AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
JUNE 10, 2005
REGISTRATION NO.
(INVESTMENT COMPANY ACT REGISTRATION NO. 811-07024)
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-14
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
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PRE-EFFECTIVE AMENDMENT NO. / /
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POST-EFFECTIVE AMENDMENT NO. / /
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(CHECK APPROPRIATE BOX OR BOXES)
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COLUMBIA INTERNATIONAL STOCK FUND, INC.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
1-800-426-3750
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R. SCOTT HENDERSON, ESQUIRE
COLUMBIA MANAGEMENT GROUP, INC.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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COPIES TO:
BRIAN D. MCCABE, ESQUIRE
ROPES & GRAY LLP
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
CAMERON S. AVERY, ESQUIRE
BELL, BOYD & LLOYD LLC
70 WEST MADISON STREET, SUITE 3300
CHICAGO, IL 60602-4207
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Title of Securities Being Registered:
Class A
Class B
Class C
Class Z
Approximate Date of Proposed Offering: as soon as practicable after the
Registration Statement becomes or is declared effective.
It is proposed that this filing will become effective on July 11, 2005 pursuant
to Rule 488 under the Securities Act of 1933.
An indefinite amount of the Registrant's securities has been registered under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. In reliance upon such Rule, no filing fee is being paid at this
time.
COLUMBIA NEWPORT TIGER FUND
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2621
Dear Shareholder:
I am writing to ask for your vote on (1) the proposed merger between
Columbia Newport Tiger Fund (the "Acquired Fund") and Columbia International
Stock Fund, Inc. (the "Acquiring Fund") (each a "Fund" and together the "Funds")
and (2) the election of Trustees of Columbia Funds Trust VII at a special
meeting of shareholders to be held on September 9, 2005.
The proposed merger is one of several mergers recommended by Columbia
Management Group, Inc. ("Columbia"), the parent company of the investment
advisor to the Columbia funds. Columbia's overall goal in proposing these fund
mergers is two-fold. First, by merging funds with generally similar investment
strategies, Columbia can create larger, more efficient investment portfolios.
Second, by streamlining its product offerings, Columbia can more effectively
concentrate its investment management and distribution resources on a more
focused group of portfolios. Columbia recommended the merger to enable
shareholders to invest in a larger, more efficient investment portfolio while
continuing to access a similar investment strategy.
Should the merger be approved and other conditions to the merger be
satisfied, your current fund investment will be exchanged, without immediate tax
consequences, for an equal investment (that is, dollar value) in the Acquiring
Fund. Shareholders of the Acquired Fund will receive shares of the Acquiring
Fund of the same class as the shares they currently own (except that Class
T shareholders of the Acquired Fund will receive Class A shares of the Acquiring
Fund). It is also expected that if shareholders so approve (pursuant to a
separate proxy statement), the Acquiring Fund will be reorganized as a series of
Columbia Funds Trust IX, a Massachusetts business trust into which the legal
entities of all of the Columbia Funds are expected to be consolidated. We
believe this consolidation will enhance the efficiency of administration and
compliance monitoring for the Columbia Funds. More information on the specific
details and reasons for the Acquired Fund's acquisition is contained in the
enclosed combined prospectus/Proxy Statement. Please read it carefully.
THE TRUSTEES OF COLUMBIA FUNDS TRUST VII UNANIMOUSLY RECOMMEND THAT YOU
VOTE FOR THE MERGER.
THE TRUSTEES OF COLUMBIA FUNDS TRUST VII UNANIMOUSLY RECOMMEND THAT YOU
VOTE FOR ALL OF THE NOMINEES FOR TRUSTEES OF THE ACQUIRED FUND.
YOUR VOTE IS IMPORTANT. YOU CAN VOTE BY COMPLETING THE ENCLOSED PROXY
CARD. A SELF-ADDRESSED POSTAGE-PAID ENVELOPE HAS BEEN ENCLOSED FOR YOUR
CONVENIENCE.
We appreciate your participation and prompt response in these matters
and thank you for your continued support.
Sincerely,
Christopher L. Wilson
President and Chief Executive Officer
_________, 2005
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NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 9, 2005
COLUMBIA NEWPORT TIGER FUND
A SERIES OF COLUMBIA FUNDS TRUST VII
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
To the shareholders of Columbia Newport Tiger Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of
Columbia Newport Tiger Fund (the "Acquired Fund") will be held at 2:00 p.m.
Eastern Daylight Time on September 9, 2005, at the offices of Columbia
Management Group, Inc. ("Columbia"), One Financial Center, Boston, Massachusetts
02111, for the following purpose:
1. To approve an Agreement and Plan of Reorganization providing
for (i) the sale of all of the assets of the Acquired Fund to,
and the assumption of all of the liabilities of the Acquired
Fund by, Columbia International Stock Fund, Inc. (the
"Acquiring Fund"), in exchange for shares of the Acquiring
Fund, (ii) the distribution of such shares to the shareholders
of the Acquired Fund in complete liquidation of the Acquired
Fund and (iii) the dissolution under state law of the Acquired
Fund.
2. To elect Trustees of Columbia Funds Trust VII. Mses. Kelly and
Verville and Messrs. Hacker, Lowry, Mayer, Nelson, Neuhauser,
Simpson, Stitzel, Theobald and Woolworth (who have each agreed
to serve) are nominees for election as trustees of Columbia
Funds Trust VII by the shareholders of Columbia Funds Trust
VII.
3. To consider and act upon such other matters that properly come
before the meeting or any adjourned session of the meeting.
Shareholders of record of the Acquired Fund at the close of business on
July 7, 2005, are entitled to notice of and to vote at the meeting and any
adjourned session.
By Order of the Board of Trustees,
R. Scott Henderson, Secretary
_______ , 2005
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE SEE THE ENCLOSED PROSPECTUS/ PROXY STATEMENT AND OTHER MATERIALS
FOR INSTRUCTIONS ON HOW TO VOTE EASILY AND QUICKLY.
-3-
PROSPECTUS/PROXY STATEMENT
JUNE __, 2005
ACQUISITION OF THE ASSETS AND LIABILITIES OF
COLUMBIA NEWPORT TIGER FUND
c/o Columbia Funds Trust VII
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
BY AND IN EXCHANGE FOR SHARES OF
COLUMBIA INTERNATIONAL STOCK FUND, INC.
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
* * *
ELECTION OF TRUSTEES OF
COLUMBIA FUNDS TRUST VII
TABLE OF CONTENTS
I. QUESTIONS AND ANSWERS REGARDING APPROVAL OF THE MERGER.................................................... 6
II. PROPOSAL 1 - ACQUISITION OF THE ACQUIRED FUND BY THE ACQUIRING FUND....................................... 14
The Proposal........................................................................................... 14
Principal Investment Risks............................................................................. 14
Information about the Acquisition...................................................................... 15
III. QUESTIONS AND ANSWERS REGARDING THE ELECTION OF TRUSTEES 22
IV. PROPOSAL 2 - ELECTION OF TRUSTEES OF COLUMBIA FUNDS TRUST VII............................................. 23
V. GENERAL................................................................................................... 34
Voting Information..................................................................................... 34
Information about Proxies and the Conduct of the Meeting............................................... 34
Appendix A -- Agreement and Plan of Reorganization........................................................ A
Appendix B -- Fund Information............................................................................ B
Appendix C -- Capitalization.............................................................................. C
Appendix D -- Information Applicable to the Acquiring Fund................................................ D
Appendix E -- Financial Highlights for Acquiring Fund..................................................... E
Appendix F -- Comparison of Organizational Documents...................................................... F
Appendix G -- Governance Committee Charter ............................................................... G
This Prospectus/Proxy Statement (the "Prospectus/Proxy Statement") contains
information that a shareholder should know before voting on the following
proposals:
PROPOSAL 1 - Approval of an Agreement and Plan of Reorganization, dated June 1,
2005, between Columbia Funds Trust VII ("Trust VII"), on behalf of each of
Columbia Newport Tiger Fund (the "Acquired Fund") and Columbia International
Stock Fund, Inc. (the "Acquiring Fund"), and Columbia Management Advisors, Inc.
("Columbia Management") (the "Agreement and Plan of Reorganization") relating to
the proposed merger between the Acquired Fund and the Acquiring Fund.
-4-
PROPOSAL 2 - The election of Trustees of Columbia Funds Trust VII.
These two proposals will be considered by shareholders of the Acquired Fund at a
special meeting of shareholders of the Acquired Fund that will be held at the
offices of Columbia Management, One Financial Center, Boston, Massachusetts
02111. The transaction contemplated by the Agreement and Plan of Reorganization
is referred to as the "Merger." Each of the Acquired Fund and the Acquiring Fund
is referred to as a "Fund", and together, the "Funds". Each of the Funds is a
registered open-end management investment company, or a portfolio series
thereof. Please read this Prospectus/Proxy Statement and keep it for future
reference.
The Acquiring Fund seeks long-term capital appreciation by investing, under
normal market conditions, at least 80% of its total net assets (plus any
borrowings for investment purposes) in stocks issued by companies from at least
three different countries outside the United States. If the Agreement and Plan
of Reorganization relating to the Acquired Fund is approved by the shareholders
of the Acquired Fund and the Acquisition occurs, the Acquired Fund will transfer
all of the assets attributable to each class of its shares to the Acquiring Fund
and the Acquiring Fund will assume all of the liabilities in exchange for shares
of the same class of the Acquiring Fund with the same aggregate net asset value
as the net value of the assets transferred and liabilities assumed, except that
Class T shareholders of the Acquired Fund will receive Class A shares of the
Acquiring Fund. After that exchange, shares of each class received by the
Acquired Fund will be distributed pro rata to its shareholders of the
corresponding class and they will become shareholders of the Acquiring Fund.
The following documents have been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated into this Prospectus/Proxy Statement
by reference:
- The Statement of Additional Information of the Acquiring Fund
dated [ ], 2005, relating to this Prospectus/Proxy Statement.
- The Prospectuses of the Acquired Fund dated January 1, 2005,
as supplemented.
- The Statement of Additional Information of the Acquired Fund
dated January 1, 2005, as supplemented.
- The Report of Independent Registered Public Accounting Firm
and the audited financial statements included in the Annual
Report to Shareholders of the Acquired Fund dated August 31,
2004.
The Acquired Fund has previously sent its Annual Report to its shareholders. For
a free copy of this report or any of the documents listed above, call
1-800-426-3750, or write to the Acquired Fund at the address listed on the cover
of this Prospectus/Proxy Statement. Shareholders may also obtain many of these
documents by accessing the Internet site for the Acquired Fund at
www.columbiafunds.com. Text-only versions of all the Acquired Fund and Acquiring
Fund documents can be viewed online or downloaded from the EDGAR database on the
SEC's Internet site at www.sec.gov. Shareholders can review and copy information
about the funds by visiting the Public Reference Room, U.S. Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, DC 20549-0102.
Shareholders can obtain copies, upon payment of a duplicating fee, by sending an
e-mail request to publicinfo@sec.gov or by writing the Public Reference Room at
the address above. Information on the operation of the Public Reference Room may
be obtained by calling 1-202-942-8090.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
An investment in a Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
-5-
I. QUESTIONS AND ANSWERS REGARDING APPROVAL OF THE MERGER
THE FOLLOWING QUESTIONS AND ANSWERS PROVIDE AN OVERVIEW OF KEY FEATURES OF THE
MERGER AND OF THE INFORMATION CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT.
PLEASE REVIEW THE PROSPECTUS/PROXY STATEMENT PRIOR TO CASTING THE VOTE. PLEASE
CALL 1-866-270-3134 WITH ANY QUESTIONS ABOUT THE MERGER OR THIS PROSPECTUS/PROXY
STATEMENT GENERALLY.
1. WHAT MERGER IS BEING PROPOSED?
The Board of Trustees of the Acquired Fund is recommending that the Acquiring
Fund acquire the Acquired Fund. This means that the Acquiring Fund would acquire
all of the assets and assume all of the liabilities of the Acquired Fund in
exchange for shares of the Acquiring Fund. If the Merger is approved and
completed, shareholders of the Acquired Fund will receive shares of the
Acquiring Fund of a class corresponding to the class of their Acquired Fund
shares and with a dollar value equal to the value of their Fund shares on the
business day prior to the closing of the merger. The Merger is currently
scheduled to take place on or around October 7, 2005, or such other date as the
parties may agree.
2. WHY IS THE MERGER BEING PROPOSED?
The Trustees recommend approval of the Merger because the Merger offers
shareholders of the Acquired Fund the opportunity to invest in a larger combined
portfolio that has generally similar investment goals and principal investment
strategies, except with respect to geographic focus. Spreading fixed costs over
a broader asset base allows the potential for more efficient operation, and
lower overall expenses. In reviewing the Merger, the Trustees also considered
that, based on estimated expense ratios as of _____, 2005, shareholders of the
Acquired Fund are expected to experience lower expenses, as a result of the
Merger.
Please review "Reasons for the Merger and Trustees' Considerations" in Sections
II and III of this Prospectus/Proxy Statement for more information regarding the
factors considered by the Acquired Fund's Board.
Shareholders should note that, although the investment goal and strategy of the
Acquiring Fund is generally similar to that of the Acquired Fund, the
fundamental investment restrictions of the combined Fund differ from those of
the Acquired Fund in that it invests broadly in foreign securities, rather than
focusing on Asian markets. Please see "How do the Investment goals, strategies
and policies of the Funds compare?" below.
3. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS COMPARE AND WHAT ARE
THEY ESTIMATED TO BE FOLLOWING THE MERGER?
The tables below allow shareholders to compare the sales charges and management
fees and expenses of each Fund and to analyze the estimated expenses that
Columbia Management expects the combined Fund to bear in the first year
following the Merger. The shareholder fees presented below for the Acquiring
Fund apply both before and after giving effect to the Merger. Sales charges, if
applicable, are paid directly by shareholders to Columbia Funds Distributor,
Inc., each Fund's distributor. Annual Fund Operating Expenses are paid by each
Fund. They include management fees, distribution and service (12b-1) fees (if
applicable) and administrative costs, including pricing and custody services.
In addition, following the presentation of that information, Annual Fund
Operating Expenses and Example Expenses are presented on a pro forma combined
basis. The Annual Fund Operating Expenses shown in the table below represent
expenses as of each Fund's most recent fiscal year (year ended August 31, 2004
for both Funds) and those projected for the combined Fund on a pro forma basis
after giving effect to the proposed Merger and based on pro forma combined net
assets as of October 31, 2004.
Shareholders of the Acquired Fund and the Acquiring Fund will not pay additional
sales charges as a result of the Merger, although contingent deferred sales
charges ("CDSCs") applicable to share purchases made prior to the Merger will
continue to apply.
-6-
Based on the expense ratios shown below, total annual operating expenses of each
class of shares of the Acquiring Fund are expected to be lower to the total
annual operating expenses of each corresponding class of shares of the Acquired
Fund.
SHAREHOLDER FEES
(paid directly from the investment)
ACQUIRED FUND(1)
CLASS A CLASS B CLASS C CLASS T(5) CLASS Z
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Maximum sales charge (load) imposed on purchases (%) (as a
percentage of the offering price) 5.75 0.00 0.00 5.75% 0.00
Maximum deferred sales charge (load) on redemptions (%)
(as a percentage of the lesser of original purchase
price or net asset value) 1.00(2) 5.00 1.00 1.00(2) 0.00
Redemption fee (%) (as a percentage of amount redeemed, if
applicable) 2.00(3)(4) 2.00(3)(4) 2.00(3)(4) 2.00(3)(4) 2.00(3)(4)
ACQUIRING FUND(1)
CLASS A CLASS B CLASS C CLASS Z
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Maximum sales charge (load) on purchases (%) (as a
percentage of the offering price) 5.75 0.00 0.00 0.00
Maximum deferred sales charge (load) on redemptions (%)
(as a percentage of the lesser of purchase price or
redemption price) 1.00(2) 5.00 1.00 0.00
Redemption fee (%) (as a percentage of amount redeemed, if
applicable) 2.00(3)(4) 2.00(3)(4) 2.00(3)(4) 2.00(3)(4)
ACQUIRING FUND(1)
(PRO FORMA COMBINED)
CLASS A CLASS B CLASS C CLASS Z
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Maximum sales charge (load) on purchases (%) (as a
percentage of the offering price) 5.75 0.00 0.00 0.00
Maximum deferred sales charge (load) on redemptions (%)
(as a percentage of the lesser of purchase price or
redemption price) 1.00(2) 5.00 1.00 0.00
Redemption fee (%) (as a percentage of amount redeemed, if
applicable) 2.00(3)(4) 2.00(3)(4) 2.00(3)(4) 2.00(3)(4)
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid
to the transfer agent.
(2) This charge applies only to certain Class A shares and Class T shares
bought without an initial sales charge.
(3) A redemption fee of 2.00% of redemption proceeds may be imposed on
redemptions (including redemptions by exchange) of shares of the fund
that were owned for 60 days or less.
(4) There is a $7.50 charge for wiring sale proceeds to a bank.
(5) Class T shares are sold only to investors who received (and who have
continuously held) Class T shares in connection with the merger of
certain Galaxy Funds into various Columbia Funds (formerly named
Liberty Funds). Class T shareholders will receive Class A shares of the
Acquiring Fund in the Merger.
ANNUAL FUND OPERATING EXPENSES
(deducted directly from fund assets)
ACQUIRED FUND
CLASS A CLASS B CLASS C CLASS T CLASS Z
------- ------- ------- ------- -------
Management fee (%)(1)(2) 0.95 0.95 0.95 0.95 0.95
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00 0.00 0.00
Other expenses(2)(3) (%) 0.61 0.61 0.61 0.61 0.61
Total annual fund operating expenses (2) (%) 1.81 2.56 2.56 1.56 1.56
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ACQUIRING FUND
CLASS A CLASS B CLASS C CLASS Z
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Management fee (%) 0.87 0.87 0.87 0.87
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00 0.00
Other expenses(3)(4) (%) 0.32 0.32 0.32 0.32
Total annual fund operating expenses(4) (%) 1.44 2.19 2.19 1.19
ACQUIRING FUND
(PRO FORMA COMBINED)
CLASS A CLASS B CLASS C CLASS Z
------- ------- ------- -------
Management fee (%) 0.85 0.85 0.85 0.85
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00 0.00
Other expenses(5) (%) 0.32 0.32 0.32 0.32
Total annual fund operating expenses(5) (%) 1.42 2.17 2.07 1.07
(1) The Fund pays a management fee of 0.70% and an administration fee of
0.25%.
(2) The Fund's advisor and administrator have voluntarily agreed to waive
advisory and administration fees and reimburse the Fund for certain
expenses so that the total annual fund operating expenses (exclusive of
distribution and service fees, brokerage commissions, interest, taxes
and extraordinary expenses, if any) will not exceed 1.55%. If this
waiver were reflected in the table, the other expenses for each share
class would be 0.60% and total annual fund operating expenses for Class
A, B, C, T and Z shares would be 1.80%, 2.55%, 2.55% , 1.55% and 1.55%,
respectively. This arrangement may be modified or terminated by the
advisor or administrator at any time.
(3) Other expenses have been restated to reflect contractual changes to the
transfer agency fee for the Acquiring Fund and for the Acquired Fund
effective November 1, 2003.
(4) Columbia Management has voluntarily agreed to waive 0.11% of the
transfer agency fees for each Class A, B, C and Z share class,
respectively. If these waivers were reflected in the table, other
expenses for Class A, B and C shares would be 0.21% for each class
and total annual fund operating expenses for Class A, B and C shares
would be 1.33%, 2.08%, 2.08% and 1.08%, respectively. This arrangement
may be modified or terminated by the advisor at any time.
(5) Columbia Management has voluntarily agreed to waive 0.10% of the
transfer agency fees for each Class A, Class B, Class C and Class Z
shares, respectively. If these waivers were reflected in the table,
other expenses for Class A, Class B, Class C and Class Z shares would
be 1.32%, 2.07%, 1.97%, and 0.97% respectively.
EXAMPLE EXPENSES
Example Expenses help compare the cost of investing in each Fund currently with
the cost of investing in the combined Fund on a pro forma combined basis and
also allow shareholders to compare these costs with the cost of investing in
other mutual funds. It uses the following hypothetical conditions.
- $10,000 initial investment
- 5% total return for each year
- Each Fund's operating expenses remain the same
- Reinvestment of all dividends and distributions
-8-
- Class B shares convert to Class A shares after eight years
EXAMPLE EXPENSES
(actual costs may be higher or lower)
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------- --------
ACQUIRED FUND
Class A $ 748 $1,112 $ 1,499 $ 2,579
Class B: did not sell shares $ 259 $ 796 $ 1,360 $ 2,712
sold all shares at end of period $ 759 $1,096 $ 1,560 $ 2,712
Class C: did not sell shares $ 259 $ 796 $ 1,360 $ 2,895
sold all shares at end of period $ 359 $ 796 $ 1,360 $ 2,895
Class T: $ 725 $1,039 $ 1,376 $ 2,325
Class Z $ 159 $ 493 $ 850 $ 1,856
ACQUIRING FUND
Class A $ 713 $1,004 $ 1,317 $ 2,200
Class B: did not sell shares $ 222 $ 685 $ 1,175 $ 2,334
sold all shares at end of period $ 722 $ 985 $ 1,375 $ 2,334
Class C: did not sell shares $ 222 $ 685 $ 1,175 $ 2,524
sold all shares at end of period $ 322 $ 685 $ 1,175 $ 2,524
Class Z $ 121 $ 378 $ 654 $ 1,590
ACQUIRING FUND
(pro forma combined) (both Acquisitions)
Class A $ 711 $ 998 $ 1,307 $ 2,179
Class B: did not sell shares $ 220 $ 679 $ 1,164 $ 2,313
sold all shares at end of period $ 720 $ 979 $ 1,364 $ 2,313
Class C: did not sell shares $ 220 $ 679 $ 1,164 $ 2,503
sold all shares at end of period $ 320 $ 679 $ 1,164 $ 2,503
Class Z $ 119 $ 372 $ 644 $ 1,420
HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
Please see Appendix D for information relating to supplemental hypothetical
investment information that provides additional information in a different
format from the preceding Annual Fund Operating Expenses tables about the effect
of the expenses of the Acquiring Fund on a pro forma basis, including investment
advisory fees and other Fund costs, on such Fund's returns over a 10-year
period.
4. HOW DO THE INVESTMENT GOALS, PRINCIPAL INVESTMENT STRATEGIES AND POLICIES OF
THE FUNDS COMPARE?
This table shows the investment goal and principal investment strategies of each
fund:
ACQUIRED FUND ACQUIRING FUND
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INVESTMENT GOAL: The Acquired Fund seeks INVESTMENT GOAL: The Fund seeks capital appreciation by investing, under normal
capital appreciation. market conditions,at least 80% of its net assets (plus any borrowings for
investment purposes) in stocks issued by companies from at least three
countries outside of the United States.
PRINCIPAL INVESTMENT STRATEGIES: The Acquired PRINCIPAL INVESTMENT STRATEGIES: The Fund seeks to achieve its goal as follows:
Fund seeks to achieve its goal as follows:
- - Under normal market conditions, the Fund - The Fund intends to invest primarily in companies considered to be large and
invests at least 80% of its net assets (plus well-established, based on standards of the applicable country or foreign
any borrowings for investment purposes) in market. Most of the Funds' stocks will be denominated in foreign currencies.
stocks of companies located in the Tiger
countries of Asia. The countries or regions
in which the fund invests include Hong Kong,
-9-
Singapore, South Korea, Taiwan, Malaysia, - The Fund intends to invest principally in the equity securities of companies
Thailand, India, Indonesia, China and the located in the following countries or regions: Australia, Brazil, Canada,
Philippines. In selecting investments for the China, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Italy,
Fund, the advisor typically purchases stocks Japan, Mexico, The Netherlands, New Zealand, Norway, Singapore, South Korea,
of quality growth companies. Spain, Sweden, Switzerland, Taiwan, Thailand and the United Kingdom.
- - At times, the Fund's investment advisor - The Fund may also invest in securities convertible into or exercisable for
may determine that adverse market conditions stock (including preferred stock, warrants and debentures) and certain
make it desirable to suspend temporarily the options and financial futures contracts (derivatives).
Fund's normal investment activities. During
such times, the Fund may, but is not required - At times, the Fund's investment advisor may determine that adverse market
to, invest in cash or high-quality, conditions make it desirable to suspend temporarily the Fund's normal
short-term debt securities, without limit. investment activities. During such times, the Fund may, but is not
Taking a temporary defensive position may required to, invest in cash or high-quality, short-term debt securities,
prevent the Fund from achieving its without limit. Taking a temporary defensive position may prevent the
investment goal. Fund from achieving their investment goal.
- As part of its investment strategy, the Fund may buy and sell securities
frequently. This may result in higher transaction costs and additional tax
liability.
- The Fund may also invest up to 33 1/3% of their net assets in foreign
securities, including American Depositary Receipts (ADRs), Global Depositary
Receipts (GDRs) and Nasdaq-listed foreign securities.
The following highlights the differences in investment restrictions and certain
investment strategies that the Funds use to achieve their investment goals:
- The Acquired Fund has a fundamental investment restriction
under which it may purchase and sell futures contracts and
related options as long as the total initial margin and
premiums do not exceed 5% of total assets. The Acquiring Fund
has a fundamental investment restriction under which it may
not buy or sell commodities. However, the Acquiring Fund may
invest in futures contracts or options on such contracts
relating to broadly based stock indices, but may not buy and
sell puts and calls as securities, stock index futures or
options on stock index futures, or financial futures or
options on financial futures, unless such options are written
by other persons and the options or futures are offered
through the facilities of a recognized securities association
or are listed on a recognized securities or commodities
exchange or similar entity, and may enter into foreign
currency transactions.
- The Acquired Fund has a non-fundamental investment restriction
under which it may not have a short sales position, unless the
Acquired Fund owns, or owns rights (exercisable without
payment) to acquire, an equal amount of such securities. The
Acquiring Fund has a fundamental investment restriction under
which it
-10-
may not engage in short sales of securities except to the
extent that it owns an equal amount of the securities sold
short or other securities convertible into an equivalent
amount of such securities ("short sales against the box").
Such transactions may only be made to protect a profit in or
to attempt to minimize a loss with respect to convertible
securities. In any event, no more than 5 percent of the value
of the Acquiring Fund's net assets taken at market may, at any
time, be held as collateral for such sales.
- The Acquiring Fund has a fundamental investment restriction
under which it may not invest its assets in securities of any
company if the purchase would cause more than 5 percent of the
value of the Fund's total assets to be invested in companies
which, including predecessors and parents, have a record of
less than three years continuous operation. The Acquired Fund
does not have a similar investment restriction.
- The Acquired Fund has a fundamental investment restriction
under which it may make loans but subject to the following
restrictions: the Acquired Fund may not make loans (a) through
lending of securities, (b) through the purchase of debt
instruments or similar evidences of indebtedness typically
sold privately to financial institutions, (c) through an
interfund lending program with other a affiliated funds
provided that no such loan may be made if, as a result, the
aggregate of such loans would exceed 33 1/3% of the value of
its total assets (taken at market value at the time of such
loans), and (d) through repurchase agreements. The Acquiring
Fund has a fundamental investment restriction under which it
may not make loans, except that the Acquiring Fund may (a)
purchase debt obligations which are consistent with its
investment objectives and policies; (b) enter into repurchase
agreements; and (c) loan its portfolio securities, to the
fullest extent permitted under the 1940 Act.
- The Acquired Fund has a fundamental investment restriction
under which it may not concentrate more than 25% of its total
assets in any industry, but may invest above and beyond 25% of
its assets in obligations issued or guaranteed as to principal
and interest by the U.S Government or any agency or
instrumentality thereof. Also, with respect to 75% of the
Acquired Fund's assets, it may not purchase the securities of
any issuer if, as a result of such purchase, more than 5% of
the its total assets would be invested in the securities of
such issuer. Notwithstanding the investment policies and
restrictions of the Acquired Fund, the Acquired Fund may
invest all or a portion of its investable assets in investment
companies with substantially the same investment objective,
policies and restrictions as the Acquired Fund. The Acquiring
Fund has a fundamental investment restriction under which it
may not concentrate investments in any industry. However, the
Acquiring Fund may (a) invest up to 25 percent of the value of
its assets in any one industry and (b) invest for temporary
defensive purposes up to 100 percent of the value of its
assets in securities issued or guaranteed by the United States
or its agencies or instrumentalities.
- The Acquired Fund has a fundamental investment restriction
under which it may not issue senior securities, except as
permitted in the 1940 Act. The Acquiring Fund has a
fundamental investment restriction under which it may not
issue senior securities, bonds or debentures.
Except as noted above, the Funds are generally subject to substantially similar
fundamental and non-fundamental investment policies. For a complete list of the
Funds' investment policies and restrictions, see each Fund's Statement of
Additional Information.
The shareholders of the Acquiring Fund are currently scheduled to vote on
changes to the investment restrictions for the Acquiring Fund at a meeting of
shareholders scheduled to be held on September 9, 2005. Shareholders of record
of the Acquiring Fund on July 7, 2005, will vote separately on each proposed
change to the fundamental investment restrictions of the Acquiring Fund. If the
changes to the Acquiring Fund's fundamental investment restrictions are
approved, the differences in investment restrictions and certain investment
strategies that the Funds use to achieve their investment goals will be as
follows:
- The Acquired Fund has a fundamental investment restriction
under which it may purchase and sell futures contracts and
related options as long as the total initial margin and
premiums do not exceed 5% of total assets. The Acquiring Fund
will have a fundamental investment restriction under which it
may not buy or sell commodities. However, the Acquiring Fund
will to the extent consistent with its investment objective,
invest in securities of companies that purchase or sell
commodities or which invest in such
-11-
programs, and purchase and sell options, forward contracts,
futures contracts, and options on futures contracts and enter
into swap contract and other financial transactions relating
to commodities. This limitation will not apply to foreign
currency transactions including without limitation forward
currency contracts.
- The Acquired Fund has a non-fundamental investment restriction
under which it may not have a short sales position, unless the
Acquired Fund owns, or owns rights (exercisable without
payment) to acquire, an equal amount of such securities. The
Acquiring Fund will not have such fundamental investment
restriction.
- The Acquired Fund has a fundamental investment restriction
under which it may make loans but subject to the following
restrictions: the Acquired Fund may not make loans (a) through
lending of securities, (b) through the purchase of debt
instruments or similar evidences of indebtedness typically
sold privately to financial institutions, (c) through an
interfund lending program with other affiliated funds provided
that no such loan may be made if, as a result, the aggregate
of such loans would exceed 33 1/3% of the value of its total
assets (taken at market value at the time of such loans), and
(d) through repurchase agreements. The Acquiring Fund will
have a fundamental investment restriction under which it may
not make loans, except to the extent permitted under the 1940
Act, the rules and regulations thereunder and any applicable
exemptive relief. Generally, the 1940 Act permits an
investment company to borrow up to 33 1/3 % of its total
assets, including the amount borrowed.
- The Acquired Fund has a fundamental investment restriction
under which it may not concentrate more than 25% of its total
assets in any industry, but may invest above and beyond 25% of
its assets in obligations issued or guaranteed as to principal
and interest by the U.S Government or any agency or
instrumentality thereof. Also, with respect to 75% of the
Acquired Fund's assets, it may not purchase the securities of
any issuer if, as a result of such purchase, more than 5% of
the its total assets would be invested in the securities of
such issuer. Notwithstanding the investment policies and
restrictions of the Acquired Fund, the Acquired Fund may
invest all or a portion of its investable assets in investment
companies with substantially the same investment objective,
policies and restrictions as the Acquired Fund. The Acquiring
Fund will have a fundamental investment restriction under
which it may not purchase securities (except securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities) of any one issuer if, as a result, more
than 5% of its total assets will be invested in the securities
of such issuer or it would own more than 10% of the voting
securities of such issuer, except that: (a) up to 25% of its
total assets may be invested without regard to these
limitations and (b) its assets may be invested in the
securities of one or more management investment companies to
the extent permitted by the 1940 Act, the rules and
regulations thereunder, or any applicable exemptive relief.
- The Acquired Fund has a fundamental investment restriction
under which it may not issue senior securities, except as
permitted in the 1940 Act. The Acquiring Fund will have a
fundamental investment restriction under which it may not
borrow money or issue senior securities except to the extent
permitted by the 1940 Act, the rules and regulations
thereunder and any applicable exemptive relief.
5. WHAT CLASS OF THE ACQUIRING FUND SHARES WILL SHAREHOLDERS RECEIVE IF THE
MERGER OCCURS?
Shareholders will receive the shares of the Acquiring Fund corresponding to the
shares that they currently own, except that if a shareholder owns Class T shares
of the Acquired Fund, that shareholder will receive Class A shares of the
Acquiring Fund. The shares will have the same exchange rights and will bear the
same CDSCs upon redemption and, in the case of Class B shares, will convert to
Class A shares at the same time as the current shares. The shares will have
similar exchange, purchase and redemption procedures to the shares that
shareholders currently own.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
The Merger is expected to be tax-free to shareholders for federal income tax
purposes. This means that neither shareholders nor the Acquired Fund is expected
to recognize a gain or loss directly as a result of the Merger. However, since
the Merger will end the tax year of the Acquired Fund, it may accelerate
distributions from the Acquired Fund to shareholders. Specifically, the Acquired
Fund will recognize any net investment company taxable income and any net
capital gains, including those realized on disposition of portfolio securities
in connection with
-12-
the Merger (after reduction by any available capital loss carryforwards) or
losses in the short tax year ending on the date of the Merger, and will declare
and pay a distribution of such income and such gains to its shareholders on or
before that date.
A substantial portion of the portfolio assets of the Funds may be sold in
connection with the Merger into the Acquiring Fund. The actual tax impact of
such sales will depend on the difference between the price at which such
portfolio assets are sold and the Fund's basis in such assets. Any capital gains
recognized in these sales on a net basis will be distributed to the Fund's
shareholders as capital-gain dividends (to the extent of net realized long-term
capital gains distributed) and/or ordinary dividends (to the extent of net
realized short-term capital gains distributed) during or with respect to the
year of sale, and such distributions will be taxable to shareholders.
The cost basis and holding period of the Acquired Fund shares are expected to
carry over to the new shares in the Acquiring Fund.
Certain other tax consequences are discussed below under "Federal Income Tax
Consequences."
7. WHO BEARS THE EXPENSES ASSOCIATED WITH THE MERGER?
Columbia Management and the Acquired Fund will each bear a portion of the
out-of-pocket expenses associated with the Merger, including, but not limited
to: (1) the expenses associated with the preparation, printing and mailing of
any shareholder communications, including this Prospectus/Proxy Statement, and
any filings with the SEC and other governmental authorities in connection with
the Merger; (2) the fees and expenses of any proxy solicitation firm retained in
connection with the Merger; (3) the legal fees and expenses incurred by the
Funds in connection with the Merger; and (4) the Trustees' fees and
out-of-pocket expenses incurred as a result of the Merger. The estimated costs
of the Merger to be borne by the Acquired Fund and the Acquiring Fund are
approximately $176,343 and $0, respectively. Should the Merger fail to occur,
Columbia Management will bear all costs associated with the Merger.
8. WHO IS ELIGIBLE TO VOTE?
Shareholders of record on July 7, 2005 are entitled to attend and vote at the
Meeting or any adjournment of the Meeting. On Proposal 1, all shareholders of
the Acquired Fund, regardless of the class of shares held, will vote together as
a single class. Each share is entitled to one vote. Shares represented by
properly executed proxies, unless revoked before or at the Meeting, will be
voted according to shareholders' instructions. If a shareholder sign a proxy but
do not fill in a vote, the shares will be voted to approve the Merger. If any
other business comes before the Meeting, the shares will be voted at the
discretion of the persons named as proxies.
9. WHY IS THE ACQUIRING FUND EXPECTED TO BE REORGANIZED FOLLOWING THE MERGER?
At a meeting held on May 11, 2005, the Board, including all Trustees who are not
"interested persons" of Trust VII (as defined in section 2(a)(19) of the 1940
Act) (each, an "independent Trustee") unanimously approved the reorganization of
the surviving open-end retail Columbia Funds, including the Acquiring Fund. In
the Trust Reorganization, the Acquiring Fund will be reorganized into a newly
created series of Columbia Funds Trust IX. The primary purpose of the Trust
Reorganization is to facilitate compliance monitoring and administration for the
Columbia Funds.
Consummation of the Trust Reorganization is expected to occur immediately
following the completion of the Merger. The Merger is not conditioned on the
completion of the Trust Reorganization. Shareholders of the Acquired Fund are
not being asked to approve the Trust Reorganization.
For a summary of significant differences between the organizational documents of
the Acquired Fund and Columbia Funds Trust IX, the trust into which it is
proposed that the Acquiring Fund be reorganized, please see Appendix F.
-13-
II. PROPOSAL 1 -- ACQUISITION OF THE ACQUIRED FUND BY THE ACQUIRING FUND
THE PROPOSAL
Shareholders of the Acquired Fund are being asked to approve the Acquired Fund
Agreement and Plan of Reorganization, a copy of which is attached as Appendix A
to this Prospectus/Proxy Statement. By approving the Acquired Fund Agreement and
Plan of Reorganization, shareholders are approving the acquisition of the
Acquired Fund by the Acquiring Fund.
PRINCIPAL INVESTMENT RISKS
What are the principal investment risks of the Acquiring Fund, and how do
they compare with those of the Acquired Fund?
The principal risks associated with the Acquired Fund and the Acquiring Fund are
generally similar because they have generally similar investment goals and
principal investment strategies, except with respect to geographic focus. The
actual risks of investing in the Acquired Fund and the Acquiring Fund depend on
the securities held in their portfolios and on market conditions, both of which
change over time. Both the Acquired Fund and the Acquiring Fund are subject to
the following risks:
The Acquiring Fund is subject to both management risk and market risk.
Management risk means that Columbia Management's investment decisions might
produce losses or cause the Acquiring Fund to underperform when compared to
other funds with a similar investment goal. Market risk means that security
prices in a market, sector or industry may fall, reducing the value of one's
investment. Because of management and market risk, there is no guarantee that
the Acquiring Fund will achieve its investment goal or perform favorably among
comparable funds. Since it purchases equity securities, the Acquiring Fund is
subject to equity risk. This is the risk that stock prices will fall over short
or extended periods of time.
The Acquiring Fund may also be subject to sector risk and the risks associated
with investing in foreign securities. Companies that are in different but
closely related industries are sometimes described as being in the same broad
economic sector. The values of stocks of different companies in a market sector
may be similarly affected by particular economic or market events. Although the
Acquiring Fund does not intend to focus on any particular sector, at times the
Acquiring Fund may have a large portion of its assets invested in a particular
sector.
Foreign securities are subject to special risks. Foreign markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. The liquidity of foreign securities may be more limited than that of
domestic securities, which means that the Acquiring Fund may, at times, be
unable to sell foreign securities at desirable prices. Brokerage commissions,
custodial fees and other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which would reduce
the amount of income and capital gains available to distribute to shareholders.
Other risks include possible delays in the settlement of transactions or in the
notification of income; less publicly available information about companies; the
impact of political, social or diplomatic events; possible seizure,
expropriation or nationalization of the company or its assets; and possible
imposition of currency exchange controls. Because the Acquired Fund's
investments are concentrated in the so-called Tiger countries of Asia, the
Acquired Fund is particularly susceptible to regional risks. Events in any one
Tiger country may impact the other countries or the Asian region as a whole. As
a result, events in the region in which the Acquired Fund invests might have a
greater effect on the Acquired Fund than if the Acquired Fund was more
geographically diversified, which may result in greater losses and volatility.
Although the stock market has historically outperformed other asset classes over
the long term, the stock market tends to move in cycles. Individual stock prices
may fluctuate drastically from day to day and may underperform other asset
classes over an extended period of time. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These price movements may result from factors affecting
individual companies, industries or the securities market as a whole. There are
many circumstances (including additional risks that are not
-14-
described here) which could prevent the Fund from achieving its investment goal.
Shareholders may lose money by investing in the Acquiring Fund.
The Acquiring Fund is also subject to derivatives risk (although the Acquiring
Fund will not use derivatives for speculative purposes or as a leveraged
instrument), as well as convertible securities risk (less risk than common stock
but more than debt obligations). In addition, both Funds are subject to market
timing risk because the Funds invest primarily in foreign securities and may
therefore be particularly susceptible to market timers.
Shareholders of the Acquired Fund should note that, although the investment
goal; principal investment strategies and current investment restrictions of the
Acquiring Fund are generally similar to those of the Acquired Fund, the
fundamental investment restrictions of the combined Fund may differ and it will
have a different geographic focus. In particular, the Acquiring Fund does not
currently expect to focus on securities of companies located in the so-called
Tiger Countries. Please see the answer to question 4 above under "III. Questions
and Answers" for more information comparing the investment goals, strategies and
policies of the Funds.
INFORMATION ABOUT THE MERGER
Terms of the Agreement and Plan of Reorganization
If approved by the shareholders of the Acquired Fund, the Merger is expected to
occur on or around October 7, 2005, or such other date as the parties may agree,
under the Acquired Fund Agreement and Plan of Reorganization. The following is a
brief summary of the principal terms of the Acquired Fund Agreement and Plan of
Reorganization. Please review Appendix A to this Prospectus/Proxy Statement for
more information regarding the Acquired Fund Agreement and Plan of
Reorganization.
