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: 811-3009
Columbia Funds Trust II
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(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
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Date of fiscal year end: 03/31/05
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Date of reporting period: 03/31/05
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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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Columbia
Money Market Fund
ANNUAL REPORT
MARCH 31, 2005
[PHOTO OF WOMAN SMILING]
TABLE OF CONTENTS
FUND PROFILE ................................ 1
UNDERSTANDING YOUR EXPENSES ................. 2
ECONOMIC UPDATE ............................. 3
PORTFOLIO MANAGER'S REPORT .................. 4
FINANCIAL STATEMENTS ........................ 6
INVESTMENT PORTFOLIO ..................... 7
STATEMENT OF ASSETS AND LIABILITIES ...... 13
STATEMENT OF OPERATIONS .................. 14
STATEMENT OF CHANGES IN NET ASSETS ....... 15
NOTES TO FINANCIAL STATEMENTS ............ 17
FINANCIAL HIGHLIGHTS ..................... 22
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM ................... 26
TRUSTEES .................................... 27
OFFICERS .................................... 29
BOARD CONSIDERATION AND
APPROVAL OF INVESTMENT
ADVISORY AGREEMENT ....................... 30
IMPORTANT INFORMATION
ABOUT THIS REPORT ........................ 33
PRESIDENT'S MESSAGE
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COLUMBIA MONEY MARKET FUND
[Photo of Christopher Wilson]
DEAR SHAREHOLDER:
In 2004, Columbia Funds became part of the Bank of America family, one of the
largest, most respected financial institutions in the United States. As a direct
result of this merger, a number of changes are in the works that we believe may
offer significant benefits for our shareholders. Plans are underway to combine
various Nations Funds and Columbia Funds together to form a single fund family
that covers a wide range of markets, sectors and asset classes under the
management of talented, seasoned investment professionals. As a result, some
funds will be merged in order to eliminate redundancies and fund management
teams will be aligned to help maximize performance potential. You will receive
more detailed information about these proposed mergers, and you will be asked to
vote on certain fund changes that may affect you and your account. In this
matter, your timely response will help us to implement the changes in 2005.
The increased efficiencies we expect from a more streamlined offering of funds
may help us reduce fees charged to the funds, because larger funds often benefit
from size and scale of operations. For example, significant savings for the
combined complex may result from the consolidation of certain vendor agreements.
In fact, we recently announced plans to consolidate the transfer agency of all
of our funds and consolidate custodial services, each under a single vendor. We
have also reduced management fees for many funds as part of our settlement
agreement (See Note 5 in the Notes to Financial Statements) with the New York
Attorney General.
As a result of these changes, we believe we will offer shareholders an even
stronger lineup of investment options, with management expenses that continue to
be competitive and fair. What will not change as we enter this next phase of
consolidation is our commitment to the highest standards of performance and our
dedication to superior service. Change for the better has another name: it's
called improvement. It helps move us forward, and we believe that it represents
progress for all our shareholders in their quest for long-term financial
success. In the pages that follow, you'll find a discussion of the economic
environment during the period followed by a detailed report from the fund's
manager or managers on key factors that influenced performance. We hope that you
will read the manager reports carefully and discuss any questions you might have
with your financial advisor. As always, we thank you for choosing Columbia
Funds. We appreciate your continued confidence. And, we look forward to helping
you keep your long-term financial goals on target in the years to come.
Sincerely,
/s/ Christopher Wilson
Christopher Wilson
Head of Mutual Funds, Columbia Management
Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible
for the day-to-day delivery of mutual fund services to the firm's investors.
With the exception of distribution, Chris oversees all aspects of the mutual
fund services operation, including treasury, investment accounting and
shareholder and broker services. Chris serves as Columbia Management's liaison
to the mutual fund boards of trustees. Chris joined Bank of America in August
2004.
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
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NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
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FUND PROFILE
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COLUMBIA MONEY MARKET FUND
SUMMARY
o FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, THE FUND'S CLASS A SHARES
RETURNED 1.01%.
o MONEY MARKET YIELDS MOVED HIGHER DURING THE PERIOD FOLLOWING A SERIES OF
SHORT-TERM INTEREST RATE INCREASES BY THE FEDERAL RESERVE.
o THE FUND'S POSITIONS IN FLOATING RATE NOTES AIDED RELATIVE PERFORMANCE.
CLASS A SHARES LIPPER MONEY MARKET FUNDS CATEGORY
1.01% 0.91%
OBJECTIVE
Seeks maximum current income consistent with capital
preservation and the maintenance of liquidity.
TOTAL NET ASSETS
$483.3 million
The information below gives you a snapshot of your fund at the end of the
reporting period. Your fund is actively managed and the composition of its
portfolio will change over time.
PORTFOLIO BREAKDOWN AS OF 03/31/05 (%)
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CORPORATE FIXED-INCOME BONDS & NOTES 41.8
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COMMERCIAL PAPER 19.0
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GOVERNMENT AGENCIES & OBLIGATIONS 18.0
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MUNICIPAL BONDS 10.6
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CERTIFICATES OF DEPOSIT 9.5
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SHORT-TERM OBLIGATION 0.1
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PORTFOLIO MATURITY AS OF 03/31/05 (%)
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1-4 DAYS 1.8
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5-14 DAYS 42.0
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15-29 DAYS 30.6
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30-59 DAYS 9.3
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MORE THAN 59 DAYS 16.3
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Portfolio breakdown is calculated as a percentage of net assets. Portfolio
maturity is calculated as a percentage of total investments.
1
UNDERSTANDING YOUR EXPENSES
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COLUMBIA MONEY MARKET FUND
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
o FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM COLUMBIA FUNDS
SERVICES, INC., YOUR ACCOUNT BALANCE IS AVAILABLE ONLINE AT
WWW.COLUMBIAFUNDS.COM OR BY CALLING SHAREHOLDER SERVICES AT 800.345.6611
o FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE
FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE
1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT
BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6
2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD,"
LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE
COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1.
YOUR ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING
THE PERIOD
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees, Rule 12b-1 fees, and other fund expenses. The
information on this page is intended to help you understand your ongoing costs
of investing in the fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class during the reporting period.
The information in the following table is based on an initial investment of
$1,000, which is invested at the beginning of the reporting period and held for
the entire period. Expense information is calculated two ways and each method
provides you with different information. The amount listed in the "actual"
column is calculated using the fund's actual operating expenses and total return
for the period. The amount listed in the "hypothetical" column for each share
class assumes that the return each year is 5% before expenses and includes the
fund's actual expense ratio. You should not use the hypothetical account values
and expenses to estimate either your actual account balance at the end of the
period or the expenses you paid during this reporting period.
10/01/04 - 03/31/05
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ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%)
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ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
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CLASS A 1,000.00 1,000.00 1,007.28 1,020.84 4.10 4.13 0.82
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CLASS B 1,000.00 1,000.00 1,002.29 1,017.40 7.54 7.59 1.51
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CLASS C 1,000.00 1,000.00 1,005.29 1,019.00 5.95 5.99 1.19
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CLASS Z 1,000.00 1,000.00 1,007.23 1,020.84 4.10 4.13 0.82
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Expenses paid during the period are equal to the fund's annualized expense
ratio, multiplied by the average account value over the period, then multiplied
by the number of days in the fund's most recent fiscal half-year and divided by
365.
Had the Investment Advisor and Distributor not waived or reimbursed a portion of
Class B and Class C shares' expenses, Class B and Class C shares' total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
COMPARE WITH OTHER FUNDS
Since all mutual fund companies 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 fund with other funds. To do so,
compare the 5% 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 continuing cost of investing in a fund and do not reflect
any transactional costs, such as sales charges or redemption or exchange fees.
2
SUMMARY:
FOR THE 12-MONTH PERIOD
ENDED MARCH 31, 2005
o THE FEDERAL FUNDS RATE ROSE FROM 1.0% TO 2.75%, SENDING MONEY MARKET YIELDS
HIGHER DURING THE PERIOD.1
o BONDS CHALKED UP MODEST GAINS AS MEASURED BY THE LEHMAN BROTHERS AGGREGATE
BOND INDEX. HIGH-YIELD BONDS LED THE FIXED-INCOME MARKETS, AS MEASURED BY
THE MERRILL LYNCH US HIGH YIELD, CASH PAY INDEX. HOWEVER, THEY GAVE BACK
SOME OF THEIR RETURN IN THE LAST MONTHS OF THE PERIOD.
LEHMAN INDEX MERRILL LYNCH INDEX
1.15% 6.79%
o STOCKS OUTPERFORMED BONDS, AS MEASURED BY THE S&P 500 INDEX. MOST OF THE
PERIOD'S GAINS WERE GENERATED DURING A FOURTH-QUARTER RALLY IN 2004.
S&P 500 INDEX
6.69%
The Lehman Brothers 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, non-convertible investment
grade corporate debt issues with at least $250 million par amount outstanding
and with at least one year to final maturity.
The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that
tracks the performance of non-investment-grade corporate bonds.
The S&P 500 Index is an unmanaged index that tracks the performance of 500
widely held, large capitalization US stocks.
1 On May 3, 2005, the fed rate was raised to 3.00%.
ECONOMIC UPDATE
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COLUMBIA MONEY MARKET FUND
The US economy moved ahead at a healthy pace during the 12-month period that
began April 1, 2004 and ended March 31, 2005. Gross domestic product (GDP)
expanded at an estimated annualized rate of 3.5%, as job growth helped buoy
consumer spending and rising profits boosted business spending. Higher energy
prices put something of a damper on growth as the period wore on - enough to
slow the pace of growth to 3.1% in the first quarter of 2005, yet not enough to
raise any serious concerns about the health of the current expansion.
Job growth dominated the economic news and drove consumer confidence readings
that moved up and down, depending on the number of new jobs reported. Overall,
consumers remained significantly more optimistic about the prospects for the
economy and about their own employment than they were a year ago.
Consumer spending grew during the period, as retail sales and the housing market
remained strong. The business sector also contributed to the economy's solid
pace. Yet, business spending was not as robust as expected, given a maturing
economic cycle, two straight years of double-digit profit growth and a
significant build-up of cash on corporate balance sheets.
MONEY MARKET YIELDS RISE
After a year of the lowest short-term interest rates in recent history, the
Federal Reserve Board (the Fed) raised the federal funds rate, a key short-term
rate, from 1.0% to 2.75% in seven one-quarter percentage point steps during the
period. The Fed indicated early on that it would continue to raise short-term
interest rates at a "measured pace," in an attempt to balance economic growth
against inflationary pressures. So far, it has kept its word. However, the Fed
left the door open for more aggressive action in remarks made on the economy and
inflation when it met in March.
