. Second, it is not possible to invest directly in an index. Finally, an index does not have fees and expenses like a mutual fund. These costs are deducted from the total value of the fund before returns are calculated.

Top 10 Holdings. Some stocks take up a larger part of a fund's portfolio. This section of the report lists the 10 stocks that were the fund's biggest investments. Pay attention, because price changes in these stocks have a significant impact on the portfolio's performance. Also, because portfolio managers review a fund's portfolio on a daily basis and make decisions to buy and sell stock based on their daily reviews, the top holdings will change over time.

Investment Portfolio. Want to know exactly what stocks are in the fund? This section lists them all, along with the number of shares the fund owns of each stock and the value of those shares on the last day of the reporting period.

 

Our article "Understanding Total Return" provides more information on this term.



 
 
Please consider the objectives, risks, charges and expenses of any Columbia fund carefully before investing. Contact your financial advisor for a prospectus, which contains this and other important information about the fund. You should read it carefully before investing.