- - The Acquired Fund will transfer all of the assets and
liabilities to the Acquiring Fund in exchange for shares of
the same class of the Acquiring Fund (except that Class T
shareholders of the Acquired Fund will receive Class A shares
of the Acquiring Fund) with an aggregate net asset value equal
to the net value of the transferred assets and liabilities.
- - The Acquisition will occur on the next business day after the
time (currently scheduled to be 4:00 p.m. Eastern Time on
_____, 2005, or such other date and time as the parties may
determine) when the assets of each Fund are valued for
purposes of the Acquisition.
- - The shares of each class of the Acquiring Fund received by the
Acquired Fund will be distributed to the shareholders of the
corresponding class of the Acquired Fund pro rata in
accordance with their percentage ownership of such class of
the shares of the Acquired Fund in full liquidation of the
Acquired Fund.
- - After the Merger, the Acquired Fund's affairs will be wound up
in an orderly fashion, it will be dissolved under state law.
- - The Merger requires approval by the Acquired Fund's
shareholders and satisfaction of a number of other conditions;
the Merger may be terminated at any time with the approval of
the Trustees of Trust VII and the Acquiring Fund.
Shareholders should be aware that the Merger as proposed is not expected to
result in recognition of gain or loss to shareholders for federal income tax
purposes.
Shares Shareholders Will Receive
If the Merger occurs, shareholders will receive shares in the Acquiring Fund of
the same class (except that Class T shareholders of the Acquired Fund will
receive Class A shares of the Acquiring Fund) as the shares currently owned in
the Acquired Fund. In comparison to the shares that shareholders currently own,
the shares that shareholders will receive will have the following
characteristics:
-15-
- - They will have an aggregate net asset value equal to the
aggregate net asset value of the current shares as of the
business day before the closing of the Merger.
- - They will bear the same sales charges, redemption fees and
CDSCs, if any, as the current shares to the extent such
charges and fees apply, and for purposes of determining the
CDSC applicable to any redemption and/or conversion of Class B
shares to Class A shares, if applicable, the new shares will
continue to age from the date a shareholder purchased Acquired
Fund shares.
- - It is expected that in connection with the consolidation of certain
service providers to the Columbia Funds, and the Nations Funds, prior
to the Merger, the procedures for purchasing, redeeming and exchanging
shares will be aligned by modifying both complexes. Accordingly,
although changes to such procedures are anticipated, the Merger itself
will not result in any changes to such procedures. .
- - Shareholders will have the same exchange options as they
currently have.
- - Shareholders will have voting and other rights generally
similar to those they currently have, but as a shareholder of
the Acquiring Fund. Please see Appendix F to this
Prospectus/Proxy Statement for more information regarding the
differences between the rights of shareholders of the
Acquiring Fund and those of the Acquired Fund. Appendix F
identifies certain differences in voting rights that will
result from the Trust Reorganization, including a change from
voting rights based on one vote per share to the use of dollar
based voting.
- - The account options that shareholders have selected for
handling distributions from the Acquired Fund will not change
as a result of the Merger.
Information concerning the capitalization of each of the Funds is contained in
Appendix C to this Prospectus/Proxy Statement.
Reasons for the Merger and Trustees' Considerations
The Trustees of Trust VII, including all of the Independent Trustees of Trust
VII, Columbia Management or its affiliates, have determined on behalf of the
Acquired Fund that the Merger would be in the best interests of the Acquired
Fund's shareholders and that the interests of existing shareholders in the
Acquired Fund would not be diluted as a result of the Merger. The Trustees have
unanimously approved the Agreement and Plan of Reorganization and the Merger,
and recommend that Fund shareholders vote in favor of the Merger by approving
the Agreement and Plan of Reorganization.
Columbia proposed the Merger to the Trustees of the Acquired Fund at a meeting
held on February 8-9, 2005 because the Merger is expected to create a larger
fund with an investment goal and strategies generally similar to those of the
Acquired Fund, except with respect to geographic focus.
At the meeting, the Trustees (with the advice and assistance of independent
counsel) considered, among other things:
1. the Merger as part of a continuing initiative to streamline
and improve the offerings of the Columbia Funds family by
eliminating overlapping funds and clarifying investor choices;
2. various potential shareholder benefits of the Merger;
3. the current asset level of the Acquired Fund and the combined
pro forma asset level of the Acquiring Fund;
4. the historical performance results of the Funds (see
"Performance Information" below), although no assurances can
be given that the Acquiring Fund will achieve any particular
level of performance after the Merger;
5. the investment objectives and principal investment strategies
of the Funds;
6. that the Acquiring Fund is expected to have lower total
operating expenses than the Acquired Fund;
7. the anticipated tax-free nature of the exchange of shares in
the Merger and other expected U.S. federal income tax
consequences of the Merger, including limitations on the use
of realized and unrealized losses for U.S.
-16-
federal income tax purposes and the potential diminution of
the ability to use such losses to offset future gains (see
"Federal Income Tax Consequences" below);
8. that the Acquired Fund would bear part of the expenses
associated with the Merger; and
9. the potential benefits of the Merger to Columbia Management
and its affiliates (e.g. the benefit of consolidating
resources within Columbia Management and BACAP).
If the Merger is approved by the shareholders of the Acquired Fund, the
transactions will combine the Acquired Fund's assets with those of the Acquiring
Fund, resulting in a combined portfolio that is significantly larger than the
Acquired Fund. Larger mutual funds generally have more buying power (for
example, they have greater opportunity to purchase round lots of securities) and
are better able to diversify their portfolios.
Columbia Management also believes that the Merger helps eliminate overlapping
products. Both Funds are large capitalization equity funds. Columbia Management
believes that streamlining its product offerings in a particular asset segment
will help minimize investor confusion.
Performance Information
The charts below show the percentage gain or loss in each calendar year for the
10-year period or since inception if shorter, ending December 31, 2004, for the
Class Z shares of the Acquired Fund. The tables should give a general idea of
how each Fund's return has varied from year to year. The charts include the
effects of Fund expenses, but not sales charges. Returns would be lower if any
applicable sales charges were included. The calculations of total return assume
the reinvestment of all dividends and capital gain distributions on the
reinvestment date. Performance results include the effect of expense reduction
arrangements, if any. If these arrangements had not been in place, the
performance results would have been lower. AS WITH ALL MUTUAL FUNDS, PAST
PERFORMANCE IS NOT AN INDICATION OF FUTURE RESULTS. No assurance can be given
that the Acquiring Fund will achieve any particular level of performance after
the Acquisition.
Additional discussion of the manner of calculation of total return is contained
in each Fund's respective Prospectuses and Statement of Additional Information.
ACQUIRED FUND (CLASS Z)
(Bar chart to be inserted)
16.28% 11.24% -33.96% -12.09% 73.68% -15.68% -16.43% -12.61% -45.04%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
For period shown in bar chart:
Best quarter: 4th quarter 1998, +37.75%
Worst quarter: 2nd quarter 1998, -31.19%
ACQUIRING FUND (CLASS Z)
(Bar chart to be inserted)
5.15% 16.59% 11.47% 12.83% 57.93% -22.64% -18.47% -16.10% 33.08%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
For period shown in bar chart:
Best quarter: 4th quarter 1999, +34.96%
Worst quarter: 3rd quarter 2002, -18.71%
The following tables list each Fund's average annual total return for each class
of its shares for the one-year, five-year and 10-year or since inception periods
ending December 31, 2004, (including applicable sales charges), for Class A, B,
C, T, and Z shares of the Acquired Fund and for Class A, B, C and Z shares of
the Acquiring Fund. These tables are intended to provide some indication of the
risks of investing in the Funds. At the bottom of each table, shareholders can
compare the Funds' performance with one or more broad-based market indices.
-17-
After-tax returns are calculated using the historical highest individual federal
income tax rates and do not reflect the impact of state and local taxes. Actual
after-tax returns depend on an investor's tax situation and may differ from
those shown, and may not be relevant to investors who hold shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts.
ACQUIRED FUND(1)
AVERAGE ANNUAL TOTAL RETURNS -- FOR PERIODS ENDED DECEMBER 31, 2004
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Class A (%)
Return Before Taxes 36.24 7.63 -0.49(1)
Return After Taxes on Distributions 36.30 7.53 -0.69(1)
Return After Taxes on Distributions and Sale of Fund Shares 23.87 6.57 -0.52(1)
Class B (%)
Return Before Taxes 38.65 7.81 -0.56(1)
Return After Taxes on Distributions 38.83 7.82 -0.67(1)
Return After Taxes on Distributions and Sale of Fund Shares 25.33 6.80 -0.53(1)
Class C (%)
Return Before Taxes 42.60 8.10 -0.56(1)
Return After Taxes on Distributions 42.77 8.11 -0.66(1)
Return After Taxes on Distributions and Sale of Fund Shares 27.89 7.05 -0.53(1)
Class T (%)
Return Before Taxes 36.71 7.89 -0.29
Return After Taxes on Distributions 36.74 7.74 -0.53
Return After Taxes on Distributions and Sale of Fund Shares 24.22 6.77 -0.37
Class Z (%)
Return Before Taxes 45.04 9.18 0.28
Return After Taxes on Distributions 45.07 9.03 0.04
Return After Taxes on Distributions and Sale of Fund Shares 29.65 7.91 0.11
MSCI AC ASIA Ex Japan Index (%)(2) 46.98 6.98 -3.19
(1) Class A, B and C are newer classes of shares. Their
performance information includes returns of Class T shares
(the oldest existing Fund class) for periods prior to their
inception. These returns have not been restated to reflect any
differences in expenses (such as Rule 12b-1 fees) between
Class T shares and the newer classes of shares. If differences
in expenses had been reflected, the returns shown for periods
prior to the inception of the newer classes of shares would
have been lower. Class T and Z shares were initially offered
on May 31, 1989, and Class A, B and C shares were initially
offered on April 1, 1995.
(2) The Fund's returns are compared to the MSCI AC Asia ex Japan
Index, an unmanaged index that tracks the performance of
equity securities in eleven countries in Asia, excluding
Japan, and takes into account local market restrictions on
share ownership by foreigners. Unlike the Fund, indices are
not investments, do not incur fees, expenses or taxes and are
not professionally managed.
ACQUIRING FUND
AVERAGE ANNUAL TOTAL RETURNS -- FOR PERIODS ENDED DECEMBER 31, 2004
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Class A (%)
Return Before Taxes 24.64 0.82 4.59(1)
Return After Taxes on Distributions 24.78 -0.21 3.35(1)
Return After Taxes on Distributions and Sale of Fund Shares 16.15 0.47 3.45(1)
Class B (%)
Return Before Taxes 26.04 1.45 5.08(1)
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Return After Taxes on Distributions 26.19 0.40 3.84(1)
Return After Taxes on Distributions and Sale of Fund Shares 17.07 1.02 3.89(1)
Class C (%)
Return Before Taxes 30.14 1.79 5.09(1)
Return After Taxes on Distributions 30.29 0.75 3.84(1)
Return After Taxes on Distributions and Sale of Fund Shares 19.74 1.30 3.90(1)
Class Z (%)
Return Before Taxes 33.08 2.15 5.28
Return After Taxes on Distributions 33.45 1.14 4.04
Return After Taxes on Distributions and Sale of Fund Shares 22.02 1.64 4.08
MSCI EAFE Index (%)(2) 38.59 -0.05 4.47
MSCI AC World Free Ex U.S. Index (3) 41.38 1.54 4.66
(1) Class A, B and C are newer classes of shares of the Acquiring Fund.
Their performance information includes returns of the Acquiring Fund's
class Z shares (the oldest existing class) for periods prior to their
inception. These returns have not been restated to reflect any
differences in expenses (such as Rule 12b-1 fees) between Class Z
shares and the newer classes of shares. If differences in expenses had
been reflected, the returns shown for periods prior to the inception of
the newer classes of shares would have been lower. The Acquiring Fund
initially offered Class C shares on October 13, 2003, Class A and B
shares were initially offered on November 1, 2002, and Class Z shares
were initially offered on October 1, 1992.
(2) The Acquiring Fund's returns are compared to the MSCI AC World Free Ex
U.S. Index and the MSCI EASE Index. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally
managed.
(3) The Fund's returns are compared to the MSCI AC World Ex US Index, an
unmanaged index representing major stock markets in Europe, Australasia
and the Far East. The MSCI AC World Ex US Index is also an unmanaged
index representing both developed and emerging markets of 49 countries,
excluding the United States. Unlike the Fund, indices are not
investments, do not incur fees, expenses or taxes and are not
professionally managed.
Federal Income Tax Consequences
The Merger is intended to be a tax-free reorganization. Ropes & Gray LLP will
deliver to the Acquiring Fund and the Acquired Fund an opinion, and the closing
of the Acquisition will be conditioned on receipt of such opinion, to the effect
that, on the basis of existing provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), although not entirely free from doubt, for federal
income tax purposes:
- - the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and the Acquired Fund and the Acquiring
Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
- - under Section 361 of the Code, no gain or loss will be recognized by
the Acquired Fund upon the transfer of its assets to the Acquiring Fund
in exchange for Acquiring Fund shares and the assumption by the
Acquiring Fund of the Acquired Fund's liabilities, or upon the
distribution of Acquiring Fund shares by the Acquired Fund to its
shareholders in liquidation;
- - under Section 354 of the Code, no gain or loss will be recognized by
shareholders of the Acquired Fund on the distribution of Acquiring Fund
shares to them in exchange for their shares of the Acquired Fund;
- - under Section 358 of the Code, the aggregate tax basis of the Acquiring
Fund shares that the Acquired Fund's shareholders receive in exchange
for their Acquired Fund shares will be the same as the aggregate tax
basis of the Acquired Fund shares exchanged therefor;
- - under Section 1223(1) of the Code, a Acquired Fund shareholder's
holding period for the Acquiring Fund shares received will be
determined by including the holding period for the Acquired Fund shares
exchanged therefor, provided that the shareholder held the Acquired
Fund shares as a capital asset;
-19-
- - under Section 1032 of the Code, no gain or loss will be recognized by
the Acquiring Fund upon receipt of the assets transferred to the
Acquiring Fund in exchange for Acquiring Fund shares and the assumption
by the Acquiring Fund of the liabilities of the Acquired Fund;
- - under Section 362(b) of the Code, the Acquiring Fund's tax basis in the
assets that the Acquiring Fund receives from the Acquired Fund will be
the same as the Acquired Fund's tax basis in such assets immediately
prior to such exchange;
- - under Section 1223(2) of the Code, the Acquiring Fund's holding periods
in such assets will include the Acquired Fund's holding periods in such
assets; and
- - under Section 381 of the Code, the Acquiring Fund will succeed to the
capital loss carryovers of the Acquired Fund, if any, but the use by
the Acquiring Fund of any such capital loss carryovers (and of capital
loss carryovers of the Acquiring Fund) may be subject to limitation
under Section 383 of the Code.
The opinion will be based on certain factual certifications made by officers of
the Acquired Fund and the Acquiring Fund. The opinion is not a guarantee that
the tax consequences of the Merger will be as described above.
Ropes & Gray LLP will express no view with respect to the effect of the Merger
on any transferred asset as to which any unrealized gain or loss is required to
be recognized at the end of a taxable year (or on the termination or transfer
thereof) under federal income tax principles.
A substantial portion of the portfolio assets of the Acquired Fund may be sold
in connection with the Merger. The actual tax impact of such sales will depend
on the difference between the price at which such portfolio assets are sold and
the Acquired Fund's basis in such assets. Any net capital gains recognized in
these sales will be distributed to the Acquired Fund's shareholders as capital
gain dividends (to the extent of net realized long-term capital gains) and/or
ordinary dividends (to the extent of net realized short-term capital gains)
during or with respect to the year of sale, and such distributions will be
taxable to shareholders.
Prior to the closing of the Merger, the Acquired Fund will, and the Acquiring
Fund may, declare a distribution to shareholders, which together with all
previous distributions, will have the effect of distributing to shareholders all
of its investment company taxable income (computed without regard to the
deduction for dividends paid) and net capital gains, including those realized on
disposition of portfolio securities in connection with the Merger (after
reduction by any available capital loss carryforwards), if any, through the
closing of the Merger. Such distributions will be taxable to shareholders.
The Acquiring Fund's ability to utilize the pre-Merger losses of the Acquired
Fund to offset post-Merger gains of the combined fund is expected to be limited
as a result of the Merger due to the application of loss limitation rules under
federal tax law. The effect of this limitation, however, will depend on the
amount of losses in each Fund at the time of the Merger. As a result, under
certain circumstances the Acquired Fund shareholders could receive taxable
distributions earlier than they would if the Merger were not to have occurred.
This description of the federal income tax consequences of the Merger is made
without regard to the particular facts and circumstances of any shareholder.
Shareholders are urged to consult their own tax advisors as to the specific
consequences to them of the Merger, including the applicability and effect of
state, local, non-U.S. and other tax laws.
THE TRUSTEES OF THE COLUMBIA FUNDS TRUST VII ON BEHALF OF THE ACQUIRED FUND
UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION AND
THE DISSOLUTION OF THE ACQUIRED FUND IN ACCORDANCE WITH THE AGREEMENT AND PLAN
OF REORGANIZATION.
Required Vote for the Proposal
-20-
Approval of the Merger requires the affirmative vote of holders of the lesser of
(1) more than 50% of the Acquired Fund's outstanding shares or (2) 67% or more
of the Acquired Fund's shares present at the Meeting if more than 50% of the
outstanding shares of the Fund are represented at the Meeting in person or by
proxy. A vote of shareholders of the Acquiring Fund is not needed to approve the
Merger.
-21-
III. QUESTIONS AND ANSWERS REGARDING ELECTION OF TRUSTEES
THE FOLLOWING QUESTIONS AND ANSWERS PROVIDE AN OVERVIEW OF THE PROPOSAL TO ELECT
TRUSTEES OF THE ACQUIRED FUND AND OF THE INFORMATION CONTAINED IN THIS
PROSPECTUS/PROXY STATEMENT. PLEASE REVIEW THE PROSPECTUS/PROXY STATEMENT PRIOR
TO CASTING THE VOTE. PLEASE DIRECT QUESTIONS ABOUT THE MERGER TO 1-866-270-3134.
1. WHY ARE SHAREHOLDERS BEING ASKED TO ELECT TRUSTEES IF THE ACQUIRED FUND IS
PROPOSED TO BE ACQUIRED AND SUBSEQUENTLY DISSOLVED?
On February 9, 2005, pursuant to a settlement with the SEC, without admitting or
denying the findings of the SEC, Columbia Management and Columbia Funds
Distributors, Inc. consented to the entry of the settlement with the SEC. In
connection with this settlement, the Funds made a voluntary undertaking to elect
Trustees at least every five years, commencing in 2005. A copy of the SEC order
is available on the SEC's website at www.sec.gov. In the event that the Merger
does not occur, the Funds, by asking shareholders to elect Trustees at the
Meeting, will save the costs of soliciting proxies and holding a separate
meeting for the election of Trustees at a later date.
2. WHO ARE THE INDIVIDUALS PROPOSED FOR ELECTION AS TRUSTEES OF THE FUNDS?
The Fund is being asked in Proposal 2 to elect all of the incumbent Trustees of
the Fund. The Trustees recommends that shareholders vote for the election of the
following nominees, who currently serve as Trustees of the Trust: Mses. Kelly
and Verville and Messrs. Hacker, Lowry, Nelson, Neuhauser, Mayer, Theobald,
Simpson, Stitzel, and Woolworth. More information about the individual Trustees
can be found in Section IV of this Prospectus/Proxy Statement.
3. WHO IS ELIGIBLE TO VOTE?
Shareholders of record on July 7, 2005 are entitled to attend and vote at the
Meeting or any adjournment of the Meeting. On each proposal, all shareholders of
an Acquired Fund, regardless of the class of shares held, will vote together as
a single class. (Proxies with respect to the election of Trustees are being
solicited from the shareholders of the other series of Trust VII, including the
Acquiring Fund, through a separate proxy statement.) Each share is entitled to
one vote. Shares represented by properly executed proxies, unless revoked before
or at the Meeting, will be voted according to shareholders' instructions. If a
shareholder sign a proxy but does not fill in a vote, the shares will be voted
to approve the election of all Trustees. If any other business comes before the
Meeting, the shares will be voted at the discretion of the persons named as
proxies.
Please review "IV. Proposal No. 2 - Election of Trustees" in this
Prospectus/Proxy Statement for more information.
-22-
IV. PROPOSAL 2 - ELECTION OF TRUSTEES
Mses. Kelly and Verville and Messrs. Hacker, Lowry, Mayer, Nelson, Neuhauser,
Simpson, Stitzel, Theobald and Woolworth (who have each agreed to serve) are
proposed for election as Trustees of the Funds and are to be elected by the
shareholders of the Fund.
Required vote: The affirmative vote of a plurality of all share classes of the
Acquired Fund, voting together as a single class with shareholders of all other
series of Trust VII, present at the Meeting in person or by proxy, is required
for the election of each such Trustee.
THE TRUSTEES OF THE COLUMBIA FUNDS TRUST VII ON BEHALF OF THE ACQUIRED FUND
UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR" ELECTING THE PROPOSED
TRUSTEES OF THE FUND.
-23-
TRUSTEES AND OFFICER INFORMATION
The names and ages of the Trustees and executive officers of the Funds, 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 in all
registered investment companies advised by Columbia Management or its affiliates
(the "Fund Complex") overseen by each Trustee and other directorships that each
Trustee holds are shown below. As of December 31, 2004, the Fund Complex
consisted of 127 open-end funds and 12 closed-end management investment company
portfolios. The address of each Trustee and officer is One Financial Center,
Boston, MA 02111-2621, unless otherwise indicated.
NUMBER OF
YEAR FIRST PORTFOLIOS
ELECTED IN FUND
POSITION OR APPOINTED COMPLEX
NAME/AGE AND WITH TO PRINCIPAL OCCUPATION(s) OVERSEEN BY OTHER
ADDRESS FUNDS OFFICE (1) DURING PAST FIVE YEARS TRUSTEE DIRECTORSHIPS HELD
- ------------ -------- ------------ ------------------------ ------------- ------------------
DISINTERESTED
TRUSTEES
Douglas A. Hacker Trustee 1996 Executive Vice 101 None
Age 49 President-Strategy of
United Airlines (airline)
since December, 2002
(formerly President of UAL
Loyalty Services (airline)
from September, 2001 to
December, 2002; Executive
Vice President and Chief
Financial Officer of
United Airlines from July,
1999 to September, 2001;
Senior Vice President -
Finance from March, 1993
to July, 1999).
Janet Langford Trustee 1996 Partner, Zelle, 101 None
Kelly Hofmann, Voelbel,
Age 47 Mason & Gette LLP (Law
firm); Adjunct Professor
of Law, Northwestern
University, since
September, 2004; (formerly
Chief Administration
Officer and Senior Vice
President, Kmart Holding
Corporation (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
-24-
NUMBER OF
YEAR FIRST PORTFOLIOS
ELECTED IN FUND
POSITION OR APPOINTED COMPLEX
NAME/AGE AND WITH TO PRINCIPAL OCCUPATION(s) OVERSEEN BY OTHER
ADDRESS FUNDS OFFICE (1) DURING PAST FIVE YEARS TRUSTEE DIRECTORSHIPS HELD
- ------------ -------- ------------ ------------------------ ------------- ------------------
(branded, packaged,
consumer-products
manufacturer) from
January, 1995 to
September, 1999).
Richard W. Lowry (2) Trustee 1995 Private Investor since 103 None
Age 69 August, 1987 (formerly
Chairman and Chief
Executive Officer,
U.S. Plywood
Corporation (building
products
manufacturer)).
Charles R. Nelson Trustee 1981 Professor of 101 None
Age 62 Economics, University
of Washington, since
January, 1976; Ford and
Louisa Van Voorhis
Professor of Political
Economy, University of
Washington, since
September, 1993; (formerly
Director, Institute for
Economic Research,
University of Washington,
from September, 2001 to
June, 2003; Adjunct
Professor of Statistics,
University of Washington,
since September, 1980;
Associate Editor, Journal
of Money Credit and
Banking, since September,
1993; consultant on
econometric and
statistical matters).
John J. Neuhauser (2) Trustee 1985 Academic Vice 103 Saucony, Inc.
Age 62 President and Dean of (athletic footwear)
Faculties since
August, 1999, Boston
College (formerly Dean,
Boston College School of
Management from September,
1977 to August, 1999).
Patrick J. Simpson Trustee 2000 Partner, Perkins Coie, 101 None
Age 61 LLP (law firm)
-25-
NUMBER OF
YEAR FIRST PORTFOLIOS
ELECTED IN FUND
POSITION OR APPOINTED COMPLEX
NAME/AGE AND WITH TO PRINCIPAL OCCUPATION(s) OVERSEEN BY OTHER
ADDRESS FUNDS OFFICE (1) DURING PAST FIVE YEARS TRUSTEE DIRECTORSHIPS HELD
- ------------ -------- ------------ ------------------------ ------------- ------------------
Thomas E. Stitzel Trustee 1998 Business Consultant 101 None
Age 69 since 1999 (formerly
Professor of Finance from
1975 to 1999; College of
Business, Boise State
University); Chartered
Financial Analyst).
Thomas C. Trustee 1996 Partner and Senior 101 Anixter
Theobald (3) Advisor, Chicago International
Age 68 Growth Partners (network support
(private equity equipment
investing) since distributor);
September, 2004; Ventas Inc. (real
(formerly Managing estate investment
Director, William trust); Jones Lang
Blair Capital Partners LaSalle (real
(private equity estate management
investing) from services) and
September, 1994 to Ambac Financial
September 2004). Group (financial
guarantee
insurance).
Anne-Lee Verville Trustee 1998 Retired since 1997 101 Chairman of the
Age 59 (formerly General Board of
Manager, Global Directors, Enesco
Education Industry, Group, Inc.
IBM Corporation (designer,
(computers and importer and
technology)) from 1994 distributor of
to 1997. giftware and
collectibles).
Richard L. Trustee 1991 Retired since 101 NorthWest Natural
Woolworth December, 2003 (a natural gas
Age 64 (formerly Chairman and service provider).
Chief Executive Officer,
The Regence Group
(regional health insurer);
Chairman and Chief
Executive Officer, Blue
Cross Blue Shield of
Oregon; Certified Public
Accountant, Arthur Young &
Company).
INTERESTED Trustee 1994 Partner, Park Avenue 103 Lee Enterprises
TRUSTEES Equity Partners (print media); WR
William E. Mayer (private equity) since Hambrecht + Co.
(2)(4) February, 1999 (financial service
Age 65 (formerly Partner, provider); First
Development Capital Health
LLC from November, (healthcare);
1996 to February, Readers Digest
1999). (publisher);
OPENFIELD
-26-
NUMBER OF
YEAR FIRST PORTFOLIOS
ELECTED IN FUND
POSITION OR APPOINTED COMPLEX
NAME/AGE AND WITH TO PRINCIPAL OCCUPATION(s) OVERSEEN BY OTHER
ADDRESS FUNDS OFFICE (1) DURING PAST FIVE YEARS TRUSTEE DIRECTORSHIPS HELD
- ------------ -------- ------------ ------------------------ ------------- ------------------
Solutions (retail
industry
technology
provider).
(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 consisting of 88
investment companies (collectively, the "Liberty Board"). On October 8,
2003, the trustees on the Liberty Board were elected to the boards of
the Columbia Funds, consisting of 15 investment companies (the
"Columbia Board"), and of the CMG Fund Trust consisting of 15 publicly
offered investment companies (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 elected to serve as trustees of the Liberty Board. Also on
October 8, 2003, each of the Funds' incumbent trustees were elected as
directors of the 15 Columbia Funds and as trustees of the 15 publicly
offered Funds in the CMG Fund Trust.
(2) Messrs. Lowry, Neuhauser and Mayer each also serve as a
director/trustee of the All-Star Funds, currently consisting of 2
investment companies, which are advised by an affiliate of the Adviser.
(3) Mr. Theobald was appointed as Chairman of the Board effective December
10, 2003.
(4) Mr. Mayer is an "interested person" (as defined in the Investment
Company Act of 1940, as amended) of the Fund by reason of his
affiliation with WR Hambrecht + Co.
YEAR FIRST
POSITION ELECTED
OFFICERS WITH OR APPOINTED TO
NAME/AGE AND ADDRESS FUNDS OFFICE PRINCIPAL OCCUPATION(s) DURING PAST FIVE YEARS
- -------------------- --------------- --------------- -------------------------------------------------------------------
Christopher L. Wilson Head of Mutual 2004 Head of Mutual Funds since August, 2004 and Senior Vice President
(Age 47) Funds since of Columbia Management since January, 2005; President of the
August 2004; Columbia Funds, Liberty Funds and Stein Roe Funds since October,
President of 2004; President and Chief Executive Officer of the Nations Funds
the Columbia since January, 2005; Senior Vice President of BACAP Distributors
Funds since LLC since January, 2005; Director of FIM Funding, Inc. since
October 2004 January, 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 President 2004 Treasurer of the Columbia Funds since October, 2003 and of the
(Age 40) since Liberty Funds, Stein Roe Funds and All-Star Funds since December,
February 27, 2000; Vice President of Columbia Management since April, 2003
2004; Treasurer (formerly President of the Columbia Funds, Liberty Funds and
since December Stein Roe Funds from February, 2004 to October, 2004; Chief
14, 2000 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.
-27-
from February, 1998 to October, 2000).
Mary Joan Hoene Senior Vice 2004 Senior Vice President and Chief Compliance Officer of the Columbia
(Age 54) President Funds, Liberty Funds, Stein Roe Funds and All-Star Funds since
40 West 57th Street and Chief August, 2004 (formerly Partner, Carter, Ledyard & Milburn LLP
New York, NY 10019 Compliance from January, 2001 to August, 2004; Counsel, Carter, Ledyard &
Officer Milburn LLP from November, 1999 to December, 2000; Vice President
since 2004 and Counsel, Equitable Life Assurance Society of the United States
from April, 1998 to November, 1999.
Michael G. Clarke Chief 2004 Chief Accounting Officer of the Columbia Funds, Liberty Funds,
(Age 34) Accounting Stein Roe Funds and All-Star Funds since October, 2004 (formerly
Officer Controller of the Columbia Funds, Liberty Funds, the Stein Roe
since Funds and the All-Star Funds from October, 2004 to October, 2004
October 2004 (formerly Controller of the Columbia Funds, Liberty Funds, Stein
Roe Funds and the All-Star Funds from May, 2004 to October, 2004);
Assistant treasurer from June, 2002 to May, 2004; Vice President,
Product Strategy & Development of the Liberty Funds Group from
February, 2001 to June, 2002; Assistant Treasurer of the Liberty
Funds Group 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 Controller 2004 Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds
(Age 35) since and the All-Star Funds since October, 2004 (formerly Vice
October 2004 President of CDC IXIS Asset Management Services, Inc. and Deputy
Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from
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 Secretary 2004 Secretary of the Columbia Funds, Liberty Funds and the Stein Roe
(Age 45) since Funds since December, 2004 (formerly Of Counsel Bingham McCutchen
December from April 2001 to September 2004; Executive Director and General
2004 Counsel, Massachusetts Pension Reserves Investment Management
Board from September, 1997 to March, 2001).
TRUSTEES' COMPENSATION
The members of each Fund's Board also serve as Trustees of the funds within the
Fund Complex. Two-thirds of the Trustees' fees are allocated among the funds
within the Fund Complex based on the relative net assets of each fund and
one-third of the fees is divided equally among the funds within the Fund
Complex. As of December 31, 2004, the Fund Complex consisted of 127 open-end
funds and 12 closed-end funds. Two-thirds of the Trustees' fees are allocated
among the funds within the Fund Complex based on the relative net assets of each
fund and one-third of the fees is allocated equally among the funds within the
Fund Complex.
The tables below show the compensation received by the Trustees.
For the fiscal year ended November 30, 2004, and for the calendar year ended
December 31, 2004 the Trustees received from each Fund the following
compensation for serving as Trustees:
-28-
TOTAL COMPENSATION FROM THE AGGREGATE
FUND COMPLEX PAID TO THE COMPENSATION
PENSION OR RETIREMENT TRUSTEES FOR THE FROM THE ACQUIRED FUND
BENEFITS ACCRUED AS PART CALENDAR YEAR ENDED FOR THE FISCAL
OF FUND EXPENSES (1) DECEMBER 31, 2004 YEAR ENDED 08/31/04
------------------------ --------------------------- ----------------------
INDEPENDENT TRUSTEES
Douglas A. Hacker N/A $135,000 $1,181
Janet Langford Kelly N/A $148,500 1,178
Richard W. Lowry N/A $150,700 1,099
Charles R. Nelson N/A $141,500 1,167
John J. Neuhauser N/A $158,284 1,154
Patrick J. Simpson N/A $129,000 928
Thomas E. Stitzel N/A $149,000 1,240
Thomas C. Theobald (2) N/A $172,500 1,442
Anne-Lee Verville (2) N/A $157,000 1,383
Richard L. Woolworth N/A $131,000 1,013
INTERESTED TRUSTEE
William E. Mayer N/A $166,700 1,202
(1) The Funds do not currently provide pension or retirement plan benefits
to the Trustees.
(2) During the calendar year ended December 31, 2004, Mr. Simpson deferred
$129,000 of his total compensation pursuant to the deferred
compensation plan, Mr. Theobald deferred $90,000 of his total
compensation pursuant to the deferred compensation plan and Ms.
Verville deferred $55,000 of her total compensation pursuant to the
deferred compensation plan.
TRUSTEE SHARE OWNERSHIP
The following table shows the dollar range of equity securities beneficially
owned by each Trustee as of December 31, 2004 (i) in the Fund, and (ii) in all
Funds overseen by the Trustees in the Fund Complex.
DOLLAR RANGE OF EQUITY AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES OWNED IN THE SECURITIES IN ALL FUNDS OVERSEEN
ACQUIRED FUND BY TRUSTEE IN FUND COMPLEX
----------------------- --------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker................ $0 Over $100,000
Janet Langford Kelly............. $0 Over $100,000
Richard W. Lowry(a).............. $0 Over $100,000
Charles R. Nelson................ $0 Over $100,000
John J. Neuhauser(a)............. $0 Over $100,000
Patrick J. Simpson............... $0 Over $100,000
Thomas E. Stitzel................ $0 Over $100,000
Thomas C. Theobald............... $0 Over $100,000
Anne-Lee Verville................ $0 Over $100,000
Richard L. Woolworth............. $0 Over $100,000
INTERESTED TRUSTEE
William E. Mayer(a).............. $0 $50,001-$100,000
-29-
(a) Messrs. Lowry, Mayer and Neuhauser also serve as Trustees of the All-Star
Funds.
As of December 31, 2004, no independent Trustee or any of his or her immediate
family members(1) owned beneficially or of record any class of securities of
Bank of America Corporation, Columbia Management Advisers, Inc., another
investment adviser, sub-adviser or portfolio manager of any of the Funds in the
Fund Complex, or any person controlling, controlled by or under common control
with any such entity.
SHAREHOLDER COMMUNICATIONS
Shareholders may communicate with the Trustees as a group or individually. Any
such communications should be sent to a Fund's Board or an individual Trustee in
writing, c/o the Secretary of the Funds, One Financial Center, Boston, MA
02111-2621. The Secretary may determine not to forward any communication to the
Board or a Trustee that does not relate to the business of a Fund.
TRUSTEES' MEETINGS AND COMMITTEES
The Board of Trustees of the Fund (the "Board") is responsible for the overall
management and supervision of the Fund's affairs and for protecting the
interests of the Fund's shareholders. For the fiscal year ended August 31, 2004,
the Columbia Funds held 23 meetings (12 regular joint Board meetings and 11
special joint Board meetings). The Columbia Funds do not have a formal policy on
Trustee attendance at the annual meetings of shareholders, but encourage such
attendance. None of the Trustees attended the Funds' 2004 annual meetings.
The Board has created several committees to perform specific functions on behalf
of the Fund. The members of each committee, along with a description of each
committee's functions, appear below, followed by a table that sets forth the
number of meetings held by the Board and each committee during the last fiscal
year.
1. AUDIT COMMITTEE
The Board has an Audit Committee (the "Audit Committee") comprised of only
"Independent Trustees" (as defined in the listing standards of the New York
Stock Exchange ("NYSE") and the American Stock Exchange ("AMEX")), who are also
not "interested persons" (as defined in the Investment Company Act of 1940, as
amended ("1940 Act")) of any Fund. Each member of the Audit Committee must be
financially literate and at least one member must have prior accounting
experience or related financial management expertise. The Board has determined,
in accordance with applicable regulations of the NYSE and AMEX, that each member
of the Audit Committee is financially literate and has prior accounting
experience or related financial management expertise.
On February 10, 2004, the Audit Committee adopted a revised written charter
which sets forth the Audit Committee's structure, duties and powers, and methods
of operation. A copy of the revised Audit Committee Charter is attached as
Appendix L. The Audit Committee serves as an independent and objective party to
monitor the Fund's accounting policies, financial reporting and internal control
systems and the work of the Fund's independent registered public accounting
firm. The Audit Committee also serves to provide an open avenue of communication
between the independent registered public accounting firms, Columbia's internal
accounting staff and the Board. The principal functions of the Audit Committee
are to assist Board oversight of (1) the integrity of the Fund's
- ----------
(1) The term "immediate family member" shall mean a person's spouse, child
residing in the person household (including step and adoptive children), and any
dependents of the person, as defined in Section 152 of the Internal Revenue Code
(26 U.S.C. 152).
-30-
financial statements, (2) the Fund's compliance with legal and regulatory
requirements, (3) the independent registered public accounting firm's
qualifications and independence, (4) the performance of the Adviser's internal
audit function, and (5) the independent registered public accounting firm. The
Audit Committee is directly responsible for the appointment, compensation,
retention and oversight of the work of the independent registered public
accounting firms (including the resolution of disagreements between management
and the independent registered public accounting firms regarding financial
reporting) for the purpose of preparing or issuing an audit report or performing
other review or attest services for the Fund.
2. GOVERNANCE COMMITTEE
Messrs. Lowry, Mayer, Simpson and Theobald are members of the Governance
Committee of the Fund. The Fund has no nominating or compensation committee. The
Governance Committee performs certain of the functions typically performed by
these committees. Among other things, the Governance Committee recommends to the
Board nominees for Trustee and nominees for appointment to various committees;
performs periodic evaluations of the effectiveness of the Board; reviews and
recommends to the Board policies and practices to be followed in carrying out
the Trustees' duties and responsibilities; and reviews and makes recommendations
to the Board regarding the compensation of the Trustees who are not affiliated
with Columbia. On February 9, 2005, the Governance Committee adopted a written
charter which sets forth the Government Committee's structure, duties and
powers, and methods of operation. A copy of the Governance Committee Charter is
attached as Appendix G.
Three of the four Governance Committee members, Messrs. Lowry, Simpson and
Theobald, who are "Independent Trustees" and are not "interested persons" (as
defined in the 1940 Act) of any Fund ("Governance Committee Independent
Trustees"), participate in the consideration, selection and nomination of
Trustees. The Governance Committee Independent Trustees have considered and
nominated all of the nominated Trustees. The Governance Committee Independent
Trustees will consider candidates for Trustee identified by any reasonable
source, including current Independent Trustees, Fund management, Fund
shareholders and other persons or entities. Shareholders of a Fund who wish to
nominate a candidate to a Fund's Board may send information regarding
prospective candidates to the Governance Committee, in care of the relevant
Fund, at One Financial Center, Boston, MA 02111-2621. The information should
include evidence of the shareholders' Fund ownership, a full listing of the
proposed candidate's education, experience, current employment, date of birth,
names and addresses of at least three professional references, information as to
whether the candidate is not an "interested person" under the 1940 Act and
"independent" under NYSE and AMEX listing standards in relation to the Fund, and
such other information as may be helpful to the Governance Committee Independent
Trustees in evaluating the candidate. All satisfactorily completed information
packages regarding a candidate will be forwarded to a member of the Governance
Committee for consideration. Recommendations for candidates will be evaluated in
light of whether the number of Trustees of a Fund is expected to be increased
and anticipated vacancies. All nominations from Fund shareholders will be
considered. There may be times when the Governance Committee is not recruiting
New Board members. In that case, shareholder recommendations will be maintained
on file pending the active recruitment of Trustees.
When considering candidates for Trustee, the Governance Committee Independent
Trustees consider, among other things, whether prospective nominees have
distinguished records in their primary careers, personal and professional
integrity, and substantive knowledge in areas important to the Board's
operations, such as background or education in finance, auditing, securities
law, the workings of the securities markets, or investment advice. For
candidates to serve as Independent Trustees, independence from the Fund's
investment adviser, its affiliates and other principal service providers is
critical, as is an independent and questioning mind-set. In each case, the
Governance Committee Independent Trustees will evaluate whether a candidate is
an "interested person" under the 1940 Act and "independent" under NYSE and AMEX
listing standards. The Governance Committee Independent Trustees also consider
whether a prospective candidate's workload would be consistent with regular
attendance at Board meetings and would allow him or her to be available for
service on Board committees, and devote the additional time and effort necessary
to stay apprised of Board matters and the rapidly changing regulatory
environment in which the Fund operates. Different substantive areas may assume
greater or lesser significance at particular times, in light of a Board's
present composition and its perceptions about future issues and needs.