BONDS DELIVER MODEST GAINS
The US bond market delivered a positive return, despite rising interest rates in
the final six weeks of the period. The yield on the 10-year Treasury note, a
bellwether for the bond market, rose above 4.5%, and sent bond prices down.
However, it settled just below 4.5% at the end of the period.
In this environment, the Lehman Brothers Aggregate Bond Index returned 1.15% for
the 12-month period. Municipal bonds did even better than investment-grade
taxable bonds as state revenues strengthened and fiscal constraints helped many
states balance their budgets. The Lehman Municipal Bond Index returned 2.67%.
High-yield bonds led the fixed-income markets, as a stronger economy resulted in
improved credit ratings, stronger balance sheets and higher profits for many
companies in the high-yield universe. The Merrill Lynch US High Yield, Cash Pay
Index returned 6.79%. However, the riskiest bonds were the hardest hit when the
bond market pulled back, and high-yield bonds gave back some of their gains in
the final months of the period.
STOCKS OUTPERFORMED BONDS
Buoyed by strong gains in the fourth quarter of 2004, the S&P 500 Index returned
6.69% for the period. Returns were lackluster throughout most of 2004, but most
segments of the stock market bounced back after the presidential election was
settled in November. However, stocks retreated early in 2005, as rising energy
prices and higher interest rates turned investors cautious once again. Small and
mid-cap stocks did significantly better than large-cap stocks, and value stocks
led growth stocks by a significant margin. Energy and utilities were the best
performing sectors.
3
DISTRIBUTIONS DECLARED PER SHARE
04/01/04 - 03/31/05 ($)
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CLASS A 0.010
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CLASS B 0.003
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CLASS C 0.006
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CLASS Z 0.010
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7-DAY YIELDS ON 03/31/05 (%)
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CLASS A 1.98
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CLASS B 0.98
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CLASS C 1.58
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CLASS Z 1.98
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30-DAY YIELDS ON 03/31/05 (%)
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CLASS A 1.90
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CLASS B 0.90
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CLASS C 1.50
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CLASS Z 1.89
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The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period.
Performance data quoted represents past performance and current performance may
be lower or higher. Past performance is no guarantee of future investment
results. The investment return and principal value will fluctuate so the shares
may be worth more or less than the original cost. Please visit
www.columbiafunds.com for daily and most recent month-end performance updates.
PORTFOLIO MANAGER'S REPORT
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COLUMBIA MONEY MARKET FUND
For the 12-month period ended March 31, 2005, Columbia Money Market Fund class A
shares returned 1.01%. The fund's return was higher than the average return of
its peer group, the Lipper Money Market Funds Category, which was 0.91% for the
same period.1 The fund was aided during the period by its significant position
in variable and floating rate securities.
THE FED SETS THE TONE
The period was characterized by the Federal Reserve's push to raise short-term
interest rates in an effort to balance economic growth and potential inflation.
Altogether, the Fed raised the federal funds rate by 1.75 percentage points in a
series of seven quarter-point hikes that began in June of 2004. Prior to that
time, rates had been kept low in an effort to stimulate the economy, but the Fed
shifted its stance once steady economic growth had taken hold.
While higher money market yields are a favorable outgrowth of the Fed's policy,
the transition to higher rates poses special challenges to money market funds.
Our most important response to the Fed's policy shift was to significantly lower
the weighted average maturity of the fund. We lowered the weighted average
maturity from 45 days on March 31, 2004, to just 30 days on March 31, 2005. By
keeping investments ultra-short, we positioned the fund to reinvest at higher
rates following each Fed intervention as well as to minimize the fund's exposure
to securities whose value declines as newer, higher-yielding securities hit the
market.
FLOATING RATE NOTES AID PERFORMANCE
Throughout the past 12 months, the fund has had over 70% of its assets invested
in variable and floating rate notes. This concentrated position proved to be an
ideal match for a rising-rate environment. The coupons on floating rate notes
are reset (usually weekly or monthly) in accordance with the fluctuations of a
set benchmark (notably the London Interbank Offered Rate, or LIBOR), so these
securities hold their value as the benchmark yield increases. In addition,
because LIBOR is forward-looking, and because investors expect the Fed to
continue raising rates, securities pegged to LIBOR have been yielding slightly
more than comparable 7-day fixed-rate paper.
FOLLOWING THE FED FORWARD
With the national economy demonstrating steady but unspectacular growth, we
anticipate that the Federal Reserve will continue to inch short-term rates
higher in 2005 and possibly beyond. With so much
1 Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
4
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COLUMBIA MONEY MARKET FUND
speculation devoted to the Fed's intent, we have found that the market
occasionally gets ahead of itself, providing the opportunity to purchase
three-month or six-month securities whose yields are higher than what the Fed's
interim hikes would be expected to produce. Other than capitalizing on isolated
opportunities of this type, we expect to follow our basic investment model of
keeping maturities short, a model that served us well during the past 12 months.
[photo of Karen Arneil]
Karen Arneil has managed Columbia Money Market Fund since July 2002 and has been
with the advisor or its predecessors or affiliate organizations since 1996.
/s/ Karen Arneil
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
5
FINANCIAL STATEMENTS
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MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
A GUIDE TO UNDERSTANDING YOUR FUND'S FINANCIAL STATEMENTS
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INVESTMENT PORTFOLIO The investment portfolio details all of the fund's holdings and
their market value as of the last day of the reporting period. Portfolio
holdings are organized by type of asset, industry, country or geographic region
(if applicable) to demonstrate areas of concentration and diversification.
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STATEMENT OF ASSETS AND LIABILITIES This statement details the fund's assets, liabilities, net assets and share price
for each share class as of the last day of the reporting period. Net assets are
calculated by subtracting all the fund's liabilities (including any unpaid
expenses) from the total of the fund's investment and non-investment assets. The
share price for each class is calculated by dividing net assets for that class by
the number of shares outstanding in that class as of the last day of the
reporting period.
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STATEMENT OF OPERATIONS This statement details income earned by the fund and the expenses accrued by the
fund during the reporting period. The Statement of Operations also shows any net
gain or loss the fund realized on the sales of its holdings during the period, as
well as any unrealized gains or losses recognized over the period. The total of
these results represents the fund's net increase or decrease in net assets
from operations.
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STATEMENT OF CHANGES IN NET ASSETS This statement demonstrates how the fund's net assets were affected by its
operating results, distributions to shareholders and shareholder transactions
(e.g., subscriptions, redemptions and dividend reinvestments) during the reporting
period. The Statement of Changes in Net Assets also details changes in the number
of shares outstanding.
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NOTES TO FINANCIAL STATEMENTS These notes disclose the organizational background of the fund, its significant
accounting policies (including those surrounding security valuation, income
recognition and distributions to shareholders), federal tax information, fees and
compensation paid to affiliates and significant risks and contingencies.
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FINANCIAL HIGHLIGHTS The financial highlights demonstrate how the fund's net asset value per share was
affected by the fund's operating results. The financial highlights table also
discloses the classes' performance and certain key ratios (e.g., class expenses
and net investment income as a percentage of average net assets).
6
INVESTMENT PORTFOLIO
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MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
CORPORATE FIXED-INCOME BONDS & NOTES - 41.8%
FINANCIALS - 41.8%
BANKS - 5.8%
- ------------------------------------------ ------------------------------------------------------------------------------
PAR ($) VALUE ($)
HBOS TREASURY SERVICES PLC 2.900% 07/29/05 (a)(b) 10,000,000 10,002,937
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US BANK NA 2.770% 02/17/06 (b) 8,000,000 7,999,943
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WELLS FARGO & CO. 2.780% 05/15/06 (a)(b) 10,000,000 10,000,000
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Banks Total 28,002,880
DIVERSIFIED FINANCIAL SERVICES - 36.0%
- ------------------------------------------ ------------------------------------------------------------------------------
20/20 CUSTOM MOLDED PLASTICS LP LOC: National City Bank
2.920% 08/01/13 (c) 4,365,000 4,365,000
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ACC LEASING LLC LOC: National City Bank
2.920% 05/01/23 (c) 3,366,000 3,366,000
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AMERICAN EXPRESS CREDIT CORP. 2.826% 06/05/06 (b) 13,000,000 13,000,000
-------------------------------------------------------------------------------
AMERICAN HEALTHCARE FUNDING CORP. LOC: LaSalle Bank NA
2.850% 03/01/29 (c) 3,803,000 3,803,000
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ARCHBISHOP OF CINCINNATI TRUSTEE LOC: Fifth Third Bank
2.860% 04/01/23 (c) 1,000,000 1,000,000
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ASSOCIATES CORP. OF NORTH AMERICA 6.625% 06/15/05 7,150,000 7,207,966
-------------------------------------------------------------------------------
AUTUMN HOUSE AT POWDER MILL, INC. LOC: SunTrust Bank
2.850% 02/01/28 (c) 3,575,000 3,575,000
-------------------------------------------------------------------------------
BATH TECHNOLOGY ASSOCIATES LTD. LOC: National City Bank
2.920% 07/01/17 (c) 1,820,000 1,820,000
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BEST ONE TIRE & SERVICES LLC LOC: Fifth Third Bank
2.860% 02/01/18 (c) 7,510,000 7,510,000
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CONGREGATION MKOR SHALOM LOC: Wachovia Bank
2.930% 06/01/23 (c) 2,225,000 2,225,000
-------------------------------------------------------------------------------
CRESCENT PAPER TUBE CO. LOC: Fifth Third Bank
2.860% 08/01/22 (c) 2,710,000 2,710,000
-------------------------------------------------------------------------------
CRESTMONT REALTY CORP. LOC: Fifth Third Bank
2.860% 11/01/22 (c) 4,440,000 4,440,000
-------------------------------------------------------------------------------
DELTIME LLC PROJECT LOC: National City Bank
2.920% 02/01/23 (c) 2,350,000 2,350,000
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DOMINICAN SISTERS LOC: Fifth Third Bank
2.860% 10/01/23 (c) 3,945,000 3,945,000
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DUBLIN BUILDING LLC LOC: National City Bank
2.920% 11/01/18 (c) 1,805,000 1,805,000
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FANNIN AND FANNIN LLC LOC: Fifth Third Bank
2.860% 12/01/24 (c) 2,000,000 2,000,000
-------------------------------------------------------------------------------
GENERAL ELECTRIC CAPITAL CORP. 2.930% 05/17/06 (b) 13,000,000 13,000,000
-------------------------------------------------------------------------------
HARRIER FINANCE FUNDING LLC 2.660% 10/25/05 (a)(b) 10,000,000 10,000,000
-------------------------------------------------------------------------------
K.C. JORDAN & ASSOCIATES, INC. LOC: Fifth Third Bank
2.860% 04/01/23 (c) 1,000,000 1,000,000
See Accompanying Notes to Financial Statements.
