Reports Mailed to Shareholders (registered Investment Company) (n-30b-2)

Q3 2012

Columbia Acorn Family of Funds

Class Z Shares

Managed by Columbia Wanger Asset Management, LLC

Third Quarter Report

September 30, 2012

n   Columbia
Acorn® Fund

n   Columbia
Acorn International®

n   Columbia
Acorn USA®

n   Columbia
Acorn International Select ^SM

n   Columbia
Acorn Select ^SM

n   Columbia
Thermostat Fund ^SM

n   Columbia
Acorn Emerging Markets Fund ^SM

n   Columbia
Acorn European Fund ^SM

Not FDIC insured • No bank guarantee • May lose value

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 Capital 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.

•    HSBC Smaller European Companies (inc UK) Index is a weighted combination of two indexes: the HSBC Smaller Europe (ex UK) Index and the HSBC Smaller UK Index. The index is rebalanced on a quarterly basis.

•    Lipper Indexes include the largest funds tracked by Lipper, Inc. in the named category. Lipper Mid-Cap Growth Funds Index, 30 largest mid-cap growth funds, including Columbia Acorn Fund and Columbia Acorn Select; Lipper International Small/Mid Growth Funds Index, 10 largest non-U.S. small/mid growth funds, including Columbia Acorn International; Lipper Small-Cap Growth Funds Index, 30 largest small-cap growth funds, including Columbia Acorn USA; 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 Europe, Australasia, Far East (EAFE) Index (Net) is a capitalization-weighted index that tracks the total return of common stocks in 22 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.

•    MSCI Emerging Markets Small Cap Index , a widely recognized international benchmark, is a free float-adjusted market capitalization index that is designed to measure small-cap emerging market equity performance. The MSCI Emerging Markets Small Cap Index currently consists of the following 21 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

•    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.

•    Standard & Poor's (S&P) MidCap 400 Index is a market value-weighted index that tracks the performance of 400 mid-cap U.S. companies.

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

•    S&P Emerging Markets Between $500M and $5B Index represents the institutionally investable capital of emerging market countries with market caps ranging between $500 million to $5 billion, as selected by S&P. The index currently consists of the following 21 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

•    S&P Europe Between $500M and $5B Index represents the institutionally investable capital of European countries with market caps ranging between $500 million to $5 billion, as selected by S&P. The index currently consists of the following 17 developed market country indexes: Austria, Belgium, Denmark, Finland, France, Germany, Greece, 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 representing the mid- and small-cap developed and emerging markets, excluding the United States.

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

The views expressed in the "Chattering Squirrels" and "In a Nutshell" 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 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. Columbia ^SM , Columbia Management®, and the Columbia Management Logo® are service marks owned and/or registered by Ameriprise Financial, Inc.

Estimated Year-End Distributions

To help with your tax planning, following are the estimated year-end capital gain distributions for the Columbia Acorn Funds. With the exception of Columbia Thermostat Fund, the expected record date is December 5, 2012, the ex-dividend date is December 6, 2012, and the payable date is December 6, 2012. For Columbia Thermostat Fund, the expected record date is December 20, 2012, the ex-dividend date is December 21, 2012, and the payable date is December 21, 2012. Distribution information is not final and should not be considered final until after the record date. The board of trustees will determine the actual distributions the Funds will pay.

				Short-term Capital Gains				Long-term Capital Gains
Columbia Acorn Fund					None			$	1.25 - $1.50
Columbia Acorn International					None				None
Columbia Acorn USA					None			$	2.20 - $2.45
Columbia Acorn International Select					None			$	1.95 - $2.20
Columbia Acorn Select					None			$	1.35 - $1.60
Columbia Thermostat Fund					None				None
Columbia Acorn Emerging Markets Fund					None				None
Columbia Acorn European Fund					None				None

    

*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.

Performance data shown represents past performance and is not a guarantee of future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance results reflect any fee waivers or reimbursements of Fund expenses by the investment manager (Columbia Wanger Asset Management, LLC ("CWAM")) and/or any of its affiliates. Absent these fee waivers or expense reimbursement arrangements, performance results would have been lower. Current performance may be lower or higher than the performance data shown. Please visit columbiamanagement.com for daily and most recent month-end updates.

Net asset value (NAV) returns do not include sales charges or contingent deferred sales charges (CDSC). If they were included, returns would have been lower. Class Z shares are sold only at NAV with no distribution and service (Rule 12b-1) fees. Only eligible investors may purchase Class Z shares of the Funds, directly or by exchange. Please see each Fund's prospectus for eligibility and other details. Class Z shares have limited eligibility and the investment minimum requirement may vary.