The Governance Committee Independent Trustees initially evaluate prospective
candidates on the basis of their resumes, considered in light of the criteria
discussed above. Those prospective candidates that appear likely to be able to
fill a significant need of the Board would be contacted by a Governance
Committee Independent Trustee by
-31-
telephone to discuss the position; if there appeared to be sufficient interest,
an in-person meeting with one or more of the Governance Committee Independent
Trustees would be arranged. If a Governance Committee Independent Trustee, based
on the results of these contacts, believes he or she has identified a viable
candidate, he or she would air the matter with the other Governance Committee
Independent Trustees for input. Any request by Fund management to meet with the
prospective candidate would be given appropriate consideration. The Fund has not
paid a fee to third parties to assist in finding nominees.
3. ADVISORY FEES & EXPENSES COMMITTEE
Ms. Kelly and Messrs. Mayer, Nelson and Neuhauser are members of the Advisory
Fees & Expenses Committee of the Fund. The Advisory Fees & Expenses Committee's
functions include reviewing and making recommendations to the Board as to
contracts requiring approval of a majority of the disinterested Trustees and as
to any other contracts that may be referred to the committee by the Board.
4. COMPLIANCE COMMITTEE
Mses. Kelly and Verville, Messrs. Nelson and Simpson are members of the
Compliance Committee of the Board of Trustees of the Fund. Prior to August 10,
2004, Mses. Kelly and Verville and Mr. Nelson were members of the Compliance
Committee of the Board of Trustees of the Fund. The Compliance Committee's
functions include providing oversight of the monitoring processes and controls
regarding the Trust. The Committee supervises legal, regulatory and internal
rules, policies, procedures and standards other than those relating to
accounting matters and oversight of compliance by the Trusts' investment
adviser, principal underwriter and transfer agent.
NUMBER OF
MEETINGS
FOR FISCAL YEAR
ENDED
AUGUST 31, 2004
---------------
Board of Trustees 23
Audit Committee 11
Governance Committee 5
Advisory Fees & Expenses Committee 7
Compliance Committee 4
5. INVESTMENT OVERSIGHT COMMITTEES
These Committees regularly meet with investment personnel of Columbia Management
to review the investment performance and strategies of the Columbia funds in
light of their stated investment objectives and policies. Investment Oversight
Committee 1 currently consists of Messrs. Lowry, Mayer and Neuhauser. Investment
Oversight Committee 2 currently consists of Mr. Hacker and Ms. Verville.
Investment Oversight Committee 3 currently consists of Ms. Kelley and Messrs.
Stitzel and Theobald. Investment Oversight Committee 4 currently consists of
Messrs. Nelson, Simpson and Woolworth.
AUDIT COMMITTEE PRE-APPROVAL OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
SERVICES
The Audit Committee is required to pre-approve the engagement of Independent
Registered Public Accounting Firm to the Fund to provide audit and non-audit
services to the Fund and non-audit services to Columbia Management (not
including any subadviser whose role is primarily portfolio management and is
contracted with or overseen by another investment adviser) or any entity
controlling, controlled by or under common control with Columbia Management that
provides ongoing services to the Fund ("Columbia Affiliate"), if the engagement
relates directly to the operations or financial reporting of the Fund. The
engagement may be entered into pursuant to pre-approval policies and procedures
established by the Audit Committee.
The Fund's Audit Committee has adopted an Audit and Non-Audit Services
Pre-Approval Policy ("Policy") for the pre-approval of audit and non-audit
services provided to the Fund and non-audit services provided to Columbia
-32-
Management and Columbia Affiliates, if the engagement relates directly to the
operations or financial reporting of the Fund. The Policy sets forth the
procedures and conditions pursuant to which services to be performed by the
Fund's independent registered public accounting firm are to be pre-approved.
Unless a type of service receives general pre-approval under the Policy, it
requires specific pre-approval by the Audit Committee if it is to be provided by
the independent registered public accounting firm.
The Policy provides for the general pre-approval by the Audit Committee of
certain: (i) audit services to the Fund; (ii) audit-related services to the
Fund; (iii) tax services to the Fund; (iv) other services to the Fund; and (v)
Fund-related services to Columbia Affiliates. The Policy requires the Fund
Treasurer and/or Director of Trustee Administration to submit to the Audit
Committee, at least annually, a schedule of the types of services that are
subject to general pre-approval. The schedule(s) must provide a description of
each type of service that is subject to general pre-approval and, where
possible, will provide projected fee caps for each instance of providing each
service. At least annually, the Audit Committee will review and approve the
types of services and review the projected fees for the next year, and may add
to, or subtract from, the list of pre-approved services from time to time, based
on subsequent determinations. 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. The fee
amounts listed on the schedules will be updated to the extent necessary at each
of the other regularly scheduled meetings of the Audit Committee.
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table sets forth the aggregate fees billed by
PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm to the
Funds, for the Fund's last two fiscal years for professional services rendered
for (i) audit services, including the audit of the Fund's financial statements
and services normally provided in connection with statutory and regulatory
filings or engagements for those fiscal years; (ii) audit-related services
associated with the review of the Fund's semi-annual financial statements, and
(iii) tax services and, primarily, reviews of Fund tax returns; and (iv) other
services. Please note that the table includes amounts related to non-audit
services that would have been subject to pre-approval if SEC rules relating to
the pre-approval of non-audit services had been in effect at that time.
All of the audit fees, audit-related fees, tax fees and other fees billed by
PricewaterhouseCoopers for services provided to the Fund in the fiscal year
ended August 31, 2004 were pre-approved by the Audit Committee.
There were no amounts billed by PricewaterhouseCoopers LLP in the fiscal year
ended August 31, 2004 for audit-related services, tax services or other services
provided to Columbia or Columbia Affiliates for engagements that related
directly to the operations or financial reporting of the Fund.
AUDIT AUDIT-RELATED TAX ALL OTHER
FEES FEES FEES FEES
----- ------------- ------ ---------
Acquired Fund 2003 $25,090 $3,500 $4,100 $0
2004 $26,350 $3,700 $4,300 $0
The aggregate amount of fees paid for non-audit services billed to the Fund,
Columbia and Columbia Affiliates was $[ ] in the fiscal year ended August 31,
2003 and $[ ] for the fiscal year ended August 31, 2004.
The Audit Committee has determined that the provision of the services described
above is compatible with maintaining the independence of PricewaterhouseCoopers
LLP.
THE TRUSTEES OF THE COLUMBIA FUNDS TRUST VII ON BEHALF OF THE ACQUIRED FUND
UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR" ELECTING THE PROPOSED
TRUSTEES OF THE FUND.
-33-
GENERAL
VOTING INFORMATION
The Board is soliciting proxies from the shareholders of the Funds in connection
with the Meeting, which has been called to be held at 2 p.m. Eastern Time on
September 9, 2005, at Columbia Management's offices at One Financial Center,
Boston, Massachusetts 02111. The meeting notice, this Prospectus/Proxy Statement
and the proxy card are being mailed to shareholders beginning on or
about [July 18].
INFORMATION ABOUT PROXIES AND THE CONDUCT OF THE MEETING
Solicitation of Proxies. Proxies will be solicited primarily by mailing this
Prospectus/Proxy Statement and its enclosures, but proxies may also be solicited
through further mailings, telephone calls, personal interviews or e-mail by
officers of the Funds or by employees or agents of Columbia Management and its
affiliated companies. In addition, [_____________________________], has been
engaged to assist in the solicitation of proxies, at an estimated cost of
approximately $ [_____].
Voting Process
Shareholders can vote in any one of the following ways:
a. By mail, by filling out and returning the enclosed proxy card;
b. By phone, fax or Internet (see enclosed proxy card for instructions); or
c. In person at the Meeting.
Shareholders who owned shares on the record date, July 7, 2005, are entitled to
vote at the Meeting. Shareholders of the Fund are entitled to cast one vote for
each share owned on the record date. If a shareholder choose to vote by mail or
fax and is an individual account owner, please sign exactly as the name appears
on the proxy card. Either owner of a joint account may sign the proxy card, but
the signer's name must exactly match the name that appears on the card.
Costs. The estimated costs of the Meeting, including the costs of soliciting
proxies, and the costs of the Acquisition to be borne by the Acquiring Fund are
approximately $0 and $176,000 for the Acquired Fund. Columbia Management is also
bearing a portion of the costs of the Merger. This portion to be borne by
Columbia Management is in addition to the amounts to be borne by the Funds. In
the event that the shareholders of the Fund do not approve the Agreement and
Plan of Reorganization or the Merger does not close for any reason, Columbia
will bear the costs of the failed Merger which would otherwise have been borne
by the Acquired Fund.
Quorum and Method of Tabulation. Shares represented by duly executed proxies
will be voted as instructed on the proxy. If no instructions are given, the
proxy will be voted in favor of the Proposal. Shareholders can revoke their
proxy by sending a signed, written letter of revocation to the Secretary of the
Acquired Fund, by properly executing and submitting a later-dated proxy or by
attending the Meeting and voting in person.
Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Fund as tellers for the Meeting (the "Tellers"). Thirty percent
(30%) of the shares entitled to vote on the record date, present in person or
represented by proxy, constitute a quorum for the transaction of business by the
shareholders of the Acquired Fund and Trust VII at the Meeting. In determining
whether a quorum is present, the Tellers will count shares represented by
proxies that reflect abstentions and "broker non-votes" as shares that are
present and entitled to vote. Abstentions and broker non-votes have the effect
of a negative vote on Proposal 1, and will have no effect on Proposal 2. "Broker
non-votes" are shares held by brokers or nominees as to which (i) the broker or
nominee does not have discretionary voting power and (ii) the broker or nominee
has not received instructions from the beneficial owner or other person who is
entitled to instruct how the shares will be voted.
-34-
Underwriter's Addresses. The address of the Fund's principal underwriter,
Columbia Funds Distributor, Inc., is One Financial Center, Boston, Massachusetts
02111.
Share Ownership. Appendix B to this Prospectus/Proxy Statement lists the total
number of shares outstanding as of July 7, 2005, for each class of the Acquired
Fund entitled to vote at the Meeting. It also identifies holders of more than
five percent of any class of shares of the Fund, and contains information about
the executive officers and Trustees of the Funds and their shareholdings in the
Fund.
Adjournments; Other Business. If the Acquired Fund has not received enough votes
by the time of the Meeting to approve the Proposal, the persons named as proxies
may propose that such Meeting be adjourned one or more times to permit further
solicitation of proxies. Any adjournment requires the affirmative vote of a
majority of the total number of shares of the Acquired Fund that are present in
person or by proxy on the question when the adjournment is being voted on. The
persons named as proxies will vote in favor of any such adjournment all proxies
that they are entitled to vote in favor of the Proposal. They will vote against
any such adjournment any proxy that directs them to vote against the Proposal.
They will not vote any proxy that directs them to abstain from voting on the
Proposal.
The Meeting has been called to transact any business that properly comes before
it. The only business that management of the Acquired Fund intends to present or
knows that others will present is the Proposal. If any other matters properly
come before the Meeting, and on all matters incidental to the conduct of the
Meeting, the persons named as proxies intend to vote the proxies in accordance
with their judgment, unless the Secretary of the Acquired Fund has previously
received written contrary instructions from the shareholder entitled to vote the
shares.
-35-
APPENDIX A -- AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of June 1, 2005, is by and
among Columbia Funds Trust VII (the "Trust"), a Massachusetts business trust, on
behalf of Columbia Newport Tiger Fund (the "Acquired Fund"); Columbia
International Stock Fund, Inc. (the "Acquiring Fund"), an Oregon corporation,
and Columbia Management Advisors, Inc. ("Columbia").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Sections 361(a) and Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and any
successor provision. The reorganization will consist of the transfer of all of
the assets of the Acquired Fund attributable to its Class A shares in exchange
for Class A shares of Common stock of the Acquiring Fund ("Class A Acquisition
Shares"), the transfer of all of the assets of the Acquired Fund attributable to
its Class B shares in exchange for Class B shares of Common stock of the
Acquiring Fund ("Class B Acquisition Shares"), the transfer of all of the assets
of the Acquired Fund attributable to its Class C shares in exchange for Class C
shares of Common stock of the Acquiring Fund ("Class C Acquisition Shares"), the
transfer of all of the assets of the Acquired Fund attributable to its Class T
shares in exchange for Class A shares of Common stock of the Acquiring Fund
("Class T/A Acquisition Shares"), and the transfer of all of the assets of the
Acquired Fund attributable to its Class Z shares in exchange for Class Z shares
of Common stock of the Acquiring Fund ("Class Z Acquisition Shares" and together
with the Class A Acquisition Shares, Class B Acquisition Shares, Class C
Acquisition Shares and Class T/A Acquisition Shares, the "Acquisition Shares")
and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund
(other than certain expenses of the reorganization contemplated hereby) and the
distribution of the Class A Acquisition Shares, the Class B Acquisition Shares,
the Class C Acquisition Shares, the Class T/A Acquisition Shares, and the Class
Z Acquisition Shares to the Class A, Class B, Class C, Class T, and Class Z
shareholders, respectively, of the Acquired Fund in liquidation of the Acquired
Fund, all upon the terms and conditions set forth in this Agreement.
In consideration of the premises and of the covenants and agreements hereinafter
set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ACQUISITION SHARES AND LIQUIDATION OF ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein,
(a) The Acquired Fund, will transfer and deliver to the Acquiring Fund,
and the Acquiring Fund will acquire, all the assets of the Acquired
Fund as set forth in paragraph 1.2;
(b) The Acquiring Fund will assume all of the Acquired Fund's
liabilities and obligations of any kind whatsoever, whether
absolute, accrued, contingent or otherwise, in existence on the
Closing Date (as defined in paragraph 1.2 hereof) (the
"Obligations"), except that expenses of the reorganization
contemplated hereby to be paid by the Acquired Fund pursuant to
paragraph 9.2 shall not be assumed or paid by the Acquiring Fund;
and
(c) The Acquiring Fund will issue and deliver to the Acquired Fund in
exchange for such assets the number of Class A, Class B, Class C,
Class T/A and Class Z Acquisition Shares (including fractional
shares, if any) determined by dividing the net asset values of the
Class A, Class B, Class C, Class T and Class Z shares of the
Acquired Fund, respectively, computed in the manner and as of the
time and date set forth in paragraph 2.1, by the net asset value of
one Class A, Class B, Class C or Class Z Acquisition Share, as
applicable, computed in the manner and as of the time and date set
forth in paragraph 2.2. Such transactions shall take place at the
closing provided for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all cash, securities, dividends and interest
receivable, receivables for shares sold and all other assets which
are owned by the
A-1
Acquired Fund on the closing date provided in paragraph 3.1 (the
"Closing Date") and any deferred expenses, other than unamortized
organizational expenses, shown as an asset on the books of the
Acquired Fund on the Closing Date. The Acquiring Fund agrees that
all rights to indemnification and all limitations of liability
existing in favor of the Acquired Fund's current and former Trustees
and officers, acting in their capacities as such, under the Trust's
Declaration of Trust and Bylaws as in effect as of the date of this
Agreement shall survive the reorganization as obligations of the
Acquiring Fund and shall continue in full force and effect, without
any amendment thereto, and shall constitute rights which may be
asserted against the Acquired Fund, its successors or assigns.
1.3 As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Acquired Fund
will liquidate and distribute pro rata to its Class A shareholders
of record ("Acquired Fund Class A Shareholders"), determined as of
the close of business on the Valuation Date (as defined in paragraph
2.1), Class A Acquisition Shares received by the Acquired Fund
pursuant to paragraph 1.1; to its Class B shareholders of record
("Acquired Fund Class B Shareholders"), determined as of the close
of business on the Valuation Date, Class B Acquisition Shares
received by the Acquired Fund pursuant to paragraph 1.1; to its
Class C shareholders of record ("Acquired Fund Class C
Shareholders"), determined as of the close of business on the
Valuation Date, Class C Acquisition Shares received by the Acquired
Fund pursuant to paragraph 1.1; to its Class T shareholders of
record ("Acquired Fund Class T Shareholders"), determined as of the
close of business on the Valuation Date, Class T/A Acquisition
Shares received by the Acquired Fund pursuant to paragraph 1.1; and
to its Class Z shareholders of record ("Acquired Fund Class Z
Shareholders," and collectively with Acquired Fund Class A
Shareholders, Acquired Fund Class B Shareholders, Acquired Fund
Class C Shareholders and Acquired Fund Class T Shareholders, the
"Acquired Fund Shareholders"), determined as of the close of
business on the Valuation Date, Class Z Acquisition Shares received
by the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquisition
Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of
the Acquiring Fund in the names of the Acquired Fund Shareholders
and representing the respective pro rata number of Acquisition
Shares due such shareholders. The Acquiring Fund shall not be
obligated to issue certificates representing Acquisition Shares in
connection with such exchange.
1.4 With respect to Acquisition Shares distributable pursuant to
paragraph 1.3 to an Acquired Fund Shareholder holding a certificate
or certificates for shares of the Acquired Fund, if any, on the
Valuation Date, the Acquired Fund will not permit such shareholder
to receive Acquisition Share certificates therefor, exchange such
Acquisition Shares for shares of other investment companies, effect
an account transfer of such Acquisition Shares, or pledge or redeem
such Acquisition Shares until the Acquired Fund has been notified by
the Acquired Fund or its agent that such Acquired Fund Shareholder
has surrendered all his or her outstanding certificates for Acquired
Fund shares or, in the event of lost certificates, posted adequate
bond.
1.5 After the Closing Date, the Acquired Fund shall not conduct any
business except in connection with its liquidation, deregistration
(if applicable) and dissolution.
2. VALUATION.
2.1 For the purpose of paragraph 1, the value of the Acquired Fund's
assets to be acquired by the Acquiring Fund hereunder shall be the
net asset value computed as of the close of regular trading on the
New York Stock Exchange on the business day next preceding the
Closing (such time and date being herein called the "Valuation
Date") using the valuation procedures set forth in the Declaration
of Trust of the Trust and the then current prospectus or
prospectuses or statement or statements of additional information of
the Acquiring Fund (collectively, as amended or supplemented from
time to time, the "Acquiring Fund Prospectus"), after deduction for
the expenses of the reorganization contemplated hereby to be paid by
the Acquired Fund pursuant to paragraph 9.2, and shall be certified
by the Acquired Fund.
2.2 For the purpose of paragraph 2.1, the net asset value of a Class A,
Class B, Class C, Class T/A or Class Z Acquisition Share shall be
the net asset value per share computed as of the close of regular
trading on the New York Stock Exchange on the Valuation Date, using
the valuation procedures set forth in the Declaration of Trust of
the Trust and the Acquiring Fund Prospectus.
A-2
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be on October 7, 2005, or on such other date
as the parties may agree. The Closing shall be held at 5:00 p.m. at
Columbia's offices, One Financial Center, Boston, Massachusetts
02111, or at such other time and/or place as the parties may agree.
3.2 The portfolio securities of the Acquired Fund shall be made
available by the Acquired Fund to State Street Bank and Trust
Company, as custodian for the Acquiring Fund (the "Custodian"), for
examination no later than five business days preceding the Valuation
Date. On the Closing Date, such portfolio securities and all the
Acquired Fund's cash shall be delivered by the Acquired Fund to the
Custodian for the account of the Acquiring Fund, such portfolio
securities to be duly endorsed in proper form for transfer in such
manner and condition as to constitute good delivery thereof in
accordance with the custom of brokers or, in the case of portfolio
securities held in the U.S. Treasury Department's book-entry system
or by the Depository Trust Company, Participants Trust Company or
other third party depositories, by transfer to the account of the
Custodian in accordance with Rule 17f-4, Rule 17f-5 or Rule 17f-7,
as the case may be, under the Investment Company Act of 1940, as
amended (the "1940 Act") and accompanied by all necessary federal
and state stock transfer stamps or a check for the appropriate
purchase price thereof. The cash delivered shall be in the form of
currency or certified or official bank checks, payable to the order
of "[Name of Custodian], custodian for Columbia Newport Tiger Fund."
3.3 In the event that on the Valuation Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be
restricted, or (b) trading or the reporting of trading on said
Exchange or elsewhere shall be disrupted so that accurate appraisal
of the value of the net assets of the Acquired Fund or the Acquiring
Fund is impracticable, the Closing Date shall be postponed until the
first business day after the day when trading shall have been fully
resumed and reporting shall have been restored; provided that if
trading shall not be fully resumed and reporting restored within
three business days of the Valuation Date, this Agreement may be
terminated by the Acquiring Fund upon the giving of written notice
to the other party.
3.4 At the Closing, the Acquired Fund or its transfer agent shall
deliver to the Acquiring Fund or its designated agent a list of the
names and addresses of the Acquired Fund Shareholders and the number
of outstanding shares of beneficial interest of the Acquired Fund
owned by each Acquired Fund Shareholder, all as of the close of
business on the Valuation Date, certified by the Vice President,
Secretary or Assistant Secretary of the Acquired Fund. The Acquiring
Fund will provide to the Acquired Fund evidence satisfactory to the
Acquired Fund that the Acquisition Shares issuable pursuant to
paragraph 1.1 have been credited to the Acquired Fund's account on
the books of the Acquiring Fund. On the Liquidation Date, the
Acquiring Fund will provide to the Acquired Fund evidence
satisfactory to the Acquired Fund that such Acquisition Shares have
been credited pro rata to open accounts in the names of the Acquired
Fund Shareholders as provided in paragraph 1.3.
3.5 At the Closing each party shall deliver to the other such bills of
sale, instruments of assumption of liabilities, checks, assignments,
stock certificates, receipts or other documents as such other party
or its counsel may reasonably request in connection with the
transfer of assets, assumption of liabilities and liquidation
contemplated by paragraph 1.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Trust, on behalf of the Acquired Fund represents and warrants
the following to the Acquiring Fund as of the date hereof and agrees
to confirm the continuing accuracy and completeness in all material
respects of the following on the Closing Date:
(a) The Trust is a business trust duly organized, validly existing and
in good standing under the laws of The Commonwealth of
Massachusetts;
(b) The Trust is a duly registered investment company classified as a
management company of the open-end type and its registration with
the Securities and Exchange Commission as an investment company
under the
A-3
1940 Act is in full force and effect, and the Acquired Fund is a
separate series thereof duly designated in accordance with the
applicable provisions of the Declaration of Trust of the Trust and
the 1940 Act;
(c) The Trust is not in violation in any material respect of any
provision of its Declaration of Trust or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
the Trust is a party or by which the Acquired Fund is bound, and the
execution, delivery and performance of this Agreement will not
result in any such violation;
(d) The Acquired Fund has no material contracts or other commitments
(other than this Agreement and such other contracts as may be
entered into in the ordinary course of its business) which if
terminated may result in material liability to the Acquired Fund or
under which (whether or not terminated) any material payments for
periods subsequent to the Closing Date will be due from the Acquired
Fund;
(e) To the knowledge of the Acquired Fund, except as has been disclosed
in writing to the Acquiring Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental
body is presently pending or threatened as to the Acquired Fund or
any of its properties or assets or any person whom the Acquired Fund
may be obligated to indemnify in connection with such litigation,
proceeding or investigation, and the Acquired Fund is not a party to
or subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects
its business or its ability to consummate the transactions
contemplated hereby;
(f) The statement of assets and liabilities, the statement of
operations, the statement of changes in net assets, and the schedule
of investments of the Acquired Fund at, as of and for the fiscal
year ended August 31, 2004, audited by PricewaterhouseCoopers LLP,
copies of which have been furnished to the Acquiring Fund, fairly
reflect the financial condition and results of operations of the
Acquired Fund as of such date and for the period then ended in
accordance with generally accepted accounting principles
consistently applied, and the Acquired Fund has no known liabilities
of a material amount, contingent or otherwise, other than those
shown on the statements of assets referred to above or those
incurred in the ordinary course of its business since August 31,
2004;
(g) Since August 31, 2004, there has not been any material adverse
change in the Acquired Fund's financial condition, assets,
liabilities or business (other than changes occurring in the
ordinary course of business), or any incurrence by the Acquired Fund
of indebtedness, except as disclosed in writing to the Acquiring
Fund. For the purposes of this subparagraph (g), distributions of
net investment income and net realized capital gains, changes in
portfolio securities, changes in the market value of portfolio
securities or net redemptions shall be deemed to be in the ordinary
course of business;
(h) As of the Closing Date, all federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by
such date (giving effect to extensions) shall have been filed, and
all federal and other taxes shown to be due on such returns and
reports or on any assessment received shall have been paid, or
provisions shall have been made for the payment thereof. All of the
Acquired Fund's tax liabilities will have been adequately provided
for on its books. To the best of the Acquired Fund's knowledge, it
will not have had any tax deficiency or liability asserted against
it or question with respect thereto raised, and it will not be under
audit by the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid;
(i) The Acquired Fund meets the requirements of subchapter M of the Code
for treatment as a "regulated investment company" within the meaning
of Section 851 of the Code, and will continue meeting such
requirements at all times through the Closing Date. The Acquired
Fund has not at any time since its inception been liable for nor is
now liable for any material income or excise tax pursuant to Section
852 or 4982 of the Code. The Acquired Fund has duly filed all
federal, state, local and foreign tax returns which are required to
have been filed, and all taxes of the Acquired Fund which are due
and payable have been paid except for amounts that alone or in the
aggregate would not reasonably be expected to have a material
adverse effect. The Acquired Fund is in compliance in all material
respects with applicable regulations of the Internal Revenue Service
pertaining to the reporting of dividends and other distributions on
and redemptions of its capital stock and to withholding in respect
of dividends and other distributions to shareholders, and is
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not liable for any material penalties which could be imposed
thereunder;
(j) The authorized capital of the Acquired Fund consists of an unlimited
number of shares of beneficial interest, no par value, of such
number of different series as the Board of Trustees may authorize
from time to time. The outstanding shares of beneficial interest in
the Acquired Fund are, and at the Closing Date will be, divided into
Class A shares, Class B shares, Class C shares, Class T shares and
Class Z shares of beneficial interest, each having the
characteristics described in the Acquiring Fund Prospectus. All
issued and outstanding shares of the Acquired Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable (except as set forth in the Acquiring Fund
Prospectus) by the Acquired Fund and will have been issued in
compliance with all applicable registration or qualification
requirements of federal and state securities laws. Except for Class
B shares which convert to Class A shares, no options, warrants or
other rights to subscribe for or purchase, or securities convertible
into, any shares of common stock in the Acquiring Fund of any class
are outstanding and none will be outstanding on the Closing Date;
(k) The Acquired Fund's investment operations from inception to the date
hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus or prospectuses and statement or statements of additional
information as in effect from time to time, except as previously
disclosed in writing to the Acquiring Fund;
(l) The execution, delivery and performance of this Agreement has been
duly authorized by the Trustees of the Trust, and, upon approval
thereof by the required majority of the shareholders of the Acquired
Fund, this Agreement will constitute the valid and binding
obligation of the Acquired Fund enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and other equitable principles;
(m) The Acquisition Shares to be issued to the Acquired Fund pursuant to
paragraph 1 will not be acquired for the purpose of making any
distribution thereof other than to the Acquired Fund Shareholders as
provided in paragraph 1.3;
(n) The information provided by the Acquired Fund for use in the
Registration Statement and Prospectus/Proxy Statement referred to in
paragraph 5.3 shall be accurate and complete in all material
respects and shall comply with federal securities and other laws and
regulations as applicable thereto;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement,
except such as may be required under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act and state securities or "Blue
Sky" laws (which terms used herein shall include the laws of the
District of Columbia and of Puerto Rico);
(p) At the Closing Date, the Acquired Fund will have good and marketable
title to its assets to be transferred to the Acquiring Fund pursuant
to paragraph 1.1 and will have full right, power and authority to
sell, assign, transfer and deliver the Investments (as defined
below) and any other assets and liabilities of the Acquired Fund to
be transferred to the Acquiring Fund pursuant to this Agreement. At
the Closing Date, subject only to the delivery of the Investments
and any such other assets and liabilities and payment therefor as
contemplated by this Agreement, the Acquiring Fund will acquire good
and marketable title thereto and will acquire the Investments and
any such other assets and liabilities subject to no encumbrances,
liens or security interests whatsoever and without any restrictions
upon the transfer thereof, except as previously disclosed to the
Acquiring Fund. As used in this Agreement, the term "Investments"
shall mean the Acquired Fund's investments shown on the schedule of
its investments as of August 31, 2004, referred to in subparagraph
4.1(f) hereof, as supplemented with such changes in the portfolio as
the Acquired Fund shall make, and changes resulting from stock
dividends, stock split-ups, mergers and similar corporate actions
through the Closing Date;
(q) At the Closing Date, the Acquired Fund will have sold such of its
assets, if any, as are necessary to assure that, after giving effect
to the acquisition of the assets of the Acquired Fund pursuant to
this Agreement, the
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Acquiring Fund will remain a "diversified company" within the
meaning of Section 5(b)(1) of the 1940 Act and in compliance with
such other mandatory investment restrictions as are set forth in the
Acquiring Fund Prospectus, as amended through the Closing Date; and
(r) No registration of any of the Investments would be required if they
were, as of the time of such transfer, the subject of a public
distribution by either of the Acquiring Fund or the Acquired Fund,
except as previously disclosed by the Acquired Fund to the Acquiring
Fund.
4.2 The Acquiring Fund, represents and warrants the following to the
Trust and to the Acquired Fund as of the date hereof and agrees to
confirm the continuing accuracy and completeness in all material
respects of the following on the Closing Date:
(a) The Acquiring Fund is a corporation duly organized and validly
existing under the laws of the State of Oregon;
(b) The Acquiring Fund is a duly registered investment company
classified as a management company of the open-end type and its
registration with the Securities and Exchange Commission as an
investment company under the 1940 Act is in full force and effect;
(c) The Acquiring Fund Prospectus conforms in all material respects to
the applicable requirements of the 1933 Act and the rules and
regulations of the Securities and Exchange Commission thereunder and
does not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, and there are no material
contracts to which the Acquiring Fund is a party that are not
referred to in such Prospectus or in the registration statement of
which it is a part;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to its assets;
(e) The Acquiring Fund is not in violation in any material respect of
any provisions of its Articles of Incorporation or Bylaws or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which the
Acquiring Fund is bound, and the execution, delivery and performance
of this Agreement will not result in any such violation;
(f) To the knowledge of the Acquiring Fund, except as has been disclosed
in writing to the Trust or the Acquired Fund, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the
Acquiring Fund, any of their properties or assets, or any person
whom the Acquiring Fund may be obligated to indemnify in connection
with such litigation, proceeding or investigation, and the Acquiring
Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to
consummate the transactions contemplated hereby;
(g) The statement of assets and liabilities, the statement of
operations, the statement of changes in net assets, and the schedule
of investments at, as of and for the fiscal year ended August 31,
2004, of the Acquiring Fund, audited by PricewaterhouseCoopers LLP,
copies of which have been furnished to the Acquired Fund, fairly
reflect the financial condition and results of operations of the
Acquiring Fund as of such dates and for the period then ended in
accordance with generally accepted accounting principles
consistently applied, and the Acquiring Fund has no known
liabilities of a material amount, contingent or otherwise, other
than those shown on the statements of assets referred to above or
those incurred in the ordinary course of its business since August
31, 2004;
(h) Since August 31, 2004, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets,
liabilities or business (other than changes occurring in the
ordinary course of business), or any incurrence by the Acquiring
Fund of indebtedness. For the purposes of this subparagraph (h),
changes in portfolio securities, changes in the market value of
portfolio securities or net redemptions shall be deemed to be in the
ordinary course of business;
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(i) As of the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed by
such date (giving effect to extensions) shall have been filed, and
all federal and other taxes shown to be due on such returns and
reports or any assessments received shall have been paid, or
provisions shall have been made for the payment thereof. All of the
Acquiring Fund's tax liabilities will have been adequately provided
for on its books. To the best of the Acquiring Fund's knowledge, it
will not have not have had any tax deficiency or liability asserted
against it or question with respect thereto raised, and it will not
be under audit by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid;
(j) The Acquiring Fund meets the requirements of subchapter M of the
Code for treatment as a "regulated investment company" within the
meaning of Section 851 of the Code, and will continue meeting such
requirements at all times through the Closing Date. The Acquiring
Fund has not at any time since its inception been liable for nor is
now liable for any material income or excise tax pursuant to Section
852 or 4982 of the Code. The Acquiring Fund has duly filed all
federal, state, local and foreign tax returns which are required to
have been filed, and all taxes of the Acquiring Fund which are due
and payable have been paid except for amounts that alone or in the
aggregate would not reasonably be expected to have a material
adverse effect. The Acquiring Fund is in compliance in all material
respects with applicable regulations of the Internal Revenue Service
pertaining to the reporting of dividends and other distributions on
and redemptions of its capital stock and to withholding in respect
of dividends and other distributions to shareholders, and is not
liable for any material penalties which could be imposed thereunder;
(k) The authorized capital of the Acquiring Fund presently consists of
2,000,000,000 shares of Common stock, no par value, of such number
of different classes as the Board of Directors may authorize from
time to time. The outstanding shares of Common stock in the
Acquiring Fund are, and at the Closing Date will be divided into
Class A shares, Class B shares, Class C shares, Class D shares,
Class G shares and Class Z shares, each having the characteristics
described in the Acquiring Fund Prospectus. All issued and
outstanding shares of the Acquiring Fund are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid
and non-assessable (except as set forth in the Acquiring Fund
Prospectus) by the Acquiring Fund, and will have been issued in
compliance with all applicable registration or qualification
requirements of federal and state securities laws. Except for Class
B shares which convert to Class A shares no options, warrants or
other rights to subscribe for or purchase, or securities convertible
into, any shares of Common stock in the Acquiring Fund of any class
are outstanding and none will be outstanding on the Closing Date;
(l) The Acquiring Fund's investment operations from inception to the
date hereof have been in compliance in all material respects with
the investment policies and investment restrictions set forth in the
Acquiring Fund Prospectus;
(m) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes the valid and binding
obligation of the Acquiring Fund enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and other equitable principles;
(n) The Acquisition Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement will at the Closing
Date have been duly authorized and, when so issued and delivered,
will be duly and validly issued Class A, Class B, Class C and Class
Z shares of in the Acquiring Fund, and will be fully paid and
non-assessable (except as set forth in the Acquiring Fund
Prospectus) by the Acquiring Fund, and no shareholder of the
Acquiring Fund will have any preemptive right of subscription or
purchase in respect thereof;
(o) The information to be furnished by the Acquiring Fund for use in the
Registration Statement and Prospectus/Proxy Statement referred to in
paragraph 5.3 shall be accurate and complete in all material
respects and shall comply with federal securities and other laws and
regulations applicable thereto; and
(p) No consent, approval, authorization or order of any court or
governmental authority is required for the
A-7
consummation by the Acquiring Fund of the transactions contemplated
by this Agreement, except such as may be required under the 1933
Act, the 1934 Act, the 1940 Act and state securities or "Blue Sky"
laws (which term as used herein shall include the laws of the
District of Columbia and of Puerto Rico).
5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND.
The Acquiring Fund, and the Acquired Fund, each hereby covenants and agrees as
follows:
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of
business will include regular and customary periodic dividends and
distributions.
5.2 The Acquired Fund will call a meeting of its shareholders to be held
prior to the Closing Date to consider and act upon this Agreement
and take all other reasonable action necessary to obtain the
required shareholder approval of the transactions contemplated
hereby.
5.3 In connection with the Acquired Fund shareholders' meeting referred
to in paragraph 5.2, the Acquired Fund will prepare a
Prospectus/Proxy Statement for such meeting, to be included in a
Registration Statement on Form N-14 (the "Registration Statement")
which the Acquiring Fund will prepare and file for the registration
under the 1933 Act of the Acquisition Shares to be distributed to
the Acquired Fund shareholders pursuant hereto, all in compliance
with the applicable requirements of the 1933 Act, the 1934 Act, and
the 1940 Act.
5.4 The information to be furnished by the Acquired Fund for use in the
Registration Statement and the information to be furnished by the
Acquiring Fund for use in the Prospectus/Proxy Statement, each as
referred to in paragraph 5.3, shall be accurate and complete in all
material respects and shall comply with federal securities and other
laws and regulations thereunder applicable thereto.
5.5 The Acquiring Fund will advise the Acquired Fund promptly if at any
time prior to the Closing Date the assets of the Acquired Fund
include any securities which the Acquiring Fund is not permitted to
acquire.
5.6 Subject to the provisions of this Agreement, the Acquired Fund and
the Acquiring Fund will each take, or cause to be taken, all action,
and do or cause to be done, all things reasonably necessary, proper
or advisable to cause the conditions to the other party's
obligations to consummate the transactions contemplated hereby to be
met or fulfilled and otherwise to consummate and make effective such
transactions.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state securities or "Blue Sky" laws as it may deem
appropriate in order to continue its operations after the Closing
Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Trust and
the Acquiring Fund of all the obligations to be performed by them hereunder on
or before the Closing Date and, in addition thereto, to the following further
conditions:
6.1 The Acquiring Fund shall have delivered to the Acquired Fund, a
certificate executed in its name by its President or Vice President
and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquired Fund and dated as of the Closing Date,
to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as
of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and that the Acquiring
Fund has complied with all the covenants and agreements and
satisfied all of the conditions on their parts to be performed or
satisfied by it under this Agreement at or prior to the Closing
Date.
6.2 The Acquired Fund shall have received a favorable opinion of Stoel
Rives LLP, special Oregon counsel to the Acquiring Fund for the
transactions contemplated hereby, dated the Closing Date and, in a
form satisfactory to the Acquired Fund, to the following effect:
A-8
(a) The Acquiring Fund is a corporation duly organized and validly
existing under the laws of the State of Oregon and has power to own
all of its properties and assets and to carry on its business as
presently conducted;
(b) This Agreement has been duly authorized, executed and delivered by
the Acquiring Fund and, assuming the Registration Statement and the
Prospectus/Proxy Statement referred to in paragraph 5.3 comply with
applicable federal securities laws and assuming the due
authorization, execution and delivery of this Agreement by the
Trust, on behalf of the Acquired Fund is the valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring
Fund in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and other
equitable principles;
(c) The Acquiring Fund has the power to assume the liabilities to be
assumed by it hereunder and upon consummation of the transactions
contemplated hereby the Acquiring Fund will have duly assumed such
liabilities;
(d) The Acquisition Shares to be issued for transfer to the Acquired
Fund Shareholders as provided by this Agreement are duly authorized
and upon such transfer and delivery will be validly issued and
outstanding and fully paid and non-assessable Class A, Class B,
Class C and Class Z shares of Common stock in the Acquiring Fund,
and no shareholder of the Acquiring Fund has any preemptive right of
subscription or purchase in respect thereof;
(e) The execution and delivery of this Agreement did not, and the
performance by the Acquiring Fund of its respective obligations
hereunder will not, violate the Acquiring Fund's Articles of
Incorporation or By-laws, or any provision of any agreement known to
such counsel to which the Acquiring Fund is a party or by which it
is bound or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition of any penalty
under any agreement, judgment, or decree to which the Acquiring Fund
is a party or by which it is bound;
(f) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by the Acquiring Fund of the
transactions contemplated by this Agreement except such as may be
required under state securities or "Blue Sky" laws or such as have
been obtained;
(g) Such counsel does not know of any legal or governmental proceedings
relating to the Acquiring Fund existing on or before the date of
mailing of the Prospectus/Proxy Statement referred to in paragraph
5.3 or the Closing Date required to be described in the Registration
Statement which are not described as required;
(h) The Acquiring Fund is registered with the Securities and Exchange
Commission as an investment company under the 1940 Act; and
(i) To the knowledge of such counsel, except as has been disclosed in
writing to the Acquired Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental
body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets or any person whom the Acquiring
Fund may be obligated to indemnify in connection with such
litigation, proceeding or investigation, the Acquiring Fund is not a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body, which materially and
adversely affects its business or its ability to consummate the
transactions contemplated hereby.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by the Acquired
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, to the following further conditions:
A-9
7.1 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate executed in its name by its President or Vice President
and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date,
to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as
of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and that the Acquired
Fund have complied with all the covenants and agreements and
satisfied all of the conditions on their parts to be performed or
satisfied under this Agreement at or prior to the Closing Date;
7.2 The Acquiring Fund shall have received a favorable opinion of Ropes
& Gray LLP, counsel to the Acquired Fund for the transactions
contemplated hereby, dated the Closing Date and in a form
satisfactory to the Acquired Fund, to the following effect:
(a) The Trust is a business trust duly organized and validly existing
under the laws of The Commonwealth of Massachusetts and has power to
own all of its properties and assets and to carry on its business as
presently conducted, and the Acquired Fund is a separate series
thereof duly constituted in accordance with the applicable
provisions of the 1940 Act and the Declaration of Trust and Bylaws
of the Trust;
(b) This Agreement has been duly authorized, executed and delivered on
behalf of the Acquired Fund and, assuming the Registration Statement
and the Prospectus/Proxy Statement referred to in paragraph 5.3
comply with applicable federal securities laws and assuming the due
authorization, execution and delivery of this Agreement by the
Acquiring Fund, is the valid and binding obligation of the Acquired
Fund enforceable against the Acquired Fund in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and other equitable principles;
(c) The Acquired Fund has the power to sell, assign, transfer and
deliver the assets to be transferred by it hereunder, and, upon
consummation of the transactions contemplated hereby, the Acquired
Fund will have duly transferred such assets to the Acquiring Fund;
(d) The execution and delivery of this Agreement did not, and the
performance by the Acquired Fund of its respective obligations
hereunder will not, violate the Trust's Declaration of Trust or
Bylaws, or any provision of any agreement known to such counsel to
which the Acquired Fund is a party or by which it is bound or, to
the knowledge of such counsel, result in the acceleration of any
obligation or the imposition of any penalty under any agreement,
judgment, or decree to which the Acquired Fund is a party or by
which it is bound;
(e) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by the Acquired Fund of the
transactions contemplated by this Agreement, except such as have
been obtained;
(f) Such counsel does not know of any legal or governmental proceedings
relating to the Acquired Fund existing on or before the date of
mailing of the Prospectus/Proxy Statement referred to in paragraph
5.3 or the Closing Date required to be described in the Registration
Statement which are not described as required;
(g) The Trust is registered with the Securities and Exchange Commission
as an investment company under the 1940 Act; and
(h) To the knowledge of such counsel, except as has been disclosed in
writing to the Acquiring Fund, no litigation or administrative
proceeding or investigation of or before any court or governmental
body is presently pending or threatened as to the Acquired Fund or
any of their properties or assets or any person whom the Acquired
Fund may be obligated to indemnify in connection with such
litigation, proceeding or investigation, and the Acquired Fund is
not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body, which materially and
adversely affects its business or its ability to consummate the
transactions contemplated hereby.