7
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MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
FINANCIALS - (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES - (CONTINUED)
- ------------------------------------------ -------------------------------------------------------------------------------
PAR ($) VALUE ($)
KINGSTON CARE CENTER OF SYLVANIA LOC: Bank One NA
2.900% 05/01/33 (c) 11,675,000 11,675,000
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MICHIGAN EQUITY GROUP LLC LOC: Fifth Third Bank
2.860% 04/01/34 (c) 5,890,000 5,890,000
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MORGAN STANLEY 2.890% 04/27/06 (b) 12,000,000 12,000,000
-------------------------------------------------------------------------------
PILOT DRIVE PROPERTIES LLC LOC: JPMorgan Chase Bank
2.900% 02/01/35 (c) 4,000,000 4,000,000
-------------------------------------------------------------------------------
PRECISION RADIOTHERAPY LLC LOC: Fifth Third Bank
2.860% 08/01/18 (c) 2,430,000 2,430,000
-------------------------------------------------------------------------------
PS GREETINGS, INC. LOC: LaSalle Bank NA
3.020% 12/01/33 (c) 965,000 965,000
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REDCAY FUNDING LLC LOC: Sun Trust Bank
2.890% 11/01/25 (c) 2,145,000 2,145,000
-------------------------------------------------------------------------------
SEDNA FINANCE, INC. 2.590% 10/14/05 (a)(b) 10,000,000 10,000,000
-------------------------------------------------------------------------------
SERVAAS, INC. LOC: Fifth Third Bank
2.860% 03/01/13 (c) 5,190,000 5,190,000
-------------------------------------------------------------------------------
SHEPHERD CAPITAL LLC LOC: Old Kent Bank & Trust
2.980% 03/15/49 (c) 1,935,000 1,935,000
-------------------------------------------------------------------------------
SKELETAL PROPERTIES LLC LOC: Fifth Third Bank
2.860% 11/01/14 (c) 2,000,000 2,000,000
-------------------------------------------------------------------------------
SOUTHTOWN PARTNERS LLC LOC: Fifth Third Bank
2.860% 12/01/44 (c) 2,000,000 2,000,000
-------------------------------------------------------------------------------
SPRINGSIDE CORP. EXCHANGE PARTNERS I LLC LOC: US Bank NA
2.920% 02/01/36 (c) 2,245,000 2,245,000
-------------------------------------------------------------------------------
TANGO FINANCE CORP. 2.650% 01/17/06 (a)(b) 10,000,000 10,001,012
-------------------------------------------------------------------------------
WHITE PINE FINANCE LLC 2.905% 09/07/05 (a)(b) 10,000,000 9,998,267
-------------------------------------------------------------------------------
YOUNG MEN'S CHRISTIAN ASSOCIATION LOC: Wachovia Bank
2.830% 02/01/24 (c) 2,400,000 2,400,000
-------------------------------------------------------------------------------
Diversified Financial Services Total 173,996,245
FINANCIALS TOTAL 201,999,125
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(COST OF $201,999,125) 201,999,125
COMMERCIAL PAPER - 19.0%
- ------------------------------------------ ------------------------------------------------------------------------------
ATLANTIS ONE FUNDING CORP. 3.250% 09/19/05 (d) 6,000,000 5,908,800
-------------------------------------------------------------------------------
CANCARA ASSET SECURITISATION LTD. 2.740% 05/18/05 (d) 5,000,000 4,982,114
-------------------------------------------------------------------------------
GIRO BALANCED FUNDING CORP. 3.250% 09/23/05 (d) 5,000,000 4,922,222
-------------------------------------------------------------------------------
GRAMPIAN FUNDING LLC 2.860% 06/30/05 (d) 8,000,000 7,942,800
3.130% 09/09/05 (d) 8,000,000 7,888,016
See Accompanying Notes to Financial Statements.
8
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
COMMERCIAL PAPER - (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------ ------------------------------------------------------------------------------
HARRIER FINANCE FUNDING LLC 2.720% 06/10/05 (d) 5,000,000 4,973,556
-------------------------------------------------------------------------------
MANE FUNDING CORP. 2.540% 04/07/05 (d) 5,000,000 4,997,883
-------------------------------------------------------------------------------
MITTEN GMAC MORTGAGE CORP. 2.890% 04/01/05 (d) 8,500,000 8,500,000
-------------------------------------------------------------------------------
PREMIER ASSET COLLECTION LLC 2.840% 05/25/05 (d) 5,000,000 4,978,700
-------------------------------------------------------------------------------
SCALDIS CAPITAL LLC 3.000% 06/30/05 (d) 5,000,000 4,962,500
-------------------------------------------------------------------------------
SIGMA FINANCE, INC. 2.750% 07/01/05 (d) 4,000,000 3,972,195
2.970% 06/27/05 (d) 10,000,000 9,928,708
-------------------------------------------------------------------------------
SOLITAIRE FUNDING LLC 3.000% 06/22/05 (d) 5,000,000 4,965,833
-------------------------------------------------------------------------------
SUNBELT FUNDING CORP. 2.830% 04/21/05 (d) 8,000,000 7,987,422
-------------------------------------------------------------------------------
WHISTLEJACKET CAPITAL LTD. 2.760% 04/15/05 (a)(b) 5,000,000 4,999,943
TOTAL COMMERCIAL PAPER
(COST OF $91,910,692) 91,910,692
GOVERNMENT AGENCIES & OBLIGATIONS - 18.0%
U.S. GOVERNMENT AGENCIES & OBLIGATIONS - 18.0%
- ------------------------------------------ -------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK 1.350% 04/15/05-04/29/05 13,000,000 13,000,000
2.590% 04/19/05 (b) 15,000,000 14,999,779
2.770% 04/25/05 (b) 7,000,000 6,999,815
-------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. 2.550% 10/07/05 (b) 30,000,000 30,000,000
2.725% 11/07/05 (b) 8,000,000 8,000,000
-------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION 1.550% 05/04/05 6,000,000 6,000,000
1.600% 05/13/05 3,000,000 3,000,000
1.750% 05/23/05 5,000,000 5,000,000
U.S. GOVERNMENT AGENCIES &
OBLIGATIONS TOTAL 86,999,594
TOTAL GOVERNMENT AGENCIES & OBLIGATIONS
(COST OF $86,999,594) 86,999,594
MUNICIPAL BONDS - 10.6%
CALIFORNIA - 2.1%
- ------------------------------------------ -------------------------------------------------------------------------------
CA ABAG FINANCE AUTHORITY FOR NONPROFIT CORPS. California Multifamily Revenue:
Bachenheimer Building Apartments, Series 2002,
LOC: FNMA
2.850% 07/15/35 (c) 2,100,000 2,100,000
Berkeleyan LLC, Series 2003,
LOC: FNMA
2.850% 05/15/33 (c) 2,200,000 2,200,000
Gaia Building LLC, Series 2000,
LOC: FNMA
2.850% 09/15/32 (c) 2,375,000 2,375,000
See Accompanying Notes to Financial Statements.
9
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
MUNICIPAL BONDS - (CONTINUED)
CALIFORNIA - (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------ ------------------------------------------------------------------------------
CA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY Vineyard Creek Apartments,
Series 2003,
LOC: Federal Home Loan Bank
2.900% 12/01/36 (c) 3,700,000 3,700,000
-------------------------------------------------------------------------------
CALIFORNIA TOTAL 10,375,000
IOWA - 0.5%
- ------------------------------------------ ------------------------------------------------------------------------------
IA FINANCE AUTHORITY St. Luke's Health Foundation,
Series 2003 B,
LOC: General Electric Capital Corp.
2.850% 03/01/18 (c) 2,280,000 2,280,000
-------------------------------------------------------------------------------
IOWA TOTAL 2,280,000
MARYLAND - 1.7%
- ------------------------------------------ ------------------------------------------------------------------------------
MD BALTIMORE PROJECT REVENUE Baltimore Parking Facilities
Series 2002
Insured: FGIC
SPA: Dexia Credit Local
2.850% 07/01/32 (c) 8,100,000 8,100,000
-------------------------------------------------------------------------------
MARYLAND TOTAL 8,100,000
MASSACHUSETTS - 0.8%
- ------------------------------------------ ------------------------------------------------------------------------------
MA STATE HOUSING FINANCE AGENCY REVENUE Avalon Upper Falls LLC
Series 2004 A
LOC: JPMorgan Chase Bank
2.840% 12/01/34 (c) 3,780,000 3,780,000
-------------------------------------------------------------------------------
MASSACHUSETTS TOTAL 3,780,000
MICHIGAN - 1.0%
- ------------------------------------------ ------------------------------------------------------------------------------
MI OAKLAND COUNTY Series 2004,
1.625% 05/01/05 5,000,000 4,995,986
-------------------------------------------------------------------------------
MICHIGAN TOTAL 4,995,986
NEW HAMPSHIRE - 1.4%
- ------------------------------------------ ------------------------------------------------------------------------------
NH BUSINESS FINANCE AUTHORITY Series 2002 A,
SPA: Bank of New York
2.910% 11/01/20 (c) 7,100,000 7,100,000
-------------------------------------------------------------------------------
NEW HAMPSHIRE TOTAL 7,100,000
TENNESSEE - 0.4%
- ------------------------------------------ ------------------------------------------------------------------------------
TN COFFEE COUNTY INDUSTRIAL BOARD, INC., REVENUE Stamtec, Inc.,
Series 1999,
LOC: JPMorgan Chase Bank
2.930% 09/01/14 (c) 1,890,000 1,890,000
-------------------------------------------------------------------------------
TENNESSEE TOTAL 1,890,000
See Accompanying Notes to Financial Statements.