Annual operating expense ratios are stated as of each Fund's prospectus dated May 1, 2012, and differences in expense ratios disclosed elsewhere in this report may result from including fee waivers and expense reimbursements as well as different

time periods used in calculating the ratios for Class Z shares. Columbia Acorn Fund: 0.77%. Columbia Acorn International: 0.98%. Columbia Acorn USA: 1.05%. Columbia Acorn International Select: 1.25%. Columbia Acorn Select: 1.00%. Columbia Thermostat Fund has a contractual fee waiver and expense reimbursement agreement with CWAM that expires on April 30, 2013; expense ratios without and with the contractual waiver/reimbursement, including fees and expenses associated with the Fund's investments in other investment companies (underlying funds), are 1.03% and 0.90%, respectively. Columbia Acorn Emerging Markets Fund and Columbia Acorn European Fund have a contractual fee waiver and expense reimbursement agreement with CWAM that also expires on April 30, 2013; expense ratios without and with the contractual waiver/reimbursement for Columbia Acorn Emerging Markets Fund are 13.35% and 1.60%, respectively, and for Columbia Acorn European Fund are 19.02% and 1.50%, respectively. See Page 93 for more information about the Funds' fees and expenses.

†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 an investment in a fund that invests and trades directly in financial instruments under the direction of a single manager.

All results shown assume reinvestment of distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. Unlike mutual funds, indexes are not actively managed and do not incur fees or expenses. It is not possible to invest directly in an index.

On September 23, Columbia Acorn International celebrated its 20-year anniversary. The timing of the Fund's launch was auspicious: after posting a 6.9% return through December 31, 1992, even as international markets were generally down, the Fund went on in its first calendar year of operation in 1993 to return over 49%, with assets under management rising from $29 million to $906 million. By all accounts, the Fund has had a successful run. As of September 30, 2012, Columbia Acorn International was ranked the best performing (1 out of 53) equity mutual fund over 20 years in the "Global ex-USA" investment area as defined by Morningstar. ¹ However, past performance does not guarantee future results. Today the Fund has about $6.4 billion in assets under management.

As one of the largest dedicated international small-cap funds, the Fund enjoys certain advantages. One important advantage that scale provides is the ability to maintain a large and specialized analyst team. Our current 10-person team has the necessary language and other skills, time and financial resources to ferret out investment ideas wherever they might be. In the course of the last year alone, our analysts have met with over a thousand companies and spent time on the ground in dozens of countries. Our size and research firepower also allow us to construct a broad portfolio containing lots of stocks and consequently myriad data points on industry and other developments. Combined with an investment holding period comparatively long for the industry (as reflected in the Fund's historically low portfolio turnover), our size facilitates patient analysis and thoughtful decision making. Scale also confers an ability to vote large numbers of shares of our portfolio companies in the interests of our clients, and to engage in a dialogue with portfolio companies regarding the issues that matter most to us as long-term shareholders.

An annualized 11.06% return from Fund inception through September 30, 2012, equates to an eight-times multiple of investment. At the 1992 launch, the Fund used

the MSCI EAFE Index as its benchmark, which was the most widely recognized international benchmark at the time. This index returned a comparatively lower 5.51% annualized gain over this same time period. While that is still nicely ahead of inflation and therefore confers a pleasing increase in purchasing power, it equates to a multiple of merely three-times an initial investment made at the Fund's launch, reflecting how, when compounded over a long period, a spread over a benchmark makes a big difference. Today the Fund uses the S&P Global Ex-U.S. Between $500M and $5B Index as its benchmark, which better captures our small-cap orientation and inclusion of emerging market stocks. This index has returned 8.24% per annum since the Fund's inception, which equates to a multiple on invested capital from Fund launch through September 30, 2012, of about 4.9 times. A $1,000 investment in Columbia Acorn International at inception would be worth about $8,000 today, but worth only about $4,900 had one obtained instead merely the benchmark return. For this reason, we at CWAM are hyper attentive to how we do versus benchmarks. We track the returns on actual dollars that individual analysts generate, and have structured incentives so that analysts and portfolio managers are rewarded if shareholders enjoy returns net of fees that are meaningfully better than the benchmark return.

Consistency of process has also been a hallmark of the Fund over its 20-year history. While we have tried to learn from our mistakes and worked to improve our processes over the years, seeking to pay reasonable prices for growing businesses with better-than-average economics has remained a constant. By better-than-average economics, we mean high profits relative to the capital that must be tied up in the business in the form of assets, inventories and receivables. A good measure of the quality of a business can be its return on equity ("ROE"), defined as net income divided by accounting book value. The Fund's quality bias is reflected in the average ROEs of the companies that comprise it. The following table shows how, over the last 15 years (we couldn't get primary benchmark data going back 20 years), the weighted average ROE of the companies in the Fund has been substantially higher (61% on average) than that of companies

in the benchmark. Identifying high-quality businesses, however, is not enough to generate competitive returns. It is also important to buy them at the right price. The two right-hand columns in the table below demonstrate that, while we generally have had to pay a premium to the market as

measured by the price-to-earnings multiple, that premium has on average been modest (13%). Given the higher growth and quality we expect from these companies, that premium strikes us as reasonable.