7.3 Prior to the Closing Date, the Acquired Fund shall have declared a
dividend or dividends which, together with all previous dividends,
shall have the effect of distributing all of the Acquired Fund's
investment
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company taxable income for its taxable years ending on or after
August 31, 2004, and on or prior to the Closing Date (computed
without regard to any deduction for dividends paid), and all of its
net capital gains realized in each of its taxable years ending on or
after August 31, 2004, and on or prior to the Closing Date.
7.4 The Acquired Fund shall have furnished to the Acquiring Fund a
certificate, signed by the President (or any Vice President) and the
Treasurer of the Acquired Fund, as to the adjusted tax basis in the
hands of the Acquired Fund of the securities delivered to the
Acquiring Fund pursuant to this Agreement.
7.5 The custodian of the Acquired Fund shall have delivered to the
Acquiring Fund a certificate identifying all of the assets of the
Acquired Fund held by such custodian as of the Valuation Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE ACQUIRING FUND AND
THE ACQUIRED FUND.
The respective obligations of the Acquired Fund and the Acquiring Fund hereunder
are each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
received all necessary shareholder approvals at the meeting of
shareholders of the Acquired Fund referred to in paragraph 5.2.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated
hereby.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities
(including those of the Securities and Exchange Commission and of
state "Blue Sky" and securities authorities) deemed necessary by the
Acquired Fund and the Acquiring Fund to permit consummation, in all
material respects, of the transactions contemplated hereby shall
have been obtained, except where failure to obtain any such consent,
order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the
Acquired Fund.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop order suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened or contemplated under the
1933 Act.
8.5 The Acquired Fund and the Acquiring Fund shall have received a
favorable opinion of Ropes & Gray LLP satisfactory to both parties
substantially to the effect that, for federal income tax purposes:
(a) The acquisition by the Acquiring Fund of the assets of the Acquired
Fund in exchange for the Acquiring Fund's assumption of the
liabilities and Obligations of the Acquired Fund and issuance of the
Acquisition Shares, followed by the distribution by the Acquired
Fund of such Acquisition Shares to the shareholders of the Acquired
Fund in exchange for their shares of the Acquired Fund, all as
provided in paragraph 1 hereof, will constitute a reorganization
within the meaning of Section 368(a) of the Code, and the Acquired
Fund and the Acquiring Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquired Fund (i) upon the
transfer of its assets to the Acquiring Fund in exchange for the
Acquisition Shares and the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund or (ii) upon the distribution of
the Acquisition Shares by the Acquired Fund to its shareholders in
liquidation, as contemplated in paragraph 1 hereof;
(c) No gain or loss will be recognized by the Acquiring Fund upon
receipt of the assets of the Acquired Fund in exchange for the
assumption of liabilities and obligations and issuance of the
Acquisition Shares as contemplated in paragraph 1 hereof;
A-11
(d) The tax basis of the assets of the Acquired Fund acquired by the
Acquiring Fund will be the same as the tax basis of such assets in
the hands of the Acquired Fund immediately prior to the transfer,
and the holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund;
(e) The holding periods of the assets of the Acquired Fund in the hands
of the Acquiring Fund will include the periods during which such
assets were held by the Acquired Fund;
(f) No gain or loss will be recognized by the Acquired Fund shareholders
upon the exchange of all of their Acquired Fund shares for the
Acquisition Shares;
(g) The aggregate tax basis of the Acquisition Shares to be received by
each shareholder of the Acquired Fund will be the same as the
aggregate tax basis of the Acquired Fund shares exchanged therefor;
(h) An Acquired Fund shareholder's holding period for the Acquisition
Shares to be received will include the period during which the
Acquired Fund shares exchanged therefor were held, provided that the
shareholder held the Acquired Fund shares as a capital asset on the
date of the exchange; and
(i) The Acquiring Fund will succeed to and take into account the items
of the Acquired Fund described in Section 381(c) of the Code,
subject to the conditions and limitations specified in Sections 381,
382, 383 and 384 of the Code and the regulations thereunder.
The opinion and the confirming letter will be based on certain factual
certifications made by officers of the Acquired Fund and the Acquiring
Fund and will also be based on customary assumptions. Neither the opinion
nor the confirming letter is a guarantee that the tax consequences of the
Acquisition will be as described above.
Ropes & Gray LLP will express no view with respect to the effect of the
Acquisition on any transferred asset as to which any unrealized gain or
loss is required to be recognized at the end of a taxable year (or on the
termination or transfer thereof) under federal income tax principles.
8.6 At any time prior to the Closing, any of the foregoing conditions of
this Agreement may be waived by the Board of Directors of the
Acquiring Fund and the Board of Trustees of the Trust, if, in their
judgment, such waiver will not have a material adverse effect on the
interests of the shareholders of the Acquired Fund or the Acquiring
Fund.
9. BROKERAGE FEES AND EXPENSES.
9.1 The Acquired Fund and the Acquiring Fund, each represents and
warrants to the other that there are no brokers or finders entitled
to receive any payments in connection with the transactions provided
for herein.
9.2 All fees paid to governmental authorities for the registration or
qualification of the Acquisition Shares and all transfer agency
costs related to the Acquisition Shares shall be allocated to the
Acquiring Fund. All fees and expenses related to printing, mailing,
solicitation of proxies and tabulation of votes of Acquired Fund
shareholders shall be allocated to the Acquired Fund. All of the
other expenses of the transactions, including without limitation,
accounting, legal and custodial expenses, contemplated by this
Agreement shall be allocated equally between the Acquired Fund, and
the Acquiring Fund. The expenses detailed above shall be borne as
follows: (a) as to expenses allocable to the Acquired Fund,
seventy-five percent (75%) of such expenses shall be borne by the
Acquired Fund and twenty-five percent (25%) by Columbia; and (b) as
to expenses allocable to the Acquiring Fund, one hundred percent
(100%) of such expenses shall be borne by Columbia.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.
10.1 The Acquired Fund, and the Acquiring Fund, agree that neither party
has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement
between the parties.
A-12
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall not survive the consummation of the
transactions contemplated hereunder except paragraphs 1.1, 1.3, 1.5,
5.4, 9, 10, 13 and 14.
11. TERMINATION.
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Acquired Fund. In addition, either the
Acquiring Fund or the Acquired Fund may at its option terminate this
Agreement at or prior to the Closing Date because:
(a) Of a material breach by the other of any representation, warranty,
covenant or agreement contained herein to be performed by the other
party at or prior to the Closing Date;
(b) A condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears
that it will not or cannot be met; or
(c) Any governmental authority of competent jurisdiction shall have
issued any judgment, injunction, order, ruling or decree or taken
any other action restraining, enjoining or otherwise prohibiting
this Agreement or the consummation of any of the transactions
contemplated herein and such judgment, injunction, order, ruling,
decree or other action becomes final and non-appealable; provided
that the party seeking to terminate this Agreement pursuant to this
Section 11.1(c) shall have used its reasonable best efforts to have
such judgment, injunction, order, ruling, decree or other action
lifted, vacated or denied.
If the transactions contemplated by this Agreement have not been
substantially completed by December 31, 2006, this Agreement shall
automatically terminate on that date unless a later date is agreed to by
both the Acquiring Fund and the Acquired Fund.
11.2 If for any reason the transactions contemplated by this Agreement
are not consummated, no party shall be liable to any other party for
any damages resulting therefrom, including without limitation
consequential damages.
12. AMENDMENTS.
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon in writing by the authorized officers of the Acquired Fund
and the Acquiring Fund; provided, however, that following the shareholders'
meeting called by the Acquired Fund pursuant to paragraph 5.2 no such amendment
may have the effect of changing the provisions for determining the number of the
Acquisition Shares to be issued to shareholders of the Acquired Fund under this
Agreement to the detriment of such shareholders without their further approval.
13. NOTICES.
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquired Fund, or to the Acquiring
Fund, Attention: Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; NON-RECOURSE.
14.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the domestic substantive laws of The Commonwealth of Massachusetts,
without giving effect to any choice or conflicts of law rule or
A-13
provision that would result in the application of the domestic
substantive laws of any other jurisdiction.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other party. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.5 A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and a copy of the
Articles of Incorporation of the Acquiring Fund is on file with the
Secretary of State of the State of Oregon, and notice is hereby
given that no trustee, officer, agent or employee of either the
Trust or the Acquiring Fund shall have any personal liability under
this Agreement, and that this Agreement is binding only upon the
assets and properties of the Acquired Fund and the Acquiring Fund.
[The rest of this page intentionally left blank]
A-14
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as a sealed instrument by its President or Treasurer and its corporate
seal to be affixed thereto and attested by its Secretary or Assistant Secretary.
COLUMBIA FUNDS TRUST VII
On behalf of the Columbia Newport Tiger Fund
By: ___________________________________
Name: Christopher L. Wilson
Title: President
ATTEST:
_________________________________
Name: Michelle Rhee
Title: Assistant Secretary
COLUMBIA INTERNATIONAL STOCK FUND, INC.
By: ______________________________________
Name: Christopher L. Wilson
Title: President
ATTEST:
_________________________________
Name: Michelle Rhee
Title: Assistant Secretary
Prospectus/Proxy Statement
A-15
Solely for purposes of Paragraph 9.2 of
the Agreement
COLUMBIA MANAGEMENT ADVISORS, INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
Prospectus/Proxy Statement
A-16
APPENDIX B -- FUND INFORMATION
SHARES OUTSTANDING AND ENTITLED TO VOTE OF THE FUND
For each class of the Acquired Fund's shares entitled to vote at the Meeting,
the number of shares outstanding as of July 7, 2005, was as follows:
NUMBER OF SHARES
OUTSTANDING
FUND CLASS AND ENTITLED TO VOTE
- ------------- ----- --------------------
Acquired Fund A
B
C
T
Z
OWNERSHIP OF SHARES
As of July 7, 2005, Trust VII and the Acquired Fund believes that, as a group,
the Trustees and officers, as the case may be, of the Fund owned less than one
percent of each class of shares of the Fund. As of July 7, 2005, the following
shareholders of record owned five percent or more of the outstanding shares of
the noted class of shares of the Fund:
PERCENTAGE OF
OUTSTANDING SHARES
NUMBER OF PERCENTAGE OF OF CLASS
OUTSTANDING OUTSTANDING OWNED UPON
FUND SHARES OF SHARES OF CONSUMMATION OF
AND CLASS NAME AND ADDRESS OF SHAREHOLDER CLASS OWNED CLASS OWNED ACQUISITION*
- ------------- ------------------------------- ------------ ------------- ------------------
ACQUIRED FUND
Class A
Class B
Class C
Class T
Class Z
* Percentage owned assuming completion of the Acquisition on [_____].
Prospectus/Proxy Statement
B-1
APPENDIX C -- CAPITALIZATION
The following table shows on an unaudited basis the capitalization of the
Acquired Fund and the Acquiring Fund as of [April 29, 2005], and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of the Acquired Fund at net asset value as of that date:
ACQUIRING FUND
ACQUIRED PRO FORMA PRO FORMA
FUND ACQUIRING FUND ADJUSTMENTS COMBINED (1)
-------- -------------- ----------- ------------
CLASS A*
Net asset value $ 184,653,514 $ 69,346,501 $ 26,133,240 (2)(3) $ 280,133,255
Shares outstanding 14,072,681 4,721,110 276,315 (2) 19,070,106
Net asset value per share $ 13.12 $ 14.69 $ 14.69
CLASS B*
Net asset value $ 56,931,805 $ 11,687,728 $ (31,422)(3) $ 68,588,111
Shares outstanding 4,493,675 813,774 (531,253) 4,776,196
Net asset value per share $ 12.67 $ 14.36 $ 14.36
CLASS C*
Net asset value $ 25,976,516 $ 717,532 $ (14,337)(3) $ 26,679,711
Shares outstanding 2,051,575 49,770 (251,146) 1,850,199
Net asset value per share $ 12.66 $ 14.42 $ 14.42
CLASS D
Net asset value N/A $ 723,995 N/A $ 723,995
Shares outstanding 50,037 50,037
Net asset value per share $ 14.47 $ 14.47
CLASS G
Net asset value N/A $ 4,404,465 N/A $ 4,404,465
Shares outstanding 306,671 306,671
Net asset value per share $ 14.36 $ 14.36
CLASS T*
Net asset value $ 26,249,641 $ - $ (26,249,641) $ -
Shares outstanding 1,989,354 - (1,989,354) -
Net asset value per share $ 13.20 $ - $ -
CLASS Z*
Net asset value $ 25,698,393 $ 997,692,456 $ (14,183)(3) $ 1,023,376,666
Shares outstanding 1,952,875 67,595,755 (212,752) 69,335,878
Net asset value per share $ 13.16 $ 14.76 $ 14.76
(1) Assumes the consummation of the Merger on April 29, 2005 and is for
information purposes only. No assurance can be given as to how many shares
of the Acquiring Fund will be received by the shareholders of the Acquired
Fund on the date an Merger takes place, and the foregoing should not be
relied upon to reflect the number of shares of the Acquiring Fund that
actually will be received on or after such date.
(2) Includes net assets and shares from Class T. Class T shares will merge
into Class A on the date of the Merger.
(3) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $0 and $176,343 to be borne by the Acquiring Fund
and the Acquired Fund, respectively.
(*) Class A, B, C, T and Z shares of the Acquired Fund are exchanged for Class
A, B, C, A and Z shares of the Acquiring Fund based on net asset value per
share of the Acquiring Fund's Class A, B, C, A and Z shares, respectively,
at the time of the Merger.
Prospectus/Proxy Statement
C-1
APPENDIX D -- INFORMATION APPLICABLE TO THE ACQUIRING FUND
HOW TO BUY SHARES
CLASS A, B AND C SHARES
A financial advisor can help establish an appropriate investment portfolio, buy
shares and monitor investments. When the fund receives a purchase request in
"good form," shares will be bought at the next calculated public price. "Good
form" means that an order was placed with the financial advisor or that payment
has been received and the application is complete, including all necessary
signatures. The USA Patriot Act may require the Fund to obtain certain personal
information from shareholders which will be used to verify a shareholders
identity. If shareholders do not provide the information, the Fund may not be
able to open an account. If the Fund is unable to verify customer information,
the Fund reserves the right to close the account or take such other steps as it
deems reasonable.
INVESTMENT MINIMUMS
Initial Investment $ 1,000
Subsequent Investments $ 50
Automatic Investment Plan $ 50
Retirement Plan $ 25
The Fund reserves the right to change these investment minimums. The Fund also
reserves the right to refuse a purchase order for any reason, including if it
believes that doing so would be in the best interest of the Fund and its
shareholders.
ELIGIBLE INVESTORS FOR CLASS Z SHARES
Only Eligible Investors may purchase Class Z shares of the Fund, directly or by
exchange. Class Z shares of the Fund generally are available only to certain
"grandfathered" shareholders and to investors holding accounts with
intermediaries that assess account level fees for the services they provide.
Please read the following section for a more detailed description of the
eligibility requirements. The Eligible Investors described below are subject to
different minimum initial investment requirements.
IMPORTANT THINGS TO CONSIDER WHEN DECIDING ON A CLASS OF SHARES:
Broker-dealers, investment advisers or financial planners selling mutual fund
shares may offer their clients more than one class of shares in the Fund with
different pricing options. This allows a shareholder and the shareholders
financial adviser to choose among different types of sales charges and different
levels of ongoing operating expenses, depending on the investment programs the
financial advisor offers. Investors should consider carefully any separate
transactions and other fees charged by these programs in connection with
investing in any available share class before selecting a share class.
Eligibility for certain waivers, exemptions or share classes by new or existing
investors may not be readily available or accessible through all intermediaries
or all types of accounts offered by an intermediary. Accessibility of these
waivers through a particular intermediary may also change at any time. If a
shareholder believes that the shareholder is eligible to purchase shares under a
specific exemption, but are not permitted by the shareholder s intermediary to
do so, please contact the intermediary. The shareholder may be asked to provide
information, including account statements and other records, regarding
eligibility.
Eligible Investors and their applicable investment minimums are as follows:
NO MINIMUM INITIAL INVESTMENT
- Any client of Bank of America Corporation or a subsidiary purchasing
shares through an asset management company, trust, retirement plan
administration or similar arrangement with Bank of America
Corporation or the subsidiary;
- Any group retirement plan, including defined benefit and defined
contribution plans such as: 401(k), 403(b), and 457(b) plans (but
excluding individual retirement accounts (IRAs)), for which an
Prospectus/Proxy Statement
D-1
intermediary or other entity provides services and is not
compensated by the Funds for those services, other than payments for
shareholder servicing or sub-accounting performed in place of a
Fund's transfer agent;
- Any investor purchasing through a Columbia Management Group state
tuition plan organized under Section 529 of the Internal Revenue
Code; or
- Any person investing all or part of the proceeds of a distribution,
rollover or transfer of assets into a Columbia Management Individual
Retirement Account, from any deferred compensation plan which was a
shareholder of any of the funds of Columbia Acorn Trust (formerly
named Liberty Acorn Trust) on September 29, 2000, in which the
investor was a participant and through which the investor invested
in one or more of the funds of Columbia Acorn Trust immediately
prior to the distribution, transfer or rollover.
$1,000 MINIMUM INITIAL INVESTMENT
- Any shareholder (as well as any family member of a shareholder or
person listed on an account registration for any account of the
shareholder) of a fund distributed by Columbia Funds Distributor,
Inc. (i) who holds Class Z shares; (ii) who holds Class A shares
that were obtained by exchange of Class Z shares; or (iii) who
purchased certain no-load shares of a fund merged with a fund
distributed by Columbia Funds Distributor, Inc.;
- Any trustee or director (or family member of a trustee or director)
of any fund distributed by Columbia Funds Distributor, Inc.;
- Any employee (or family member of an employee) of Bank of America
Corporation or a subsidiary;
- Any investor participating in an account offered by an intermediary
or other entity that provides services to such an account, is paid
an asset-based fee by the investor and is not compensated by the
Funds for those services, other than payments for shareholder
servicing or sub-accounting performed in place of the Fund's
transfer agent (each investor purchasing through an intermediary
must independently satisfy the $1,000 minimum investment
requirement); or
- Any insurance company, trust company, bank, endowment, investment
company or foundation purchasing shares for its own account.
The Fund reserves the right to change the criteria for eligible investors and
the investment minimums. No minimum investment applies to accounts participating
in the automatic investment plan; however, each investment requires a $50
minimum purchase. The Fund also reserves the right to refuse a purchase order
for any reason, including if it believes that doing so would be in the best
interest of the Fund and its shareholders.
HOW TO BUY SHARES
Outlined below are the various options for buying shares:
METHOD INSTRUCTIONS
- ------ ------------
Through a financial
advisor A financial advisor can help establish an account and
buy Fund shares. To receive the current trading day's
price, the financial advisor must receive the request
prior to the close of regular trading on the New York
Stock Exchange (NYSE), usually 4:00 p.m. Eastern Time.
The financial advisor may charge fees for executing the
purchase.
By check (New
account) For New accounts, send a completed application and
check made payable to the Fund and mail to the transfer
agent, Columbia Funds Services, Inc., P.O. Box 8081,
Boston, MA02266-8081.
By check (existing For existing accounts, fill out and return the
account) additional investment stub included in the account
statement, or send a letter of instruction including
the Acquired Fund name and account number with a check
made payable to the fund to Columbia Funds Services,
Inc., P.O. Box 8081, Boston, MA 02266-8081.
Prospectus/Proxy Statement
D-2
By exchange A shareholder or that shareholder's financial advisor
may acquire shares of the Fund by exchanging shares
owned by the SH in a different fund distributed by
Columbia Funds Distributor, Inc. for shares of the same
class (and, in some cases, certain other classes) of
the Fund at no additional cost. There may be an
additional charge if exchanging from a money market
fund. To exchange by telephone, call 1-800-422-3737.
By wire A shareholder may purchase shares of the Fund by wiring
money from a bank account to the Acquired Fund account.
To wire funds to the Acquired Fund account, call
1-800-422-3737 for wiring instructions.
By electronic A shareholder may purchase shares of the Fund by
funds transfer electronically transferring money from a bank account
to the Acquired Fund account by calling 1-800-422-3737.
An electronic funds transfer may take up to two
business days to settle and be considered in "good
form." A shareholder must set up this feature prior to
the telephone request. Be sure to complete the
appropriate section of the application.
Automatic investment A shareholder may make monthly or quarterly investments
plan automatically from a bank account to the Acquired Fund
account. A shareholder may select a pre-authorized
amount to be sent via electronic funds transfer. Be
sure to complete the appropriate section of the
application for this feature.
Automated dollar A shareholder may purchase shares of the Fund by
cost averaging exchanging $100 or more each month from another Fund
foreshores of the same class of the Fund at no
additional cost. Exchanges will continue so long as the
Acquired Fund balance is sufficient to complete the
transfers. A shareholder may terminate the program or
change the amount of the exchange (subject to the $100
minimum) by calling 1-800-345-6611. Be sure to complete
the appropriate section of the account application for
this feature.
By dividend A shareholder may automatically invest dividends
diversification distributed by another fund into the same class of
shares (and, in some cases, certain other classes) of
the Fund at no additional sales charge. There may be an
additional sales charge if exchanging from a money
market fund. To invest dividends in the Fund, call
1-800-345-6611.
SALES CHARGES
CHOOSING A SHARE CLASS
The Fund offers Class A, B, C and Z shares in this Prospectus/Proxy Statement.
Each of Class A, Class B and Class C shares has its own sales charge and expense
structure. Determining which of Class A, Class B or Class C shares is best
depends on the dollar amount a shareholder is investing and the number of years
for which a shareholder is willing to invest. If a shareholder's financial
advisor does not participate in the Class B discount program, purchases of
$250,000 or more but less than $1 million can be made only in Class A or Class C
shares. Purchases of $1 million or more can be made only in Class A shares.
Based on the individual situation, a financial advisor can help decide which
class of shares makes the most sense.
The Fund also offers Class Z shares in this Prospectus/Proxy Statement, which
are available exclusively to certain institutional and other investors. The Fund
also has Class D shares which are closed to new investors and new accounts. The
Fund also has Class G shares. Class G shares are sold only to investors of the
Acquiring Fund who received (and who have continuously held) Class G shares in
connection with the merger of certain Galaxy Funds into various Columbia Funds
(formerly named Liberty Funds) and are available through a separate prospectus.
In general, anyone who is eligible to purchase Class Z shares, which do not
incur Rule 12b-1 fees or sales charges, should do so in preference over other
classes.
SALES CHARGES FOR CLASS A, B AND C SHARES
A shareholder may be subject to an initial sales charge when purchasing, or a
contingent deferred sales charge (CDSC) selling, shares of the Fund. These sales
charges are described below. In certain circumstances, the sales charge may be
waived, as described below and in the Statement of Additional Information.
CLASS A SHARES. Shareholder purchases of Class A shares are made at the public
offering price for these shares. This price includes a sales charge that is
based on the amount of the initial investment when opening the account. The
sales charge to be paid on an additional investment is based on the total amount
of the purchase and the current value of the account. Shares purchased with
reinvested dividends or other distributions are not subject to a sales
Prospectus/Proxy Statement
D-3
charge. A portion of the sales charge is paid as a commission to the financial
advisor on the sale of Class A shares. The amount of the sales charge differs
depending on the amount invested as shown in the table below.
CLASS A SALES CHARGES
AS A % OF AS A % OF % OF OFFERING
THE PUBLIC THE PRICE RETAINED BY
AMOUNT PURCHASED OFFERING PRICE INVESTMENT FINANCIAL ADVISOR
- ---------------- -------------- ---------- -----------------
Less than $50,000 5.75 6.10 5.00
$50,000 to less than $100,000 4.50 4.71 3.75
$100,000 to less than $250,000 3.50 3.63 2.75
$250,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more 0.00 2.04 1.75
Class A shares bought without an initial sales charge in accounts aggregating $1
million to $25 million at the time of purchase are subject to a 1.00% CDSC if
the shares are sold within 18 months of the time of purchase. Subsequent Class A
share purchases that bring the account value above $1 million (but less than $25
million) are subject to a CDSC if redeemed within 18 months of the date of
purchase. The 18-month period begins on the first day of the month in which the
purchase was made. The CDSC does not apply to retirement plans purchasing
through a fee-based program.
For Class A share purchases of $1 million or more, financial advisors receive a
cumulative commission from the distributor as follows:
PURCHASES OVER $1 MILLION
AMOUNT PURCHASED COMMISSION %
- ---------------- ------------
Less than $3 million 1.00
$3 million to less than $5 million 0.80
$5 million to less than $25 million 0.50
$25 million or more 0.25
The commission to financial advisors for Class A share purchases of $25 million
or more is paid over 12 months but only to the extent the shares remain
outstanding.
For Class A share purchases by participants in certain group retirement plans
offered through a fee-based program, financial advisors receive a 1.00%
commission from the distributor on all purchases of less than $3 million.
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES
Certain investments in Class A, B and C shares are subject to a CDSC, a sales
charge applied at the time the shares are sold. A shareholder will pay the CDSC
only on shares sold within a certain amount of time after purchase. The CDSC
generally declines each year until there is no charge for selling shares. The
CDSC is applied to the net asset value at the time of purchase or sale,
whichever is lower. For purposes of calculating the CDSC, the start of the
holding period is the first day of the month in which the purchase was made.
Shares purchased with reinvested dividends or capital gains are not subject to a
CDSC. When placing an order to sell shares, the Fund will automatically sell
first those shares not subject to a CDSC and then those held the longest.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS
A. What are the principal ways to obtain a breakpoint discount?
There are two principal ways to pay a lower sales charge (often referred to as
"breakpoint discounts") when purchasing Class A shares of the Fund and other
funds in the Columbia family of Funds.
RIGHTS OF ACCUMULATION. The value of eligible accounts (regardless of class)
maintained by a shareholder and each member of the immediate family may be
combined with the value of the current purchase to reach a sales charge discount
level (according to the chart on the previous page) and to obtain the lower
sales charge for the current
Prospectus/Proxy Statement
D-4
purchase. To calculate the combined value of the accounts, the Fund will use the
shares' current public offering price.
STATEMENT OF INTENT. A shareholder also may pay a lower sales charge when
purchasing Class A shares by signing a Statement of Intent. By doing so, a
shareholder would be able to pay the lower sales charge on all purchases made
under the Statement of Intent within 13 months. As described in the chart on the
previous page, the first breakpoint discount will be applied when total
purchases reach $50,000. If Statement of Intent purchases are not completed
within 13 months, a shareholder will be charged the applicable sales charge on
the amount invested to that date. To calculate the total value of the Statement
of Intent purchases, the Fund will use the historic cost (i.e. dollars invested)
of the shares held in each eligible account. A shareholder must retain all
records necessary to substantiate historic costs because the Fund and the
financial intermediary may not maintain this information. Upon request, a
Statement of Intent may apply to purchases made 90 days prior to the date the
Statement of Intent is received by the Fund.
B. What accounts are eligible for breakpoint discounts?
The types of eligible accounts that may be aggregated to obtain one or both of
the breakpoint discounts described above include:
- - Individual accounts
- - Joint accounts
- - Certain IRA accounts
- - Certain trusts
- - UTMA/UGMA accounts
For the purposes of obtaining a breakpoint discount, members of a shareholder's
"immediate family" include a spouse, parent, step parent, legal guardian, child,
step child, father-in-law and mother-in-law. Eligible accounts include those
registered in the name of a shareholder's dealer or other financial intermediary
through which a shareholder owns Columbia fund shares. The value of a
shareholder's investment in a Columbia money market fund held in an eligible
account may be aggregated with investments in other funds in the Columbia family
of funds to obtain a breakpoint discount through a Right of Accumulation. Money
market funds may also be included in the aggregation for a Statement of Intent
for shares that have been charged a commission. For purposes of obtaining either
breakpoint discount, purchases of Galaxy money market funds are not included.
C. How do I obtain a breakpoint discount?
The steps necessary to obtain a breakpoint discount depends on how the account
is maintained with the Columbia family of funds. To obtain any of the above
breakpoint discounts, a shareholder must notify the shareholder's financial
advisor at the time the shareholder purchase shares of the existence of each
eligible account maintained by a shareholder or the immediate family. It is the
sole responsibility of the shareholder's financial advisor to ensure that the
shareholder receive discounts for which the shareholder is eligible and the Fund
is not responsible for a financial advisor's failure to apply the eligible
discount to the account. A shareholder may be asked by the Fund or the financial
advisor for account statements or other records to verify discount eligibility,
including, where applicable, records for accounts opened with a different
financial advisor and records of accounts established by members of the
shareholder's immediate family. If a shareholder owns shares exclusively through
an account maintained with the Fund's transfer agent, Columbia Funds Services,
Inc., the shareholder will need to provide the foregoing information to a
Columbia Funds Services, Inc. representative at the time the shareholder
purchases shares.
D. How to obtain more information about breakpoint discounts?
Prospectus/Proxy Statement
D-5
Certain investors may purchase shares at a reduced sales charge or net asset
value, which is the value of a Fund share excluding any sales charges.
Restrictions may apply to certain accounts and certain transactions. Further
information regarding these discounts may be found in the Fund's Statement of
Additional Information and at www.columbiafunds.com.
CLASS B SHARES. A purchase of Class B shares are made at Class B's net asset
value. Class B shares have no front-end sales charge, but they do carry a CDSC
that is imposed only on shares sold prior to elimination of the CDSC as shown in
the applicable chart below. The CDSC generally declines each year and eventually
disappears over time. The distributor pays a shareholder's financial advisor an
up-front commission on sales of Class B shares as described in the charts below.
PURCHASES OF LESS THAN $250,000:
CLASS B SALES CHARGES
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
- ----------------------------- ---------------
Through first year 5.00
Through second year 4.00
Through third year 3.00
Through fourth year 3.00
Through fifth year 2.00
Through sixth year 1.00
Longer than six years 0.00
Commission to financial advisors is 4.00%.
Automatic conversion to Class A shares occurs eight years after purchase.
A shareholder can pay a lower CDSC and reduce the period during which a CDSC
would apply when making purchases of Class B shares through a financial advisor
that participates in the Class B share discount program for larger purchases as
described in the charts below. Some financial advisors are not able to
participate because their record keeping or transaction processing systems are
not designed to accommodate these reductions. For non-participating financial
advisors, purchases of Class B shares must be less than $250,000. Consult a
financial advisor to see whether it participates in the discount program for
larger purchases. For participating financial advisors, Rights of Accumulation
(as described above) apply, so that if the combined value of the eligible Fund
accounts in all classes maintained by a shareholder and each member of the
immediate family (as defined above), together with the value of the current
purchase, is at or above a discount level, the current purchase will be subject
to a lower CDSC and the applicable reduced holding period, provided that a
shareholder have notified the financial advisor in writing of the identity of
such other accounts and the relationship to the other account holders. It is the
sole responsibility of the financial advisor to ensure that a shareholder
receives discounts for which the shareholder is eligible and the Fund is not
responsible for a financial advisor's failure to apply the eligible discount to
the account. A shareholder may be asked by the fund or the financial advisor for
account statements or other records to verify discount eligibility, including,
where applicable, records for accounts opened with a different financial advisor
and records of accounts established by members of the immediate family.
PURCHASES OF $250,000 TO LESS THAN $500,000:
CLASS B SALES CHARGES
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
- ----------------------------- ---------------
Through first year 3.00
Through second year 2.00
Through third year 1.00
Longer than three years 0.00
Prospectus/Proxy Statement
D-6
Commission to financial advisors is 2.50%.
Automatic conversion to Class A shares occurs four years after purchase.
PURCHASES OF $500,000 TO LESS THAN $1 MILLION:
CLASS B SALES CHARGES
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
- ----------------------------- ---------------
Through first year 3.00
Through second year 2.00
Through third year 1.00
Commission to financial advisors is 1.75%.
Automatic conversion to Class A shares occurs three years after purchase.
If exchanging into a fund participating in the Class B share discount program or
transfer the Acquired Fund account from a financial advisor that does not
participate in the program to one that does, the exchanged or transferred shares
will retain the pre-existing CDSC but any additional purchases of Class B shares
which, together with the exchanged or transferred account, exceed the applicable
discount level will be subject to the lower CDSC and the reduced holding period
for amounts in excess of the discount level. A financial advisor will receive
the lower commission for purchases in excess of the applicable discount level.
If a shareholder exchange from a participating fund or transfer an account from
a financial advisor that does participate in the program into a
non-participating fund or financial advisor that does not participate in the
program, the exchanged or transferred shares will retain the pre-existing CDSC
schedule and holding period but all additional purchases of Class B shares will
be subject to the higher CDSC and longer holding period of the non-participating
fund or applicable to the non-participating financial advisor.
CLASS C SHARES. Purchases of Class C shares are made at Class C's net asset
value. Although Class C shares have no front-end sales charge, they carry a CDSC
of 1.00% that is applied to shares sold within the first year after they are
purchased. After holding shares for one year, a shareholder may sell them at any
time without paying a CDSC. The distributor pays the financial advisor an
up-front commission of 1.00% on sales of Class C shares.
CLASS C SALES CHARGES
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
- ----------------------------- ---------------
Through first year 1.00
Longer than one year 0.00
CLASS Z SHARES. Purchases of Class Z shares are at net asset value, which is the
value of a Class Z share excluding any sales charge. Class Z shares are not
subject to an initial sales charge when purchased or a CDSC.
HOW TO EXCHANGE SHARES
A shareholder may exchange shares for shares of the same share class (and in
some cases, certain other classes) of another fund distributed by Columbia Funds
Distributor, Inc. at net asset value. If a shareholder's shares are subject to a
CDSC, the shareholder will not be charged a CDSC upon the exchange. However,
when selling the shares acquired through the exchange, the shares sold may be
subject to a CDSC, depending upon when the shareholder originally purchased the
shares being exchanged. For purposes of computing the CDSC, the length of time
the shareholder has owned the shares will be computed from the date of the
original purchase and the applicable CDSC will be the CDSC of the original fund.
Unless the account is part of a tax-deferred retirement plan, an exchange is a
taxable event, and the shareholder may realize a gain or a loss for tax
purposes. The fund may terminate a shareholder's exchange privilege if the
advisor determines that exchange activity is likely to adversely impact its
ability to manage the fund. See "Fund Policy on Trading of Fund Shares" for the
fund's policy. To exchange by telephone, call 1-800-422-3737. Please have the
account and taxpayer identification numbers available when calling.
Prospectus/Proxy Statement
D-7
HOW TO SELL SHARES
A financial advisor can help determine if and when a shareholder should sell
shares. A shareholder may sell shares of the fund on any regular business day
that the NYSE is open.
When the Fund receives the sales request in "good form," shares will be sold at
the next calculated price. "Good form" means that money used to purchase the
shares is fully collected. When selling shares by letter of instruction, "good
form" also means (i) the letter has complete instructions, the proper signatures
and Medallion Signature Guarantees, (ii) the shareholder have included any
certificates for shares to be sold, and (iii) any other required documents are
attached. For additional documents required for sales by corporations, agents,
fiduciaries, surviving joint owners and other legal entities, please call
1-800-345-6611. Retirement plan accounts have special requirements; please call
1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale within seven days (usually
on the next business day after the request is received in "good form"). However,
if the shares were purchased by check, the Fund may delay sending the proceeds
from the sale of the shares for up to 15 days after the purchase to protect
against checks that are returned. No interest will be paid on uncashed
redemption checks. Redemption proceeds may be paid in securities, rather than in
cash, under certain circumstances. For more information, see the paragraph
"Non-Cash Redemptions" under the section "How to Sell Shares" in the Statement
of Additional Information.
Outlined below are the various options for selling shares:
METHOD INSTRUCTIONS
- ------ ------------
Through a financial
advisor A shareholder may call the financial advisor to place
the sell order. To receive the current trading day's
price, the financial advisor must receive the request
prior to the close of regular trading on the NYSE,
usually 4:00 p.m. Eastern Time. The financial advisor
may charge fees for executing a redemption.
By exchange A shareholder or the financial advisor may sell shares
of the Fund by exchanging from the Fund into the same
share class (and, in some cases, certain other classes)
of another fund distributed by Columbia Funds
Distributor, Inc. at no additional cost. To exchange by
telephone, call 1-800-422-3737.
By telephone A shareholder or the financial advisor may sell shares
of the Fund by telephone and request that a check be
sent to the address of record by calling
1-800-422-3737, unless the shareholder's has notified
the fund of an address change within the previous 30
days. The dollar limit for telephone sales is $100,000
in a 30-day period. A shareholder does not need to set
up this feature in advance of the call. Certain
restrictions apply to retirement accounts. For details,
call 1-800-799-7526.
By mail A shareholder may send a signed letter of instruction
or stock power form along with any share certificates
to be sold to the address below. In the letter of
instruction, note the Fund's name, share class, account
number, and the dollar value or number of shares being
sold. All account owners must sign the letter.
Signatures must be guaranteed by either a bank, a
member firm of a national stock exchange or another
eligible guarantor institution that participates in the
Medallion Signature Guarantee Program for amounts over
$100,000 or for alternate payee or mailing
instructions. Additional documentation is required for
sales by corporations, agents, fiduciaries, surviving
joint owners and individual retirement account owners.
For details, call 1-800-345-6611.
Mail the letter of instruction to Columbia Funds
Services, Inc., P.O. Box 8081, Boston, MA 02266-8081.
By wire A shareholder may sell shares of the Fund and request
that the proceeds be wired to the shareholder's bank. A
shareholder must set up this feature prior to the
telephone request. Be sure to complete the appropriate
section of the account application for this feature.
By systematic A shareholder may automatically sell a specified dollar
amount or withdrawal plan percentage of the account on
a monthly, quarterly or semi-annual basis and have the
proceeds sent if the account balance is at least
$5,000. This feature is not available if a shareholder
holds shares in certificate form. All dividend and
capital gains distributions must be reinvested. Be sure
to complete the appropriate section of the
Prospectus/Proxy Statement
D-8
account application for this feature.
By electronic A shareholder may sell shares of the Fund and request
funds transfer that the proceeds be electronically transferred to the
bank. Proceeds may take up to two business days to be
received by the bank. A shareholder must set up this
feature prior to the request. Be sure to complete the
appropriate section of the account application for this
feature.
FUND POLICY ON TRADING OF FUND SHARES
The interests of the Fund's long-term shareholders may be adversely affected by
certain short-term trading activity by Fund shareholders. Such short-term
trading activity, when excessive, has the potential to interfere with efficient
portfolio management, generate transaction and other costs, dilute the value of
Fund shares held by long-term shareholders and have other adverse effects on the
Fund. This type of excessive short-term trading activity is referred to herein
as "market timing." The Columbia funds are not intended as vehicles for market
timing. The Board of Trustees of the Fund has adopted the policies and
procedures set forth below with respect to frequent trading of the Fund's
shares.
The Fund, directly and through its agents, takes various steps designed to deter
and curtail market timing. For example, if the Fund detects that any shareholder
has conducted two "round trips" (as defined below) in the Fund in any 28-day
period, except as noted below with respect to orders received through omnibus
accounts, the Fund will reject the shareholder's future purchase orders,
including exchange purchase orders, involving any Columbia fund (other than a
Money Market Fund). In addition, if the Fund determines that any person, group
or account has engaged in any type of market timing activity (independent of the
two-round-trip limit), the Fund may, in its discretion, reject future purchase
orders by the person, group or account, including exchange purchase orders,
involving the same or any other Columbia fund, and also retains the right to
modify these market timing policies at any time without prior notice.
The rights of shareholders to redeem shares of the Fund are not affected by any
of the limits mentioned above. However, certain funds impose a redemption fee on
the proceeds of fund shares that are redeemed or exchanged within 60 days of
their purchase.
For these purposes, a "round trip" is a purchase by any means into a Columbia
fund followed by a redemption, of any amount, by any means out of the same
Columbia fund. Under this definition, an exchange into the Fund followed by an
exchange out of the Fund is treated as a single round trip. Also for these
purposes, where known, accounts under common ownership or control generally will
be counted together. Accounts maintained or managed by a common intermediary,
such as an adviser, selling agent or trust department, generally will not be
considered to be under common ownership or control.