10
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
MUNICIPAL BONDS - (CONTINUED)
TEXAS - 2.2%
PAR ($) VALUE ($)
- ------------------------------------------ ------------------------------------------------------------------------------
TX STATE Veterans' Housing,
Series 2002 B,
SPA: Landesbank Hessen-Thuringen GZ
2.850% 06/01/23 (c) 10,550,000 10,550,000
-------------------------------------------------------------------------------
TEXAS TOTAL 10,550,000
VIRGINIA - 0.5%
- ------------------------------------------ ------------------------------------------------------------------------------
VA RICHMOND REDEVELOPMENT & HOUSING Old Manchester,
AUTHORITY PROJECT REVENUE Series 1995 B,
LOC : Wachovia Bank, NA
2.900% 12/01/25 (c) 2,310,000 2,310,000
-------------------------------------------------------------------------------
VIRGINIA TOTAL 2,310,000
TOTAL MUNICIPAL BONDS
(COST OF $51,380,986) 51,380,986
CERTIFICATES OF DEPOSIT - 9.5%
- ------------------------------------------ ------------------------------------------------------------------------------
BARCLAYS BANK PLC 2.775% 05/25/05 10,000,000 9,999,548
-------------------------------------------------------------------------------
CANADIAN IMPERIAL BANK OF CANADA 2.860% 03/15/08 (b) 20,000,000 20,000,000
-------------------------------------------------------------------------------
CS FIRST BOSTON 3.110% 12/29/05 (b) 6,000,000 6,000,897
-------------------------------------------------------------------------------
UNICREDITO ITALIANO S.P.A. 2.630% 07/27/05 (b) 10,000,000 9,997,848
TOTAL CERTIFICATES OF DEPOSIT
(COST OF $45,998,293) 45,998,293
SHORT-TERM OBLIGATION - 0.1%
- ------------------------------------------ ------------------------------------------------------------------------------
Repurchase agreement with State Street Bank & Trust Co.,
dated 03/31/05, due 04/01/05 at 2.560%, collateralized by
a U.S. Government Agency maturing 03/05/19, market
value of $292,500 (repurchase proceeds $286,020) 286,000 286,000
TOTAL SHORT-TERM OBLIGATION
(COST OF $286,000) 286,000
TOTAL INVESTMENTS - 99.0%
(COST OF $478,574,690) (E) 478,574,690
OTHER ASSETS & LIABILITIES, NET - 1.0% 4,734,272
NET ASSETS - 100.0% 483,308,962
See Accompanying Notes to Financial Statements.
11
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
NOTES TO INVESTMENT PORTFOLIO:
(a) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
March 31, 2005, these securities amounted to $65,002,159, which represents
13.4% of net assets.
(b) Floating rate note. The interest rate shown reflects the rate as of March
31, 2005.
(c) Variable rate security. The interest rate shown reflects the rate as of
March 31, 2005.
(d) Security exempt from registration under Section 4(2) of the Securities Act
of 1933. These securities may only be resold in exempt transactions to
qualified buyers. Private resales of these securities to qualified
institutional buyers are also exempt from registration pursuant to Rule
144A under the Securities Act of 1933. At March 31, 2005, these securities
amounted to $86,910,749, which represents 18.0% of net assets.
(e) Cost for federal income tax purposes is $478,574,690.
Acronym Name
------- ----
ABAG Association of Bay Area Government
FGIC Financial Guaranty Insurance Co.
FNMA Federal National Mortgage Association
LOC Letter of Credit/Line of Credit
SPA Stand-by Purchase Agreement
See Accompanying Notes to Financial Statements.
12
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
($)
- ------------------------------------------ -----------------------------------------------------------------------------
ASSETS Investments, at cost 478,574,690
Investments, at value 478,574,690
Cash 546
Receivable for:
Investments sold 4,510,123
Fund shares sold 961,336
Interest 1,276,424
Expense reimbursement due from Investment Advisor 65,267
Deferred Trustees' compensation plan 26,729
-------------
Total Assets 485,415,115
------------------------------------------------------------------------------
LIABILITIES Payable for:
Fund shares repurchased 1,472,297
Distributions 16,824
Investment advisory fee 100,705
Administration fee 106,930
Transfer agent fee 190,963
Pricing and bookkeeping fees 17,040
Trustees' fees 1,621
Custody fee 2,875
Distribution and service fees 110,646
Deferred Trustees' fees 26,729
Other liabilities 59,523
-------------
Total Liabilities 2,106,153
NET ASSETS 483,308,962
------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS Paid-in capital 483,340,967
Overdistributed net investment income (30,807)
Accumulated net realized loss (1,198)
-------------
NET ASSETS 483,308,962
------------------------------------------------------------------------------
CLASS A Net assets 208,148,289
Shares outstanding 208,199,287
Net asset value and offering price per share 1.00(a)
------------------------------------------------------------------------------
CLASS B Net assets 61,467,330
Shares outstanding 61,498,782
Net asset value and offering price per share 1.00(a)
------------------------------------------------------------------------------
CLASS C Net assets 9,978,888
Shares outstanding 9,983,791
Net asset value and offering price per share 1.00(a)
------------------------------------------------------------------------------
CLASS Z Net assets 203,714,455
Shares outstanding 203,964,233
Net asset value, offering and redemption price per share 1.00
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See Accompanying Notes to Financial Statements.
13
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
($)
- ------------------------------------------ -----------------------------------------------------------------------------
($)
- ------------------------------------------ ------------------------------------------------------------------------------
INVESTMENT INCOME Interest 9,329,151
------------------------------------------------------------------------------
EXPENSES Investment advisory fee 1,320,197
Administration fee 1,310,632
Distribution fee:
Class B 576,696
Class C 85,589
Service fee:
Class B 192,232
Class C 28,602
Transfer agent fee 1,162,794
Pricing and bookkeeping fees 141,444
Trustees' fees 25,176
Custody fee 21,624
Other expenses 229,830
----------
Total Expenses 5,094,816
Distribution and service fees
reimbursed by Investment
Advisor:
Class B (236,287)
Class C (3,728)
Fees waived by Distributor - Class C (68,429)
Custody earnings credit (2,029)
----------
Net Expenses 4,784,343
----------
Net Investment Income 4,544,808
-------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS Net realized gain on investments 5,343
----------
Net Increase in Net Assets from Operations 4,550,151
See Accompanying Notes to Financial Statements.
14
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
YEAR ENDED PERIOD ENDED YEAR ENDED
MARCH 31, MARCH 31, JUNE 30,
INCREASE (DECREASE) IN NET ASSETS: 2005 ($) 2004 (a)($) 2003 (b)($)
- ------------------------------------------ ------------------------------------------------------------------------------
OPERATIONS Net investment income 4,544,808 1,035,604 3,538,268
Net realized gain (loss) on investments 5,343 (149) --
-------------------------------------------
Net Increase from Operations 4,550,151 1,035,455 3,538,268
------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income:
Class A (2,113,778) (441,305) (1,493,624)
Class B (191,763) (73,946) (208,504)
Class C (63,771) (12,956) (55,169)
Class Z (2,175,651) (588,244) (1,763,556)
-------------------------------------------
Total Distributions Declared
to Shareholders (4,544,963) (1,116,451) (3,520,853)
------------------------------------------------------------------------------
SHARE TRANSACTIONS Class A:
Subscriptions 215,560,472 271,755,492 910,150,826
Distributions reinvested 2,043,937 412,583 1,302,088
Redemptions (238,207,842) (309,985,945) (855,426,770)
-------------------------------------------
Net Increase (Decrease) (20,603,433) (37,817,870) 56,026,144
Class B:
Subscriptions 53,430,955 54,247,449 155,689,122
Distributions reinvested 169,267 64,742 158,062
Redemptions (74,471,696) (82,734,676) (141,953,170)
-------------------------------------------
Net Increase (Decrease) (20,871,474) (28,422,485) 13,894,014
Class C:
Subscriptions 16,402,459 33,670,794 120,063,340
Distributions reinvested 58,574 10,662 45,279
Redemptions (21,875,105) (35,609,703) (123,559,631)
-------------------------------------------
Net Decrease (5,414,072) (1,928,247) (3,451,012)
Class Z:
Subscriptions 179,117,629 167,190,771 262,511,827
Proceeds received in connection
with merger -- -- 338,355,029
Distributions reinvested 2,094,040 565,585 1,710,449
Redemptions (225,823,469) (208,829,522) (313,151,895)
-------------------------------------------
Net Increase (Decrease) (44,611,800) (41,073,166) 289,425,410
Net Increase (Decrease) from
Share Transactions (91,500,779) (109,241,768) 355,894,556
-------------------------------------------
Total Increase (Decrease)
in Net Assets (91,495,591) (109,322,764) 355,911,971
------------------------------------------------------------------------------
NET ASSETS Beginning of period 574,804,553 684,127,317 328,215,346
End of period 483,308,962 574,804,553 684,127,317
Undistributed (overdistributed)
net investment income at
end of period (30,807) (30,652) 42,533
(a) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(b) Class Z shares commenced operations on July 29, 2002.
See Accompanying Notes to Financial Statements.
15
COLUMBIA MONEY MARKET FUND
- --------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
MARCH 31, MARCH 31, JUNE 30,
2005 2004 (a) 2003 (b)
- ------------------------------------------ ------------------------------------------------------------------------------
CHANGES IN SHARES Class A:
Subscriptions 215,560,472 271,755,491 910,150,825
Issued for distributions reinvested 2,043,937 412,582 1,302,088
Redemptions (238,207,842) (309,985,944) (855,426,769)
-------------------------------------------
Net Increase (Decrease) (20,603,433) (37,817,871) 56,026,144
Class B:
Subscriptions 53,430,954 54,247,449 155,689,123
Issued for distributions reinvested 169,266 64,742 158,062
Redemptions (74,471,685) (82,734,670) (141,953,166)
-------------------------------------------
Net Increase (Decrease) (20,871,465) (28,422,479) 13,894,019
Class C:
Subscriptions 16,402,459 33,670,794 120,063,342
Issued for distributions reinvested 58,575 10,662 45,279
Redemptions (21,875,105) (35,609,703) (123,559,630)
-------------------------------------------
Net Decrease (5,414,071) (1,928,247) (3,451,009)
Class Z:
Subscriptions 179,117,629 167,190,771 262,735,612
Issued in connection with merger -- -- 338,355,029
Issued for distributions reinvested 2,094,040 565,585 1,710,449
Redemptions (225,823,468) (208,829,520) (313,151,894)
-------------------------------------------
Net Increase (Decrease) (44,611,799) (41,073,164) 289,649,196
(a) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(b) Class Z shares commenced operations on July 29, 2002.
See Accompanying Notes to Financial Statements.
16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
NOTE 1. ORGANIZATION
Columbia Money Market Fund (the "Fund"), a series of Columbia Funds Trust II
(the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
INVESTMENT GOAL
The Fund seeks maximum current income consistent with capital preservation and
the maintenance of liquidity.