September 30:				ROE Columbia Acorn International (%)				ROE benchmark (%)				P/E Columbia Acorn International (multiple)				P/E benchmark (multiple)
	1998	*			22.4				12.7				33.3				25.9
	1999	*			11.9				10.7				49.4				34.8
	2000	*			17.1				9.4				60.0				36.8
	2001	*			18.2				10.1				26.1				24.1
	2002	*			15.0				7.9				19.1				21.1
	2003	*			13.7				6.7				20.8				24.5
	2004	*			15.7				9.9				23.9				25.0
	2005	*			18.5				11.3				23.6				26.6
	2006	*			18.9				12.9				24.1				25.0
	2007	*			20.3				15.3				31.1				26.7
	2008	**			20.9				15.9				18.6				20.1
	2009	**			18.6				8.1				23.4				23.0
	2010	**			16.7				9.8				28.7				24.9
	2011	**			18.3				12.9				20.3				18.1
	2012	**			19.9				12.0				22.9				20.3
	Average over 15 years				17.7				11.0				28.4				25.1
	Premium (multiple)				1.61								1.13

These are weighted average, trailing 12-month figures.

*The primary benchmark for Columbia Acorn International was the Citigroup EMI Global ex-U.S. Index ("EMI"). EMI was added as a benchmark for Columbia Acorn International on September 30, 1997.

**The primary benchmark for Columbia Acorn International was the S&P Global Ex-U.S. Between $500M and $5B Index.

We attribute much of the Fund's success over the last 20 years to generally getting the relationship between growth, quality and cost right. We did let valuations get away from us in the 1999-2000 period, which we don't intend to repeat. High ROE businesses generally have more of their earnings available to return to shareholders as dividends or share buybacks, or to reinvest in growth, as opposed to simply maintaining their asset base.

The international investment landscape is considerably changed from what it looked like in 1992. This is particularly salient when one considers Asia. While the "Asian Tiger" economies of Hong Kong, Singapore, Taiwan and Korea attracted a great deal of attention when the Fund was launched—the Fund roughly had as much weight in Asia ex-Japan as it does now—important markets today,

such as China and India, were essentially not investable. Throughout emerging markets, ² the opportunity set was also comparatively narrow in 1992, and heavily skewed towards unexciting banks and construction companies. We have a lot more entrepreneurial companies from which to choose today, companies that enjoy leadership positions in profitable niche areas, and therefore conform more closely to the high quality, Acorn-style businesses discussed above. The next 20 years could very well be as volatile and exciting as the last 20 years. We will remain steadfast in our process, and seek to be able to report at that time an even better record of stewardship of your money.

¹   Morningstar Percentile Rankings are based on the average annual total returns of the funds in the category for the periods stated and do not include any sales charges or redemption fees, but do include 12b-1 fees and the reinvestment of

dividends and capital gains distributions. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. Rankings for each share class will vary due to different expenses. Had sales charges or redemption fees been included, total returns would be lower. Columbia Acorn International was ranked as follows. Rankings are based on funds that have an inception date of September 23, 1992, Columbia Acorn International's inception date, or older and reflect performance of the oldest share class.

As of September 30, 2012

Morningstar Category: Global ex USA				1-year				3-year				5-year				10-year				20-year
Columbia Acorn International, Class Z					20				2				1				2				1
Number of funds in category					53				53				53				53				53

  ©2012 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

²   Emerging markets today represent about a quarter of the Fund's investment universe and a quarter of the stocks in the Fund. Emerging market countries include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

2012 Shareholder Information Meeting Recap

On September 19, 2012, we held our annual Shareholder Information Meeting in Chicago. Following are highlights from your portfolio managers' presentations. While they did not present at this year's meeting, the portfolio managers of Columbia Acorn Emerging Markets Fund, Columbia Acorn European Fund and Columbia Acorn Select have provided comments to include in this recap. Data used in the presentations has been updated through September 30, 2012.

Charles P. McQuaid, Chief Investment Officer and Lead Portfolio Manager, Columbia Acorn Fund and Columbia Thermostat Fund

Columbia Acorn Fund's performance fell short of its benchmark, the Russell 2500 Index, for the 1-year period ended September 30, 2012. Fund foreign stock holdings hurt performance by 0.8% during the period, as did domestic consumer discretionary holdings, which cost the Fund nearly 1.5%. Domestic industrials were about neutral for performance this year, while telecom services stocks helped.

Looking at largest positions in the Fund, industrial stocks Ametek, Donaldson and Mettler-Toledo International occupy important niches, and all have shown excellent profitability and continue to do well fundamentally. Premium active apparel retailer lululemon athletica has generally been strong but on a roller coaster ride over the last year. It was a standout on the negative side in the second quarter, then a top contributor in the third. Due to valuation concerns and our desire to control risk, we sold about 40% of the Fund's position in lululemon athletica over the last year.