Purchases, redemptions and exchanges made through the Columbia funds' Automatic
Investment Plan, Systematic Withdrawal Plan or similar automated plans are not
subject to the two-round-trip limit. The two-round-trip limit may be modified
for, or may not be applied to, accounts held by certain retirement plans to
conform to plan limits, considerations relating to the Employee Retirement
Income Security Act of 1974 or regulations of the Department of Labor, and for
certain asset allocation or wrap programs.
The practices and policies described above are intended to deter and curtail
market timing in the Fund. However, there can be no assurance that these
policies, individually or collectively, will be totally effective in this regard
because of various factors. In particular, a substantial portion of purchase,
redemption and exchange orders are received through omnibus accounts. Omnibus
accounts, in which shares are held in the name of an intermediary on behalf of
multiple beneficial owners, are a common form of holding shares among financial
intermediaries and retirement plans. The Fund typically is not able to identify
trading by a particular beneficial owner through an omnibus account, which may
make it difficult or impossible to determine if a particular account is engaged
in market timing. Certain financial intermediaries have different policies
regarding monitoring and restricting market timing in the underlying beneficial
owner accounts that they maintain through an omnibus account that may be more or
less restrictive than the Fund practices discussed above.
Prospectus/Proxy Statement
D-9
The Fund seeks to act in a manner that it believes is consistent with the best
interests of Fund shareholders in making any judgments regarding market timing.
Neither the Fund nor its agents shall be held liable for any loss resulting from
rejected purchase orders or exchanges.
DISTRIBUTION AND SERVICE FEES
RULE 12B-1 PLAN. The Fund has adopted a plan under Rule 12b-1 that permits it to
pay its distributor marketing and other fees to support the sale and
distribution of Class B and C shares and certain services provided to
shareholders by their financial advisor. The annual service fee may equal up to
0.25% for each of Class A, Class B and Class C shares. The plan also permits the
Fund to pay the financial advisor fees for certain services provided regarding
Class A, B and C shares. The annual distribution fee may equal up to 0.75% for
each of Class B and C shares. Distribution and service fees are paid out of the
assets of these classes. Over time, these fees will reduce the return on
investment and may cost more than paying other types of sales charges. Class B
shares automatically convert to Class A shares after a certain number of years,
eliminating the distribution fee upon conversion. Conversion may occur three,
four or eight years after purchase, depending on the program under which the
shareholder purchased shares. See above for the conversion schedule applicable
to Class B shares.
ADDITIONAL INTERMEDIARY COMPENSATION. In addition to the commissions specified
in this Prospectus/Proxy Statement, the distributor, or its advisory affiliates,
from their own resources, may make cash payments to financial service firms that
agree to promote the sale of shares of funds that the distributor distributes. A
number of factors may be considered in determining the amount of those payments,
including the financial service firm's sales, client assets invested in the Fund
and redemption rates, the quality of the financial service firm's relationship
with the distributor and/or its affiliates, and the nature of the services
provided by financial service firms to its clients. The payments may be made in
recognition of such factors as marketing support, access to sales meetings and
the financial service firm's representatives, and inclusion of the Fund on
focus, select or other similar lists.
Subject to applicable rules, the distributor may also pay non-cash compensation
to financial service firms and their representatives, including: (i) occasional
gifts (ii) occasional meals, or other entertainment; and/or (iii) support for
financial service firm educational or training events.
In addition, the distributor, and/or the Fund's investment advisor, transfer
agent or their affiliates, may pay service, administrative or other similar fees
to broker/dealers, banks, third-party administrators or other financial
institutions (each commonly referred to as an "intermediary"). Those fees are
generally for subaccounting, sub-transfer agency and other shareholder services
associated with shareholders whose shares are held of record in omnibus or other
group accounts. The rate of those fees may vary and is generally calculated on
the average daily net assets of a Fund attributable to a particular
intermediary.
In some circumstances, the payments discussed above may create an incentive for
an intermediary or its employees or associated persons to recommend or sell
shares of the fund. For further information about payments made by the
distributor and its affiliates to financial service firms and intermediaries,
please see the Statement of Additional Information. PLEASE ALSO CONTACT A
FINANCIAL SERVICE FIRM OR INTERMEDIARY FOR DETAILS ABOUT PAYMENTS IT MAY
RECEIVE.
OTHER INFORMATION ABOUT SHARHOLDER ACCOUNTS
HOW THE FUND'S SHARE PRICE IS DETERMINED. The price of each class of the Fund's
shares is based on its net asset value. The net asset value is determined at the
close of regular trading on the NYSE, usually 4:00 p.m. Eastern Time, on each
business day that the NYSE is open for trading (typically Monday through
Friday). Shares are not priced the days on which the NYSE is closed for trading.
When requesting a transaction, it will be processed at the net asset value (plus
any applicable sales charges) next determined after the request is received in
"good form" by the distributor. In most cases, in order to receive that day's
price, the distributor must receive the order before that day's transactions are
processed. If requesting a transaction through a financial advisor, the
financial advisor must receive the order by the close of trading on the NYSE to
receive that day's price.
Prospectus/Proxy Statement
D-10
The Fund determines its net asset value for each share class by dividing each
class's total net assets by the number of that class's outstanding shares. In
determining the net asset value, the Fund must determine the price of each
security in its portfolio at the close of each trading day. Because the Fund
holds securities that are traded on foreign exchanges, the value of the Fund's
securities may change on days when shareholders will not be able to buy or sell
fund shares. Securities for which market quotations are available are valued
each day at the current market value. However, where market quotations are
unavailable, or when the advisor believes that subsequent events have made them
unreliable, the Fund may use other data to determine the fair value of the
securities.
The Fund has retained an independent fair value pricing service to assist in the
fair valuation process for securities principally traded in a foreign market in
order to adjust for possible changes in value that may occur between the close
of the foreign exchange and the time at which Fund shares are priced. If a
security is valued at a "fair value," that value may be different from the last
quoted market price for the security.
Daily prices of some share classes for the Fund may be found in most major daily
Newspapers under the heading "Columbia." Daily prices for all share classes may
be found by visiting www.columbiafunds.com.
ACCOUNT FEES. If an account value falls below $1,000 (other than as a result of
depreciation in share value) the account may be subject to an annual fee of $10.
The Fund's transfer agent will send a written notification of any such action
and provide details on how to add money to the account to avoid this penalty.
SHARE CERTIFICATES. Share certificates are not available for any class of shares
offered by the Fund. If a shareholder currently holds previously issued share
certificates, the shareholder will not be able to sell shares until the
certificates are endorsed and returned to the transfer agent.
DIVIDENDS, DISTRIBUTIONS AND TAXES. The Fund has the potential to make the
following distributions:
TYPES OF DISTRIBUTIONS
Dividends Represents interest and dividends earned from
securities held by the Fund, net of expenses incurred
by the Fund.
Capital gains Represents net long-term capital gains on sales of
securities held for more than 12 months and net
short-term capital gains, which are gains on sales of
securities held for a 12-month period or less.
UNDERSTANDING FUND DISTRIBUTIONS. The Fund may earn income from the securities
it holds. The Fund also may realize capital gains or losses on sales of its
securities. The Fund distributes substantially all of its net investment income
and capital gains to shareholders. Shareholders, are entitled to a portion of
the Fund's income and capital gains based on the number of shares owned at the
time these distributions are declared.
DISTRIBUTION OPTIONS. The Fund distributes any dividends annually and any
capital gains (including short-term capital gains) at least annually.
Shareholders can choose one of the options listed in the table below for these
distributions when opening the account. To change distribution options, call
1-800-345-6611.
If a shareholder does not indicate on the application or at the time the account
is established any preference for handling distributions, the Fund will
automatically reinvest all distributions in additional shares of the Fund.
DISTRIBUTION OPTIONS
Reinvest all distributions in additional shares of the current Fund
Reinvest all distributions in shares of another Fund
Receive dividends in cash (see options below) and reinvest capital gains
Receive all distributions in cash (with one of the following options):
- - send the check to the address of record
Prospectus/Proxy Statement
D-11
- - send the check to a third party address
- - transfer the money to the bank via electronic funds transfer
Distributions of $10 or less will automatically be reinvested in additional Fund
shares. If a shareholder elects to receive distributions by check and the check
is returned as undeliverable, or if a shareholder does not cash a distribution
check within six months of the check date, the distribution, and all subsequent
distributions, will be reinvested in additional shares of the fund.
TAX CONSEQUENCES. Unless a shareholder is an entity exempt from income taxes or
invest under a retirement account, regardless of whether the shareholder
receives distributions in cash or reinvest them in additional Fund shares, all
Fund distributions are subject to federal income tax. Depending on where the
shareholder lives, distributions may also be subject to state and local income
taxes.
In general, any distributions of dividends, interest and short-term capital
gains are taxable as ordinary income unless such dividends are "qualified
dividend income" (as defined in the Internal Revenue Code) eligible for a
reduced rate of tax. Distributions of long-term capital gains are generally
taxable as such, regardless of how long a shareholder has held the Acquired Fund
shares. A shareholder will be provided with information each year regarding the
amount of ordinary income and capital gains distributed to shareholder s for the
previous year and any portion of the distribution which is exempt from state and
local taxes. Investments in the Fund may have additional personal tax
implications. Please consult a tax advisor about foreign, federal, state, local
or other applicable tax laws.
In addition to the dividends and capital gains distributions made by the Fund, a
shareholder may realize a capital gain or loss when selling or exchanging shares
of the Fund. Such transactions also may be subject to federal, state and local
income tax.
MANAGING THE FUND
INVESTMENT ADVISOR
Columbia Management, located at 100 Federal Street, Boston, Massachusetts 02110,
is the Fund's investment advisor. The investment advisor is responsible for the
Fund's management, subject to oversight by the Fund's Board of Trustees. In its
duties as investment advisor, Columbia Management runs the Fund's day-to-day
business, including placing all orders for the purchase and sale of the Fund's
portfolio securities. Columbia Management is a direct wholly owned subsidiary of
Columbia, which is an indirect wholly owned subsidiary of Bank of America
Corporation. Prior to April 1, 2004, Columbia was an indirect wholly owned
subsidiary of FleetBoston Financial Corporation. Effective April 1, 2004,
FleetBoston Financial Corporation was acquired by Bank of America Corporation.
Columbia Management, a registered investment advisor, has been an investment
advisor since 1969.
For the 2004 fiscal year, aggregate annualized advisory fees paid to Columbia
Management by the fund, amounted to 0.92% of average daily net assets of the
Fund.
PORTFOLIO MANAGERS
PENELOPE L. BURGESS, a Senior Vice President of Columbia Management, is a
co-manager of the Acquiring Fund and has co-managed the Acquiring Fund since
July, 2004. Ms. Burgess has served as an equity analyst for the Acquiring Fund
since 1997. Ms. Burgess has been associated with Columbia Management as its
predecessors since November, 1993.
DEBORAH F. SNEE, a Senior Vice President of Columbia Management, is a co-manager
of the Acquiring Fund and has co-managed the Acquiring Fund since July, 2004.
Ms. Snee has been associated with Columbia Management or its predecessors since
March, 1999. Previously, Ms. Snee was a portfolio manager at Progress Investment
Management and an analyst at Sit/Kim International Investments from 1993 to
1998.
LITIGATION MATTERS
Prospectus/Proxy Statement
D-12
On March 15, 2004, Columbia Management and CFD entered into agreements in
principle with the staff of the SEC and the Office of the New York Attorney
General ("NYAG") to resolve the proceedings brought in connection with the SEC's
and NYAG's investigations of frequent trading and market timing in certain
Columbia mutual funds.
On February 9, 2005, Columbia Management entered into an Assurance of
Discontinuance with the NYAG (the "NYAG Settlement") and consented to the entry
of a cease-and-desist order by the SEC (the "SEC Order" and together, the
"Settlements"). The Settlements contain substantially the same terms and
conditions as outlined in the agreements in principle.
Under the terms of the SEC Order, Columbia 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 Columbia
Management's applicable supervisory, compliance, control and other policies and
procedures; and retain an independent distribution consultant. The Funds have
also voluntarily 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 Management and its affiliates, Banc of
America Capital Management, LLC and Bank of America Capital Management
Distributors, LLC, to reduce 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 settlement amounts 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 will be communicated
at a later date.
As a result of these matters or any adverse publicity or other developments
resulting from them, including lawsuits brought by shareholders of the affected
Columbia Funds, there may be increased redemptions or reduces sales of Fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the Columbia Funds.
A copy of the SEC Order is available on the SEC's website at www.sec.gov. A copy
of the NYAG Settlement is available as part of Bank of America Corporation Form
8-K filing files February 10, 2005.
Since February 2004, Columbia, Columbia Management, CFD and other
Columbia-affiliated entities have been named as defendants in eleven civil
lawsuits (1) filed in New York and Massachusetts that have been transferred and
consolidated for pretrial proceedings in the United States District Court for
the District of Maryland in the Special Multi-District Litigation proceeding
(Index No. 04-MO-15863) created for actions involving market timing issues
against mutual fund complexes. The lawsuits were commenced as putative class
actions on behalf of investors who purchased, held or redeemed shares of the
Funds during specified periods or as derivative actions on behalf of the Funds.
The lawsuits allege, among other things, that the Columbia defendants allowed
the market timing and late trading of Columbia funds. The plaintiffs seek, among
other things, unspecified compensatory damages plus interest and, in some cases,
punitive damages, the rescission of investment advisory contracts, the return of
fees paid under those contracts and restitution. The consolidated amended class
action complaint against Columbia-affiliated defendants was filed in the United
States District Court for the District of Maryland on September 29, 2004 and
does not name the Funds as defendants or nominal defendants. The consolidated
amended fund derivative complaint against Columbia-affiliated defendants was
also filed on September 29, 2004 in the United States District Court for the
District of Maryland and names the Columbia Funds, collectively, as nominal
defendants.
- --------------
(1) Dukes, et al. v. Columbia Acorn Fund, et al., (D. Mass. Feb. 13, 2004);
Wick, et al. v. FleetBoston Financial Corporation, et al., (D. Mass. Mar. 1,
2004); McKenna, et al. v. Columbia Acorn Fund, et al., (S.D.N.Y. Feb. 18, 2004);
AB Medical Equipment Corp., et al. v. FleetBoston Financial Corporation, et al.,
(D. Mass. Feb. 20, 2004); Ehrlich, et al. v. Columbia Acorn Fund, et al., (D.
Mass. Mar. 1, 2004); Caprio, et al. v. Columbia Acorn Fund, et al., (D. Mass.
Mar. 29, 2004); Simmonds, et al. v. Columbia Acorn Fund, et al., (S.D.N.Y. Mar.
9, 2004); Armetta v. FleetBoston Financial Corporation, et al., (D. Mass. Mar.
19, 2004); Segel, et al. v. FleetBoston Financial Corporation, et al., (D. Mass.
Mar. 23, 2004); Beardsley, et al. v. FleetBoston Financial Corporation, et al.,
(D. Mass. Mar. 18, 2004); Slaybe, et al. v. Columbia Management Advisers, Inc.,
(D. Mass. Mar. 16, 2004).
Prospectus/Proxy Statement
D-13
On March 2, 2005, four civil revenue sharing lawsuits,(1) all filed in the
District Court for the District of Massachusetts during August and September of
2004 were consolidated into a single action in the United States District Court
for Massachusetts (In re Columbia Entities Litigation, Civil Action No.
04-11704-REK). The complaints allege, among other things, that various mutual
funds advised by Columbia Management, Columbia Wanger Asset Management, L.P. and
their affiliates inappropriately used fund assets to pay brokers to promote the
funds by directing fund brokerage transactions to such brokers without fully
disclosing such arrangements to shareholders, and charged excessive 12b-1 fees.
The plaintiffs seek, among other things, compensatory damages, punitive damages,
rescission of contracts and restitution. The complaints in the four actions name
Columbia, Columbia Management, and CFD as defendants and several Columbia Funds
as nominal defendants. None of the Funds are named as defendants or nominal
defendants in any of the four revenue sharing actions.
DISCLOSURE OF THE FUND'S PORTFOLIO HOLDINGS
The Statement of Additional Information and the Fund's website
(www.columbiafunds.com) includes a description of the fund's policies with
respect to the disclosure of its portfolio holdings.
Hypothetical Investment and Expense Information
The charts show the estimated expenses that would be charged on a hypothetical
investment of $10,000 in each class of the Acquiring Fund assuming a 5% return
each year, the hypothetical year-end balance before expenses and the cumulative
return after fees and expenses. The charts also assume that the annual expense
ratios stay the same throughout the 10-year period, reinvesting all dividends
and distributions and converting Class B to A shares after eight years. The
annual expense ratio used for the Acquiring Fund, which is the same as that is
stated in the Annual Fund Operating Expenses tables, is reflected in the chart
and is net of any fee waiver or expense reimbursement.
Acquiring Fund - Class A
ANNUAL EXPENSE RATIO INITIAL HYPOTHETICAL INVESTMENT AMOUNT ASSUMED RATE OF RETURN
1.31% $10,000.00 5%
CUMULATIVE RETURN HYPOTHETICAL YEAR- HYPOTHETICAL YEAR-
BEFORE FEES & END BALANCE BEFORE CUMULATIVE RETURN END BALANCE AFTER ANNUAL FEES &
YEAR EXPENSES FEES & EXPENSES AFTER FEES & EXPENSES FEES & EXPENSES EXPENSES
1 $ % $ $
2 $ % $ $
3 $ % $ $
4 $ % $ $
5 $ % $ $
6 $ % $ $
7 $ % $ $
8 $ % $ $
9 $ % $ $
10 $ % $ $
TOTAL GAIN BEFORE FEES & EXPENSES $
TOTAL GAIN AFTER FEES & EXPENSES $
- -------------
(1) Cohen, et al. v. FleetBoston Financial Corporation, et al., (D. Mass. Aug.
2, 2004); Osburn, et al. v. FleetBoston Financial Corporation, et al., (D. Mass.
Aug. 10, 2004); Slick er, et al. v. FleetBoston Financial Corporation, et al.,
(D. Mass. Aug. 11, 2004); Simmonds, et al. v. FleetBoston Financial Corporation,
et al., (D. Mass. Sept. 8, 2004).
Prospectus/Proxy Statement
D-14
TOTAL ANNUAL FEES & EXPENSES PAID $ 2,063.19
Acquiring Fund - Class B
ANNUAL EXPENSE RATIO INITIAL HYPOTHETICAL INVESTMENT AMOUNT ASSUMED RATE OF RETURN
2.06% $10,000.00 5%
CUMULATIVE RETURN HYPOTHETICAL YEAR- HYPOTHETICAL YEAR-
BEFORE FEES & END BALANCE BEFORE CUMULATIVE RETURN END BALANCE AFTER ANNUAL FEES &
YEAR EXPENSES FEES & EXPENSES AFTER FEES & EXPENSES FEES & EXPENSES EXPENSES
1
2
3
4
5
6
7
8
9
10
TOTAL GAIN BEFORE FEES & EXPENSES $
TOTAL GAIN AFTER FEES & EXPENSES
TOTAL ANNUAL FEES & EXPENSES PAID
Acquiring Fund - Class C
ANNUAL EXPENSE RATIO INITIAL HYPOTHETICAL INVESTMENT AMOUNT ASSUMED RATE OF RETURN
2.06% $10,000.00 5%
CUMULATIVE RETURN HYPOTHETICAL YEAR- HYPOTHETICAL YEAR-
BEFORE FEES & END BALANCE BEFORE CUMULATIVE RETURN END BALANCE AFTER ANNUAL FEES &
YEAR EXPENSES FEES & EXPENSES AFTER FEES & EXPENSES FEES & EXPENSES EXPENSES
1
2
3
4
5
6
7
8
9
10
Prospectus/Proxy Statement
D-15
TOTAL GAIN BEFORE FEES & EXPENSES
TOTAL GAIN AFTER FEES & EXPENSES
TOTAL ANNUAL FEES & EXPENSES PAID $
Acquiring Fund - Class Z
ANNUAL EXPENSE RATIO INITIAL HYPOTHETICAL INVESTMENT AMOUNT ASSUMED RATE OF RETURN
1.06% $10,000.00 5%
CUMULATIVE RETURN HYPOTHETICAL YEAR- HYPOTHETICAL YEAR-
BEFORE FEES & END BALANCE BEFORE CUMULATIVE RETURN END BALANCE AFTER ANNUAL FEES &
YEAR EXPENSES FEES & EXPENSES AFTER FEESu & EXPENSES FEES & EXPENSES EXPENSES
1
2
3
4
5
6
7
8
9
10
TOTAL GAIN BEFORE FEES & EXPENSES $
TOTAL GAIN AFTER FEES & EXPENSES $
TOTAL ANNUAL FEES & EXPENSES PAID
(*) Annual Fees and Expenses are approximate and assume that the investor held
shares of the Acquiring Fund for the entire 10-year period. Annual Fees and
Expenses are calculated based on the average between the beginning and ending
balance for each year. All information is calculated on an annual compounding
basis.
(**) The year one Annual Fees & Expenses information shown include the dollar
amount and effect of any applicable front-end sales charge of the Acquiring
Fund.
Prospectus/Proxy Statement
D-16
APPENDIX E -- FINANCIAL HIGHLIGHTS FOR ACQUIRING FUND
The financial highlights table below is intended to help shareholders understand
the Fund's financial performance. Information is shown for the last three fiscal
years (the last six fiscal years for Class Z), for the Acquiring Fund. Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that shareholders would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information, other than the unaudited information for the
six months ended February 28, 2005, is included in the Fund's financial
statements which, have been audited by PricewaterhouseCoopers LLP, Independent
Registered Public Accounting Firm, whose report, along with the Fund's financial
statements, is included in the Fund's annual report. A shareholder can request a
free annual report by calling 1-800-426-3750.
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED PERIOD ENDED PERIOD ENDED
6 MONTHS ENDED AUGUST 31, AUGUST 31, DECEMBER 31,
FEBRUARY 28, 2005 2004 2003(a) 2002(b)
CLASS A CLASS A CLASS A CLASS A
----------------- --------- ------------ ------------
(UNAUDITED)
NET ASSET VALUE --
BEGINNING OF PERIOD ($) $13.04 11.34 10.05 10.04
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment income (loss)(c) (d) 0.01 0.04 (0.02)
Net realized and unrealized gain on
investments, foreign currency and foreign
capital gains tax 2.28 1.69 1.25 0.03
Total from Investment Operations 2.28 1.70 1.29 0.01
REDEMPTION FEES: (c)(d)
Redemption fees added to paid-in capital
NET ASSET VALUE --
END OF PERIOD ($) $15.32 13.04 11.34 10.05
Total return (%)(e) 17.51(f)(g) 14.99(f) 12.84(g) 0.10(g)
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) ($) $27.675 24,119 21,664 20,178
Ratio of expenses to average net assets (%)(h) 1.28 1.72 1.90(i) 1.86(i)
Ratio of net investment income (loss) to average net
assets (%)(h) 0.05% 0.10 0.61(i) (0.39)(i)
Waiver (%) 0.13 0.09
Portfolio turnover rate ( %) 38 90 43(g) 96
(a) The Fund changed its fiscal year end from December 31 to August 31.
(b) The Class A shares were initially offered on November 1, 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) Rounds to less than $0.01 per share.
(e) Total return at net asset value assuring no initial sales charge or
contingent deferred sales charge.
(f) Had the Investment Advisor not waived a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
Prospectus/Proxy Statement
E-1
6 MONTHS ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
FEBRUARY 28, 2005 AUGUST 31, AUGUST 31, DECEMBER 31,
(UNAUDITED) 2004 2003(A) 2002(B)
CLASS B CLASS B CLASS B CLASS B
----------------- ---------- ------------ ------------
NET ASSET VALUE --
BEGINNING OF PERIOD ($) 12.81 11.23 10.02 10.04
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment loss(c) (0.05) (0.09) (0.03) (0.05)
Net realized and unrealized gain on
investments, foreign currency and foreign
capital gains tax 2.24 1.67 1.24 0.03
Total from Investment Operations 2.19 1.58 1.21 (0.02)
REDEMPTION FEES: --
Redemption fees added to paid-in capital (c)(d) (c)(d) --
NET ASSET VALUE --
END OF PERIOD ($) 15.00 12.81 11.23 10.02
Total return (%)(e)(f) 17.10(g) 14.07 12.08(g) (0.20)(g)
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) ($) 11,317 10,221 10,316 10,920
Ratio of expenses to average net assets (%)(h) 2.03 (i) 2.50 2.98(i) 3.64(i)
Ratio of net investment income (loss) to average net (0.70)(i)
assets (%)(h) (0.69) (0.47)(i) (2.17)(i)
Waiver (%) 0.13(i) 0.18 0.11(i) 0.11(i)
Portfolio turnover rate (%) 38(g) 90 43(g) 96
(a) The Fund changed its fiscal year end from December 31 to August 31.
(b) Class B shares were initially offered on November 1, 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) Rounds to less than $0.01 per share.
(e) Total return at net asset value assuming no contingent deferred sales
charge.
(f) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
Prospectus/Proxy Statement
E-2
6 MONTHS ENDED PERIOD ENDED
FEBRUARY 28, 2005 AUGUST 31,
(UNAUDITED) 2004(a)
CLASS C CLASS C
----------------- ------------
NET ASSET VALUE -- 12.86 12.27
BEGINNING OF PERIOD
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment loss(b) (0.05) (0.01)
Net realized and unrealized gain on investments, foreign currency and foreign
capital gains tax 2.24 0.60
Total from Investment Operations 2.19 0.59
REDEMPTION FEES:
Redemption fees added to paid-in capital (b)(c)
NET ASSET VALUE --
END OF PERIOD ($) 15.05 12.86
Total return(d)(e)(f) 17.03 4.81
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) ($) 622 632
Ratio of expenses to average net assets ($)(g)(h) 2.03 2.11
Ratio of net investment income (loss) to average net assets (%)(g)(h) (0.70) (0.05)
Waiver (%)(h) 0.13 0.35
Portfolio turnover rate (%) 38(f) 90
(a) Class C shares were initially offered on October 13, 2003. Per share data
and total return reflect activity from that date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming no contingent deferred sales
charge.
(e) Had the Fund's Investment Advisor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact (g) of less than 0.01%.
(h) Annualized.
Prospectus/Proxy Statement
E-3
6 MONTHS ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
FEBRUARY 28, 2005 AUGUST 31, AUGUST 31, DECEMBER 31,
(UNAUDITED) 2004 2003(a) 2002(b)
CLASS D CLASS D CLASS D CLASS D
----------------- ---------- ------------ ------------
NET ASSET VALUE --
BEGINNING OF PERIOD ($) 12.91 11.27 10.02 10.04
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment loss(c) (0.05) (0.04) --(d) (0.04)
Net realized and unrealized gain on
investments, foreign currency and foreign
capital gains tax 2.25 1.68 1.25 0.02
Total from Investment Operations 2.20 1.64 1.25 (0.02)
REDEMPTION FEES: --
Redemption fees added to paid-in capital (c)(d) (c)(d) --
NET ASSET VALUE --
END OF PERIOD ($) 15.11 12.91 11.27 10.02
Total return (%)(e)(f) 17.04 14.55 12.48(g) (0.20)(g)
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) ($) 750 738 633 542
Ratio of expenses to average net assets (%)(h) 2.03(i) 2.10 2.49(i) 3.48(i)
Ratio of net investment income (loss) to average net
assets (%)(h) (0.70)(i) (0.27) 0.02(i) (2.01)(i)
Waiver (%) 0.13(i) 0.57 0.75(i) 0.75(i)
Portfolio turnover rate (%) 38(g) 90 43(g) 96
(a) The Fund changed its fiscal year end from December 31 to August 31.
(b) Class D shares were initially offered on November 1, 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) Rounds to less than $0.01 per share.
(e) Total return at net asset value assuming no contingent deferred sales
charge.
(f) Had the Fund's Investment Advisor not waived a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
Prospectus/Proxy Statement
E-4
6 MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31,
FEBRUARY 28, AUGUST 31, AUGUST 31, -------------------------------------------
2005 (UNAUDITED) 2004 2003(a) 2002(b) 2001 2000 1999
CLASS Z CLASS Z CLASS Z CLASS Z CLASS Z CLASS Z CLASS Z
------------- ---------- ------------ ------- ------- ------- -------
NET ASSET VALUE --
BEGINNING OF PERIOD ($) 13.14 11.40 10.05 12.03 14.70 22.81 15.45
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02(c) 0.11(c) 0.07(c) (c)(d) 0.01 (0.04) (0.05)
Net realized and unrealized gain
(loss) on investments, foreign
currency and foreign capital
gains tax 2.29 1.67 1.27 (1.94) (2.74) 5.17 9.00
Total from Investment Operations 2.31 1.78 1.34 (1.94) (2.73) 5.21 8.95
LESS DISTRIBUTIONS:
From net investment income (0.07) (0.04) (0.01) (0.01)
From net realized gains -- -- (2.83) (1.59)
Return of capital -- (0.03)
Total distributions (0.07) (0.04) (0.04) (0.01) (2.83) (1.59)
REDEMPTION FEES:
REDEMPTION FEES ADDED TO
PAID-IN CAPITAL (c)(d) (c)(d) 0.01(c)
NET ASSET VALUE --
END OF PERIOD ($) 15.38 13.14 11.40 10.05 12.03 14.77 22.81
Total return(e) 17.61(f)(g) 15.65(f) 13.43(f)(g) (16.10)(f) (18.47) (22.64) 57.93
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ($) 637,601 558,082 248,718 143,332 135,626 175,316 239,223
Ratio of expenses to average
net assets(h) (%) 1.03(i) 1.10 1.47(i) 1.49 1.56 1.42 1.48
Ratio of net investment income
(loss) to average net assets(h) 0.30(i) 0.81 1.03(i) (0.02) 0.06 (0.19) (0.35)
Waiver (%) 0.13(i) 0.18 0.12(i) 0.12 -- -- --
Portfolio turnover rate (%) 38(g) 90 43(g) 96 130 112 94
(a) The Fund changed its fiscal year end from December 31 to August 31.
(b) On November 1, 2002, the existing Fund shares were redesignated Class Z
shares.
(c) Per share data was calculated using average shares outstanding during
the period.
(d) Rounds to less than $0.01 per share.
(e) Total return at net asset value assuming that all distributions are
reinvested.
(f) Had the Advisor not waived a portion of expenses, total return would
have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
Prospectus/Proxy Statement
E-5
APPENDIX F -- COMPARISON OF ORGANIZATIONAL DOCUMENTS
The following chart compares the organizational documents of the Acquired Fund
(left column) with the organizational documents of the Acquiring Fund as
currently in effect (middle column) and with the organizational documents (and
Oregon state law) governing the Acquiring Fund if the proposal to reorganize the
Acquiring Fund is approved (right column).
- ---------------------------------------------------------------------------------------------------------------------
THE ACQUIRED FUND THE ACQUIRING FUND PROPOSED SURVIVING TRUST
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDER A shareholder or former Shareholders who have fully A shareholder or former
LIABILITY: shareholder held to be paid the subscription price shareholder held to be
personally liable solely by for their shares have no personally liable solely by
reason of his or her being or personal liability in excess reason of his or her being or
having been a shareholder is of their shares. having been a shareholder is
entitled to be held harmless entitled to be held harmless
from and indemnified against from and indemnified against
all loss and expense arising all loss and expense arising
from such liability. from such liability.
Every note, bond, contract, Every note, bond, contract,
instrument, certificate or instrument, certificate or
undertaking made or issued by undertaking made or issued by
any Trustees or Trustee or by any Trustees or Trustee or by
any officers or officer must any officers or officer must
recite that the same was recite that the same was
executed or made by or on executed or made by or on
behalf of the Trust and that behalf of the Trust and that
obligations of such obligations of such instrument
instrument are not binding on are not binding on any of them
any of them or shareholders or shareholders individually.
individually.
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDER VOTING Shareholders have the power Shareholders of an Oregon Shareholders have the power to
RIGHTS: to vote only (i) for the corporation have a right to vote only (i) for the election
election or removal of vote on the dissolution, or, to the extent required by
Trustees; (ii) with respect merger, consolidation, share law, removal of Trustees;
to any investment adviser; exchange or sale of all or (ii) with respect to any
(iii) with respect to any substantially all assets of termination, by the
termination, by the the Fund. shareholders, of the Trust or
shareholders, of the Trust or Shareholders of an Oregon series or class of the Trust;
series or class of the Trust; corporation also have a right (iii) with respect to
(iv) with respect to any to vote (i) for the election derivative actions, to the
amendment, by the Trustees or removal of directors; (ii) extent certain demand
that requires shareholder with respect to any requirements are met; and (iv)
authorization; (v) with amendments to the articles of with respect to any other
respect to derivative actions incorporation (except for matters required by law, the
similar to a Massachusetts minor amendments which are organizational documents or
corporation; and (vi) with subject to only Board deemed desirable by the Board
respect to any other matters approval); (iii) with respect of Trustees.
required by law, the to any amendments to or
organizational documents, or repeal of the Bylaws (even Each whole share (or
deemed desirable by the Board though the Bylaws may also be fractional share) outstanding
of Trustees. amended or repealed by the on the record date is entitled
Board of Directors); and (iv) to a number of votes on any
On a record date, each with respect to any other matter which it is entitled to
outstanding share or matters required by law, the vote equal to the net asset
fractional share is entitled organizational documents or value of the share (or
to one vote or a proportional as deemed desirable by the fractional share) in U.S.
fractional vote. Board of Directors. dollars determined at the
close of business on the
Shareholders may vote On a record date, each record date (for example, a
together with shareholders of outstanding share or share having a net asset value
the other series of the Trust fractional share of common of $10.50 would be entitled to
on matters affecting the stock is entitled to one vote 10.5 votes).
Trust
- ---------------------------------------------------------------------------------------------------------------------
Prospectus/Proxy Statement
F-1
- ----------------------------------------------------------------------------------------------------------------------
Trust as a whole, such as the or a proportional fractional Shareholders may vote together
election of Trustees. vote. with shareholders of the other
series of the Trust on matters
Shareholders of separate affecting the Trust as a
corporations vote separately. whole, such as the election of
Trustees.
Shares of common stock vote
together as a single class
except as otherwise required by
law or except on any matters
that affect only one or more
classes of stock, in which case
only the holders of shares of
the class or classes affected
shall be entitled to vote.
- ----------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS Shareholders have no specific Corporation must make a list Shareholders have no specific
MEETINGS: right to call meetings, of shareholders available two right to call meetings, except
except as may be required by days before any shareholder as may be required by
applicable law, including the meeting. applicable law, including the
Investment Company Act of Investment Company Act of 1940.
1940. A special meeting of
shareholders may be called by
the holders of 10 percent or
more of the votes entitled to
be cast on any issue proposed
to be considered at the
special meeting, or by such
persons as are specified in
the articles of incorporation
or Bylaws (which persons are
usually the president or vice
president of the corporation).
- ----------------------------------------------------------------------------------------------------------------------
SHAREHOLDER QUORUM: 30% of the shares entitled to A majority of shares entitled 30% of the shares entitled to
vote at the meeting. to vote at the meeting. vote at the meeting.
- ----------------------------------------------------------------------------------------------------------------------
SHAREHOLDER CONSENT: Majority consent required for Unanimous written consent is Majority consent required for
shareholder action taken required for shareholder shareholder action taken
without a meeting. action taken without a without a meeting.
meeting.
- ----------------------------------------------------------------------------------------------------------------------
NOTICE TO Written notice of shareholder Notice of shareholder Notice of shareholder meetings
SHAREHOLDERS: meetings must be given not meetings must be given at is to be mailed, postage
less than seven days in least 10 days before the date prepaid, or sent by facsimile
advance. of the meeting. or other electronic submission
not less than seven days
Notice is not expressly For an annual meeting of before the date of such
required to state the purpose shareholders, the notice is meeting.
for which the meeting is not expressly required to
called. describe the purpose(s) for Notice is not expressly
which the meeting is called. required to state the purpose
In the case of a special for which the meeting is
meeting of shareholders, the called.
notice must include a
description of the
- ----------------------------------------------------------------------------------------------------------------------
Prospectus/Proxy Statement
F-2
- ----------------------------------------------------------------------------------------------------------------------
purpose(s) for which the
meeting is called.
- ----------------------------------------------------------------------------------------------------------------------
SHAREHOLDER PROXIES: Shareholders may put a proxy Shareholders may put a proxy Shareholders may put a proxy
in place for a duration of up in place for a duration of up in place for a duration of up
to six months. to eleven months unless a to six months.
longer period is expressly
provided in the authorization
form.
- ----------------------------------------------------------------------------------------------------------------------
TRUSTEE'S POWER TO The Declaration of Trust may Directors may adopt routine The Declaration of Trust may
AMEND DECLARATION be amended at any time by an limited amendments to the be amended at any time by an
OF TRUST: instrument in writing signed articles of incorporation. instrument in writing signed
by a majority of the then In addition, the Board may by a majority of the then
Trustees when authorized so amend the articles without Trustees, provided that, for
to do by vote of a majority shareholder approval to (i) non-ministerial amendments,
of the shares entitled to create any class of shares or notice is mailed to
vote with respect to such series within a class before shareholders upon the same day
amendment, except that issuance of any shares of the such amendment is effective.
shareholder authorization is class or series, if the
not required for amendments articles of incorporation so
to change the name of the provide, and (ii) in the case
Trust, supply any omission, of a registered open-end
cure any ambiguity or cure, investment company, increase
correct or supplement any or decrease the number of
defective or inconsistent authorized shares. If the
provision. Board of Directors is not
specifically empowered by the
Oregon Revised Statutes to amen
the articles of incorporation,
any other amendment must be
submitted to shareholders for
approval.
- ----------------------------------------------------------------------------------------------------------------------
TERMINATION OF Shareholders have the right Termination (dissolution) of Shareholders have the right to
TRUST: to terminate the Trust or the corporation requires the terminate the Trust, or series
series upon approval of at approval of the Board of or class, upon approval of at
least two-thirds of the Directors and a majority of least 66 2/3% of the
outstanding shares of the the outstanding shares. outstanding shares of the
Trust or the affected series. Trust or the affected series
or class.
Trustees may terminate the
Trust or series without Trustees may terminate the
shareholder approval by Trust, or any series or class,
written notice to the without shareholder approval
shareholders. by written notice to
shareholders.
- ----------------------------------------------------------------------------------------------------------------------
MERGER OR Shareholders have no express Shareholders have a right to The Declaration of Trust
CONSOLIDATION TRUST: right under the Declaration vote on a merger, provides that a consolidation,
of Trust to vote on mergers consolidation, share exchange merger or transfer may be
or consolidations. or sale of all or authorized by vote of a
substantially all assets, majority of the Trustees then
with a required vote of a in office without shareholder
majority of outstanding approval, unless otherwise
shares. required by law.
Shareholders have dissenters'
rights.
- ----------------------------------------------------------------------------------------------------------------------
Prospectus/Proxy Statement
F-3
- ----------------------------------------------------------------------------------------------------------------------
REMOVAL OF TRUSTEES: Trustee may be removed, with A director may be removed by Trustee may be removed, with
or without cause, by (i) a (i) shareholders with or or without cause, by a
majority of Trustees then in without cause and (ii) majority of Trustees then in
office or (ii) by a vote of judicial proceedings. office.
two-thirds of the holders of Further, in the case of
outstanding shares, with, at removal by shareholders, a
a meeting called for the director may be removed only
purpose. at a meeting of the
shareholders called for the
purpose of removing the
director, and the meeting notic
must state that the purpose, or
one of the purposes, of the
meeting is the removal of a
director. The director may only
be removed if the number of
votes cast to remove the
director exceeds that number of
votes cast not to remove the
director.
- ----------------------------------------------------------------------------------------------------------------------
DIRECTOR/TRUSTEE Not limited. Committees may not take Not limited.
COMMITTEES: certain actions including:
authorizing distributions;
approving or proposing to
shareholders any actions that
requires shareholder approval;
filling vacancies on the Board
or any committees; amending the
articles of incorporation, to
the extent directors may do so
without shareholder approval;
adopting, amending or repealing
Bylaws; approving a plan of
merger not requiring shareholde
approval; authorizing or
approving reacquisition of
shares unless within limits
prescribed by the Board;
generally authorizing or
approving the issuance of
shares; or determining the
designation, rights, preference
or limitations of any class or
series of shares.
- ----------------------------------------------------------------------------------------------------------------------
TRUSTEE LIABILITY: Trustees are not personally Directors are not personally Trustees are not personally
liable for claims against the liable for monetary damages liable for claims against the
Trust or for any neglect or for their conduct as Trust or for any neglect or
wrongdoing of any officer, directors, but are personally wrongdoing of any officer,
agent, employee, investment liable for acts in breach of agent, employee, investment
adviser, or principal their duty of loyalty to the adviser, or principal
underwriter of the Trust. corporation or its underwriter of the Trust.
Each Trustee is not shareholders; acts or Each Trustee is not
responsible for the act or omissions not in good faith responsible for the act or
omission of any other Trustee or which involve intentional omission of any other Trustee
and may be liable only by misconduct or knowing and may be liable only by
reason of willful violation of the law; an reason of willful misfeasance,
misfeasance, unlawful distribution to
- ----------------------------------------------------------------------------------------------------------------------
Prospectus/Proxy Statement
F-4
- ----------------------------------------------------------------------------------------------------------------------
bad faith, gross shareholders; and transaction bad faith, gross negligence or
negligence or reckless from which the director reckless disregard of the
disregard of the duties derived an improper personal duties involved in the conduct
involved in the conduct of benefit. of his office.
his office.
