Columbia ETF Trust - Columbia Management

Portfolio Managers’ Report – Columbia Concentrated Large Cap Value Strategy Fund
For the 12-month period that ended October 31, 2011, the fund returned 2.03% at net
asset value. It lagged the 6.16% gain of the Russell 1000 Value Index. Subsequent to
the acquisition of Grail Advisors, LLC (the fund’s previous investment manager) by
Columbia Management Investment Advisers, LLC in May 2011, new managers took
over management of the fund and restructured the portfolio of investments. The
portfolio managers substantially reduced the number of holdings, focusing on a
portfolio of approximately 35 stocks of companies which had attractive valuations and
which the managers believed could improve their earnings over time against a
backdrop of a slowing growing economy. However, the fund’s investments in out-offavor
financials stocks generally held back results. The following discussion of
performance focuses on the period since May 2011.
Weaker economic prospects weighed on the markets
As the impact of Japan’s first-quarter natural disasters worked its way through the
global supply chain and Europe scrambled, once again, to prop up debtor
nations—notably Greece—the pace of economic growth slowed around the world. In
the United States, unfriendly spring and summer storms cut a swath of destruction
across the Midwest, the South and eastern coastal states, and Washington wrangled
over the deficit and the federal debt ceiling. The combined effect of both global and
domestic concerns weighed on investors and weakened consumer confidence.
Against this backdrop, the U.S. economy expanded at a modest 1.6% over the past 12
months, as measured by gross domestic product (GDP). Growth was solid in the fourth
quarter of 2010 but fell sharply in the first quarter of 2011, as the housing market
continued its five-year slide and the job market disappointed with fewer-than-expected
new jobs and a stagnant unemployment rate. Just as recession fears began to mount,
growth rebounded in the second quarter of 2011, and a rise in the number of
advertised job openings offered hope for the labor markets. However, a downtick in
manufacturing activity in recent months continued to dampen prospects for the
remainder of the year.
General stock-picking led to improved results
Good overall stock selection helped propel the improved results over the period’s final
months. Top performers since Columbia assumed portfolio management included:
Humana, a health care benefits manager; discount retailer Costco; and up-scale retailer
Nordstrom. Humana’s share price had been at a low level because of market fears
about the effects of new national health care legislation. However, investors started to
recognize that companies such as Humana would play key roles in any health care
reform. At the same time, Humana continued to meet its earnings targets and its share
price rebounded. Costco, which operates big-box retail outlets offering discounted
prices, exceeded its earnings targets as increasingly price-conscious shoppers sought
out the values. Costco also benefited from a strong management team operating in the
fastest-growing segment of the retail industry. Department store chain Nordstrom’s
share price had fallen amid fears that the economic climate would permanently erode
Performance data quoted represents
past performance and current
performance may be lower or higher.
Past performance is no guarantee of
future results. The investment return
and principal value will fluctuate so
that shares, when redeemed, may be
worth more or less than the original
cost. Please visit
www.columbiamanagementetf.com
for daily and most recent month-end
performance updates.
Top 10 Holdings*
As of 10/31/11 (%)
Wells Fargo & Co. 3.9
Tyson Foods, Inc. 3.7
Bristol-Myers Squibb Co. 3.6
Humana, Inc. 3.6
U.S. Bancorp 3.4
Union Pacific Corp. 3.3
Altria Group, Inc. 3.2
General Mills, Inc. 3.2
Nordstrom, Inc. 3.2
Unum Group 3.1
*Percentages are based upon net assets. For further
detail about these holdings, please refer to the section
“Investment Portfolio.” Holdings are subject to change.
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