The communications tower industry is a prime example of our "downstream from technology" theme. Technology is a tough sector with lots of competition and fast product cycles. Think of cell phones. First Motorola dominated the industry, then Nokia, then Blackberry-RIM, and now Apple and Samsung. Instead of investing in these companies, we've invested downstream. Most recently, we've focused on communications towers companies, which are often local monopolies because zoning keeps out additional towers. Big wireless companies are leasing additional tower space for antennas as consumers demand more data. Crown Castle International was on the Fund's top-10 list

last year and SBA Communications has joined the list this year. Due to size and valuation, we trimmed about a quarter of the Fund's Crown Castle position over the last year but we thought SBA Communications had more upside so we added to it.

Looking at weightings by industry, the Fund continues to have its largest overweight in industrials, where we've found stocks representing what we think are good businesses at reasonable valuations. Furthermore, we've added a new theme that we call, "The Resurgence of American Manufacturing." Manufacturing unit labor costs have remained steady in the United States for a few decades, while unit labor costs are rising rapidly in many developing countries. In addition, natural gas prices are much cheaper in the United States than in most of the industrialized world, and that reduces costs for many manufacturers. We've seen examples of companies moving manufacturing to the United States, and with that manufacturing comes demand for equipment and components.

Though down from last year, Columbia Acorn Fund's next largest overweight is in consumer discretionary. While we still believe in the affordable luxury of American brands, economic problems overseas have slowed progress in several countries and some of the stocks are down as a result. We also felt that some stocks in this sector were getting expensive, so we trimmed.

The largest underweight continues to be in financials, due largely to the Fund having relatively little exposure to Real Estate Investment Trusts (REITs). REIT growth has generally been slower than other industries, and we don't think many of the stocks are cheap. We did make some purchases of insurance stocks because we believed valuations were reasonable and the insurance cycle was turning positive, but returns on capital are generally uninspiring.

Turning our attention to Columbia Thermostat Fund, we celebrated the Fund's 10-year anniversary in September. From inception through the end of September, the Fund's Class Z share performance edged out its equity benchmark, despite having lower volatility, and beat its debt benchmark.

A decade ago, firm and Fund founder Ralph Wanger noted that, historically, there have been two long-term

market phases: one he called "exponential growth," where stocks generally rise for many years, and the other he called "sine wave," where stocks are stuck in a trading range. These sine wave phases had lasted as long as 25 years. Ralph designed Columbia Thermostat Fund for a sine wave market cycle, and that is indeed what we've experienced since the Fund's inception.

Columbia Thermostat Fund buys stock funds when the market drops and sells them when the market goes up. Except for a little cash, the dollars come from, or go to, the bond funds. Thermostat's percentage of stocks has faithfully moved in the opposite direction of the market. Buying low and selling high has been effective so far in this sine wave market.

Robert A. Mohn, Director of Domestic Research, Lead Portfolio Manager, Columbia Acorn USA and Co-portfolio Manager, Columbia Acorn Fund

Columbia Acorn USA fell short of its small-cap benchmark, the Russell 2000 Index, for the one-year period ended September 30, 2012. Most of that shortfall occurred as the market surged during the fourth quarter of last year and the Fund failed to keep up. In 2012, Columbia Acorn USA's relative performance began to bounce back, and the Fund led its benchmark year-to-date through the end of September.

The Fund's best-performing sectors over the past 12 months were telecommunications and industrials. In telecom, the Fund benefitted from a heavy weight in cellular tower stocks and companies providing fiber optic connections to businesses. In industrials, the Fund had strong performers ranging from companies that manufacture dispensing systems for adhesives to companies that sell commercial lighting fixtures. The poorest-performing sectors over the past 12 months were: retailers, where too many of the Fund's larger holdings announced disappointing same-store sales results; financials, hurt by a group of our smaller, regional banks whose margins are getting squeezed by the Fed's zero interest rate policy; and health care equipment, with companies suffering from crimped capital expenditure budgets at hospitals.

I want to discuss two aspects of our research process: our team approach and our theme approach. Our domestic

research team is made up of 15 analysts organized along industry lines, each with a specialized area of expertise. What is rather unique to us is how deeply the team is involved in directly managing our flagship Columbia Acorn Fund. We think of Columbia Acorn Fund as being divided into smaller industry sector funds, each managed by one of our analysts. We internally track the performance of each analyst's sector funds and tie his or her compensation to the return the analyst achieves relative to an industry-specific benchmark. Furthermore, roughly half of our analysts are able to directly input trades for the Fund. This is why we often refer to our investment management style as a team approach. Less seasoned analysts are required to run their trading ideas by the portfolio managers, who are also responsible for industry weighting decisions and risk management.