FUND SHARES
The Fund may issue an unlimited number of shares and offers four classes of
shares: Class A, Class B, Class C and Class Z. Each share class has its own
sales charge and expense structure.
Class A shares are sold at net asset value. Class A shares are subject to a
1.00% contingent deferred sales charge ("CDSC") on shares sold within eighteen
months on an original purchase of $1 million to $25 million. When exchanged for
Class A shares in another Columbia Fund, a sales charge may be imposed. Class B
shares are subject to a maximum CDSC of 5.00% based upon the holding period
after purchase. Class B shares will convert to Class A shares in a certain
number of years after purchase, depending on the program under which shares were
purchased. Class C shares are subject to a 1.00% CDSC on shares sold within one
year after purchase. Class Z shares are offered continuously at net asset value.
There are certain restrictions on the purchase of Class Z shares, as described
in the Fund's prospectus.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION
Securities in the Fund are valued utilizing the amortized cost valuation method
permitted in accordance with Rule 2a-7 under the 1940 Act provided certain
conditions are met. This method involves valuing a portfolio security initially
at its cost and thereafter assuming a constant accretion or amortization to
maturity of any discount or premium, respectively.
Short-term obligations maturing within 60 days are valued at amortized cost,
which approximates market value.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions with institutions that
the Fund's investment advisor has determined are creditworthy. The Fund, through
its custodian, receives delivery of underlying securities collateralizing a
repurchase agreement. Collateral is at least equal, at all times, to the value
of the repurchase obligation including interest. A repurchase agreement
transaction involves certain risks in the event of default or insolvency of the
counterparty. These risks include possible delays or restrictions upon the
Fund's ability to dispose of the underlying securities and a possible decline in
the value of the underlying securities during the period while the Fund seeks to
assert its rights.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities.
DETERMINATION OF CLASS NET ASSET VALUES
All income, expenses (other than class-specific expenses, as shown on the
Statement of Operations) and realized and unrealized gains (losses) are
allocated
17
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
to each class of the Fund on a daily basis for purposes of determining the net
asset value of each class. Income and expenses are allocated to each class based
on the settled shares method, while realized and unrealized gains (losses) are
allocated based on the relative net assets of each class.
FEDERAL INCOME TAX STATUS
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable income, if any, for its tax year, and as such
will not be subject to federal income taxes. In addition, the Fund intends to
distribute in each calendar year substantially all of its net investment income,
capital gains and certain other amounts, if any, such that the Fund should not
be subject to federal excise tax. Therefore, no federal income or excise tax
provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly. Net
realized capital gains, if any, are distributed at least annually.
NOTE 3. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations. No reclassifications
were necessary for the fiscal year ended March 31, 2005.
The tax character of distributions paid during the year ended March 31, 2005,
the period ended March 31, 2004 and the year ended June 30, 2003 was as follows:
MARCH 31, MARCH 31, JUNE 30,
2005 2004 2003
- --------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME $4,544,963 $1,116,451 $3,520,853
As of March 31, 2005, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED
ORDINARY INCOME
- --------------------------------------------------------------------------------
$14,467
The following capital loss carryforwards may be available to reduce taxable
income arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
- --------------------------------------------------------------------------------
2008 $ 694
2009 355
2012 149
- --------------------------------------------------------------------------------
TOTAL $1,198
Of the capital loss carryforwards attributable to the Fund, $111 was obtained in
the merger with Stein Roe Cash Reserves Fund and will expire on March 31, 2008.
Capital loss carryforwards of $5,343 were utilized during the year ended March
31, 2005.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Fund and receives a monthly investment advisory fee based on the Fund's
average daily net assets at the following annual rates:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
- --------------------------------------------------------------------------------
FIRST $500 MILLION 0.250%
- --------------------------------------------------------------------------------
$500 MILLION TO $1 BILLION 0.225%
- --------------------------------------------------------------------------------
OVER $1 BILLION 0.200%
- --------------------------------------------------------------------------------
For the year ended March 31, 2005, the Fund's effective investment advisory fee
rate was 0.25%.
ADMINISTRATION FEE
Columbia provides administrative and other services to the Fund for a monthly
administration fee based
18
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
on the Fund's average daily net assets at the following annual rates:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
- --------------------------------------------------------------------------------
FIRST $500 MILLION 0.25%
- --------------------------------------------------------------------------------
$500 MILLION TO $1 BILLION 0.20%
- --------------------------------------------------------------------------------
OVER $1 BILLION 0.15%
- --------------------------------------------------------------------------------
For the year ended March 31, 2005, the Fund's effective administration fee rate
was 0.25%.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Fund under a pricing and bookkeeping agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Corporation ("State Street"). As a result, Columbia pays the total fees
collected to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000 paid monthly, and in any month that
the Fund's average daily net assets exceed $50 million, an additional monthly
fee. The additional fee rate is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. This rate is applied to
the average daily net assets of the Fund for that month. The Fund also pays
additional fees for pricing services based on the number of securities held by
the Fund.
For the year ended March 31, 2005, the effective pricing and bookkeeping fee
rate for the Fund, inclusive of out-of-pocket expenses, was 0.027%.
TRANSFER AGENT FEE
Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia,
provides shareholder services to the Fund and has subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. For such
services, the Transfer Agent receives a fee, paid monthly, at the annual rate of
$33.50 per open account. The Transfer Agent also receives reimbursement for
certain out-of-pocket expenses.
For the year ended March 31, 2005, the Fund's effective transfer agent fee rate,
inclusive of out-of-pocket expenses, was 0.22%.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia,
is the principal underwriter of the Fund. For the year ended March 31, 2005, the
Distributor has retained net CDSC fees of $19,000, $468,256 and $14,934 on Class
A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a
monthly service fee to the Distributor at the annual rate of 0.25% of the
average daily net assets attributable to Class B and Class C shares of the Fund.
The Plan also requires the payment of a monthly distribution fee to the
Distributor at the annual rate of 0.75% of the average daily net assets
attributable to Class B and Class C shares only. The Distributor has voluntarily
agreed to waive a portion of the Class C share distribution fee so that it will
not exceed 0.15% annually of Class C average daily net assets. In addition,
Columbia has voluntarily agreed to reimburse a portion of the Class B share
service fee and a portion of the Class B and Class C share distribution fees.
The CDSC and the fees received from the Plan are used principally as repayment
to the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
CUSTODY CREDITS
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. The Fund could have invested a portion of the
assets utilized in connection with the expense offset arrangement in an
income-producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES
With the exception of one officer, all officers of the Fund are employees of
Columbia or its affiliates and receive no compensation from the Fund. Effective
August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to
the Fund in accordance with federal securities regulations. The Fund, along with
other affiliated funds, will pay its pro-rata share of the expenses associated
with the Office of the Chief Compliance Officer. The Fund's fee for the Office
of the Chief Compliance Officer will not exceed $15,000 per year.
19
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MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
OTHER
Columbia provides certain services to the Fund related to Sarbanes-Oxley
compliance. For the year ended March 31, 2005, the Fund paid $1,986 to Columbia
for such services. This amount is included in "Other expenses" on the Statement
of Operations.
NOTE 5. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK
The Fund holds investments that are insured by private insurers who guarantee
the payment of principal and interest in the event of default or that are
supported by a letter of credit. At March 31, 2005, private insurers who insured
greater than 5% of the total investments of the Fund were as follows:
% OF
INSURER TOTAL INVESTMENTS
- --------------------------------------------------------------------------------
FIFTH THIRD BANK 8.3%
LEGAL PROCEEDINGS
On February 9, 2005, Columbia and the Distributor (collectively, the "Columbia
Group") entered into an Assurance of Discontinuance with the New York Attorney
General ("NYAG") (the "NYAG Settlement") and consented to the entry of a
cease-and-desist order by the Securities and Exchange Commission ("SEC") (the
"SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively
as the "Settlements". The Settlements contain substantially the same terms and
conditions as outlined in the agreements in principle which Columbia Group
entered into with the SEC and NYAG in March 2004.
Under the terms of the SEC Order, the Columbia Group has agreed among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution consultant
(see below). The Columbia Funds have also undertaken to implement certain
governance measures designed to maintain the independence of their boards of
trustees. The NYAG Settlement also, among other things, requires Columbia and
its affiliates, Banc of America Capital Management, LLC and BACAP Distributors,
LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds
management fees collectively by $32 million per year for five years, for a
projected total of $160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan to be developed by an independent distribution consultant, who
is acceptable to the SEC staff and the Columbia Funds' independent trustees. The
distribution plan must be based on a methodology developed in consultation with
the Columbia Group and the Fund's independent trustees and not unacceptable to
the staff of the SEC. At this time, the distribution plan is still under
development. As such, any gain to the fund or its shareholders can not currently
be determined.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A
copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the Fund
and Columbia. The lawsuit alleges that defendants violated common law duties to
fund shareholders as well as sections of the Investment Company Act of 1940, by
failing to ensure that the Fund and other affiliated funds participated in
securities class action settlements for which the funds were eligible.
Specifically, plaintiffs allege that defendants failed to submit proof of claims
in connection with settlements of securities class action lawsuits filed against
companies in which the funds held positions.
20
- --------------------------------------------------------------------------------
MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
The Fund and the other defendants to these actions, including Columbia and
various of its affiliates, certain other mutual funds advised by Columbia and
its affiliates, and various directors of such funds, have denied these
allegations and are contesting the plaintiffs' claims. These proceedings are
ongoing, however, based on currently available information, Columbia believes
that these lawsuits are without merit, that the likelihood they will have a
material adverse impact on any fund is remote, and that the lawsuits are not
likely to materially affect its ability to provide investment management
services to its clients, including the Fund.
In connection with events described in detail above, various parties have filed
suit against certain funds, their Boards, FleetBoston Financial Corporation and
its affiliated entities and/or Bank of America Corporation and its affiliated
entities. More than 300 cases including those filed against entities
unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and
its affiliated entities and/or Bank of America Corporation and its affiliated
entities have been transferred to the Federal District Court in Maryland and
consolidated in a multi-district proceeding (the "MDL"). On March 21, 2005
purported class action plaintiffs filed suit in Massachusetts state court
alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has conditionally ordered its transfer to the MDL. The MDL is ongoing.
Accordingly, an estimate of the financial impact of this litigation on any Fund,
if any, can not currently be made.