- ----------------------------------------------------------------------------------------------------------------------
TRUSTEE The Declaration of Trust Mandatory indemnification The Bylaws state that the
INDEMNIFICATION: states that the Trust will under Oregon law for Trust will indemnify each of
indemnify each of its reasonable expenses incurred its Trustees and officers who
Trustees and officers against in connection with a are not employees or officers
all liabilities and expenses, proceeding or claim which a of any investment adviser to
including amounts paid in director is successful in the Trust or any affiliated
satisfaction of judgments, in defending. person thereof and may
compromise, as fines and indemnify each of its officers
penalties, and as counsel The articles of incorporation who are employees or officers
fees, reasonably incurred by provide for indemnification of any investment adviser to
such person while in office of directors for any the Trust or any affiliated
or thereafter, by reason of liability and expense person thereof against all
the indemnified person's incurred in a proceeding to liabilities and expenses,
service as a Trustee or the fullest extent not including amounts paid in
officer. The Trust will not prohibited by law. Under satisfaction of judgments, in
indemnify its Trustees and Oregon law, the director is compromise, as fines and
officers against any eligible for indemnification penalties, and as counsel
liability to the Trust or to if (i) the person's conduct fees, reasonably incurred by
its shareholders to which he was in good faith; (ii) the such person while in office or
or she would otherwise be person reasonably believed thereafter, by reason of the
subject by reason of willful that his or her conduct was indemnified person's service
misfeasance, bad faith, gross in the best interests of the as a Trustee or officer. The
negligence or reckless corporation or at least not Trust will not indemnify its
disregard of the duties opposed to its best Trustees and officers against
involved in the conduct of interests; and (iii) in a any liability to the Trust or
such person's office. criminal proceeding, the to its shareholders to which
person had no reasonable he or she would otherwise be
Under the Declaration of cause to believe his or her subject by reason of willful
Trust, in the absence of a conduct was unlawful. misfeasance, bad faith, gross
final decision on the merits negligence or reckless
by an adjudicating body that The Bylaws contain similar disregard of the duties
such person is liable by provisions with respect to involved in the conduct of his
reason of willful indemnification of officers. office.
misfeasance, bad faith, gross
negligence or reckless Under the Bylaws, in the
disregard of the duties absence of a final decision on
involved in the conduct of the merits by an adjudicating
their office, indemnification body that such person has not
will be provided if (a) acted in good faith in the
approved as in the best reasonable belief that such
interests of the Trust, after person's action was in the
notice that it involves such best interests of the Trust or
indemnification, by at least is liable to the Trust or its
a majority of the Shareholders by reason of
disinterested Trustees acting willful misfeasance, bad
on the matter (provided that faith, gross negligence or
a majority of the reckless disregard of the
disinterested Trustees then duties involved in the conduct
in office act on the matter) of his or her office,
upon a determination, based indemnification will be
upon a review of readily provided if (a) approved,
available facts, that such after notice that it
person is not liable to the
Trust or its shareholders by
- ----------------------------------------------------------------------------------------------------------------------
Prospectus/Proxy Statement
F-5
- ----------------------------------------------------------------------------------------------------------------------
reason of willful involves such indemnification,
misfeasance, bad faith, gross by at least a majority of the
negligence or reckless disinterested Trustees acting
disregard of the duties on the matter (provided that a
involved in the conduct of majority of the disinterested
his or her office or (b) Trustees then in office act on
there has been obtained an the matter) upon a
opinion in writing of determination, based upon a
independent legal counsel to review of readily available
the effect that such facts, that such person has
indemnification would not acted in good faith in the
protect such person against reasonable belief that such
any liability to the Trust to person's action was in the
which such person would best interests of the Trust
otherwise be subject by and is not liable to the Trust
reason of willful or its shareholders by reason
misfeasance, bad faith, gross of willful misfeasance, bad
negligence or reckless faith, gross negligence or
disregard of the duties reckless disregard of the
involved in the conduct of duties involved in the conduct
his or her office. of his or her office or (b)
there has been obtained an
opinion in writing of
independent legal counsel,
based upon a review of readily
available facts to the effect
that such person appears to
have acted in good faith in
the reasonable belief that
such person's action was in
the best interests of the
Trust and that such
indemnification would not
protect such person against
any liability to the Trust to
which such person would
otherwise be subject by reason
of willful misfeasance, bad
faith, gross negligence or
reckless disregard of the
duties involved in the conduct
of his or her office.
- ----------------------------------------------------------------------------------------------------------------------
LEGAL EXPENSES: The Declaration of Trust Directors may be reimbursed The Bylaws state that legal
states that legal expenses for legal expenses in advance expenses may be paid from time
may be paid from time to time of final disposition of any to time by the Trust in
by the Trust in advance of proceeding provided the advance of the final
the final disposition of any person provides (i) a written disposition of any such
such proceeding if the Trust affirmation of their good proceeding if the Trust
receives a written faith belief that they have receives a written undertaking
undertaking by the met the prescribed standard by the indemnified person to
indemnified person to of conduct and (ii) a written reimburse the Trust in the
reimburse the Trust in the undertaking to repay the event it is subsequently
event it is subsequently advance if it is determined determined that the
determined that the that the person did not meet indemnified person is not
indemnified person is not the standard of conduct. entitled to such
entitled to such indemnification and (a) the
indemnification and (a) the indemnified person provides
indemnified person provides security for his undertaking,
security for his undertaking, or (b) the Trust is insured
or (b) the Trust is insured against losses arising by
against losses arising by reason of any lawful advances,
reason of any lawful or (c) a majority of the
advances, or (c) a majority disinterested, non-party
of the disinterested, Trustees or an independent
non-party Trustees or an legal counsel, as expressed in
independent legal counsel, as a written opinion, determines
expressed in a written that there is reason to
opinion, determines that believe that the indemnified
there is reason to believe person ultimately will be
that the indemnified person found entitled to
ultimately will be found indemnification.
entitled to indemnification.
- ----------------------------------------------------------------------------------------------------------------------
DIVIDENDS: Not limited. Limited in circumstances Not limited.
where corporation would be
unable to pay its debts as
they become due or its total
assets would be less than its
total liabilities.
- ----------------------------------------------------------------------------------------------------------------------
As series of Trust VII, a Massachusetts business trust, the Acquired Fund is
subject to the provisions of Trust VII's Declaration of Trust and Bylaws. The
provisions of Trust VII's the Declaration of Trust and Bylaws differ in some
respects from the Acquiring Fund's Articles of Incorporation and Bylaws and
Chapter 60 of the Oregon Revised Statutes, referred to as the Oregon Business
Corporations Act ("OBCA"), which governs Oregon corporations.
The following is a summary of significant differences between (i) the Acquiring
Fund's Articles of Incorporation and Bylaws and the OBCA and (ii) Trust VII 's
Declaration of Trust and Bylaws and Massachusetts business trust law. For
additional information regarding all of the differences, shareholders of the
Acquiring Fund should refer directly to the Funds' organizational documents,
copies of which may be obtained by contacting the Acquired Fund at its address
listed on the cover of this Prospectus/Proxy Statement or toll-free at
1-800-426-3750.
Prospectus/Proxy Statement
F-8
SHAREHOLDER LIABILITY. Under the OBCA, a shareholder of an Oregon corporation
who has fully paid the subscription price for his shares generally has no
personal liability in excess of his shares. Under Massachusetts law,
shareholders of a Massachusetts business trust could, in certain circumstances,
be held personally liable for the obligations of the trust. Trust VII 's
Declaration of Trust, however, disclaims shareholder liability for acts or
obligations of Trust VII or the Acquired Fund and requires that every note,
bond, contract, instrument, certificate or undertaking made or issued by any
Trustees or Trustee or by any officers or officer shall recite that the
obligations of such instrument are not binding on the shareholders individually.
Trust VII 's Declaration of Trust provides that a shareholder or former
shareholder held to be personally liable solely by reason his or her being or
having been a shareholder shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such liability. Thus, the
risk of a shareholder's incurring financial loss from shareholder liability is
limited to circumstances in which Trust VII would be unable to meet its
obligations. The likelihood of such a circumstance is considered by the Acquired
Fund's advisor to be remote.
SHAREHOLDER VOTING RIGHTS, INTERESTS AND MEETINGS. Trust VII 's Declaration of
Trust provides that meetings of shareholders of the trust or of any series or
class thereof shall be called upon written application by shareholders holding
at least 10% of the outstanding shares of the trust (if shareholders of all
series or classes are required to vote in the aggregate), or 10% of the
outstanding shares of any series or class (if shareholders of such series or
class are entitled to vote by individual series or class at such meeting)
provided that such application shall state the purpose or purposes of such
meeting and the matters proposed to be acted on.
The Acquiring Fund's Bylaws give holders of not less than one-tenth of all the
votes entitled to be cast on any issue proposed to be considered at the meeting
the right to call a special meeting for any purpose.
Directors of the Acquiring Fund may only be removed by the shareholders. A
Trustee of Trust VII may be removed (a) at any meeting called for such purpose
by a vote of two-thirds of the outstanding shares, (b) by the holders of
two-thirds of the outstanding shares by declaration in writing filed with the
custodian of the securities of the trust, or (c) by vote of a majority of the
Trustees then in office.
The shareholders of the Acquired Fund may vote together with shareholders of
other series of Trust VII on certain matters because of the single trust
structure, whereas the shareholders of the Acquiring Fund vote separately from
the shareholders of other funds because the funds are separate corporations.
Although any such combined voting would be subject to requirements of the 1940
Act as to separate series or class voting rights, the shareholders of Trust VII
would still vote together on matters such as the election of Trustees or
ratification of auditors. Indeed, in an election of Trustees of Trust VII, the
shareholders of all funds that are series of Trust VII vote together for a
single Board of Trustees for Trust VII. By contrast, in an election of directors
of the Acquiring Fund, only shareholders of the Acquiring Fund vote for a Board
of Directors for that fund because the fund is a separate corporation.
Neither Trust VII nor the Acquiring Fund is required to hold annual shareholder
meetings for matters such as the election of Trustees or Directors, although the
requirements of the 1940 Act may effectively require that Trust VII or the
Acquiring Fund call special shareholder meetings from time to time.
Except when otherwise required by the 1940 Act, Trust VII 's Declaration of
Trust may be amended at any time by a majority of the Trustees then in office,
provided notice of any amendment (other than amendments having the purpose of
changing Trust VII 's name, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
contained therein, or having any other purpose which is ministerial or clerical
in nature) shall be mailed promptly to shareholders of record at the close of
business on the effective date of such amendment.
The Trustees may amend Trust VII 's Bylaws (except for Articles VII and X
thereof, which may only be amended by shareholders) without shareholder consent.
The shareholders of Trust VII may also amend its Bylaws. The shareholders or
Directors of the Acquiring Fund may amend the Fund's Bylaws.
A termination of Trust VII or any series or class of Trust VII may be effected
by action of the Trustees by written notice to the shareholders. The
shareholders of the Acquiring Fund have the right to vote on a dissolution of
the
Prospectus/Proxy Statement
F-9
Fund, with a required affirmative vote of the holders of more than 50% of the
outstanding shares of the Acquiring Fund.
The shareholders of the Acquired Fund have the right to vote on a merger,
consolidation or share exchange involving the Acquired Fund to the extent
required under the 1940 Act. The shareholders of the Acquiring Fund have the
right to vote on a merger, consolidation, share exchange or sale of all or
substantially all assets, with a required affirmative vote of the holders of
more than 50% of the outstanding shares of the Acquiring Fund.
The shareholders of the Acquired Fund do not have dissenters' rights for these
types of extraordinary transactions. The OBCA provides that the shareholders of
the Acquiring Fund have dissenters' rights for these types of extraordinary
transactions, although such dissenters' rights may be preempted by the 1940 Act.
Trust VII 's Declaration of Trust provides that a majority consent is required
for a shareholder action taken without a meeting. The Acquiring Fund's Bylaws
provide that unanimous consent is required for a shareholder action taken
without a meeting.
Trust VII 's Declaration of Trust provides that a quorum for a shareholder
meeting is 30% of the shares entitled to vote, except that if any provision of
law or the Declaration of Trust permits or requires that holders of any series
or class shall vote as a series or class, then 30% of the aggregate number of
shares of each series or class entitled to vote shall be necessary to constitute
a quorum for the transaction of business by that series or class. The Acquiring
Fund's Bylaws provide that a quorum for a shareholder meeting is a majority of
the shares entitled to vote at the meeting.
Trust VII 's Declaration of Trust provides that notice of a shareholder meeting
is to be mailed, postage prepaid, not less than seven days before the date of
such meeting, to each shareholder entitled to vote at such meeting, at his
address as it appears on the records of the Trust. The Acquiring Fund's Bylaws
require that notice of shareholder meetings be mailed not earlier than sixty
days nor less than ten days prior to the meeting.
A shareholder of the Acquired Fund may put a voting proxy in place for a
duration of up to six months, compared with eleven months for shareholders of
the Acquiring Fund.
The Acquiring Fund must make available a list of all shareholders beginning two
business days after notice of the meeting is given and continuing through the
meeting. No such requirement is applicable to the Acquired Fund.
Trust VII 's Declaration of Trust specifically disclaims any shareholder right
to partition of the assets of the Acquired Fund. No such disclaimer is present
in the Acquiring Fund's Articles of Incorporation, although Oregon law limits
shareholder rights in dissolution of the Acquiring Fund.
Director vacancies for the Acquiring Fund are filled by action of either the
shareholders, the Board of Directors, the remaining Directors if less than a
quorum (by the vote of a majority thereof) or by a sole remaining Director. A
Trustee vacancy for Trust VII may be filled by the Trustees, unless immediately
after filling any such vacancy, less than two-thirds of the Trustees then
holding office would have been elected to such office by the shareholders. The
Board of Trustees shall call a meeting of shareholders for the purpose of
electing Trustees whenever less than a majority of the Trustees have been
elected by shareholders.
Boards of directors or trustees form committees of subgroups of their number to
perform certain tasks. Such a committee formed by the Directors of the Acquiring
Fund may not take certain actions including: authorizing distributions;
approving or proposing to the shareholders any actions which require shareholder
approval; filling vacancies on the board or any committees; amending the Fund's
Articles of Incorporation, to the extent Directors may do so without shareholder
consent; adopting, amending or repealing the Fund's Bylaws; approving a plan of
merger not requiring shareholder approval; authorizing or approving
reacquisition of shares unless within limits prescribed by the board; generally
authorizing or approving the issuance or sale of shares; or determining the
designation, rights, preferences, or limitations of any class or series of
shares. Trustee committees for Trust VII are not so limited.
Prospectus/Proxy Statement
F-10
DIVIDENDS. The OBCA imposes certain limitations on distributions in
circumstances where the corporation would be unable to pay its debts as they
become due in the ordinary course of business, or its total assets would be less
than its total liabilities and certain other obligations. No similar limitations
are contained in Trust VII 's Declaration of Trust.
DIRECTOR AND TRUSTEE LIABILITY AND INDEMNIFICATION. Under the OBCA and the
Acquiring Fund's Articles of Incorporation, the Directors of the Acquiring Fund
are not personally liable for monetary damages to the Acquiring Fund or its
shareholders for their conduct as Directors, but are personally liable for: acts
in breach of the Director's duty of loyalty to the corporation or its
shareholders; acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of the law; an unlawful distribution to
shareholders; and transactions from which the Director derived an improper
personal benefit. Under Trust VII's Declaration of Trust, Trust VII will not
indemnify Trustees against liability to the Trust or its Shareholders resulting
from the Trustee's willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct as Trustee. Oregon law provides
for mandatory indemnification of a corporation's directors against reasonable
expenses incurred in connection with a proceeding or claim with respect to which
the director is successful in defending. This mandatory indemnification also
extends to officers unless a Fund's articles of incorporation provide otherwise.
In addition, the OBCA permits the Acquiring Fund to include a provision in its
Articles of Incorporation providing that it will indemnify an individual made
party to a proceeding because the individual is or was an officer or Director
against liability (including obligations to pay a judgment, settlement, penalty,
fine and reasonable expenses of counsel) incurred in the proceeding provided
such persons:
- - acted in good faith;
- - reasonably believed that their conduct was in the best interests of the
corporation or at least not opposed to its interests; and
- - in a criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
The Acquiring Fund now provides for such indemnification of current and former
officers and Directors to the fullest extent not prohibited by law for any such
liability. No indemnification may be granted if such person is adjudged liable
(1) to the Fund in connection with a proceeding by or in right of the Fund or
(2) on the basis that personal benefit was improperly received. In addition, the
Fund shall pay for or reimburse the reasonable expenses incurred by any such
person in any such proceeding in advance of the final disposition of the
proceeding if the person sets forth in writing (i) the person's good faith
belief that the person is entitled to indemnification and (ii) the person's
agreement to repay all advances if it is ultimately determined that the person
is not entitled to indemnification.
Pursuant to Trust VII 's Declaration of Trust, Trust VII will indemnify each of
its Trustees and officers against all liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees, reasonably incurred by such person while in
office or thereafter, by reason of the indemnified person's service as a Trustee
or officer. Trust VII will not indemnify its Trustees and officers against any
liability to the Trust or to its shareholders to which he or she would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. Legal
expenses may be paid from time to time by Trust VII in advance of the final
disposition of any such proceeding if Trust VII receives a written undertaking
by the indemnified person to reimburse Trust VII in the event it is subsequently
determined that the indemnified person is not entitled to such indemnification
and (a) the indemnified person shall provide security for his undertaking, or
(b) the trust shall be insured against losses arising by reason of any lawful
advances, or (c) a majority of the disinterested, non-party Trustees of the
trust or an independent legal counsel, as expressed in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the indemnified person
ultimately will be found entitled to indemnification.
Prospectus/Proxy Statement
F-11
APPENDIX G - GOVERNANCE COMMITTEE CHARTER
1. The Governance Committee (the "Committee") of the Columbia Funds
(the "Funds") shall be composed entirely of members of the Board of
the Funds who are not affiliated with the Funds' investment adviser,
sub-advisers or principal underwriter.
2. The functions of the Committee are:
a) To make nominations for independent trustee membership
on the Board of Trustees when necessary and to consider
candidates proposed for the Board of Trustees by
shareholders of the Funds;
b) To review periodically Board governance practices and
procedures and any recommendations of the Chief
Compliance Officer of the Funds relating thereto, and to
recommend to the Board any changes it may deem
appropriate;
c) To review periodically trustee compensation and to
recommend to the independent trustees any changes it may
deem appropriate;
d) To review committee assignments on an annual basis;
e) To review on an annual basis the responsibilities and
charter of each committee of the Board, whether there is
continuing need for each committee, whether there is a
need for additional committees of the Board, and whether
committees should be combined or reorganized, and to
make recommendations for any such action to the Board;
f) To plan and administer the Board's annual
self-evaluation process;
g) To evaluate on at least an annual basis the independence
of counsel to the independent trustees, to make
recommendations to the independent trustees regarding
their determination of such counsel's status as an
"independent legal counsel" under applicable SEC rules,
and to supervise such counsel.
3. The Committee shall meet as frequently and at such times as
circumstances dictate. Minutes shall be kept of the Committee's
meetings.
4. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including authority to retain
special counsel and other experts or consultants at the expense of
the appropriate Fund.
5. The Committee shall review this charter at least [annually] and
recommend to the Board any changes it deems appropriate.
Prospectus/Proxy Statement
G-1
COLUMBIA INTERNATIONAL STOCK FUND, INC.
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
June 10, 2005
This Statement of Additional Information (the "SAI") relates to the proposed
acquisition (the "Merger") of Columbia Newport Tiger Fund, a series of Columbia
Funds Trust VII, (the "Acquired Fund"), by Columbia International Stock Fund,
Inc. (the "Acquiring Fund"). This SAI contains information which may be of
interest to shareholders but which is not included in the combined
Prospectus/Proxy Statement dated June 10, 2005 (the "Prospectus/Proxy
Statement") which relates to the Merger. As described in the Prospectus/Proxy
Statement, the Merger would involve the transfer of all the assets of the
Acquired Fund in exchange for shares of the Acquiring Fund and the assumption of
all the liabilities of the Acquired Fund by the Acquiring Fund. The Acquired
Fund would distribute the Acquiring Fund shares it receives to its shareholders
in complete liquidation of the Acquired Fund. The Acquiring Fund will be the
survivor for accounting purposes.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing to the Acquiring Fund at One Financial Center, Boston,
Massachusetts 02111-2621, or by calling 1-800-426-3750.
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TABLE OF CONTENTS
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND......................................
PORTFOLIO MANAGERS
DIRECTORS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE FUNDS - FINANCIAL STATEMENTS....
APPENDIX A - STATEMENT OF ADDITIONAL INFORMATION OF THE ACQUIRING FUND...............
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND
Attached hereto as Appendix A is the Statement of Additional Information of the
Acquiring Fund dated January 1, 2005.
PORTFOLIO MANAGER
Other Accounts Managed by Portfolio Manager
The following table shows the number and assets of other investment accounts (or
portions of investment accounts) that the Acquiring Fund's portfolio manager
managed as of the Acquiring Fund's fiscal year-end.
OTHER SEC-REGISTERED OPEN-END
PORTFOLIO MANAGER AND CLOSED-END FUNDS OTHER POOLED INVESTMENT VEHICLES OTHER ACCOUNTS
- ------------------- ----------------------------- -------------------------------- ------------------
Number of Number of Number of
accounts Assets accounts Assets accounts Assets
--------- ------ --------- ------ --------- ------
Penelope L. Burgess
Deborah F. Snee
See "Potential Conflicts of Interest in Managing Multiple Accounts" below for
information on how Columbia Management Advisors, Inc. ("Columbia"), the
Acquiring Fund's investment adviser, addresses potential conflicts of interest
resulting from an individual's management of more than one account.
Ownership of Securities
The table below shows the dollar ranges of shares of the Acquiring Fund
beneficially owned (as determined pursuant to Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934, as amended) by the portfolio manager listed
above at the end of the Fund's most recent fiscal year:
PORTFOLIO MANAGER DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND BENEFICIALLY OWNED
- ------------------- ----------------------------------------------------------------
Penelope L. Burgess
Deborah F. Snee
Compensation
As of the Acquiring Fund's most recent fiscal year end, the portfolio manager
received all of his compensation from Columbia and its parent company, Columbia
Management Group, Inc., in the form of salary, bonus, stock options and
restricted stock. A portfolio manager's bonus is variable and is generally based
on (1) an evaluation of the manager's investment performance and (2) the results
of a peer and/or management review of such individual, which takes into account
skills and attributes such as team participation, investment process,
communication and professionalism. In evaluating investment performance,
Columbia generally considers the one-, three- and five-year performance of
mutual funds and other accounts under the portfolio manager's oversight relative
to the benchmark noted below, emphasizing the manager's three- and five-year
performance. Columbia may also consider the portfolio manager's performance in
managing client assets in sectors and industries assigned to the manager as part
of his or her investment team responsibilities, where applicable. For portfolio
managers who also have group management responsibilities, another factor in
their evaluation is an assessment of the group's overall investment performance.
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2
PORTFOLIO MANAGER PERFORMANCE BENCHMARK
- ------------------- ---------------------
Penelope L. Burgess
Deborah F. Snee
The size of the overall bonus pool each year is determined by Columbia
Management Group, Inc. and depends in part on levels of compensation generally
in the investment management industry (based on market compensation data) and
Columbia's profitability for the year, which is influenced by assets under
management.
Potential Conflicts of Interest in Managing Multiple Accounts
Like other investment professionals with multiple clients, a portfolio manager
for the Acquiring Fund may face certain potential conflicts of interest in
connection with managing both the Acquiring Fund and other accounts at the same
time. The paragraphs below describe some of these potential conflicts, which
Columbia believes are faced by investment professionals at most major financial
firms. Columbia and the Trustees of the Columbia Funds have adopted compliance
policies and procedures that attempt to address certain of these potential
conflicts.
The management of accounts with different advisory fee rates and/or fee
structures, including accounts that pay advisory fees based on account
performance ("performance fee accounts"), may raise potential conflicts of
interest by creating an incentive to favor higher-fee accounts.
These potential conflicts may include, among others:
- - The most attractive investments could be allocated to higher-fee accounts
or performance fee accounts.
- - The trading of higher-fee accounts could be favored as to timing and/or
execution price. For example, higher-fee accounts could be permitted to
sell securities earlier than other accounts when a prompt sale is
desirable or to buy securities at an earlier and more opportune time.
- - The trading of other accounts could be used to benefit higher-fee accounts
(front- running).
- - The investment management team could focus their time and efforts
primarily on higher-fee accounts due to a personal stake in compensation.
Potential conflicts of interest may also arise when the portfolio managers have
personal investments in other accounts that may create an incentive to favor
those accounts. As a general matter and subject to limited exceptions,
Columbia's investment professionals do not have the opportunity to invest in
client accounts, other than the Columbia Funds.
A potential conflict of interest may arise when the Acquiring Fund and other
accounts purchase or sell the same securities. On occasions when a portfolio
manager considers the purchase or sale of a security to be in the best interests
of the Acquiring Fund as well as other accounts, Columbia's trading desk may, to
the extent permitted by applicable laws and regulations, aggregate the
securities to be sold or purchased in order to obtain the best execution and
lower brokerage commissions, if any. Aggregation of trades may create the
potential for unfairness to the Acquiring Fund or another account if one account
is favored over another in allocating the securities purchased or sold - for
example, by allocating a disproportionate amount of a security that is likely to
increase in value to a favored account.
"Cross trades," in which one Columbia account sells a particular security to
another account (potentially saving transaction costs for both accounts), may
also pose a potential conflict of interest. Cross trades may be seen to involve
a potential conflict of interest if, for example, one account is permitted to
sell a security to another account at a higher price than an independent third
party would pay. Columbia and the Acquiring Fund's Trustees have adopted
compliance procedures that provide that any transactions between the Acquiring
Fund and another Columbia-advised account are to be made at an independent
current market price, as required by law.
Another potential conflict of interest may arise based on the different
investment objectives and strategies of the Acquiring Fund and other accounts.
For example, another account may have a shorter-term investment horizon or
different investment objectives, policies or restrictions than the Acquiring
Fund. Depending on another account's objectives or other factors, a portfolio
manager may give advice and make decisions that may differ from advice given, or
the timing or nature of decisions made, with respect to the Acquiring
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Fund. In addition, investment decisions are the product of many factors in
addition to basic suitability for the particular account involved. Thus, a
particular security may be bought or sold for certain accounts even though it
could have been bought or sold for other accounts at the same time. More rarely,
a particular security may be bought for one or more accounts managed by a
portfolio manager when one or more other accounts are selling the security
(including short sales). There may be circumstances when purchases or sales of
portfolio securities for one or more accounts may have an adverse effect on
other accounts.
The Acquiring Fund's portfolio manager who is responsible for managing multiple
funds and/or accounts may devote unequal time and attention to the management of
those funds and/or accounts. As a result, the portfolio manager may not be able
to formulate as complete a strategy or identify equally attractive investment
opportunities for each of those accounts as might be the case if he or she were
to devote substantially more attention to the management of a single fund. The
effects of this potential conflict may be more pronounced where funds and/or
accounts overseen by a particular portfolio manager have different investment
strategies.
The Acquiring Fund's portfolio manager may be able to select or influence the
selection of the brokers and dealers that are used to execute securities
transactions for the Acquiring Fund. In addition to executing trades, some
brokers and dealers provide portfolio managers with brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934), which may result in the payment of higher brokerage fees than
might have otherwise be available. These services may be more beneficial to
certain funds or accounts than to others. Although the payment of brokerage
commissions is subject to the requirement that the portfolio manager determine
in good faith that the commissions are reasonable in relation to the value of
the brokerage and research services provided to the fund, a portfolio manager's
decision as to the selection of brokers and dealers could yield disproportionate
costs and benefits among the funds and/or accounts that he or she manages.
Columbia or an affiliate may provide more services (such as distribution or
recordkeeping) for some types of funds or accounts than for others. In such
cases, a portfolio manager may benefit, either directly or indirectly, by
devoting disproportionate attention to the management of fund and/or accounts
that provide greater overall returns to the investment manager and its
affiliates.
The Acquiring Fund's portfolio manager may also face other potential conflicts
of interest in managing the Acquiring Fund, and the description above is not a
complete description of every conflict that could be deemed to exist in managing
both the Acquiring Fund and other accounts. In addition, the Acquiring Fund's
portfolio manager may also manage other accounts (including their personal
assets or the assets of family members) in their personal capacity. The
management of these accounts may also involve certain of the potential conflicts
described above. Investment personnel at Columbia, including the Acquiring
Fund's portfolio manager, are subject to restrictions on engaging in personal
securities transactions pursuant to Codes of Ethics adopted by Columbia and the
Acquiring Fund, which contain provisions and requirements designed to identify
and address certain conflicts of interest between personal investment activities
and the interests of the Acquiring Fund.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE FUNDS
PricewaterhouseCoopers LLP, located at 125 High Street, Boston, MA 02110-1707,
is Independent Registered Public Accounting Firm to the Acquiring Fund and the
Acquired Fund, providing audit and tax return review of various Securities and
Exchange Commission filings. The Report of Independent Registered Public
Accounting Firm, Financial Highlights and Financial Statements included in the
Acquiring Fund's and the Acquired Fund's Annual Report to Shareholders for the
fiscal year ended October 31, 2004, are incorporated by reference into this SAI.
The audited financial statements for the Acquiring Fund are incorporated by
reference into this SAI and the audited financial statements for the Acquired
Fund are incorporated by reference into the Prospectus/Proxy Statement and this
SAI have been so included and incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, given on their authority as experts in auditing and
accounting.
FINANCIAL STATEMENTS.
Pro forma financial statements of the Acquiring Fund for the Merger are provided
on the following pages.
The accompanying unaudited pro forma combining investment portfolio and
statement of assets and liabilities assumes that the exchange described in the
next paragraph occurred as of October 31, 2004 and the unaudited pro forma
combining statement of operations for the twelve months ended October 31, 2004
presents the results of operations of the Acquiring Fund as if the combination
with the Acquired Fund had been consummated at October 31, 2004. The pro forma
results of operations are not necessarily indicative of future operations or the
actual results that would have occurred had the combination been consummated at
Por
4
October 31, 2004. These historical statements have been derived from the
Acquiring Fund and the Acquired Fund's books and records utilized in calculating
daily net asset value at October 31, 2004, and for the twelve month period then
ended.
The pro forma statements give effect to the proposed transfer of all of the
assets of the Acquired Fund to the Acquiring Fund in exchange for the assumption
by the Acquiring Fund of all of the liabilities of the Acquired Fund and for a
number of the Acquiring Fund's shares equal in value to the value of the net
assets of the Acquired Fund transferred to the Acquiring Fund. Under generally
accepted accounting principles, the historical cost of investment securities
will be carried forward to the surviving entity and the results of operations of
the Acquiring Fund for pre-combination periods will not be restated. The pro
forma statement of operations does not reflect the expenses of either fund in
carrying out its obligations under the Agreement and Plan of Reorganization.
The unaudited Financial Highlights and Financial Statements included in the
Acquiring Fund's Semi-Annual Report to Shareholders for the six-month period
ended November 30, 2004 are incorporated by reference into this SAI. The
unaudited pro forma combining statements should be read in conjunction with the
separate financial statements of the Acquiring Fund and the Acquired Fund
incorporated by reference in this SAI.
The unaudited pro forma combining statements should be read in conjunction with
the separate financial statements of the Acquiring Fund and the Acquired Fund
incorporated by reference in this SAI.