Next, I want to elaborate on our theme approach to investing by discussing three of our current investment themes.

Orphan Drugs/Breakthrough Therapies

Our biotech analyst, Rich Watson, has concentrated his biotech holdings in a group of companies developing what are called orphan drugs. These drugs treat life-threatening diseases that only affect a small number of patients.

Why are we focused on orphans? First, they have an easier regulatory pathway through the U.S. Food and Drug Administration (FDA). Given their tiny patient populations, the FDA acknowledges that large trials are not feasible for orphan drugs and, since they treat extremely severe and unmet medical needs, the FDA is more tolerant of any side effects identified during the trial process. Second, orphan drugs have superior pricing power. Though orphan drugs are often quite expensive on an individual dosage basis, any one payor typically insures only a handful of patients with a given orphan disease so the cost is relatively small. Finally, orphan drugs have stronger patent protection, less risk of generic competition and stickier market share than traditional pharmaceuticals.

The Cloud

Traditionally, computers have operated in an on-site environment, where programs, databases and storage capacity are physically located on your site. Cloud computing takes that stuff and centralizes it, usually on a large cluster of off-site servers, where you can access your applications and

computing power through the internet. The cloud offers many benefits to computer users: it's cheaper, it's more scalable, more flexible and allows users to access huge amounts of computing power on an as-needed, pay-as-you-go basis.

Our software analyst, John Emerson, has built up investments in companies that own and manage the data centers that house the Cloud infrastructure, as well as in software companies that deliver their applications via the Cloud. These are called "software as a service" companies. Software delivered over the Cloud doesn't require on-site installation, which significantly reduces set-up costs. The time and effort required for ongoing management and maintenance of the software is also reduced, allowing companies to cut expenses and slim down their internal technology departments. Despite the obvious advantages, at the end of 2011 spending on software as a service was estimated to comprise less than 11% of the total software application market. We believe this powerful theme has a long way to go.

The Clean Theme

We began investing in our "clean theme" over 10 years ago, when our industrials analyst, Rob Chalupnik, recognized increasing global demand for cleaner inputs. These could be inputs for people, such as the air that we breathe or the water that we drink, as well as inputs for manufactured products and systems, such as engine air intakes or pharmaceutical reagents. Governmental regulation reinforces this theme, as regulatory mandates for a cleaner environment, safer food and more stringent quality control increase.

Most of our clean theme investments are in the filtration business, which has many appealing qualities. For example, a good portion of profits of these companies come from sales of replacement filters, which need to be replaced on a regular basis, in good times and in bad. Filtration companies also tend to have admirable pricing power. Another clean theme play is product inspection companies that inspect food items for contamination or test manufactured products for quality specifications.

Lead Portfolio Manager Ben Andrews and Co-portfolio Manager Robert A. Chalupnik, Columbia Acorn Select

Though we did not present at this year's Shareholder Information Meeting, we did attend and listened to what shareholders had to say. Many were concerned about U.S. deficit spending and whether it will cause high inflation in the future. The value of the dollar and the future for interest rates were also concerns.

While we consider these broader, economic problems, they reflect top-down issues that are difficult to decipher and predict. At CWAM, our analysts are what Chuck McQuaid likes to call "stock nuts." Stock nuts enjoy and get excited about analyzing and investing in companies. This is defined as bottom-up investing, an investment approach that de-emphasizes the significance of economic and market cycles and focuses on the analysis of individual stocks. As bottom-up investors, we focus our attention on a specific company rather than on the industry in which that company operates or on the economy as a whole. The bottom-up approach assumes that fundamentally strong companies can do well even in an industry that is struggling. This is the opposite of top-down investing. Top-down investing looks at the "big picture" in the economy and financial world and then breaks those components down into finer details. The top-down approach can be useful in determining the most promising sectors in a given market, but we have found that with top-down analysis, the bigger the picture you're trying to analyze, the more complicated it gets. Interest rates or inflation trends are huge, dynamic problems that are extremely difficult to predict with any sort of accuracy.

But investors are right to question the impact big-picture problems may have on their investment in the Funds. Long-term deficit spending has made the economic equation much more complicated now than in years past. Consider the U.S. Federal Reserve's quantitative easing programs. The Fed has bought $3 trillion of U.S. treasuries and mortgages, which amounts to more than 20% of the United States' debt obligations. ¹ What could be the repercussions of this move? Most would think that such excess government borrowing and market manipulation will raise interest rates and inflation. But if we look at Japan, which

has arguably been in one of these balance sheet recessions ² for many years now, there is little evidence of inflation. Japan's government debt is more than two-times its GDP, and they are experiencing more of a deflationary spiral. In the United States, the inflationary path seems more likely, though deflationary signs are present as well. It's also possible the United States won't experience either of these if solid growth of 3%-plus per year can be restored to the economy.