21
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD
ENDED ENDED YEAR ENDED JUNE 30,
MARCH 31, MARCH 31, ------------------------------------------------------
CLASS A SHARES 2005 2004 (a) 2003 (b) 2002 (b) 2001 (b) 2000 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.010(c) 0.002(c) 0.006(c) 0.015 0.052 0.052
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.010) (0.002) (0.006) (0.015) (0.052) (0.052)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total return (d) 1.01% 0.22%(e)(f) 0.60% 1.56% 5.34%(f) 5.26%(f)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses 0.79%(g) 0.88%(g)(h) 0.89%(g) 1.01% 0.70% 0.65%(g)
Net investment income 0.97%(g) 0.27%(g)(h) 0.61%(g) 1.54% 5.31% 5.13%(g)
Waiver/reimbursement -- 0.04%(h) -- -- 0.19% 0.19%
Net assets, end of period (000's) $208,148 $228,750 $266,602 $210,616 $189,822 $178,678
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the SR&F Cash Reserves Portfolio, prior to the merger.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Not annualized.
(f) Had the Investment Advisor/Administrator and/or Distributor not waived a
portion of expenses, total return would have been reduced.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
22
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD
ENDED ENDED YEAR ENDED JUNE 30,
MARCH 31, MARCH 31, ------------------------------------------------------
CLASS B SHARES 2005 2004 (a) 2003 (b) 2002 (b) 2001 (b) 2000 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.003(c) 0.001(c) 0.002(c) 0.007 0.042 0.041
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.003) (0.001) (0.002) (0.007) (0.042) (0.041)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total return (d)(e) 0.28% 0.08%(f) 0.17% 0.73% 4.31% 3.99%
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses 1.48%(g) 1.06%(g)(h) 1.41%(g) 1.84% 1.70% 1.65%(g)
Net investment income 0.25%(g) 0.09%(g)(h) 0.10%(g) 0.71% 4.31% 4.13%(g)
Waiver/reimbursement 0.31% 0.86%(h) 0.56% 0.17% 0.19% 0.19%
Net assets, end of period (000's) $ 61,467 $ 82,338 $110,776 $ 96,827 $ 80,879 $ 69,214
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the SR&F Cash Reserves Portfolio, prior to the merger.
(c) Per share data was calculated using average shares outstanding for the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Had the Investment Advisor/Administrator and/or Distributor not waived a
portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
23
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD
ENDED ENDED YEAR ENDED JUNE 30,
MARCH 31, MARCH 31, ------------------------------------------------------
CLASS C SHARES 2005 2004 (a) 2003 (b) 2002 (b) 2001 (b) 2000 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.006(c) 0.001(c) 0.003(c) 0.011 0.048 0.048
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.006) (0.001) (0.003) (0.011) (0.048) (0.048)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
Total return (d)(e) 0.63% 0.08%(f) 0.27% 1.16% 4.93% 4.71%
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses 1.16%(g) 1.06%(g)(h) 1.23%(g) 1.41% 1.10% 1.05%(g)
Net investment income 0.56%(g) 0.10%(g)(h) 0.30%(g) 1.14% 4.91% 4.73%(g)
Waiver/reimbursement 0.63% 0.86%(h) 0.66% 0.60% 0.79% 0.79%
Net assets, end of period (000's) $9,979 $15,393 $17,324 $20,772 $10,010 $3,950
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the SR&F Cash Reserves Portfolio, prior to the merger.
(c) Per share data was calculated using average shares outstanding for the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Had the Investment Advisor/Administrator and/or Distributor not waived a
portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
24
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR ENDED PERIOD ENDED PERIOD ENDED
MARCH 31, MARCH 31, JUNE 30,
CLASS Z SHARES 2005 2004 (a) 2003 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (c) 0.010 0.002 0.006
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.010) (0.002) (0.006)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
Total return (d) 1.01% 0.22%(e)(f) 0.55%(e)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (g) 0.79% 0.88%(h) 0.89%(h)
Net investment income (g) 0.97% 0.27%(h) 0.61%(h)
Waiver/reimbursement -- 0.04%(h) --
Net assets, end of period (000's) $203,714 $248,324 $289,425
- ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(b) Class Z shares were initially offered on July 29, 2002. Per share data and
total return reflect activity from that date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Not annualized.
(f) Had the Investment Advisor/Administrator and/or Distributor not waived a
portion of expenses, total return would have been reduced.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
25
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
TO THE TRUSTEES OF COLUMBIA FUNDS TRUST II
AND THE SHAREHOLDERS OF COLUMBIA MONEY MARKET FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Columbia Money Market Fund (the
"Fund") (a series of Columbia Funds Trust II) at March 31, 2005, and the results
of its operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.We conducted our audit
of these financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States), which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.We believe that our audit, which included confirmation of
securities at March 31, 2005 by correspondence with the custodian and brokers,
provides a reasonable basis for our opinion. The financial statements and
financial highlights of the fund for periods prior to July 1, 2003 were audited
by another independent registered public accounting firm whose report dated
August 19, 2003 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 20, 2005
26
TRUSTEES
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
The Trustees/Directors serve terms of indefinite duration. The names, addresses
and ages of the Trustees/Directors and officers of the Funds in the Columbia
Funds Complex, the year each was first elected or appointed to office, their
principal business occupations during at least the last five years, the number
of portfolios overseen by each Trustee/Director and other directorships they
hold are shown below. Each officer listed below serves as an officer of each
Fund in the Columbia Funds Complex.
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
Disinterested Trustees
DOUGLAS A. HACKER (Age 49) Executive Vice President - Strategy of United Airlines (airline) since December,
P.O. Box 66100 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001 to
Chicago, IL 60666 December, 2002; Executive Vice President and Chief Financial Officer of United
Trustee (since 1996) Airlines from July, 1999 to September, 2001; Senior Vice President-Finance from
March, 1993 to July, 1999). Oversees 104, None
-----------------------------------------------------------------------------------
JANET LANGFORD KELLY (Age 47) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm); Adjunct Professor
9534 W. Gull Lake Drive of Law, Northwestern University, since September, 2004 (formerly Chief
Richland, MI 49083-8530 Administrative Officer and Senior Vice President, Kmart Holding Corporation
Trustee (since 1996) (consumer goods), from September, 2003 to March, 2004; Executive Vice President-
Corporate Development and Administration, General Counsel and Secretary, Kellogg
Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice
President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged,
consumer-products manufacturer) from January, 1995 to September, 1999).
Oversees 104, None
-----------------------------------------------------------------------------------
RICHARD W. LOWRY (Age 69) Private Investor since August, 1987 (formerly Chairman and Chief Executive Officer,
10701 Charleston Drive U.S. Plywood Corporation (building products manufacturer)). Oversees 1063, None
Vero Beach, FL 32963
Trustee (since 1995)
-----------------------------------------------------------------------------------
CHARLES R. NELSON (Age 62) Professor of Economics, University of Washington, since January, 1976; Ford and
Department of Economics Louisa Van Voorhis Professor of Political Economy, University of Washington, since
University of Washington September, 1993 (formerly Director, Institute for Economic Research, University of
Seattle, WA 98195 Washington from September, 2001 to June, 2003) Adjunct Professor of Statistics,
Trustee (since 1981) University of Washington, since September, 1980; Associate Editor, Journal of
Money Credit and Banking, since September, 1993; consultant on econometric
and statistical matters. Oversees 104, None
-----------------------------------------------------------------------------------
JOHN J. NEUHAUSER (Age 62) Academic Vice President and Dean of Faculties since August, 1999, Boston College
84 College Road (formerly Dean, Boston College School of Management from September, 1977 to August,
Chestnut Hill, MA 02467-3838 1999). Oversees 1063, Saucony, Inc. (athletic footwear)
Trustee (since 1985)
-----------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
PATRICK J. SIMPSON (Age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 104, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
-----------------------------------------------------------------------------------
THOMAS E. STITZEL (Age 69) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999,
2208 Tawny Woods Place College of Business, Boise State University); Chartered Financial Analyst. Oversees
Boise, ID 83706 104, None
Trustee (since 1998)
-----------------------------------------------------------------------------------
THOMAS C. THEOBALD (Age 68) Partner and Senior Advisor, Chicago Growth Partners (private equity investing)
8 Sound Shore Drive, since September, 2004 (formerly Managing Director, William Blair Capital Partners
Suite 285 (private equity investing) from September, 1994 to September, 2004). Oversees 104,
Greenwich, CT 06830 Anixter International (network support equipment distributor); Ventas, Inc. (real
Trustee and Chairman of the Board4 estate investment trust); Jones Lang LaSalle (real estate management services) and
(since 1996) Ambac Financial Group (financial guaranty insurance)
-----------------------------------------------------------------------------------
ANNE-LEE VERVILLE (Age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM
359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 104, Chairman of
Hopkinton, NH 03229 the Board of Directors, Enesco Group, Inc. (designer, importer and distributor of
Trustee (since 1998) giftware and collectibles)
-----------------------------------------------------------------------------------
RICHARD L. WOOLWORTH (Age 64) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The
100 S.W. Market Street Regence Group (regional health insurer); Chairman and Chief Executive Officer,
#1500 BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young &
Portland, OR 97207 Company). Oversees 104, Northwest Natural Gas Co. (natural gas service provider)
Trustee (since 1991)
-----------------------------------------------------------------------------------
INTERESTED TRUSTEE
WILLIAM E. MAYER2 (Age 65) Partner, Park Avenue Equity Partners (private equity) since February, 1999
399 Park Avenue (formerly Partner, Development Capital LLC from November 1996 to February, 1999).
Suite 3204 Oversees 1063, Lee Enterprises (print media), WR Hambrecht + Co. (financial service
New York, NY 10022 provider); Reader's Digest (publishing); OPENFIELD Solutions (retail industry
technology provider) Trustee (since 1994)
-----------------------------------------------------------------------------------
(1) In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds Complex.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the
Liberty All-Star Funds, currently consisting of 2 funds, which are advised
by an affiliate of the Advisor.
(4) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
The Statement of Additional Information Includes additional information about
the Trustees of the Funds and is available, without charge, upon request by
calling 800-426-3750.
28
OFFICERS
- --------------------------------------------------------------------------------
COLUMBIA MONEY MARKET FUND
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA
FUNDS, YEAR FIRST ELECTED OR APPOINTED
TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
CHRISTOPHER L. WILSON (Age 47) Head of Mutual Funds since August, 2004 and Senior Vice President of the Advisor
One Financial Center since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe
Boston, MA 02111 Funds since October, 2004; President and Chief Executive Officer of the Nations
President (since 2004) Funds since January, 2005; President of the Galaxy Funds since April, 2005;
Director of Bank of America Global Liquidity Funds, plc since May, 2005;
Director of Banc of America Capital Management (Ireland), Limited since May
2005; Senior Vice President of Columbia Funds Distributor, Inc. since January,
2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly
President and Chief Executive officer, CDC IXIS Asset Management Services, Inc.
from September, 1998 to August, 2004).