PRO-FORMA COMBINING INVESTMENT PORTFOLIO
PRO-FORMA COMBINING INVESTMENT PORTFOLIO
FEBRUARY 28, 2005 (UNAUDITED)
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- ---------------------- ---------------------------- ----------------------------
SHARES VALUE ($) SHARES VALUE ($) SHARES VALUE ($)
----------- ---------- ------------- -------------- ------------- --------------
COMMON STOCKS 98.6%
CONSUMER DISCRETIONARY 13.6%
AUTO COMPONENTS 1.0%
Continental AG - - 55,000 4,069,163 55,000 4,069,163
Denso Corp. - - 121,400 3,114,521 121,400 3,114,521
Tong Yang Industry Co., Ltd. 2,334,000 3,586,474 - - 2,334,000 3,586,474
---------- ---------- ----------
3,586,474 7,183,684 10,770,158
AUTOMOBILES 3.7%
Bajaj Auto Ltd. 68,396 1,614,855 - - 68,396 1,614,855
Hyundai Motor Co. 150,480 8,612,983 - - 150,480 8,612,983
Maruti Udyog Ltd. 353,397 3,831,833 - - 353,397 3,831,833
Nissan Motor Co., Ltd. - - 223,500 2,397,498 223,500 2,397,498
PT Astra International 5,168,000 6,021,092 - - 5,168,000 6,021,092
Renault SA - - 80,341 7,270,451 80,341 7,270,451
Toyota Motor Corp. - - 221,300 8,613,672 221,300 8,613,672
---------- ---------- ----------
20,080,763 18,281,621 38,362,384
DISTRIBUTORS 1.0%
Li & Fung Ltd. 5,980,000 10,233,528 - - 5,980,000 10,233,528
---------- ---------- ----------
10,233,528 - 10,233,528
HOTELS, RESTAURANTS & LEISURE 0.6%
Carnival Corp. - - 41,700 2,267,646 41,700 2,267,646
Genting Berhad 686,300 3,538,075 - - 686,300 3,538,075
---------- ---------- ----------
3,538,075 2,267,646 5,805,721
HOUSEHOLD DURABLES 2.2%
Daiwa House Industry Co., Ltd. - - 182,000 2,067,198 182,000 2,067,198
Koninklijke (Royal) Philips
Electronics NV - - 194,900 5,387,907 194,900 5,387,907
Matsushita Electric Industrial Co., Ltd. - - 420,000 6,279,545 420,000 6,279,545
Pioneer Corp. - - 143,000 2,521,642 143,000 2,521,642
Sekisui Chemical Co., Ltd. - - 384,000 2,856,211 384,000 2,856,211
Sharp Corp. - - 215,000 3,416,991 215,000 3,416,991
---------- ---------- ----------
- 22,529,494 22,529,494
LEISURE EQUIPMENT & PRODUCTS 0.7%
Fuji Photo Film Co., Ltd. - - 188,000 7,121,347 188,000 7,121,347
---------- ---------- ----------
- 7,121,347 7,121,347
MEDIA 2.9%
Astro All Asia Networks PLC (a) 2,354,100 3,434,257 - - 2,354,100 3,434,257
JC Decaux SA (a) - - 78,500 2,018,624 78,500 2,018,624
Mediaset S.p.A. - - 145,000 2,040,954 145,000 2,040,954
News Corp., Class B - - 218,700 3,763,827 218,700 3,763,827
Pearson PLC - - 627,100 7,679,455 627,100 7,679,455
Singapore Press Holdings Ltd. 2,829,700 7,932,342 - - 2,829,700 7,932,342
Vivendi Universal SA (a) - - 86,000 2,715,899 86,000 2,715,899
---------- ---------- ----------
11,366,599 18,218,759 29,585,358
SPECIALITY RETAIL 0.9%
Esprit Holdings Ltd. 1,249,500 8,920,564 - - 1,249,500 8,920,564
---------- ---------- ----------
8,920,564 - 8,920,564
See Accompanying Notes to Financial Statements
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- ---------------------- ---------------------------- ----------------------------
TEXTILES, APPAREL & LUXURY GOODS 0.6%
Burberry Group PLC - - 544,846 4,127,561 544,846 4,127,561
Swatch Group AG, Registered Shares - - 77,400 2,156,227 77,400 2,156,227
---------- ---------- -----------
- 6,283,788 6,283,788
CONSUMER DISCRETIONARY TOTAL 57,726,003 81,886,339 139,612,342
---------- ---------- -----------
CONSUMER STAPLES 6.3%
BEVERAGES 1.0%
Diageo PLC - - 430,350 6,123,279 430,350 6,123,279
SABMiller PLC - - 262,079 4,326,129 262,079 4,326,129
---------- ---------- -----------
- 10,449,408 10,449,408
FOOD & STAPLES RETAILING 0.9%
Ito-Yokado Co., Ltd. - - 85,000 3,522,118 85,000 3,522,118
Metro AG - - 93,688 5,256,910 93,688 5,256,910
---------- ---------- -----------
- 8,779,028 8,779,028
FOOD PRODUCTS 2.4%
Nestle SA, Registered Shares - - 44,797 12,436,369 44,797 12,436,369
People's Food Holdings Ltd. 3,134,000 2,602,019 - - 3,134,000 2,602,019
Royal Numico NV(a) - - 50,700 2,047,030 50,700 2,047,030
Thai Union Frozen Products Public Co.,
Ltd. 3,381,800 2,560,066 - - 3,381,800 2,560,066
Unilever PLC - - 495,220 4,732,932 495,220 4,732,932
---------- ---------- -----------
5,162,085 19,216,331 24,378,416
HOUSEHOLD PRODUCTS 1.2%
Kao Corp. - - 113,000 2,685,247 113,000 2,685,247
Reckitt Benckiser PLC - - 312,064 9,818,017 312,064 9,818,017
---------- ---------- -----------
- 12,503,264 12,503,264
TOBACCO 0.8%
Imperial Tobacco Group PLC - - 191,397 5,100,771 191,397 5,100,771
Japan Tobacco, Inc. - - 289 3,142,584 289 3,142,584
---------- ---------- -----------
- 8,243,355 8,243,355
CONSUMER STAPLES TOTAL 5,162,085 59,191,386 64,353,471
---------- ---------- -----------
ENERGY 6.5%
ENERGY EQUIPMENT & SERVICES 0.4%
Saipem S.P.A. - - 193,600 2,620,923 193,600 2,620,923
Stolt Offshore SA (a) - - 244,600 1,934,318 244,600 1,934,318
---------- ---------- -----------
- 4,555,241 4,555,241
OIL & GAS 6.1%
BG Group PLC - - 707,277 5,546,850 707,277 5,546,850
BP PLC, ADR - - 227,930 14,797,216 227,930 14,797,216
EnCana Corp. - - 159,800 10,599,780 159,800 10,599,780
ENI S.p.A. - - 383,550 10,029,042 383,550 10,029,042
Norsk Hydro ASA - - 38,280 3,310,485 38,280 3,310,485
OMV AG - - 6,200 2,148,931 6,200 2,148,931
Shell Transport & Trading Co., PLC - - 569,000 5,334,398 569,000 5,334,398
Total SA - - 45,590 10,850,575 45,590 10,850,575
---------- ---------- -----------
- 62,617,277 62,617,277
ENERGY TOTAL - 67,172,518 67,172,518
---------- ---------- -----------
FINANCIALS 28.6%
CAPITAL MARKETS 1.2%
Credit Suisse Group - - 62,500 2,721,478 62,500 2,721,478
See Accompanying Notes to Financial Statements
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- ---------------------- ---------------------------- ----------------------------
Deutsche Bank AG, Registered Shares - - 77,898 6,839,822 77,898 6,839,822
Nomura Holdings, Inc. - - 191,000 2,643,173 191,000 2,643,173
---------- ----------- -----------
- 12,204,473 12,204,473
COMMERCIAL BANKS 16.6%
ABN AMRO Holding NV - - 231,770 6,391,685 231,770 6,391,685
Anglo Irish Bank Corp., PLC - - 206,000 5,428,563 206,000 5,428,563
Australia & New Zealand Banking Group
Ltd. - - 120,100 2,028,569 120,100 2,028,569
Banco Bilbao Vizcaya Argentaria SA - - 238,500 4,122,776 238,500 4,122,776
Banco de Sabadell SA - - 104,203 2,656,894 104,203 2,656,894
Banco Popolare di Verona E Novara - - 211,600 4,145,150 211,600 4,145,150
Banco Popular Espanol SA - - 60,780 4,207,911 60,780 4,207,911
Bangkok Bank Public Co., Ltd., NVDR 2,689,500 7,800,745 - - 2,689,500 7,800,745
Bank of Ireland - - 307,856 5,159,260 307,856 5,159,260
Bank of Yokohama Ltd. - - 425,000 2,612,185 425,000 2,612,185
Bank Rakyat Indonesia 11,231,000 3,969,029 - - 11,231,000 3,969,029
Barclays PLC - - 773,410 8,383,140 773,410 8,383,140
BNP Paribas SA - - 92,354 6,700,885 92,354 6,700,885
Chinatrust Financial Holding Co., Ltd. 5,720,111 6,837,586 - - 5,720,111 6,837,586
Dah Sing Financial Group 224,800 1,697,857 - - 224,800 1,697,857
DBS Group Holdings Ltd. - - 377,000 3,444,282 377,000 3,444,282
DNB NOR ASA - - 386,600 3,935,465 386,600 3,935,465
Hong Leong Bank Berhad 6,769,600 9,606,258 - - 6,769,600 9,606,258
HSBC Holdings PLC - - 571,500 9,540,171 571,500 9,540,171
Kasikornbank Public Co., Ltd. (a) 4,583,600 7,832,395 - - 4,583,600 7,832,395
Kookmin Bank 295,235 13,612,237 - - 295,235 13,612,237
Mitsubishi Tokyo Financial Group, Inc. - - 352 3,228,373 352 3,228,373
Mizuho Financial Group, Inc. - - 755 3,667,715 755 3,667,715
National Bank of Greece SA - - 125,190 4,758,409 125,190 4,758,409
Oversea-Chinese Banking Corp., Ltd. 410,000 3,422,833 - - 410,000 3,422,833
Royal Bank of Scotland Group PLC - - 255,071 8,736,632 255,071 8,736,632
Skandinaviska Enskilda Banken AB, Class A - - 149,000 2,887,422 149,000 2,887,422
Standard Chartered PLC 240,106 4,399,257 - - 240,106 4,399,257
Sumitomo Mitsui Financial Group, Inc. - - 461 3,193,269 461 3,193,269
Suncorp-Metway Ltd. - - 111,100 1,657,074 111,100 1,657,074
UniCredito Italiano S.p.A. - - 463,600 2,706,409 463,600 2,706,409
United Overseas Bank Ltd. 913,000 7,623,602 499,000 4,166,678 1,412,000 11,790,280
---------- ----------- -----------
66,801,799 103,758,917 170,560,716
CONSUMER FINANCE 0.3%
Credit Saison Co., Ltd. - - 77,800 2,762,641 77,800 2,762,641
---------- ----------- -----------
- 2,762,641 2,762,641
DIVERSIFIED FINANCIAL SERVICES 1.2%
Housing Development Finance Corp., Ltd. 389,893 6,942,350 - - 389,893 6,942,350
ING Groep NV, CVA - - 162,040 4,977,829 162,040 4,977,829
---------- ----------- -----------
6,942,350 4,977,829 11,920,179
INSURANCE 4.1%
Aegon NV - - 458,234 6,612,787 458,234 6,612,787
Allianz AG, Registered Shares - - 21,893 2,767,998 21,893 2,767,998
AXA - - 230,780 6,197,727 230,780 6,197,727
Cathay Financial Holding Co., Ltd. 2,787,000 5,657,663 - - 2,787,000 5,657,663
Irish Life & Permanent PLC - - 196,100 3,986,249 196,100 3,986,249
Mitsui Sumitomo Insurance Co., Ltd. - - 322,000 2,867,378 322,000 2,867,378
QBE Insurance Group Ltd. - - 137,100 1,657,803 137,100 1,657,803
See Accompanying Notes to Financial Statements
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- ---------------------- ---------------------------- ----------------------------
Riunione Adriatica di Sicurta S.p.A. - - 151,001 3,503,860 151,001 3,503,860
Samsung Fire & Marine Insurance Co., Ltd. 73,680 5,993,095 - - 73,680 5,993,095
Zurich Financial Services AG (a) - - 15,983 2,940,752 15,983 2,940,752
----------- ----------- -----------
11,650,758 30,534,554 42,185,312
REAL ESTATE 5.2%
City Developments Ltd. 1,591,500 6,593,109 321,000 1,329,807 1,912,500 7,922,916
Henderson Land Development Co., Ltd. 1,363,000 6,386,007 - - 1,363,000 6,386,007
Land & Houses Public Co., Ltd., NVDR 18,493,100 4,614,819 - - 18,493,100 4,614,819
SM Prime Holdings, Inc. 21,422,000 3,366,160 - - 21,422,000 3,366,160
Sumitomo Realty & Development Co., Ltd. - - 287,000 3,657,762 287,000 3,657,762
Sun Hung Kai Properties Ltd. 1,597,000 14,829,517 287,000 2,665,042 1,884,000 17,494,559
Swire Pacific Ltd., Class A 626,500 5,106,149 461,000 3,757,278 1,087,500 8,863,427
Wharf Holdings Ltd. - - 503,000 1,705,194 503,000 1,705,194
----------- ----------- -----------
40,895,761 13,115,083 54,010,844
FINANCIALS TOTAL 126,290,668 167,353,497 293,644,165
----------- ----------- -----------
HEALTH CARE 6.7%
HEALTH CARE EQUIPMENT & SUPPLIES 1.3%
GN Store Nord A/S - - 158,000 1,712,520 158,000 1,712,520
Pihsiang Machinery Manufacturing Co.,
Ltd. 858,825 2,051,799 - - 858,825 2,051,799
Smith & Nephew PLC - - 494,310 5,071,584 494,310 5,071,584
Synthes, Inc. (a) - - 28,200 3,406,529 28,200 3,406,529
Terumo Corp. - - 50,100 1,570,385 50,100 1,570,385
----------- ----------- -----------
2,051,799 11,761,018 13,812,817
PHARMACEUTICALS 5.4%
AstraZeneca PLC - - 208,600 8,272,737 208,600 8,272,737
Dr. Reddy's Laboratories Ltd., ADR 193,900 3,416,518 - - 193,900 3,416,518
GlaxoSmithKline PLC - - 478,450 11,471,745 478,450 11,471,745
Novartis AG, Registered Shares - - 137,760 6,911,158 137,760 6,911,158
Ranbaxy Laboratories Ltd. 140,732 3,289,524 - - 140,732 3,289,524
Sanofi-Aventis SA - - 79,330 6,349,412 79,330 6,349,412
Schering AG - - 66,600 4,871,302 66,600 4,871,302
Shire Pharmaceuticals Group PLC - - 201,800 2,244,160 201,800 2,244,160
Takeda Pharmaceutical Co., Ltd. - - 85,700 4,100,923 85,700 4,100,923
Teva Pharmaceutical Industries Ltd., ADR - - 141,400 4,257,554 141,400 4,257,554
----------- ----------- -----------
6,706,042 48,478,991 55,185,033
HEALTHCARE TOTAL 8,757,841 60,240,009 68,997,850
----------- ----------- -----------
INDUSTRIALS 9.9%
AEROSPACE & DEFENSE 0.2%
Singapore Technologies Engineering Ltd. - - 1,350,000 1,959,223 1,350,000 1,959,223
----------- ----------- -----------
- 1,959,223 1,959,223
BUILDING PRODUCTS 0.6%
Nippon Sheet Glass Co., Ltd. - - 429,000 1,903,045 429,000 1,903,045
Wienerberger AG - - 78,755 3,917,924 78,755 3,917,924
----------- ----------- -----------
- 5,820,969 5,820,969
COMMERCIAL SERVICES & SUPPLIES 0.9%
Randstad Holding NV - - 205,218 9,126,215 205,218 9,126,215
----------- ----------- -----------
- 9,126,215 9,126,215
CONSTRUCTION & ENGINEERING 1.2%
Obayashi Corp. - - 319,000 2,025,361 319,000 2,025,361
See Accompanying Notes to Financial Statements
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- ---------------------- ---------------------------- ----------------------------
Shimizu Corp. - - 586,000 2,885,581 586,000 2,885,581
Vinci SA - - 50,900 7,479,683 50,900 7,479,683
---------- ---------- -----------
- 12,390,625 12,390,625
ELECTRICAL EQUIPMENT 0.8%
Mitsubishi Electric Corp. - - 669,000 3,505,337 669,000 3,505,337
Optimax Technology Corp 1,604,000 4,533,174 - - 1,604,000 4,533,174
---------- ---------- -----------
4,533,174 3,505,337 8,038,511
INDUSTRIAL CONGLOMERATES 1.9%
China Merchants Holdings International
Co., Ltd. 2,170,000 4,527,273 - - 2,170,000 4,527,273
Hutchison Whampoa Ltd. 420,100 3,777,819 380,000 3,417,213 800,100 7,195,032
SembCorp Industries Ltd. - - 1,161,000 1,351,943 1,161,000 1,351,943
Siemens AG, Registered Shares - - 29,778 2,336,139 29,778 2,336,139
Smiths Group PLC - - 225,978 3,702,894 225,978 3,702,894
---------- ---------- -----------
8,305,092 10,808,189 19,113,281
MACHINERY 1.6%
Atlas Copco AB, Class B - - 178,400 8,244,354 178,400 8,244,354
Komatsu Ltd. - - 284,000 2,133,755 284,000 2,133,755
Volvo AB, Class B - - 135,200 6,213,483 135,200 6,213,483
---------- ---------- -----------
- 16,591,592 16,591,592
MARINE 0.3%
Kawasaki Kisen Kaisha Ltd. - - 443,000 3,331,073 443,000 3,331,073
---------- ---------- -----------
- 3,331,073 3,331,073
ROAD & RAIL 1.2%
Canadian National Railway Co. - - 117,385 7,279,992 117,385 7,279,992
ComfortDelGro Corp., Ltd. - - 2,285,000 2,346,808 2,285,000 2,346,808
East Japan Railway Co. - - 462 2,466,320 462 2,466,320
---------- ---------- -----------
- 12,093,120 12,093,120
TRADING COMPANIES & DISTRIBUTORS 0.5%
Mitsubishi Corp. - - 413,000 5,634,364 413,000 5,634,364
---------- ---------- -----------
- 5,634,364 5,634,364
TRANSPORTATION INFRASTRUCTURE 0.7%
BAA PLC - - 289,700 3,384,618 289,700 3,384,618
Zhejiang Expressway Co., Ltd., Class H 4,932,000 3,556,280 - - 4,932,000 3,556,280
---------- ---------- -----------
3,556,280 3,384,618 6,940,898
INDUSTRIALS TOTAL 16,394,546 84,645,325 101,039,871
---------- ---------- -----------
INFORMATION TECHNOLOGY 12.1%
COMMUNICATIONS EQUIPMENT 0.9%
Nokia Oyj - - 238,000 3,846,509 238,000 3,846,509
Tandberg ASA - - 302,600 3,376,869 302,600 3,376,869
Telefonaktiebolaget LM Ericsson, ADR (a) - - 78,800 2,309,628 78,800 2,309,628
---------- ---------- -----------
- 9,533,006 9,533,006
COMPUTERS & PERIPHERALS 1.1%
Acer, Inc. 2,074,836 3,376,787 - - 2,074,836 3,376,787
Lite-On Technology Corp. 4,155,200 4,512,263 - - 4,155,200 4,512,263
Toshiba Corp. - - 810,000 3,572,566 810,000 3,572,566
---------- ---------- -----------
7,889,050 3,572,566 11,461,616
ELECTRONIC EQUIPMENT & INSTRUMENTS 3.0%
Delta Electronics, Inc., GDR 2,043,000 3,589,642 - - 2,043,000 3,589,642
Hon Hai Precision Industry Co., Ltd. 1,856,206 8,650,221 - - 1,856,206 8,650,221
Hoya Corp. - - 16,000 1,740,796 16,000 1,740,796
Interflex Co., Ltd. 104,151 1,993,981 - - 104,151 1,993,981
See Accompanying Notes to Financial Statements
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- ---------------------- ---------------------------- ----------------------------
MFS Technology Ltd. 5,518,500 2,709,762 - - 5,518,500 2,709,762
Synnex Technology International Corp. 1,434,900 2,149,893 - - 1,434,900 2,149,893
TDK Corp. - - 78,000 5,663,651 78,000 5,663,651
Venture Corp., Ltd. 517,000 4,572,138 - - 517,000 4,572,138
---------- ---------- -----------
23,665,637 7,404,447 31,070,084
INTERNET SOFTWARE & SERVICES 0.5%
NCSoft Corp. (a) 50,250 3,607,872 - - 50,250 3,607,872
NIWS Co., Ltd. - - 475 1,465,237 475 1,465,237
---------- ---------- -----------
3,607,872 1,465,237 5,073,109
IT SERVICES 0.7%
Infosys Technologies Ltd. 140,069 7,176,685 - - 140,069 7,176,685
---------- ---------- -----------
7,176,685 - 7,176,685
OFFICE ELECTRONICS 0.4%
Canon, Inc. - - 78,400 4,151,606 78,400 4,151,606
---------- ---------- -----------
- 4,151,606 4,151,606
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 5.1%
Marvell Technology Group Ltd (a) - - 78,500 2,872,315 78,500 2,872,315
Samsung Electronics Co., Ltd. 55,330 28,792,864 11,500 5,984,419 66,830 34,777,283
STMicroelectronics NV, N.Y. Registered
Shares - - 125,100 2,225,529 125,100 2,225,529
Taiwan Semiconductor Manufacturing Co.,
Ltd. 7,140,390 12,675,691 - - 7,140,390 12,675,691
---------- ---------- -----------
41,468,555 11,082,263 52,550,818
SOFTWARE 0.4%
Sage Group PLC - - 888,100 3,519,733 888,100 3,519,733
---------- ---------- -----------
- 3,519,733 3,519,733
INFORMATION TECHNOLOGY TOTAL 83,807,799 40,728,858 124,536,657
---------- ---------- -----------
MATERIALS 5.0%
CHEMICALS 2.7%
BASF AG - - 46,600 3,490,687 46,600 3,490,687
Novozymes A/S, Class B - - 33,300 1,647,734 33,300 1,647,734
Shin-Etsu Chemical Co., Ltd. - - 114,900 4,702,166 114,900 4,702,166
Solvay SA, Class A - - 15,700 1,826,956 15,700 1,826,956
Sumitomo Chemical Co., Ltd. - - 1,243,000 6,616,521 1,243,000 6,616,521
Syngenta AG (a) - - 60,436 6,792,662 60,436 6,792,662
Teijin Ltd. - - 563,000 2,338,937 563,000 2,338,937
---------- ---------- -----------
- 27,415,663 27,415,663
CONSTRUCTION MATERIALS 1.7%
Cemex SA de CV, ADR, Certificate of
Participation - - 149,900 5,991,503 149,900 5,991,503
Siam Cement Public Co., Ltd., NVDR 1,668,200 11,769,375 - - 1,668,200 11,769,375
---------- ---------- -----------
11,769,375 5,991,503 17,760,878
METALS & MINING 0.2%
Semirara Mining Corp. (a) 1,973,006 1,588,659 - - 1,973,006 1,588,659
---------- ---------- -----------
1,588,659 - 1,588,659
PAPER & FOREST PRODUCTS 0.4%
Stora Enso Oyj, Class R - - 111,100 1,692,115 111,100 1,692,115
UPM-Kymmene Oyj - - 112,100 2,502,998 112,100 2,502,998
---------- ---------- -----------
- 4,195,113 4,195,113
MATERIALS TOTAL 13,358,034 37,602,279 50,960,313
---------- ---------- -----------
See Accompanying Notes to Financial Statements
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- ----------------------- ---------------------------- ----------------------------
TELECOMMUNICATION SERVICES 5.7%
DIVERSIFIED TELECOMMUNICATION SERVICES 2.4%
Belgacom SA (a) - - 90,300 3,793,815 90,300 3,793,815
Deutsche Telekom AG, Registered Shares
(a) - - 219,345 4,595,628 219,345 4,595,628
France Telecom SA - - 160,300 4,842,961 160,300 4,842,961
Nippon Telegraph & Telephone Corp. - - 778 3,372,766 778 3,372,766
PT Telekomunikasi Indonesia 8,010,000 3,833,757 - - 8,010,000 3,833,757
Royal Koninklijke KPN NV - - 281,410 2,723,316 281,410 2,723,316
Singapore Telecommunications Ltd. - - 1,291,000 2,081,897 1,291,000 2,081,897
----------- ----------- -------------
3,833,757 21,410,383 25,244,140
WIRELESS TELECOMMUNICATION SERVICES 3.3%
NTT DoCoMo, Inc. - - 1,158 1,966,527 1,158 1,966,527
China Mobile Hong Kong Ltd. 3,877,500 12,570,478 - - 3,877,500 12,570,478
Taiwan Cellular Corp. 6,519,000 7,030,345 - - 6,519,000 7,030,345
Vodafone Group PLC - - 4,566,860 11,975,471 4,566,860 11,975,471
----------- ----------- -------------
19,600,823 13,941,998 33,542,821
TELECOMMUNICATION SERVICES TOTAL 23,434,580 35,352,381 58,786,961
----------- ----------- -------------
UTILITIES 4.2%
ELECTRIC UTILITIES 2.1%
Datang International Power Generation
Co., Ltd., Class H 2,742,000 2,120,018 - - 2,742,000 2,120,018
E.ON AG - - 39,210 3,527,344 39,210 3,527,344
Enel S.p.A. - - 551,139 5,302,635 551,139 5,302,635
Fortum Oyj - - 204,600 3,923,252 204,600 3,923,252
Huaneng Power International, Inc., -
Class H 3,492,000 2,700,636 - - 3,492,000 2,700,636
Tokyo Electric Power Co., Inc. - - 166,800 4,090,734 166,800 4,090,734
----------- ----------- -------------
4,820,654 16,843,965 21,664,619
GAS UTILITIES 1.1%
Hong Kong & China Gas Co., Ltd. 2,800,908 5,939,967 - - 2,800,908 5,939,967
Tokyo Gas Co., Ltd. - - 676,000 2,722,674 676,000 2,722,674
Xinao Gas Holdings Ltd. (a) 4,552,000 2,520,012 - - 4,552,000 2,520,012
----------- ----------- -------------
8,459,979 2,722,674 11,182,653
MULTI-UTILITIES & UNREGULATED POWER 1.0%
National Grid Transco PLC - - 487,236 4,740,872 487,236 4,740,872
Veolia Environnement - - 157,600 5,479,735 157,600 5,479,735
----------- ----------- -------------
- 10,220,607 10,220,607
WATER UTILITIES 0.0%
Manila Water Co. (a) 977,200 116,237 - 977,200 116,237
----------- ----------- -------------
116,237 - - 116,237
UTILITIES TOTAL 13,396,870 29,787,246 43,184,116
----------- ----------- -------------
TOTAL COMMON STOCKS 348,328,426 663,959,838 1,012,288,264
----------- ----------- -------------
PREFERRED STOCK 0.5%
CONSUMER DISCRETIONARY 0.5%
AUTOMOBILES 0.5%
Porsche AG - - 7,300 5,274,572 7,300 5,274,572
----------- ----------- -------------
- 5,274,572 5,274,572
----------- ----------- -------------
CONSUMER DISCRETIONARY TOTAL - 5,274,572 5,274,572
----------- ----------- -------------
TOTAL PREFERRED STOCK - 5,274,572 5,274,572
----------- ----------- -------------
See Accompanying Notes to Financial Statements
COLUMBIA NEWPORT TIGER COLUMBIA INTERNATIONAL STOCK COLUMBIA INTERNATIONAL STOCK
% OF NET FUND FUND FUND
ASSETS TARGET FUND ACQUIRING FUND PRO-FORMA COMBINED
-------- -------------------------- --------------------------- ------------------------------
SHORT-TERM OBLIGATIONS 1.1%
Repurchase agreement with State
Street Bank & Trust Co., dated
02/28/05, due 03/01/05 at
2.5%, collateralized by a
U.S. Treasury Bond maturing
09/30/03, market value of
$8,038.881 (repurchase
proceeds $7,878,547) - - 7,878,000 7,878,000 7,878,000 7,878,000
Repurchase agreement with State
Street Bank & Trust Co., dated
02/28/05, due 03/01/05 at
2.520%, collateralized by a
U.S. Treasury Bond maturing
11/15/24, market value of
$3,597,833 (repurchase proceeds
$3,523,247) 3,523,000 3,523,000 - - 3,523,000 3,523,000
------------- ------------- --------------
TOTAL SHORT-TERM OBLIGATIONS 3,523,000 7,878,000 11,401,000
------------- ------------- --------------
PRO-FORMA ADJ
TOTAL INVESTMENTS 100.2% 351,851,426 677,112,410 1,028,963,836
Other Assets & Liabilities, Net -0.2% (2,814,639) 851,823 (176,343) (2,139,159)
------------- ------------- --------- --------------
Net Assets 100.0% $ 349,036,787 $ 677,964,233 $1,026,824,677
============= ============= ==============
TOTAL INVESTMENTS AT COST $ 270,146,522 (b) $ 565,225,710 (c) $ 835,372,232
============= ============= ==============
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $270,146,522.
(c) Cost for federal income tax purposes is $565,225,710.
ACRONYM NAME
- ------- -----------------------------
ADR American Depositary Receipt
GDR Global Depositary Receipt
NVDR Non-Voting Depositary Receipt
See Accompanying Notes to Financial Statements
<Table>
<Caption>
PRO-FORMA COMBINING STATEMENTS OF ASSETS & LIABILITIES
AS OF FEBRUARY 28, 2005 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
COLUMBIA COLUMBIA INTERNATIONAL STOCK
NEWPORT TIGER FUND STOCK FUND
TARGET FUND ACQUIRING FUND
--------------------------------------------------------------------------------------------------
ASSETS
Investments, at cost $ 270,146,522 $ 565,225,710
------------------ --------------------
Investments, at value $ 351,851,426 $ 677,112,410
Cash 680 359
Foreign currency (cost of $889,027 and $80,836,
respectively) 897,120 80,887
Receivable for:
Investments sold - 6,849,194
Fund shares sold 437,414 695,077
Interest 247 547
Dividends 590,216 872,501
Foreign tax reclaims - 166,930
Deferred Trustees' compensation plan 26,216 3,791
Receivable from advisor 266,581 -
Other assets - 5,926
------------------ --------------------
Total Assets 354,069,900 685,787,622
------------------ --------------------
- -----------------------------------------------------------------------------------------------
LIABILITIES
Expense reimbursement due to Investment
Advisor 14,272 -
Payable for:
Investments purchased 366,442 6,464,016
Fund shares repurchased 742,227 757,117
Investment advisory fee 195,262 435,750
Administration fee 71,464 -
Transfer agent fee 188,821 42,647
Pricing and bookkeeping fees 12,745 8,849
Merger fee - 17,775
Audit fee - 15,247
Custody fee 43,205 18,266
Reports to shareholders - 45,234
Service and distribution fees 93,907 14,697
Deferred Trustees' fees 26,216 3,791
Foreign capital gains tax payable 3,226,023 -
Other liabilities 52,529 -
------------------ --------------------
Total Liabilities 5,033,113 7,823,389
------------------ --------------------
NET ASSETS $ 349,036,787 $ 677,964,233
================== ====================
----------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital $ 417,768,258 $ 564,922,546
Undistributed (overdistributed) net investment
income (889,564) 84,031
Accumulated net realized gain (loss) (146,345,983) 1,050,482
Net unrealized appreciation (depreciation) on:
Investments 81,704,904 111,886,700
Foreign currency translations 25,195 20,474
Foreign capital gains tax (3,226,023) -
---------------------------------------
NET ASSETS $ 349,036,787 $ 677,964,233
=======================================
---------------------------------------------------------------------------------------
CLASS A (a)
Net assets $ 196,705,493 $ 27,675,071
Shares outstanding 14,229,632 1,806,672
================== ===================
Net asset value per share (b) (c) $ 13.82 $ 15.32
================== ===================
Maximum sales charge 5.75% 5.75%
================== ===================
Maximum offering price per share (d) $ 14.66 $ 16.25
================== ===================
---------------------------------------------------------------------------------------
CLASS B (a)
Net assets $ 66,451,365 $ 11,316,896
Shares outstanding 4,973,059 754,575
================== ===================
Net asset value and offering price per share $ 13.36 $ 15.00
(b) (c)
================== ===================
---------------------------------------------------------------------------------------
CLASS C (a)
Net assets $ 28,642,347 $ 621,545
Shares outstanding 2,144,456 41,285
================== ===================
Net asset value and offering price per share $ 13.36 $ 15.05
(b) (c)
================== ===================
---------------------------------------------------------------------------------------
CLASS D
Net assets - $ 749,574
Shares outstanding - 49,607
================== ===================
Net asset value and offering price per share
(b) (c) - $ 15.11
================== ===================
---------------------------------------------------------------------------------------
CLASS T (a)
Net assets $ 29,007,867 -
Shares outstanding 2,087,460 -
================== ===================
Net asset value per share (b) (c) $ 13.90 -
================== ===================
Maximum sales charge 5.75% -
================== ===================
Maximum offering price per share (d) $ 14.75 -
================== ===================
---------------------------------------------------------------------------------------
CLASS Z (a)
Net assets $ 28,229,715 $ 637,601,147
Shares outstanding 2,037,019 41,443,170
================== ===================
Net asset value, offering and redemption
price per share $ 13.86 $ 15.38
================== ===================
-------------------------------------------
COLUMBIA
INTERNATIONAL
PRO FORMA STOCK FUND
ADJUSTMENTS RO-FORMA COMBINED
-------------------------------------------
ASSETS
Investments, at cost $ - $ 835,372,232
------------------- --------------------
Investments, at value $ - 1,028,963,836
Cash - 1,039
Foreign currency (cost of $80,836 and $889,027,
respectively) - 978,007
Receivable for:
Investments sold - 6,849,194
Fund shares sold - 1,132,491
Interest - 794
Dividends - 1,462,717
Foreign tax reclaims - 166,930
Deferred Trustees' compensation plan - 30,007
Receivable from advisor - 266,581
Other assets - 5,926
------------------- --------------------
Total Assets - 1,039,857,522
------------------- --------------------
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Expense reimbursement due to Investment
Advisor - 14,272
Payable for:
Investments purchased - 6,830,458
Fund shares repurchased - 1,499,344
Investment advisory fee - 631,012
Administration fee - 71,464
Transfer agent fee - 231,468
Pricing and bookkeeping fees - 21,594
Merger fee - 17,775
Audit fee - 15,247
Custody fee - 61,471
Reports to shareholders - 45,234
Service and distribution fees - 108,604
Deferred Trustees' fees - 30,007
Foreign capital gains tax payable - 3,226,023
Other liabilities 176,343 (e) 228,872
------------------- --------------------
Total Liabilities 176,343 13,032,845
------------------- --------------------
NET ASSETS $ (176,343)(e) $ 1,026,824,677
=================== ====================
--------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital - $ 982,690,804
Undistributed (overdistributed) net investment
income (176,343)(e) (981,876)
Accumulated net realized gain (loss) - (145,295,501)
Net unrealized appreciation (depreciation) on:
Investments - 193,591,604
Foreign currency translations - 45,669
Foreign capital gains tax - (3,226,023)
-------------------- ---------------------
NET ASSETS $ (176,343) (e) $ 1,026,824,677
==================== =====================
--------------------------------------------------------------------------------------------
CLASS A (a)
Net assets 28,893,830 (e) $ 253,274,394
Shares outstanding 497,845 (f) 16,534,149
=====================
Net asset value per share (b) (c) $ 15.32
=====================
Maximum sales charge 5.75%
=====================
Maximum offering price per share (d) $ 16.25
=====================
--------------------------------------------------------------------------------------------
CLASS B (a)
Net assets (33,573) (e) $ 77,734,688
Shares outstanding (544,530) (f) 5,183,104
=====================
Net asset value and offering price per share $ 15.00
(b) (c)
=====================
--------------------------------------------------------------------------------------------
CLASS C (a)
Net assets (14,471) (e) $ 29,249,421
Shares outstanding (242,901) (f) 1,942,840
=====================
Net asset value and offering price per share $ 15.05
(b) (c)
=====================
--------------------------------------------------------------------------------------------
CLASS D
Net assets $ 749,574
Shares outstanding 49,607
=====================
Net asset value and offering price per share
(b) (c) $ 15.11
=====================
--------------------------------------------------------------------------------------------
CLASS T (a)
Net assets (29,007,867) -
Shares outstanding (2,087,460) -
=====================
Net asset value per share (b) (c) -
=====================
Maximum sales charge -
=====================
Maximum offering price per share (d) -
=====================
--------------------------------------------------------------------------------------------
CLASS Z (a)
Net assets (14,262) (e) $ 665,816,600
Shares outstanding (203,055) (f) 43,277,134
=====================
Net asset value, offering and redemption
price per share $ 15.38
=====================
</Table>
(a) Class A, B, C, T and Z shares of Columbia Newport Tiger Fund are exchanged
for Class A, B, C and Z shares, respectively, of Columbia International
Stock Fund based on the net asset value per share of Columbia International
Stock Fund's Class A, B, C and Z shares at the time of the merger.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(c) Redemption price per share is equal to net asset value less any applicable
redemption fees.
(d) On sales of $50,000 or more the offering price is reduced.
(e) Adjustment includes one time proxy, accounting, legal and other costs of
the reorganization as approved by the Board of Trustees of $176,343 and
$0 to be borne by Columbia Newport Tiger Fund and Columbia International
Stock Fund, respectively.
(f) Reflects estimated shares issued to Target Fund at the time of the merger.
See Accompanying Notes to Financial Statements.
PRO-FORMA COMBINING STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 2005 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
COLUMBIA COLUMBIA
COLUMBIA INTERNATIONAL STOCK INTERNATIONAL
NEWPORT TIGER FUND FUND PRO FORMA STOCK FUND
TARGET FUND ACQUIRING FUND ADJUSTMENTS PRO FORMA COMBINED
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 11,327,384 $ 12,401,440 $ 23,728,824
Interest 41,736 299,829 341,565
Foreign taxes withheld (1,291,720) (1,162,698) (2,454,418)
--------------- --------------- -------------- ------------------
Total Investment Income 10,077,400 11,538,571 - 21,615,971
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fee 2,608,916 5,786,521 (386,456) 8,008,981 (c)
Administration fee 832,516 - (832,516) - (c)
Distribution fee: -
Class B 610,717 81,983 692,700 (a)
Class C 200,486 4,547 205,033 (a)
Class D - 5,687 5,687 (a)
Service fee: -
Class A 423,749 63,654 69,915 557,318 (a)
Class B 203,572 27,327 230,899 (a)
Class C 66,863 1,518 68,381 (a)
Class D - 1,890 1,890 (a)
Transfer agent fee 1,146,244 799,850 (669,164) 1,276,930 (d)
Pricing and bookkeeping fees 98,808 166,600 (101,296) 164,112 (b)
Trustees' fees 11,512 13,946 (3,837) 21,621 (b)
Custody fee 571,926 460,819 1,032,745
Audit fee 45,907 43,063 (52,970) 36,000 (b)
Registration fee 42,928 111,204 (59,132) 95,000 (b)
Merger costs - 17,775 17,775
Non-recurring costs assumed by Investment
Advisor(See Note 5) 18,796 32,823 51,619
Other expenses 231,209 202,802 (28,794) 405,217 (b)
--------------- --------------- -------------- -------------------
Total Expenses 7,114,149 7,822,009 (2,064,250) 12,871,908
Fees and expenses waived or reimbursed by
Investment Advisor (442,332) (392,004) 834,336 - (a)
Fees waived by Transfer Agent - (570,363) (372,474) (942,837) (e)
Non-recurring costs assumed by Investment
Advisor (See Note 5) (18,796) (32,823) (51,619)
Custody earnings credit (252) (562) (814)
--------------- --------------- -------------- -------------------
Net Expenses 6,652,769 6,826,257 (1,602,388) 11,876,638
--------------- --------------- -------------- -------------------
Net Investment Income 3,424,631 4,712,314 1,602,388 9,739,333
- --------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UUNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX
Net realized gain (loss) on:
Investments 39,176,895 49,006,535 88,183,430
Foreign currency transactions (155,449) (1,365,713) (1,521,162)
Foreign capital gains tax (2,044,780) (1,171,040) (3,215,820)
--------------- --------------- -------------- -------------------
Net realized gain 36,976,666 46,469,782 - 83,446,448
Net change in unrealized appreciation
(depreciation) on:
Investments 22,476,357 23,982,978 46,459,335
Foreign currency translations 13,319 (112,160) (98,841)
Foreign capital gains tax 3,451,360 1,026,627 4,477,987
--------------- --------------- -------------- -------------------
Net change in unrealized
appreciation (depreciation) 25,941,036 24,897,445 - 50,838,481
--------------- --------------- -------------- -------------------
Net Gain 62,917,702 71,367,227 - 134,284,929
--------------- --------------- -------------- -------------------
Net Increase in Net Assets from
Operations $ 66,342,333 $ 76,079,541 $ 1,602,388 $ 142,421,874
--------------- --------------- -------------- -------------------
(a) Based on the contract in effect for the Columbia International Stock
Fund, the surviving fund.
(b) Reflects elimination of duplicate expenses achieved as a result of
merging funds.
(c) Reflects current contractual rates for the Acquiring Fund, the
surviving fund in the Merger, pursuant to the Assurance of
Discontinuous with the NYAG, effective November 1, 2004.
(d) Reflects the impact of changes to the transfer agent fee that is
expected to be implemented on the date the merger is consummated.
(e) Based on voluntary fee waiver for the Columbia International
Stock Fund, the surviving fund.
COLUMBIA INTERNATIONAL STOCK FUND
12-MONTH ACTIVITY 02/29/04-02/28/05
12-MONTH
PERIOD ENDED
2/29/2004 8/31/2004 6 MONTH 2/28/2005 02/28/05
---------- ---------- ---------- ---------- ------------
Dividends 2,355,016 10,502,144 8,147,128 4,254,312 12,401,440
Interest 103,827 225,992 122,165 177,664 299,829
Foreign taxes withheld (238,193) (1,235,663) (997,470) (165,228) (1,162,698)
---------- ---------- ---------- ---------- ------------
Total Investment Income 2,220,650 9,492,473 7,271,823 4,266,748 11,538,571
Investment advisory fee 2,062,548 4,953,878 2,891,330 2,895,191 5,786,521
Distribution fee:
Class B 42,030 83,878 41,848 40,135 81,983
Class C 806 2,845 2,039 2,508 4,547
Class D 2,671 5,532 2,861 2,826 5,687
Service fee:
Class A 30,276 61,658 31,382 32,272 63,654
Class B 14,010 27,959 13,949 13,378 27,327
Class C 266 948 682 836 1,518
Class D 886 1,834 948 942 1,890
Transfer agent fee 343,043 765,145 422,102 377,748 799,850
Pricing and bookkeeping fees 53,526 136,442 82,916 83,684 166,600
Trustees' fees 3,436 9,503 6,067 7,879 13,946
Custody fee 46,371 321,832 275,461 185,358 460,819
Audit fee 12,385 38,483 26,098 16,965 43,063
Registration fee 30,822 96,078 65,256 57,078 122,334
Merger costs - - - 17,775 17,775
Non-recurring costs (See Note 7) - 27,108 27,108 5,715 32,823
Other expenses 27,673 141,382 113,709 77,963 191,672
Total Operating Expenses 2,670,749 6,674,505 4,003,756 3,818,253 7,822,009
---------- ---------- ---------- ---------- ------------
Fees waived by Advisor (83,945) (373,733) (289,788) (102,216) (392,004)
Fees waived by Transfer Agent: (201,794) (471,541) (269,747) (300,616) (570,363)
Custody earnings credit (296) (833) (537) (25) (562)
Non-recurring cost assumed by Advisor - (27,108) (27,108) (5,715) (32,823)
Net Operating Expenses 2,384,714 5,801,290 3,416,576 3,409,681 6,826,257
---------- ---------- ---------- ---------- ------------
Interest expense - - - - -
Net Expenses 2,384,714 5,801,290 3,416,576 3,409,681 6,826,257
---------- ---------- ---------- ---------- ------------
Net Investment Income (164,064) 3,691,183 3,855,247 857,067 4,712,314
Net realized gain (loss) on:
Investments 16,874,142 31,660,421 14,786,279 34,220,256 49,006,535
Foreign currency transactions (127,635) (1,008,219) (880,584) (485,129) (1,365,713)
Foreign capital gains tax - (985,510) (985,510) (185,530) (1,171,040)
---------- ---------- ---------- ---------- ------------
Net realized gain 16,746,507 29,666,692 12,920,185 33,549,597 46,469,782
SAL SAL 12 month
Net change in unrealized app/dep on: App/Dep App/Dep change
---------- ----------- ------------
Investments 87,903,722 111,886,700 23,982,978
Foreign currency translations 132,634 20,474 (112,160)
Foreign capital gains tax (1,026,627) - 1,026,627
------------
Net change in unrealized app/dep 24,897,445
------------
Net Gain 71,367,227
COLUMBIA NEWPORT TIGER FUND
12-MONTH ACTIVITY 02/29/04-02/28/05
12-MONTH
PERIOD ENDED
2/29/2004 8/31/2004 6 MONTH 2/28/2005 02/28/05
---------- ---------- ---------- ----------- ------------
Dividends 2,617,118 11,146,006 8,528,888 2,798,496 11,327,384
Interest 23,351 39,946 16,595 25,141 41,736
Foreign taxes withheld (264,619) (1,182,588) (917,969) (373,751) (1,291,720)
---------- ---------- ---------- ----------- ------------
Total Investment Income 2,375,850 10,003,364 7,627,514 2,449,886 10,077,400
Investment advisory fee 1,563,054 2,942,853 1,379,799 1,229,117 2,608,916
Administration fee 479,579 897,618 418,039 414,477 832,516
Distribution fee:
Class B 454,887 797,061 342,174 268,543 610,717
Class C 97,624 197,314 99,690 100,796 200,486
Service fee:
Class A 185,856 388,008 202,152 221,597 423,749
Class B 151,629 265,687 114,058 89,514 203,572
Class C 32,541 65,805 33,264 33,599 66,863
Transfer agent fee 612,322 1,168,816 556,494 589,750 1,146,244
Pricing and bookkeeping fees 61,318 110,438 49,120 49,688 98,808
Trustees' fees 10,889 16,062 5,173 6,339 11,512
Custody fee 216,817 535,638 318,821 253,105 571,926
Audit fee 18,604 46,884 28,280 17,627 45,907
Registration fee 51,160 63,094 11,934 30,994 42,928
Non-recurring costs (See Note 7) - 15,871 15,871 2,925 18,796
Other expenses 93,459 234,868 141,409 89,800 231,209
---------- ---------- ---------- ----------- ------------
Total Operating Expenses 4,029,739 7,746,017 3,716,278 3,397,871 7,114,149
---------- ---------- ---------- ----------- ------------
Fees waived by Advisor (130,393) (451,052) (320,659) (121,673) (442,332)
Custody earnings credit (44) (81) (37) (215) (252)
Non-recurring cost assumed byAdvisor - (15,871) (15,871) (2,925) (18,796)
Net Operating Expenses 3,899,302 7,279,013 3,379,711 3,273,058 6,652,769
---------- ---------- ---------- ----------- ------------
Interest expense 260 254 (6) - (6)
---------- ---------- ---------- ----------- ------------
Net Expenses 3,899,562 7,279,267 3,379,705 3,273,058 6,652,763
---------- ---------- ---------- ----------- ------------
Net Investment Income (1,523,712) 2,724,097 4,247,809 (823,172) 3,424,637
Net realized gain (loss) on:
Investments 35,263,345 53,988,729 18,725,384 20,451,511 39,176,895
Foreign currency transactions (136,421) (357,485) (221,064) 65,615 (155,449)
Foreign capital gains tax - (1,175,173) (1,175,173) (869,607) (2,044,780)
---------- ---------- ---------- ----------- ------------
Net realized gain 35,126,924 52,456,071 17,329,147 19,647,519 36,976,666
SAL SAL 12 month
App/Dep App/Dep change
---------- ----------- ----------
Net change in unrealized app/dep on:
Investments 89,410,343 111,886,700 22,476,357
Foreign currency translations 7,155 20,474 13,319
Foreign capital gains tax (3,451,360) - 3,451,360
----------
Net change in unrealized app/dep 25,941,036
----------
Net Gain 62,917,702
COLUMBIA INTERNATIONAL STOCK FUND, INC.
AND
COLUMBIA NEWPORT TIGER FUND
PRO FORMA COMBINING FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2005
(UNAUDITED)
NOTE 1. ORGANIZATION
Columbia International Stock Fund Inc. (the "Acquiring Fund") is an Oregen
business Corporation registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
INVESTMENT GOAL
The Acquiring Fund seeks long-term capital appreciation by investing under
normal market conditions, at least 80% of its total net assets (plus any
borrowings for investment purposes) in stocks issued by companies from at least
three different countries outside the United States.
FUND SHARES
The Acquiring Fund may issue one billion shares. The Acquiring Fund offers five
classes of shares: Class A, Class B, Class C, Class D and Class Z shares. Each
share class has its own expense structure.
5
NOTE 2. BASIS OF COMBINATION
The accompanying pro-forma financial statements are presented to show the effect
of the proposed merger of Columbia Newport Tiger Fund ("Target Fund"), a series
of Columbia Funds Trust VII, by the Acquiring Fund as if such merger had
occurred on March 1, 2004.
Columbia Management Advisors, Inc. "CMA" expects that all of the securities held
by the Target Fund will comply with the investment goal and strategies of the
combined fund.
Under the terms of the merger, the combination of the Target Fund and Acquiring
Fund will be accounted for by the method of accounting for tax-free mergers of
investment companies. The merger will be accomplished by a combination of the
net assets of the Target Fund into the Acquiring Fund in exchange for new shares
of the Acquiring Fund at net asset value.
The Investment Portfolios and Statements of Assets and Liabilities of the Target
Fund and Acquiring Fund have been combined to reflect balances as of February
28, 2005. The Statements of Operations of the Target Fund and Acquiring Fund
have been combined to reflect twelve months ended February 28, 2005.
Following the merger the Acquiring Fund will be the accounting survivor. In
accordance with accounting principles generally accepted in the United States of
America, the historical cost of investment securities will be carried forward to
the Acquiring Fund and the results of operations for pre-combination periods
will not be re-stated.
The accompanying pro-forma combined financial statements should be read in
conjunction with the financial statements of the Acquiring Fund and the Target
Fund included within their respective annual shareholder reports as of August
31, 2004.
The following notes refer to the accompanying pro-forma combined financial
statements as if the merger referenced above of the Target Fund by the Acquiring
Fund had occurred on March 1, 2004.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
Both the Acquiring Fund and the Target Fund have substantially the same
accounting policies, which are detailed in the annual shareholder reports
referenced above in Note 2.
FEDERAL INCOME TAX STATUS
Each 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, each 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.