If the United States experiences inflation, precious metals, farmland, timberland, some real estate, and solid growth stocks may hold up in that environment. If the United States experiences deflation, cash, debt instruments (if the borrowers remain solvent), foreign investments in more stable markets and solid growth stocks, especially ones that pay a dividend (the stock's valuation multiple will initially contract, but it should rebound over time), could perform okay. Common to both of these scenarios is solid growth stocks, which is what CWAM analysts look for as bottom-up investors.

P. Zachary Egan, Director of International Research, Co-portfolio Manager, Columbia Acorn International and Columbia Acorn Emerging Markets Fund

September 23, 2012, marked the 20th anniversary of the launch of Columbia Acorn International. It is hard to exaggerate how much has changed in international politics and economics over the last 20 years. Curious about what the Fund looked like in the early days, I pulled some of the early annual reports and ran some performance comparisons. I discovered the following:

•   Many of the companies that were held at Fund inception, particularly in Europe, are no longer publicly traded. Many were either acquired or merged. Some are now large-cap companies.

•   The best performing stock in the Fund's history has been UK energy company Tullow Oil, up 20-times. We bought it almost 11 years ago and still hold it today.

•   The worst performing stock was Fu Ji Food and Catering Services, a Chinese outsourced office canteen operator that ended in an accounting scandal and was a complete loss.

•   And, while we hate losing money, the disparate outcomes of these two investments highlights one of the attractions of investing in growth companies: you can make 20-times your money, but only lose 1-time your money.

•   Japan was the worst performing market over the Fund's history. At the outset of the Fund, Japan was massively over-valued and then suffered an unwinding of a property bubble.

•   Scandinavian markets, which are mature economies with aging populations, were the best-performing markets for the Fund, underscoring that high GDP growth is less correlated with stock market returns than one might expect, though these markets had suffered through a banking crisis in the early '90s.

While doing my research, I was most struck by Ralph Wanger's commentary in the Fund's 1993 annual report. Investment commentary seldom holds up for even a few years, let alone 19, and it makes his words particularly noteworthy:

"Amazing things have been happening in the world. Over only a five-year time period, a majority of the world's population has gone from some form of socialism or state control toward free markets."

While that was not news to anybody at the time, succinctly identifying the single thing that will matter most to investors over a long period of time is not easy to do. When I consider how our Fund is positioned today, at a high level, it is this very same political/economic transformation, with origins in the late '80s and early '90s, that grounds many of the investment themes and ideas in the Fund.

This transformation is behind the integration of China, Central and Eastern Europe, and, to a lesser extent, India into the global production system. China's subsequent demand for resources brought a three-decade bear market in commodities to an end, which had huge repercussions for resource-based economies in Latin America and elsewhere. In India, after the dissolution of the Soviet Union took the shine off that economic model, economic liberalization, which started in 1992, removed constraints behind the 3% "Hindu rate of growth," in what used to be a highly insular economy. Finally, across much of Asia, this transformation

ultimately drove a marked increase in disposable incomes, resulting in the emergence of an entire continent of new consumers hungry for Western brands.

From a 40,000 foot view, this geopolitical change is still one of the biggest engines of growth in the global economy. Much of the Fund's investments ultimately tie to the movement of goods, capital, labor or ideas between high-income societies in the West and Japan on the one hand, and low cost, industrializing, urbanizing societies on the other. The uneven development of capitalism and free markets in the 20th century resulted in highly dissimilar levels of productivity and, with it, wages and living standards. As firms now invest to take advantage of these dissimilarities, they grow, as do the economies in which they operate, which makes everybody on average richer.

This gradual convergence in productivity levels between "the West" and the rest, referred to as the "Great Convergence" by Financial Times journalist Martin Wolf, is making emerging societies richer. But the magnitude of these changes is not always fully appreciated. This change has expanded the ranks of consumers to whom packaged foods, leisure activities and luxury goods are affordable.

Another group of clear beneficiaries, however, are Western industrial companies that are facilitating the convergence by supplying sophisticated factory automation to Asian producers or complex logistics systems that tie producers into global supply chains. These companies control innovative products and processes not easily replicated by the Chinese and Indians. Western companies have an advantage in the form of a highly educated workforce, but also in the form of high production, and high environmental and safety standards that are eventually sought by emerging market customers. Industrial companies represent about a quarter of the Fund's assets, and many of them—largely from Europe and Japan—fit into this bucket.

In short, the big geopolitical change, which Ralph emphasized almost 20 years ago, arguably remains the most important feature of our investment landscape, and it's likely that capital will continue to flow into developing regions, driving productivity convergence with already industrialized economies, and generating a lot of opportunity for investors along the way.