-----------------------------------------------------------------------------------
J. KEVIN CONNAUGHTON (Age 40) Treasurer of the Columbia Funds since October, 2003 and of the Liberty Funds, Stein
One Financial Center Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor
Boston, MA 02111 since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and
Treasurer (since 2000) Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and
Controller of the Liberty Funds and All-Star Funds from February, 1998 to
October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly
Treasurer from December, 2002 to December, 2004 and President from February,
2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund,
LLC; Vice President of Colonial Management Associates, Inc. from February, 1998
to October, 2000).
-----------------------------------------------------------------------------------
MARY JOAN HOENE (Age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds, Liberty
40 West 57th Street Funds, Stein Roe Funds and All-Star Funds since August, 2004 (formerly Partner,
New York, NY 10005 Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter,
Senior Vice President and Chief Compliance Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and
Officer (since 2004) Counsel, Equitable Life Assurance Society of the United States from April, 1998 to
November, 1999).
-----------------------------------------------------------------------------------
MICHAEL G. CLARKE (Age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein Roe Funds and
One Financial Center All-Star Funds since October, 2004 (formerly Controller of the Columbia Funds,
Boston, MA 02111 Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004;
Chief Accounting Officer (since 2004) Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy
& Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June,
2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star
Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Touche LLP
from May, 1997 to August, 1999).
-----------------------------------------------------------------------------------
JEFFREY R. COLEMAN (Age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds
One Financial Center since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services,
Boston, MA 02111 Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from
Controller (since 2004) February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset
Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from
August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to
August, 2000).
-----------------------------------------------------------------------------------
R. SCOTT HENDERSON (Age 45) Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds since December,
One Financial Center 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004;
Boston, MA 02111 Executive Director and General Counsel, Massachusetts Pension Reserves Investment
Secretary (since 2004) Management Board from September, 1997 to March, 2001).
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29
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT
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COLUMBIA MONEY MARKET FUND
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") requires
that the Board of Trustees/Directors (the "Board") of the Columbia Funds (the
"Funds"), including a majority of the Trustees and Directors (collectively, the
"Trustees") who are not "interested persons" of the Trusts, as defined in the
1940 Act (the "Independent Trustees"), annually review and approve the terms of
the Funds' investment advisory agreements. During the most recent six months
covered by this report, the Board reviewed and approved the management contracts
("Advisory Agreements") with Columbia Management Advisors, Inc. ("CMA") for the
Fund.
At meetings held on September 23, 2004 and October 12, 2004, the Advisory Fees
and Expenses Committee (the "Committee") of the Board considered the factors
described below relating to the selection of CMA and the approval of the
Advisory Agreement. At a meeting held on October 13, 2004, the Board, including
the Independent Trustees (who were advised by their independent legal counsel),
considered these factors and reached the conclusions described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered information regarding the nature, extent and quality of
services that CMA provides to the Fund under the Advisory Agreement. CMA
provided the most recent investment adviser registration form ("Form ADV") and
code of ethics for CMA to the Board. The Board reviewed information on the
status of Securities and Exchange Commission ("SEC") and New York Attorney
General ("NYAG") proceedings against CMA and certain of its affiliates,
including the agreement in principle entered into with the SEC and the NYAG on
March 15, 2004 to settle civil complaints filed by the SEC and the NYAG relating
to trading activity in mutual fund shares.1
The Board evaluated the ability of CMA, including its resources, reputation and
other attributes, to attract and retain highly qualified research, advisory and
supervisory investment professionals. The Board considered information regarding
CMA's compensation program for its personnel involved in the management of the
Fund.
Based on these considerations and other factors, including those referenced
below, the Board concluded that they were generally satisfied with the nature,
extent and quality of the investment advisory services provided to the Fund by
CMA.
FUND PERFORMANCE AND EXPENSES
CMA provided the Board with relative performance and expense information for the
Fund in a report prepared by Lipper Inc. ("Lipper") an independent provider of
investment company data. The Board considered the total return performance
information, which included the ranking of the Fund within a performance
universe made up of funds with the same Lipper investment classification and
objective (the "Performance Universe") by total return for one-year, three-year,
five-year, ten-year or life of fund periods, as applicable. They also considered
the Fund's performance in comparison to the performance results of a group (the
"Performance Peer Group") of funds selected by Lipper based on similarities in
fund type (e.g. open-end), investment classification and objective, asset size,
load type and 12b-1/service fees and other expense features, and to the
performance results of the Fund's benchmark index. The Board reviewed a
description of Lipper's methodology for selecting the mutual funds in the Fund's
Performance Peer Group and Performance Universe.
The Board considered statistical information regarding the Fund's total expenses
and certain components thereof, including management fees (both actual
management fees based on expenses for advisory and administrative fees including
any reductions for fee waivers and expense reimbursements as well as contractual
management fees that are computed for a hypothetical level of assets), actual
non-management expenses, and fee waivers/caps and expense reimbursements. They
also considered comparisons of these expenses to the expense information for
funds within a group (the "Expense Peer Group") selected by Lipper based on
similarities in fund type (e.g. open-end), investment
1 On February 9, 2005, CMA and its affiliate, Columbia Funds Distributor,
Inc., entered into settlement agreements with the SEC and the NYAG that
contain substantially the terms outlined in the agreements in principle.
30
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COLUMBIA MONEY MARKET FUND
classification and objective, asset size, load type and 12b-1/service fees and
other expense features (but which, unlike the Performance Peer Group, may
include funds with several different investment classifications and objectives)
and an expense universe ("Expense Universe") selected by Lipper based on the
criteria for determining the Expense Peer Group other than asset size. The
expense information in the Lipper report took into account all existing fee
waivers and expense reimbursements as well as all voluntary advisory fee
reductions applicable to certain Funds that were being proposed by management in
order to reduce the aggregate advisory fees received from mutual funds advised
by CMA and Banc of America Capital Management, LLC ("BACAP") by $32 million per
year for five years as contemplated by the agreement in principle with the NYAG.
The Committee also considered the projected impact on expenses of these Funds
resulting from the overall cost reductions that management anticipated would
result from the proposed shift to a common group of service providers for
transfer agency, fund accounting and custody services for mutual funds advised
by Bank of America affiliates.
The Boards also considered information is the Lipper report that ranked each
Fund based on (i) each Fund's one-year performance and actual advisory fees,
(ii) each Fund's one-year performance and total expenses and (iii) each Fund's
3-year performance and total expenses.
Based on these comparisons and expense and performance rankings of the Fund in
the Lipper Report, CMA determined an overall score for the Fund. The Committee
and the Board also considered projected savings to the Fund that would result
from certain modifications in soft dollar arrangements.
The Committee also considered more detailed information relating to certain
Funds that were highlighted for additional review based upon the fact that they
ranked poorly in terms of overall expense or management fees, maintained poor
performance or demonstrated a combination of below average to poor performance
while maintaining below average or poor expense rankings. At its September 23,
2004 meeting, the Committee discussed these Funds with management and in
executive session. The Committee requested additional information from
management regarding the cause(s) of the below-average relative performance of
these Funds, any remedial actions management recommended to improve performance
and the general standards for review of portfolio manager performance. At its
October 12, 2004 meeting, the Committee considered additional information
provided by management regarding these Funds including yield information with
respect to certain Funds. The Board also considered management's proposal to
merge or liquidate some of these Funds.
Based on these considerations and other factors, the Board concluded that the
overall performance and expense results supported by the approval of the
Advisory Agreements for each Fund.
INVESTMENT ADVISORY FEE RATES
The Board reviewed and considered the proposed contractual investment advisory
fee rates (the "Advisory Agreement Rates") payable by the Funds to CMA for
investment advisory services. In addition, the Board reviewed and considered the
existing and proposed fee waiver and reimbursement arrangements applicable to
the Advisory Agreement Rates and considered the Advisory Agreement Rates after
taking the fee waivers and reimbursements into account (the "Net Advisory
Rates"). At previous meetings, the Committee had separately considered
management's proposal to reduce annual investment advisory fees for certain
Funds under the NYAG agreement in principle and the impact of these reductions
on each affected Fund. Additionally, the Board considered information comparing
the Advisory Agreement Rates and Net Advisory Rates (both on a stand-alone basis
and on a combined basis with the Funds' administration fee rates) with those of
the other funds in the Expense Peer Group. The Board concluded that the Advisory
Agreement Rates and Net Advisory Rates represented reasonable compensation to
CMA, in light of the nature, extent and quality of the services provided to the
Funds, the fees paid and expenses borne by comparable funds and the costs that
CMA incurs in providing these services to the Funds.
31
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COLUMBIA MONEY MARKET FUND
PROFITABILITY
The Board considered a detailed profitability analysis of CMA based on 2003
financial statements, adjusted to take into account advisory fee reductions
implemented in November 2003 and proposed reductions under the NYAG proposed
settlement. The Board concluded that, in light of the costs of providing
investment management and other services to the Funds, the profits and other
ancillary benefits that CMA and its affiliates received for providing these
services to the Funds were not unreasonable.
ECONOMIES OF SCALE
In evaluating potential economies of scale, the Board considered CMA's proposal
to implement a standardized breakpoint schedule for combined advisory and
administrative fees for the majority of the funds of the same general asset type
within the Columbia Funds complex (other than index and closed-end funds). The
Board noted that the standardization of the breakpoints would not result in a
fee increase for any Fund. The Board concluded that any actual or potential
economies of scale are, or will be, shared fairly with Fund shareholders,
including most particularly through Advisory Agreement Rate breakpoints at
current and reasonably foreseeable asset levels.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
In evaluating the proposed fee reductions under the NYAG agreement in principle,
the Board considered information regarding the advisory fee rates charged by
BACAP for the Nations Funds. Members of the Committee and the Board had also
separately reviewed advisory fee rates for variable insurance product funds
advised by CMA. This information assisted the Board in assessing the
reasonableness of fees paid under the Advisory Agreements in light of the
nature, extent and quality of services provided under those agreements.
OTHER BENEFITS TO CMA
The Board considered information regarding potential "fall-out" or ancillary
benefits received by CMA and its affiliates as a result of their relationship
with the Funds. These benefits could include benefits directly attributable to
the relationship of CMA with the Funds (such as soft dollar credits) and
benefits potentially derived from an increase in the business of CMA as a result
of their relationship with the Funds (such as the ability to market to
shareholders other financial products offered by CMA and its affiliates).