Christopher J. Olson, Lead Portfolio Manager, Columbia Acorn International Select

Columbia Acorn International Select performance for the one-year period through September 30, 2012, more than doubled that of its benchmark, the S&P Developed Ex-U.S. Between $2B and $10B. Though up only slightly, the Fund's positive gain for the five-year period also outpaced the benchmark. The past one- and five-year periods have been characterized by a tremendous amount of volatility and economic uncertainty and I do not expect these influences to diminish in the near future.

With volatility expected to continue, you may wonder what is in store for the Fund. We closely consider the risks we are taking in the Fund's individual investments and in the portfolio as a whole. We believe that holding a portfolio of carefully researched and considered stocks should give the Fund good returns with a reasonable risk profile. It is important to manage that risk/reward balance over time to determine how long to hold a given stock.

Given the concentrated nature of the Fund, it is also important to carefully consider the larger risks that may be inherent in the portfolio, such as economic, political, country, industry, balance sheet and beta risks. While an investment may make sense on an individual level, the portfolio as a whole can take on different risk characteristics as a result of one investment.

In recent years, I've taken the view that there is much more risk inherent in the global financial system than the market believes. As a result, I've had a bias toward companies with high cash flow and dividend yields, visible earnings streams, solid and less complicated balance sheets, and businesses with good competitive positions. At the same time, I've also had a bias for regions with stronger government finances, less public debt and healthier banking systems.

The Fund's top 10 holdings reflect these themes. Taiwanese mobile telecom operators, Far EasTone and Taiwan Mobile are benefiting from the strong move to smartphones and the increasing data usage that accompanies such a transition. The mobile telecom market in Taiwan has only a few significant players, limiting competition. These are also cash-rich businesses with little debt. When purchased for the Fund in the second half of 2011,

these stocks yielded about 6% to 7% and currently yield in the 5% to 6% range. From a bottom-up perspective, these are attractive investments. From a macro perspective, they are located in an attractive environment. While Taiwan is susceptible to a slowdown in exports, its government is constitutionally limited to 40% government debt as a percent of GDP, the political situation looks stable for now, and the financial system is well regulated and relatively strong, after Taiwan learned its lesson during the Asian Crisis of the 1990s.

Another area represented in the Fund's largest holdings is Singapore REITs as highlighted by investments in Ascendas REIT, which was first added to the portfolio in May 2009, and Mapletree Industrial Trust, which was added in May of 2011. When bought, these stocks had dividend yields over 7% and are still currently around 6%, which, in a low interest rate world, is remarkable. And, they aren't the most risky businesses. During the 2008 financial crisis, occupancy rates for properties held by the REITs barely went down and the REITs were easily able to fund their debt when the markets were closed to many other participants. Singapore has a very pro-business environment with low tax rates, minimal regulations, a budget surplus, no net government debt, and a well-run banking system. It is no wonder that multinational companies are increasingly moving there, driving strong demand for property.

If we step back and look at the overall portfolio, where are the major risks to performance? The main one is possibly its more defensive nature. If real and/or nominal economic growth takes off and the markets rally, there is a risk that the Fund will lag its benchmark and competition. However, looking around the world, most data shows poor economic trends. I believe that we are unlikely to see a strong increase in growth. In fact, in many cases, the trends are worsening.

Central bank intervention could fuel a recovery and dampen the Fund's relative performance. At any sign of weakness over the past four years, central banks have stepped in to print money in an attempt to restart the financial markets and economies. In order to hedge fiscal policy risks to Fund performance, I greatly increased the Fund's weight in gold and silver mining stocks. These companies had languished for quite some time and had been trading at multiples far below

historical averages. We found a number of companies that made sense to invest in from the bottom up even if precious metal prices didn't rise. Goldcorp and Fresnillo, which show up in the top 10 holdings, are two of those.

Lead Portfolio Managers Fritz Kaegi and Stephen Kusmierczak, Co-portfolio Managers P. Zachary Egan and Louis J. Mendes, Columbia Acorn Emerging Markets Fund

A year ago, we described our investment process. With the Fund now over a year old, let's review its current positioning.

We have a team of 10 international analysts, each with a regional or sector coverage area. The analyst drives stock selection in the coverage area. We evaluate each analyst's performance by comparing the returns of the stocks selected versus the performance of all the stocks in his or her coverage area. Six of these analysts are also portfolio managers of a Columbia Acorn Fund.

Analysts' bottom-up stock selection drives the Fund's sector and regional weights—portfolio managers do not make a top-down sector or region tilt. The portfolio managers do track whether the Fund is leaning in one direction, or unintentionally making repeated bets on the same factor. We work together to appropriately size positions and triage ideas, generally (but not always) aiming for a minimum position size of 1% of the Fund for each holding.

The Fund's key tilt is toward consumer discretionary, with a sizable underweight in financials. Since September 2011, consumer discretionary has increased from 21% of the Fund to 30% as of September 30, 2012, while the benchmark weight has remained at about 15%. The Fund's consumer discretionary holdings are mostly retailers, casino operators and media stocks. In emerging markets, these companies can benefit from powerful competitive advantages, attractive incremental economics and growth drivers that are largely local, rather than global.

Growth is particularly important in valuing these companies, so they tend to trade at higher earnings multiples. In 2012, our holdings performed well but most are trading at higher earnings multiples than a year ago. These valuations get close scrutiny from us; we are spending a lot of time tracking growth trends, sustainable growth rates and

competitive conditions to make sure prices do not get ahead of reasonable expectations for growth.

In financials, the Fund's underweight relative to the benchmark is up from 9% last year to 13% at September 30, 2012. We are not making a top-down call on financials. Rather, our analysts individually see businesses—mostly banks—with little sustainable competitive advantage and transparency, and with much risk. Note that three financials (Rand Merchant Insurance, Coronation Fund Managers, and Halyk Savings Bank of Kazakhstan) are in our top 10 holdings because we like their competitive advantages. The Fund's financial holdings delivered a 37% return for the one-year period ended September 30, 2012, while financials in the benchmark rose 24% (against a rise in the benchmark itself of 18.53%). This demonstrates why we don't want top-down calls by portfolio managers to override our analysts' bottom-up assessments.

In regional terms, the Fund is 7% overweight in Southeast Asia and 10% underweight in Latin America. ³ We like the local demand drivers and macro fundamentals in Southeast Asia, but our holdings' management teams and powerful business models were decisive to our positioning. In the case of Latin America, the Fund's underweight does not result from a negative opinion on the region. We do have three analysts that look closely at the area; we just haven't found enough good companies selling at attractive valuations in that region.

Lead Portfolio Manager Andreas Waldburg-Wolfegg and Co-portfolio Manager Stephen Kusmierczak, Columbia Acorn European Fund

We noted last year that launching the new Columbia Acorn European Fund in the middle of the ongoing European economic crisis seemed an odd proposition, yet we also maintained that there were good opportunities for stock picking in the region. We are pleased to report that Columbia Acorn European Fund outperformed its benchmark, the S&P Europe Between $500M and $5B Index, by 179 basis points over the last 12 months, gaining 21.00% versus the benchmark's 19.21% increase. Since inception on August 19, 2011, the Fund was up 12.32% against a benchmark gain of 9.09%. Despite an environment of substantial macroeconomic uncertainty, this performance

has been achieved by focusing on companies and their businesses, not by trying to out-guess the political and economic strategists on the likelihood of a Greek exit from the Eurozone.

The European investment team, like the larger international team at Columbia Wanger Asset Management (CWAM) of which it is a part, is mostly composed of generalist investors. This means that CWAM's international analyst responsibilities are largely apportioned by geography. We are not committed or required to maintain the same sector or country weights as our benchmark and instead construct the portfolio stock by stock, from the bottom up. Our decision to invest in a certain company and determining its proper weighting in the portfolio are the result of fundamental analysis. We believe we can gain an edge by organizing and analyzing information about small companies, rather than trying to decipher the intricacies of Europe's complex and diversified economy.

The result of this stock-picking strategy is a European portfolio that is overweight companies listed in France and Germany. We admittedly do not know what policies the new Hollande government will implement in France, yet our two largest holdings in the Fund are French-listed companies incorporated in the Netherlands and in Luxembourg. Gemalto is a leader in smart chip technology used in pin-chip credit cards and mobile phone electronic payments, while Eurofins Scientific is a supplier of food, pharmaceuticals and materials testing services. If we had steered the portfolio based on a perceived negative election result in France, we would have missed the over 85% return in our two biggest names. Instead, our analyst determined that these companies should benefit from trends that are easier to identify and measure, such as the growth in electronic payments and the increasing focus on food and product safety. Similarly, our fifth largest holding, Wirecard, is a provider of online payment processing and risk management. Our investment is not intended as a bet on German GDP growth. Rather, our analyst believes that Wirecard should be a major beneficiary of the growth in e-commerce. The stock gained over 50% in the 12 months ended September 30, 2012.

While the macroeconomic situation is still highly uncertain, we continue to believe that there are great

opportunities to invest in European companies by following CWAM's careful and disciplined investment approach.

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 in "Chattering Squirrels" are those of the authors and not of the Columbia Acorn Trust Board, 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.

Stocks of small- and mid-cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. A fund that maintains a relatively concentrated portfolio may be subject to greater risk than a fund that is more fully diversified.

¹   Additional data available on the Federal Reserve Bank of St. Louis website at http://research.stlouisfed.org/publications/usfd/20121005/usfd.pdf.

²   Koo, Richard C., The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession, (Singapore, John Wiley & Sons (Asia) Pte. Ltd., 2008).

³   Country weights can be found on Pages 82 and 83.