OTHER FACTORS AND BROADER REVIEW
The Board reviews detailed materials provided by CMA annually as part of the
approval process under Section 15(c) of the 1940 Act. The Board also regularly
reviews and assesses the quality of the services that the Funds receive
throughout the year. In this regard, the Board reviews information provided by
CMA at their regular meetings, including, among other things, a detailed
portfolio review, and detailed fund performance reports. In addition, the Board
interviews the heads of each investment area at each regular meeting of the
Board and selected portfolio managers of the Funds at various times throughout
the year. After considering the above-described factors and based on the
deliberations and their evaluation of the information provided to them, the
Board concluded that re-approval of the Advisory Agreements for each of the
Funds was in the best interest of the Funds and their shareholders. Accordingly,
the Board unanimously approved the Advisory Agreements.
32
IMPORTANT INFORMATION ABOUT THIS REPORT
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COLUMBIA MONEY MARKET FUND
TRANSFER AGENT
Columbia Funds Services, Inc.
P.O. Box 8081
Boston MA 02266-8081
800-345-6611
DISTRIBUTOR
Columbia Funds Distributor, Inc.
One Financial Center
Boston MA 02111
INVESTMENT ADVISOR
Columbia Management Advisors, Inc.
100 Federal Street
Boston MA 02110
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
125 High Street
Boston MA 02110
The funds mail one shareholder report to each shareholder address. If you would
like more than one report, please call shareholder services at 800-345-6611 and
additional reports will be sent to you.
This report has been prepared for shareholders of Columbia Money Market Fund.
This report may also be used as sales literature when preceded or accompanied by
the current prospectus which provides details of sales charges, investment
objectives and operating policies of the funds and with the most recent copy of
the Columbia Funds Performance Update.
A description of the policies and procedures that the fund uses to determine how
to vote proxies and a copy of the fund's voting record are available (i) at
www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's
website at www.sec.gov, and (iii) without charge, upon request, by calling
800-368-0346. Information regarding how the fund voted proxies relating to
portfolio securities during the 12-month period ended June 30, 2004 is available
from the SEC's website. Information regarding how the fund voted proxies
relating to portfolio securities is also available from the fund's website.
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at www.sec.gov and may be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C. Information on the operation
of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Columbia Management is the primary investment management division of Bank of
America Corporation. Columbia Management entities furnish investment management
services and advise institutional and mutual fund portfolios.
33
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Columbia Money Market Fund Annual Report, March 31, 2005
Columbia Management(R)
(c) 2005 Columbia Funds Distributor, Inc.
One Financial Center, Boston, MA 02111-2621
800.345.6611 www.columbiafunds.com
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757-02/047V-0405 (05/05) 05/5542
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this
report, adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party.
(b) During the period covered by this report, there were not any
amendments to a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers
or implicit waivers to a provision of the code of ethics adopted in
2(a) above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas
E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members
of the registrant's Board of Trustees and Audit Committee, each qualify as an
audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr.
Woolworth are each independent trustees, as defined in paragraph (a)(2) of this
item's instructions and collectively constitute the entire Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fee information below is disclosed for the single series of the registrant whose
report to stockholders is included in this annual filing.
(a) Aggregate Audit Fees billed by the principal accountant for professional
services rendered during the fiscal years ended March 31, 2005 and March 31,
2004 are approximately as follows:
2005 2004
$21,500 $20,500
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years ended March 31, 2005 and
March 31, 2004 are approximately as follows:
2005 2004
$3,700 $4,000
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported in Audit Fees
above. In both fiscal years 2005 and 2004, Audit-Related Fees include certain
agreed-upon procedures performed for semi-annual shareholder reports.
(c) Aggregate Tax Fees billed by the principal accountant for professional
services rendered during the fiscal years ended March 31, 2005 and March 31,
2004 are approximately as follows:
2005 2004
$1,600 $1,400
Tax Fees in both fiscal years 2005 and 2004 consist primarily of the review of
annual tax returns and include amounts for professional services by the
principal accountant for tax compliance, tax advice and tax planning.
(d) Aggregate All Other Fees billed by the principal accountant for professional
services rendered during the fiscal years ended March 31, 2005 and March 31,
2004 are approximately as follows:
2005 2004
$0 $0
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) above.
None of the amounts described in paragraphs (a) through (d) above were approved
pursuant to the "de minimus" exception under paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the "Policy")
which sets forth the procedures and the conditions pursuant to which the Audit
Committee will pre-approve (i) all audit and non-audit (including audit related,
tax and all other) services provided by the registrant's independent auditor to
the registrant and individual funds
(collectively "Fund Services"), and (ii) all non-audit services provided by the
registrant's independent auditor to the funds' adviser or a control affiliate of
the adviser, that relate directly to the funds' operations and financial
reporting (collectively "Fund-related Adviser Services"). A "control affiliate"
is an entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the funds, and the term "adviser" is
deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio
management and is sub-contracted or overseen by another investment adviser. The
adviser and control affiliates are collectively referred to as "Adviser
Entities."
The Audit Committee uses a combination of specific (on a case-by-case basis as
potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received general
pre-approval, it will require specific pre-approval by the Audit Committee if it
is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
On an annual basis, the Fund Treasurer and/or Director of Trustee Administration
shall submit to the Audit Committee a schedule of the types of Fund Services and
Fund-related Adviser Services that are subject to general pre-approval.
These schedules will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide estimated fees
for each instance of providing each service. This general pre-approval and
related fees (where provided) will generally cover a one-year period (for
example, from June 1 through May 31 of the following year). The Audit Committee
will review and approve the types of services and review the projected fees for
the next one-year period and may add to, or subtract from, the list of general
pre-approved services from time to time, based on subsequent determinations.
This approval acknowledges that the Audit Committee is in agreement with the
specific types of services that the independent auditor will be permitted to
perform. The fee amounts will be updated to the extent necessary at other
regularly scheduled meetings of the Audit Committee.
In addition to the fees for each individual service, the Audit Committee has the
authority to implement a fee cap on the aggregate amount of non-audit services
provided to an individual fund.
If, subsequent to general pre-approval, a fund, its investment adviser or a
control affiliate determines that it would like to engage the independent
auditor to perform a service that requires pre-approval and that is not included
in the general pre-approval list, the specific pre-approval procedure shall be
as follows:
o A brief written request shall be prepared by management detailing the
proposed engagement with explanation as to why the work is proposed to
be performed by the independent auditor;
o The request should be addressed to the Audit Committee with copies to
the Fund Treasurer and/or Director of Trustee Administration;
o The Fund Treasurer and/or Director of Trustee Administration will
arrange for a discussion of the service to be included on the agenda
for the next regularly scheduled Audit Committee meeting, when the
Committee will discuss the proposed engagement and approve or deny the
request.
o If the timing of the project is critical and the project needs to
commence before the next regularly scheduled meeting, the Chairperson
of the Audit Committee may approve or deny the request on behalf of
the Audit Committee, or, in the Chairperson's discretion, determine to
call a special meeting of the Audit Committee for the purpose of
considering the proposal. Should the Chairperson of the Audit
Committee be unavailable, any other member of the Audit Committee may
serve as an alternate for the purpose of approving or denying the
request. Discussion with the Chairperson (or alternate, if necessary)
will be arranged by the Fund Treasurer and/or Director of Trustee
Administration. The independent auditor will not commence any such
project unless and until specific approval has been given.
III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES
The Audit Committee recognizes that there are cases where services proposed to
be provided by the independent auditor to the adviser or control affiliates are
not Fund-related Adviser Services within the meaning of the Policy, but
nonetheless may be relevant to the Audit Committee's ongoing evaluation of the
auditor's independence and objectivity with respect to its audit services to the
funds. As a result, in all cases where an Adviser Entity engages the independent
auditor to provide audit or non-audit services that are not Fund Services or
Fund-related Adviser Services, were not subject to pre-approval by the Audit
Committee, and the projected fees for any such engagement (or the aggregate of
all such engagements during the period covered by the Policy) exceeds a
pre-determined threshold established by the Audit Committee; the independent
auditor, Fund Treasurer and/or Director of Trustee Administration will notify
the Audit Committee not later than its next meeting. Such notification shall
include a general description of the services provided, the entity that is to be
the recipient of such services, the timing of the engagement, the entity's
reasons for selecting the independent auditor, and the projected fees. Such
information will allow the Audit Committee to consider whether non-audit
services provided to the adviser and Adviser Entities, which were not subject to
Audit Committee pre-approval, are compatible with maintaining the auditor's
independence with respect to the Funds.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services or
Fund-related Adviser Services initiated since the last such report was rendered,
including:
o A general description of the services, and
o Actual billed and projected fees, and
o The means by which such Fund Services or Fund-related Adviser Services
were pre-approved by the Audit Committee.
In addition, the independent auditor shall report to the Audit Committee
annually, and no more than 90 days prior to the filing of audit reports with the
SEC, all non-audit services provided to entities in the funds' "investment
company complex," as defined by SEC rules, that did not require pre-approval
under the Policy.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be reviewed
and approved at least annually by the Audit Committee.
*****
(e)(2) The percentage of services described in paragraphs (b) through (d) of
this Item approved pursuant to the "de minimis" exception under paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended March
31, 2005 and March 31, 2004 was zero.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years ended March 31, 2005 and March
31, 2004 are disclosed in (b) through (d) of this Item.
During the fiscal years ended March 31, 2005 and March 31, 2004, there were no
Audit-Related Fees or Tax Fees that were approved for services to the investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser)
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X. During the fiscal years ended March
31, 2005 and March 31, 2004, All Other Fees that were approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $93,500
and $95,000, respectively. For both fiscal years, All Other Fees relate to
internal controls reviews of the registrant's transfer agent.
The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be
approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were
approved under the "de minimis" exception during both fiscal years ended March
31, 2005 and March 31, 2004 was zero.
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, is compatible with maintaining the principal accountant's
independence. The Audit Committee determined that the provision of such services
is compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have not been any material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors, since those
procedures were last disclosed in response to requirements of Item
7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, has concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Columbia Funds Trust II
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By (Signature and Title) /S/ Christopher L. Wilson
-------------------------------------------------------
Christopher L. Wilson, President
Date May 27, 2005
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /S/ Christopher L. Wilson
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Christopher L. Wilson, President
Date May 27, 2005
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By (Signature and Title) /S/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date May 27, 2005
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