FOREIGN CAPITAL GAINS TAXES
Realized gains in certain countries may be subject to foreign taxes at the fund
level, at rates ranging from approximately 10% to 15%. The Fund accrues for such
foreign taxes on net realized and unrealized gains at the appropriate rate for
each jurisdiction.
NOTE 4. CAPITAL SHARES
The pro-forma combining net asset value per share assumes the issuance of
Acquiring Fund shares to Target Fund shareholders in connection with the
proposed merger. The number of shares assumed to be issued is equal to the net
asset
6
value of the Target Fund divided by the net asset value per share of the
Acquiring Fund as of February 28, 2005. The pro-forma number of shares
outstanding, by class, for the combined entity consists of the following at
February 28, 2005.
Shares of Additional Shares Total Shares
Acquiring Fund Assumed Issued Outstanding
Class of Shares Pre-Combination with Merger Post Combination
- --------------- --------------- ----------------- ----------------
Class A 1,806,672 14,727,477 16,534,149
Class B 754,575 4,428,529 5,183,104
Class C 41,285 1,901,555 1,942,840
Class D 49,607 - 49,607
Class Z 41,443,170 1,833,964 43,277,134
NOTE 5. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
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.
In 2004, certain Columbia funds, advisers and affiliated entities were named as
defendants in certain purported shareholder class and derivative actions making
claims, including claims under the Investment Company and the Investment
Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees
and expenses paid by the funds are excessive and that the advisers and their
affiliates inappropriately used fund assets to distribute the funds and for
other improper purpose. On March 2, 2005, the actions were consolidated in the
Massachusetts federal court as In re Columbia Entities Litigation. The
plaintiffs are expected to file a consolidated amended complaint in June 2005.
The Fund and the
7
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.
8
COLUMBIA COMMON STOCK FUND, INC.
COLUMBIA GROWTH FUND, INC.
COLUMBIA INTERNATIONAL STOCK FUND, INC.
COLUMBIA MID CAP GROWTH FUND, INC.
COLUMBIA SMALL CAP GROWTH FUND, INC.
COLUMBIA REAL ESTATE EQUITY FUND, INC.
COLUMBIA TECHNOLOGY FUND, INC.
COLUMBIA STRATEGIC INVESTOR FUND, INC.
COLUMBIA BALANCED FUND, INC.
COLUMBIA SHORT TERM BOND FUND, INC.
COLUMBIA FIXED INCOME SECURITIES FUND, INC.
COLUMBIA NATIONAL MUNICIPAL BOND FUND, INC.
COLUMBIA OREGON MUNICIPAL BOND FUND, INC.
COLUMBIA HIGH YIELD FUND, INC.
COLUMBIA DAILY INCOME COMPANY
STATEMENT OF ADDITIONAL INFORMATION
Columbia Funds
1300 S.W. Sixth Avenue
P.O. Box 1350
Portland, Oregon 97207
(503) 222-3600
This Statement of Additional Information contains information relating to
15 mutual funds: Columbia Common Stock Fund, Inc. (the "Common Stock Fund" or
"CCSF"), Columbia Growth Fund, Inc. (the "Growth Fund" or "CGF"), Columbia
International Stock Fund, Inc. (the "International Stock Fund" or "CISF"),
Columbia Mid Cap Growth Fund, Inc. formerly Columbia Special Fund, Inc. (the
"Mid Cap Growth Fund" or "CMCG"), Columbia Small Cap Growth Fund, Inc. formerly
Columbia Small Cap Fund, Inc. (the "Small Cap Growth Fund" or "CSCG"), Columbia
Real Estate Equity Fund, Inc. (the "Real Estate Fund" or "CREF"), Columbia
Technology Fund, Inc. (the "Technology Fund" or "CTF"), Columbia Strategic
Investor Fund, Inc. formerly Columbia Strategic Value Fund, Inc. (the "Strategic
Investor Fund" or "CSIF"), Columbia Balanced Fund, Inc. (the "Balanced Fund" or
"CBF"), Columbia Short Term Bond Fund, Inc. (the "Short Term Bond Fund" or
"CSTB"), Columbia Fixed Income Securities Fund, Inc. (the "Fixed Income
Securities Fund" or "CFIS"), Columbia National Municipal Bond Fund, Inc. (the
"National Municipal Bond Fund" or "CNMF"), Columbia Oregon Municipal Bond Fund,
Inc. (the "Oregon Municipal Bond Fund" or "CMBF"), Columbia High Yield Fund,
Inc. (the "High Yield Fund" or "CHYF"), and Columbia Daily Income Company (the
"Columbia Daily Income Company" or "CDIC") (each a "Fund" and together the
"Funds").
Each Fund offers its shares through one or more prospectuses (each a
"Prospectus"). This Statement of Additional Information is not a Prospectus and
should be read in conjunction with the applicable Prospectus. Copies of the
Prospectus are available without charge upon request by calling 1-800-426-3750.
The Funds' most recent Annual and Semi-Annual Reports to shareholders are
separate documents supplied with this Statement of Additional Information. The
financial statements, accompanying notes and report of independent accountants
appearing in the Annual Reports, and the financial statements and accompanying
notes appearing in the Semi-Annual Report, are incorporated by reference into
this Statement of Additional Information.
9
TABLE OF CONTENTS
DESCRIPTION OF THE FUNDS................................................................ 12
INVESTMENT RESTRICTIONS................................................................. 28
MANAGEMENT.............................................................................. 46
DISCLOSURE OF PORTFOLIO INFORMATION..................................................... 98
INVESTMENT ADVISORY AND OTHER SERVICES PROVIDED BY AFFILIATES........................... 100
PORTFOLIO TRANSACTIONS.................................................................. 111
CAPITAL STOCK AND OTHER SECURITIES...................................................... 117
DISTRIBUTION AND SERVICING.............................................................. 118
PURCHASE, REDEMPTION AND PRICING OF SHARES.............................................. 123
CUSTODIAN............................................................................... 129
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM........................................... 130
TAXES................................................................................... 130
FINANCIAL STATEMENTS.................................................................... 137
January 1, 2005
11
DESCRIPTION OF THE FUNDS
Each of the Funds is an open-end, management investment company. Each
Fund, other than the Oregon Municipal Bond Fund and the Columbia Technology
Fund, is diversified, which means that, with respect to 75 percent of its total
assets, the Fund will not invest more than 5 percent of its assets in the
securities of any single issuer. The investment advisor for each of the Funds is
Columbia Management Advisors, Inc. (the "Advisor" or "Columbia Management"). See
the section entitled "INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES" for
further information about the Advisor.
INVESTMENTS HELD AND INVESTMENT PRACTICES USED BY THE FUNDS
The Prospectus describes the fundamental investment objective and the
principal investment strategy applicable to each Fund. The investment objective
of each Fund, other than the Mid Cap Growth Fund, may not be changed without
shareholder approval. The Mid Cap Growth Fund's Board of Directors may change
its investment objective, without shareholder approval, upon 30 days written
notice to all shareholders. What follows is additional information regarding
securities in which a Fund may invest and investment practices in which it may
engage. To determine whether a Fund purchases such securities or engages in such
practices, see the chart on pages 14 and 15 of this Statement of Additional
Information.
Securities Rating Agencies
Rating agencies are private services that provide ratings of the credit
quality of fixed income securities. The following is a description of the fixed
income securities ratings used by Moody's Investor Services, Inc. ("Moody's")
and Standard & Poor's, a division of the McGraw-Hill Companies ("S&P").
Subsequent to its purchase by a Fund, a security may cease to be rated, or its
rating may be reduced below the criteria set forth for the Fund. Neither event
would require the elimination of the security from the Fund's portfolio, but the
Advisor will consider that event in its determination of whether the Fund should
continue to hold such security in its portfolio. Ratings assigned by a
particular rating agency are not absolute standards of credit quality and do not
evaluate market risk. Rating agencies may fail to make timely changes in credit
ratings and an issuer's current financial condition may be better or worse than
a rating indicates.
BOND RATINGS. MOODY'S -- The following is a description of Moody's bond ratings:
Aaa - Best quality; smallest degree of investment risk.
Aa - High quality by all standards.
Aa and Aaa are known as high-grade bonds.
A - Many favorable investment attributes; considered upper medium-grade
obligations.
Baa - Medium-grade obligations; neither highly protected nor poorly secured.
Interest and principal appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time.
Ba - Speculative elements; future cannot be considered well assured.
Protection of interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future.
B - Generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa - Poor standing, may be in default; elements of danger with respect to
principal or interest.
S&P -- The following is a description of S&P's bond ratings:
12
AAA - Highest rating; extremely strong capacity to pay principal and
interest.
AA - Also high-quality with a very strong capacity to pay principal and
interest; differ from AAA issues only by a small degree.
A - Strong capacity to pay principal and interest; somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions.
BBB - Adequate capacity to pay principal and interest; normally exhibit
adequate protection parameters, but adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest than for higher-rated bonds.
Bonds rated AAA, AA, A, and BBB are considered investment grade bonds.
BB - Less near-term vulnerability to default than other speculative grade
debt; face major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions that could lead to inadequate capacity to meet
timely interest and principal payments.
B - Greater vulnerability to default but presently have the capacity to meet
interest payments and principal repayments; adverse business, financial, or
economic conditions would likely impair capacity or willingness to pay interest
and repay principal.
CCC - Current identifiable vulnerability to default and dependent upon
favorable business, financial, and economic conditions to meet timely payments
of interest and repayments of principal. In the event of adverse business,
financial, or economic conditions, they are not likely to have the capacity to
pay interest and repay principal.
Bonds rated BB, B, and CCC are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and CCC a higher degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
A Fund may purchase unrated securities (which are not rated by a rating
agency) if the Advisor determines that a security is of comparable quality to a
rated security that the Fund may purchase. Unrated securities may be less liquid
than comparable rated securities and involve the risk that the Advisor may not
accurately evaluate the security's comparative credit rating. Analysis of the
creditworthiness of issuers of lower rated securities may be more complex than
for issuers of higher-quality fixed income securities. To the extent that a Fund
invests in unrated securities, the Fund's success in achieving its investment
objective is determined more heavily by the Advisor's creditworthiness analysis
than if the Fund invested exclusively in rated securities.
Non-Investment Grade Securities ("Junk Bonds")
Investments in securities rated below investment grade (i.e., rated Ba or
lower by Moody's or BB or lower by S&P), which are eligible for purchase by
certain of the Funds and, in particular, by the Columbia High Yield Fund, are
described as "speculative" by both Moody's and S&P. Investments in lower rated
corporate debt securities ("high yield securities" or "junk bonds") generally
provide greater income and increased opportunity for capital appreciation than
investments in higher quality securities, but they also typically entail greater
price volatility and principal and income risk. These high yield securities are
regarded as predominately speculative with respect to the issuer's continuing
ability to meet principal and interest payments. Analysis of the
creditworthiness of issuers of high yield securities may be more complex than
for issuers of higher quality debt securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of high yield securities have been found to be less sensitive to
interest-rate changes than higher-rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in high yield security prices because the advent of a
13
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If an issuer of debt
securities defaults, in addition to risking payment of all or a portion of
interest and principal, the Funds investing in such securities may incur
additional expenses to seek recovery.
The secondary market on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which the Fund
could sell a high yield security, and could adversely affect the daily net asset
value of the Fund's shares. Adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease the values and liquidity of
high yield securities, especially in a thinly-traded market. Since secondary
markets for high yield securities are generally less liquid than the market for
higher grade securities, it may be more difficult to value these securities
because such valuation may require more research, and elements of judgment may
play a greater role in the valuation because there is less reliable, objective
data available.
The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit ratings
in a timely fashion to reflect events since the security was last rated. The
Advisor does not rely solely on credit ratings when selecting securities for the
Funds, and develops its own independent analysis of issuer credit quality.
Bank Obligations
Bank obligations in which the Funds may invest include certificates of
deposit, bankers' acceptances, and fixed time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties, which vary depending upon market conditions and on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits.
Bank obligations include foreign bank obligations including Eurodollar and
Yankee obligations. Eurodollar bank obligations are dollar certificates of
deposits and time deposits issued outside the U.S. capital markets by foreign
branches of U.S. banks and by foreign banks. Yankee obligations are
dollar-denominated obligations issued in the U.S. capital markets by foreign
banks. Foreign bank obligations are subject to the same risks that pertain to
domestic issues, notably credit risk and interest rate risk. Additionally,
foreign bank obligations are subject to many of the same risks as investments in
foreign securities (see "Foreign Equity Securities" below). Obligations of
foreign banks involve somewhat different investment risks than those affecting
obligations of United States banks, including the possibilities that their
liquidity could be impaired because of future political and economic
developments of the foreign bank's country, that their obligations may be less
marketable than comparable obligations of United States banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized, that foreign
governmental restrictions such as exchange controls may be adopted, which might
adversely affect the payment of principal and interest on those obligations and
that the selection of those obligations may be more difficult because there may
be less publicly available information concerning foreign banks or the
accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign banks may differ from those applicable to
U.S. banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.
Commercial Paper
A1 and Prime 1 are the highest commercial paper ratings issued by S&P and
Moody's, respectively.
Commercial paper rated A1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated A or better; (3) the issuer has access to at least two additional
channels of borrowing; (4) basic earnings and cash flow have an upward trend
with an allowance made for unusual circumstances; (5) typically, the issuer's
industry is well established and the issuer has a strong position within the
industry; and (6) the reliability and quality of management are unquestioned.
Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of 10 years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations that may be present or may arise as a result of public interest
questions and preparation to meet such obligations.
14
Government Securities
Government securities may be either direct obligations of the U.S.
Treasury or may be the obligations of an agency or instrumentality of the United
States.
TREASURY OBLIGATIONS. The U.S. Treasury issues a variety of marketable
securities that are direct obligations of the U.S. Government. These securities
fall into three categories - bills, notes, and bonds - distinguished primarily
by their maturity at time of issuance. Treasury bills have maturities of one
year or less at the time of issuance, while Treasury notes currently have
maturities of 1 to 10 years. Treasury bonds can be issued with any maturity of
more than 10 years.
OBLIGATIONS OF AGENCIES AND INSTRUMENTALITIES. Agencies and
instrumentalities of the U.S. Government are created to fill specific
governmental roles. Their activities are primarily financed through securities
whose issuance has been authorized by Congress. Agencies and instrumentalities
include the Export Import Bank, Federal Housing Administration, Government
National Mortgage Association, Tennessee Valley Authority, Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association, Federal Home Loan Mortgage Corp., U.S. Postal System, and Federal
Finance Bank. Although obligations of "agencies" and "instrumentalities" are not
direct obligations of the U.S. Treasury, payment of the interest or principal on
these obligations is generally backed directly or indirectly by the U.S.
Government. This support can range from backing by the full faith and credit of
the United States or U.S. Treasury guarantees to the backing solely of the
issuing instrumentality itself.
Mortgage-Backed Securities and Mortgage Pass-Through Securities
Mortgage-backed securities are interests in pools of mortgage loans,
including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Mortgage-backed securities are sold to
investors by various governmental, government-related and private organizations
as further described below. A Fund may also invest in debt securities that are
secured with collateral consisting of mortgage-backed securities (see
"Collateralized Mortgage Obligations") and in other types of mortgage-related
securities.
Because principal may be prepaid at any time, mortgage-backed securities
involve significantly greater price and yield volatility than traditional debt
securities. A decline in interest rates may lead to a faster rate of repayment
of the underlying mortgages and expose the Fund to a lower rate of return upon
reinvestment. To the extent that mortgage-backed securities are held by a Fund,
the prepayment right will tend to limit to some degree the increase in net asset
value of the Fund because the value of the mortgage-backed securities held by
the Fund may not appreciate as rapidly as the price of non-callable debt
securities. When interest rates rise, mortgage prepayment rates tend to decline,
thus lengthening the duration of mortgage-related securities and increasing
their price volatility, affecting the price volatility of a Fund's shares.
Interests in pools of mortgage-backed securities differ from other forms
of debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment that consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying property, refinancing or foreclosure, net of fees or
costs incurred. Some mortgage-related securities (such as securities issued by
the Government National Mortgage Association) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.
The principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
institutions approved by GNMA (such as savings and loan institutions, commercial
banks, and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed
mortgages. These guarantees, however, do not apply to the market value or yield
of mortgage-backed securities or to the value of a Fund's shares. Also, GNMA
securities often are purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to regulation by the Secretary of Housing and Urban Development. FNMA
purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved
15
seller/servicers, which include state and federally-chartered savings and loan
associations, mutual savings banks, commercial banks, credit unions and mortgage
bankers. Pass-through securities issued by FNMA are guaranteed as to timely
payment of principal and interest by FNMA, but are not backed by the full faith
and credit of the U.S. Government.
FHLMC is a corporate instrumentality of the U.S. Government and was
created in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PCs"), which represent
interests in conventional mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers, and other secondary market issuers also
create pass-through pools of conventional mortgage loans. These issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payment. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers, and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of its issuers will be considered in
determining whether a mortgage-related security meets a Fund's investment
quality standards. There is no assurance that the private insurers or guarantors
will meet their obligations under the insurance policies or guarantee
arrangements. A Fund may buy mortgage-related securities without insurance or
guarantees if, through an examination of the loan experience and practices of
the originators/servicers and poolers, the Advisor determines that the
securities meet the Fund's quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.
Collateralized Mortgage Obligations ("CMOs")
CMOs are hybrids between mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal are paid, in most
cases, semiannually. CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities,
guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially protected against a sooner than desired return
of principal by the sequential payments. The prices of certain CMOs, depending
on their structure and the rate of prepayments, can be volatile. Some CMOs may
also not be as liquid as other securities.
In a typical CMO transaction, a corporation issues multiple series, (e.g.,
A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to
purchase mortgages or mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a trustee as security for the Bonds. Principal and
interest payments from the Collateral are used to pay principal on the Bonds in
the order A, B, C, Z. The Series A, B, and C Bonds all pay interest currently.
Interest on the Series Z Bond is accrued and added to principal and a like
amount is paid as principal on the Series A, B, or C Bond currently being paid
off. When the Series A, B, and C Bonds are paid in full, interest and principal
on the Series Z Bond begins to be paid currently. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.
A Fund will invest only in those CMOs whose characteristics and terms are
consistent with the average maturity and market risk profile of the other fixed
income securities held by the Fund.
Other Mortgage-Backed Securities
The Advisor expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investment in
addition to those described above. The mortgages underlying these securities may
include alternative mortgage instruments; that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may differ
from customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Advisor will, consistent
with a Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.
16
Other Asset-Backed Securities
The securitization techniques used to develop mortgage-backed securities
are being applied to a broad range of assets. Through the use of trusts and
special purpose corporations, various types of assets, including automobile
loans, computer leases and credit card and other types of receivables, are being
securitized in pass-through structures similar to mortgage pass-through
structures described above or in a structure similar to the CMO structure.
Consistent with a Fund's investment objectives and policies, the Fund may invest
in these and other types of asset-backed securities that may be developed in the
future. In general, the collateral supporting these securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments with interest rate fluctuations.
These other asset-backed securities present certain risks that are not
presented by mortgage-backed securities. Primarily, these securities may not
have the benefit of any security interest in the related assets. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of state and federal consumer credit laws, many of which give debtors
the right to set off certain amounts owed on the credit cards, thereby reducing
the balance due. There is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities.
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of direct parties. To reduce the effect of failures
by obligors on underlying assets to make payments, the securities may contain
elements of credit support which fall into two categories: (i) liquidity
protection and (ii) protection against losses resulting from ultimate default by
an obligor or the underlying assets. Liquidity protection refers to the making
of advances, generally by the entity administering the pool of assets, to ensure
that the receipt of payments on the underlying pool occurs in a timely fashion.
Protection against losses results from payment of the insurance obligations on
at least a portion of the assets in the pool. This protection may be provided
through guarantee policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Fund will not pay any
additional or separate fees for credit support. The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquency or
loss in excess of that anticipated, or failure of the credit support could
adversely affect the return on an investment in such a security.
Floating or Variable Rate Securities
Floating or variable rate securities have interest rates that periodically
change according to the rise and fall of a specified interest rate index or a
specific fixed-income security that is used as a benchmark. The interest rate
typically changes every six months, but for some securities the rate may
fluctuate weekly, monthly, or quarterly. The index used is often the rate for
90- or 180-day Treasury Bills. Variable-rate and floating-rate securities may
have interest rate ceilings or caps that fix the interest rate on such a
security if, for example, a specified index exceeds a predetermined interest
rate. If an interest rate on a security held by the Fund becomes fixed as a
result of a ceiling or cap provision, the interest income received by the Fund
will be limited by the rate of the ceiling or cap. In addition, the principal
values of these types of securities will be adversely affected if market
interest rates continue to exceed the ceiling or cap rate.
Loan Transactions
Loan transactions involve the lending of securities to a broker-dealer or
institutional investor for its use in connection with short sales, arbitrage, or
other securities transactions. If made, loans of portfolio securities by a Fund
will be in conformity with applicable federal and state rules and regulations.
The purpose of a qualified loan transaction is to afford a Fund the opportunity
to continue to earn income on the securities loaned and at the same time to earn
income on the collateral held by it.
It is the view of the Staff of the Securities and Exchange Commission
("SEC") that a Fund is permitted to engage in loan transactions only if the
following conditions are met: (1) the Fund must receive at least 100 percent
collateral in the form of cash or cash equivalents, e.g., U.S. Treasury bills or
notes, or an irrevocable letter of credit; (2) the borrower must increase the
collateral whenever the market value of the securities loaned (determined on a
daily basis) rises above the level of the collateral; (3) the Fund must be able
to terminate the loan, after notice, at any time; (4) the Fund must receive
reasonable interest on the loan or a flat fee from the borrower, as well as
amounts equivalent to any dividends, interest, or other distributions on the
securities loaned and any increase in market value; (5) the Fund may pay only
reasonable custodian fees in connection with the loan; (6) voting rights on the
securities loaned may pass to the borrower; however, if a material event
affecting the investment occurs, the Board of Directors must be able to
terminate the loan and vote proxies or enter into an alternative arrangement
with the borrower to enable the Board to vote proxies. Excluding items (1) and
(2), these practices may be amended from time to time as regulatory provisions
permit.
While there may be delays in recovery of loaned securities or even a loss
of rights in collateral supplied if the borrower fails financially, loans will
be made only to firms deemed by the Advisor to be of good standing and will not
be made unless, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the risk.
17
Options and Financial Futures Transactions
Certain Funds may invest up to 5 percent of their net assets in premiums
on put and call exchange-traded options. A call option gives the holder (buyer)
the right to purchase a security at a specified price (the exercise price) at
any time until a certain date (the expiration date). A put option gives the
buyer the right to sell a security at the exercise price at any time until the
expiration date. The Fund may also purchase options on securities indices.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive, on
exercise of the option, an amount of cash if the closing level of the securities
index on which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. A Fund may
enter into closing transactions, exercise its options, or permit the options to
expire.
A Fund may also write call options, but only if such options are covered.
A call option is covered if written on a security a Fund owns or if the Fund has
an absolute and immediate right to acquire that security without additional cash
consideration upon conversion or exchange of other securities held by the Fund.
If additional cash consideration is required, that amount must be held in a
segregated account by the Fund's custodian bank. A call option on a securities
index is covered if the Fund owns securities whose price changes, in the opinion
of the Advisor, are expected to be substantially similar to those of the index.
A call option may also be covered in any other manner in accordance with the
rules of the exchange upon which the option is traded and applicable laws and
regulations. Each Fund that is permitted to engage in option transactions may
write such options on up to 25 percent of its net assets.
Financial futures contracts, including interest rate futures transactions,
are commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a security
or the cash value of a securities index, during a specified future period at a
specified price. The investment restrictions for the Funds permitted to engage
in financial futures transactions do not limit the percentage of the Fund's
assets that may be invested in financial futures transactions. None of the
Funds, however, intend to enter into financial futures transactions for which
the aggregate initial margin exceeds 5 percent of the net assets of the Fund
after taking into account unrealized profits and unrealized losses on any such
transactions it has entered into. A Fund may engage in futures transactions only
on commodities exchanges or boards of trade.
A Fund will not engage in transactions in index options, financial futures
contracts, or related options for speculation. A Fund may engage in these
transactions only as an attempt to hedge against market conditions affecting the
values of securities that the Fund owns or intends to purchase. When a Fund
purchases a put on a stock index or on a stock index future not held by the
Fund, the put protects the Fund against a decline in the value of all securities
held by it to the extent that the stock index moves in a similar pattern to the
prices of the securities held. The correlation, however, between indices and
price movements of the securities in which a Fund will generally invest may be
imperfect. It is expected, nonetheless, that the use of put options that relate
to such indices will, in certain circumstances, protect against declines in
values of specific portfolio securities or the Fund's portfolio generally.
Although the purchase of a put option may partially protect a Fund from a
decline in the value of a particular security or its portfolio generally, the
cost of a put will reduce the potential return on the security or the portfolio
if either increases in value.
Upon entering into a futures contract, a Fund will be required to deposit
with its custodian in a segregated account cash, certain U.S. Government
securities, or any other portfolio assets as permitted by the SEC's rules and
regulations in an amount known as the "initial margin." This amount, which is
subject to change, is in the nature of a performance bond or a good faith
deposit on the contract and would be returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been satisfied.
The principal risks of options and futures transactions are: (a) possible
imperfect correlation between movements in the prices of options, currencies, or
futures contracts and movements in the prices of the securities or currencies
hedged or used for cover; (b) lack of assurance that a liquid secondary market
will exist for any particular options or futures contract when needed; (c) the
need for additional skills and techniques beyond those required for normal
portfolio management; (d) losses on futures contracts resulting from market
movements not anticipated by the Advisor; and (e) possible need to defer closing
out certain options or futures contracts to continue to qualify for beneficial
tax treatment afforded "regulated investment companies" under the Internal
Revenue Code of 1986, as amended (the "Code").
Swap Agreements ("Swaps," "Caps," "Collars" and "Floors")
The Funds may enter into interest rate swaps, currency swaps, and other
types of swap agreements such as caps, collars, and floors. In a typical
interest rate swap, one party agrees to make regular payments equal to a
floating interest rate times a "notional principal amount," in return for
payments equal to a fixed rate times the
18
same amount, for a specified period of time. If a swap agreement provides for
payments in different currencies, the parties might agree to exchange notional
principal amount as well. Swaps may also depend on other prices or rates, such
as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate exceeds
an agreed upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an agreed
upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of a Fund's
investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
As a result, swaps can be highly volatile and may have a considerable impact on
the Funds' performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. The Funds may also suffer losses
if they are unable to terminate outstanding swap agreements or reduce their
exposure through offsetting transactions.
Foreign Equity Securities
Foreign equity securities include common stock and preferred stock,
including securities convertible into equity securities, issued by foreign
companies, American Depositary Receipts ("ADRs") and Global Depositary Receipts
("GDRs"). In determining whether a company is foreign, the Advisor will consider
various factors including where the company is headquartered, where the
company's principal operations are located, where the company's revenues are
derived, where the principal trading market is located and the country in which
the company was legally organized. The weight given to each of these factors
will vary depending upon the circumstances.
Foreign equity securities, which are generally denominated in foreign
currencies, involve risks not typically associated with investing in domestic
securities. Foreign securities may be subject to foreign taxes that would reduce
their effective yield. Certain foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a portion of
these taxes is recoverable, the unrecovered portion of any foreign withholding
taxes would reduce the income a Fund receives from its foreign investments.
Foreign investments involve other risks, including possible political or
economic instability of the country of the issuer, the difficulty of predicting
international trade patterns, and the possibility of currency exchange controls.
Foreign securities may also be subject to greater fluctuations in price than
domestic securities. There may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing, and financial reporting standards
comparable to those of domestic companies.
There is generally less government regulation of stock exchanges, brokers,
and listed companies abroad than in the United States. In addition, with respect
to certain foreign countries, there is a possibility of the adoption of a policy
to withhold dividends at the source, or of expropriation, nationalization,
confiscatory taxation, or diplomatic developments that could affect investments
in those countries. Finally, in the event of default on a foreign debt
obligation, it may be more difficult for a Fund to obtain or enforce a judgement
against the issuers of the obligation. The Funds will normally execute their
portfolio securities transactions on the principal stock exchange on which the
security is traded.
19
The considerations noted above regarding the risk of investing in foreign
securities are generally more significant for investments in emerging or
developing countries, such as countries in Eastern Europe, Latin America, South
America or Southeast Asia. These countries may have relatively unstable
governments and securities markets in which only a small number of securities
trade. Markets of developing or emerging countries may generally be more
volatile than markets of developed countries. Investment in these markets may
involve significantly greater risks, as well as the potential for greater gains.
ADRs in registered form are dollar-denominated securities designed for use
in the U.S. securities markets. ADRs are sponsored and issued by domestic banks
and represent and may be converted into underlying foreign securities deposited
with the domestic bank or a correspondent bank. ADRs do not eliminate the risks
inherent in investing in the securities of foreign issuers. By investing in ADRs
rather than directly in the foreign security, however, a Fund may avoid currency
risks during the settlement period for either purchases or sales. There is a
large, liquid market in the United States for most ADRs. GDRs are receipts
representing an arrangement with a major foreign bank similar to that for ADRs.
GDRs are not necessarily denominated in the currency of the underlying security.
While ADRs and GDRs will generally be considered foreign securities for purposes
of calculation of any investment limitation placed on a Fund's exposure to
foreign securities, these securities, along with the securities of foreign
companies traded on NASDAQ will not be subject to any of the restrictions placed
on the Funds' ability to invest in emerging market securities.
Additional costs may be incurred in connection with a Fund's foreign
investments. Foreign brokerage commissions are generally higher than those in
the United States. Expenses may also be incurred on currency conversions when a
Fund moves investments from one country to another. Increased custodian costs as
well as administrative difficulties may be experienced in connection with
maintaining assets in foreign jurisdictions.
Foreign Fixed Income Securities
Foreign fixed income securities include debt securities of foreign
corporate issuers, certain foreign bank obligations (see "Bank Obligations"),
obligations of foreign governments or their subdivisions, agencies and
instrumentalities, and obligations of supranational entities such as the World
Bank, the European Investment Bank, and the Asian Development Bank. Any of these
securities may be denominated in foreign currency or U.S. dollars, or may be
traded in U.S. dollars in the United States although the underlying security is
usually denominated in a foreign currency.
The risk of investing in foreign fixed income securities are the same as
the risks of investing in foreign equity securities. Additionally, investment in
sovereign debt (debt issued by governments and their agencies and
instrumentality) can involve a high degree of risk. The governmental entity that
controls the repayment of sovereign debt may not be available or willing to
repay the principal and/or interest when due in accordance with the terms of the
debt. A governmental entity's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the governmental entity's
policy toward the International Monetary Fund, and the political constraints to
which a governmental entity may be subject. Governmental entities may also
depend on expected disbursements from foreign governments, multilateral agencies
and others to reduce principal and interest arrearages on their debt. The
commitment on the part of these governments, agencies and others to make such
disbursements may be conditioned on a governmental entity's implementation of
economic reforms and/or economic performance and the timely service of such
debtor's obligations. Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due may result in the
cancellation of such third parties' commitments to lend funds to the
governmental entity, which may further impair such debtor's ability or
willingness to service its debts in a timely manner. Consequently, governmental
entities may default on their sovereign debt. Holders of sovereign debt
(including the Funds) may be requested to participate in the rescheduling of
such debt and to the extend further loans to governmental entities. There is no
bankruptcy proceeding by which sovereign debt on which governmental entities
have defaulted may be collected in whole or in part.
Currency Contracts
The value of a Fund invested in foreign securities will fluctuate as a
result of changes in the exchange rates between the U.S. dollar and the
currencies in which the foreign securities or bank deposits held by the Fund are
denominated. To reduce or limit exposure to changes in currency exchange rates
(referred to as "hedging"), a Fund may enter into forward currency exchange
contracts that, in effect, lock in a rate of exchange during the period of the
forward contracts. Forward contracts are usually entered into with currency
traders, are not traded on securities exchanges, and usually have a term of less
than one year, but can be renewed. A default on a contract would deprive a Fund
of unrealized profits or force a Fund to cover its commitments for purchase or
sale of currency, if any, at the market price. A Fund will enter into forward
contracts only for hedging purposes and not for speculation. If required by the
Investment Company Act of 1940, as amended (the "1940 Act") or the SEC, a Fund
may "cover" its commitment under forward contracts by segregating cash or liquid
securities with a Fund's custodian in an amount not less than the current value
of the Fund's total assets committed to the
20
consummation of the contracts. Under normal market conditions, no more than 25
percent of the International Stock Fund's assets may be committed to the
consummation of currency exchange contracts.
A Fund may also purchase or sell foreign currencies on a "spot" (cash)
basis or on a forward basis to lock in the U.S. dollar value of a transaction at
the exchange rate or rates then prevailing. A Fund will use this hedging
technique in an attempt to insulate itself against possible losses resulting
from a change in the relationship between the U.S. dollar and the relevant
foreign currency during the period between the date a security is purchased or
sold and the date on which payment is made or received.
Hedging against adverse changes in exchange rates will not eliminate
fluctuation in the prices of a Fund's portfolio securities or prevent loss if
the prices of those securities decline. In addition, the use of forward
contracts may limit potential gains from an appreciation in the U.S. dollar
value of a foreign currency. Forecasting short-term currency market movements is
very difficult, and there is no assurance that short-term hedging strategies
used by a Fund will be successful.
Real Estate Investment Trusts ("REITs")
REITs are pooled investment vehicles that invest primarily in real
estate--such as shopping centers, malls, multi-family housing, or commercial
property, or real-estate related loans such as mortgages. Investing in REITs
involves unique risks and may be affected by changes in the value of the
underlying property owned by the REIT or affected by the quality of the credit
extended. REITs are significantly affected by the market for real estate and are
subject to many of the same risks associated with direct ownership in real
estate. Furthermore, REITs are dependent upon management skills and subject to
heavy cash flow dependency.
Repurchase Agreements
A Fund may invest in repurchase agreements, which are agreements by which
the Fund purchases a security and simultaneously commits to resell that security
to the seller (a commercial bank or securities dealer) at a stated price within
a number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus a rate of interest that is
unrelated to the coupon rate or maturity of the purchased security. Repurchase
agreements may be considered loans by the Fund collateralized by the underlying
security. The obligation of the seller to pay the stated price is in effect
secured by the underlying security. The seller will be required to maintain the
value of the collateral underlying any repurchase agreement at a level at least
equal to the price of the repurchase agreement. In the case of default by the
seller, the Fund could incur a loss. In the event of a bankruptcy proceeding
commenced against the seller, the Fund may incur costs and delays in realizing
upon the collateral. A Fund will enter into repurchase agreements only with
those banks or securities dealers who are deemed creditworthy pursuant to
criteria adopted by the Advisor. There is no limit on the portion of a Fund's
assets that may be invested in repurchase agreements with maturities of seven
days or less.
Borrowing
A Fund may borrow from a bank for temporary administrative purposes. This
borrowing may be unsecured. Provisions of the 1940 Act require a Fund to
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300 percent of the amount borrowed,
with an exception for borrowings not in excess of 5 percent of the Fund's total
assets made for temporary administrative purposes. Any borrowings for temporary
administrative purposes in excess of 5 percent of a Fund's total assets are
subject to continuous asset coverage. If the 300 percent asset coverage declines
as a result of market fluctuations or other reasons, a Fund may be required to
sell some of its portfolio holdings within three days to reduce the debt and
restore the 300 percent asset coverage. Notwithstanding the above, certain of
the Funds may not borrow in excess of 5 percent of their assets at any time. A
Fund also may enter into certain transactions, including reverse repurchase
agreements, mortgage dollar rolls, and sale-buybacks, that can be viewed as
constituting a form of borrowing or financing transaction by the Fund. To the
extent a Fund covers its commitment under such transactions (or economically
similar transaction) by the segregation of assets determined in accordance with
procedures adopted by the Board of Directors, equal in value to the amount of
the Fund's commitment to repurchase, such an agreement will not be considered a
"senior security" by the Fund and therefore will not be subject to the 300
percent asset coverage requirement otherwise applicable to borrowings by the
Fund. Borrowing will tend to exaggerate the effect on net asset value of any
increase or decrease in the market value of a Fund's portfolio. Money borrowed
will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. A Fund also may be required to
maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
21
Illiquid Securities
Illiquid securities are securities that may not be sold or disposed of in
the ordinary course of business within seven days at approximately the price
used to determine the Fund's net asset value. Under current interpretations of
the Staff of the SEC, the following instruments in which a Fund may invest will
be considered illiquid: (1) repurchase agreements maturing in more than seven
days; (2) restricted securities (securities whose public resale is subject to
legal restrictions, except as described in the following paragraph); (3)
options, with respect to specific securities, not traded on a national
securities exchange that are not readily marketable; and (4) any other
securities in which a Fund may invest that are not readily marketable.
Notwithstanding the restrictions applicable to investments in illiquid
securities described in the relevant chart below, the Funds may purchase without
limit certain restricted securities that can be resold to qualifying
institutions pursuant to a regulatory exemption under Rule 144A ("Rule 144A
securities"). If a dealer or institutional trading market exists for Rule 144A
securities, such securities are deemed to be liquid and thus exempt from that
Fund's liquidity restrictions.
Under the supervision of the Board of Directors of the Funds, the Advisor
determines the liquidity of the Funds' portfolio securities, including Rule 144A
securities, and, through reports from the Advisor, the Board of Directors
monitors trading activity in these securities. In reaching liquidity decisions,
the Advisor will consider, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the procedures for
the transfer). If institutional trading in Rule 144A securities declines, a
Fund's liquidity could be adversely affected to the extent it is invested in
such securities.
Convertible Securities and Warrants
Convertible debentures are interest-bearing debt securities, typically
unsecured, that represent an obligation of the corporation providing the owner
with claims to the corporation's earnings and assets before common and preferred
stock owners, generally on par with unsecured creditors. If unsecured, claims of
convertible debenture owners would be inferior to claims of secured debt
holders. Convertible preferred stocks are securities that represent an ownership
interest in a corporation providing the owner with claims to the corporation's
earnings and assets before common stock owners, but after bond owners.
Investments by a Fund in convertible debentures or convertible preferred stock
would be a substitute for an investment in the convertible security if available
in quantities necessary to satisfy the Fund's investment needs (for example, in
the case of a new issuance of convertible securities) or where, because of
financial market conditions, the conversion price of the convertible security is
comparable to the price of the underlying common stock, in which case a
preferred position with respect to the corporation's earnings and assets may be
preferable to holding common stock.
Warrants are options to buy a stated number of underlying securities at a
specified price any time during the life of the warrants. The securities
underlying these warrants will be the same types of securities that a Fund will
invest in to achieve its investment objective of capital appreciation. The
purchaser of a warrant expects the market price of the underlying security will
exceed the purchase price of the warrant plus the exercise price of the warrant,
thus resulting in a profit. If the market price never exceeds the purchase price
plus the exercise price of the warrant before the expiration date of the
warrant, the purchaser will suffer a loss equal to the purchase price of the
warrant.
To the extent the High Yield Fund or the Fixed Income Securities Fund
acquires common stock through exercise of conversion rights or warrants or
acceptance of exchange or similar offers, the common stock will not be retained
in the portfolio. Orderly disposition of these equity securities will be made
consistent with management's judgment as to the best obtainable price.
Investments in Small and Unseasoned Companies
Unseasoned and small companies may have limited or unprofitable operating
histories, limited financial resources, and inexperienced management. In
addition, they often face competition from larger or more established firms that
have greater resources. Securities of small and unseasoned companies are
frequently traded in the over-the-counter market or on regional exchanges where
low trading volumes may result in erratic or abrupt price movements. To dispose
of these securities, a Fund may need to sell them over an extended period or
below the original purchase price. Investments by a Fund in these small or
unseasoned companies may be regarded as speculative.
22
Dollar Roll Transactions
"Dollar roll" transactions consist of the sale by a Fund to a bank or
broker-dealer (the "counterparty") of GNMA certificates or other mortgage-backed
securities together with a commitment to purchase from the counterparty similar,
but not identical, securities at a future date and at agreed price. The
counterparty receives all principal and interest payments, including
prepayments, made on the security while it is the holder. The Fund receives a
fee from the counterparty as consideration for entering into the commitment to
purchase. Dollar rolls may be renewed over a period of several months with a new
purchase and repurchase price fixed and a cash settlement made at each renewal
without physical delivery of securities. Moreover, the transaction may be
preceded by a firm commitment agreement pursuant to which the Fund agrees to buy
a security on a future date.
A Fund will not use such transactions for leveraging purposes and,
accordingly, will segregate liquid assets in an amount sufficient to meet their
purchase obligations under the transactions. The Funds will also maintain asset
coverage of at least 300 percent for all outstanding firm commitments, dollar
rolls and other borrowings.
Dollar rolls may be treated for purposes of the 1940 Act as borrowings of
the Fund because they involve the sale of a security coupled with an agreement
to repurchase. Like all borrowings, a dollar roll involves costs to the Fund.
For example, while a Fund receives a fee as consideration for agreeing to
repurchase the security, the Fund forgoes the right to receive all principal and
interest payments while the counterparty holds the security. These payments
received by the counterparty may exceed the fee received by the Fund, thereby
effectively charging the Fund interest on its borrowing. Further, although the
Fund can estimate the amount of expected principal prepayment over the term of
the dollar roll, a variation in the actual amount of prepayment could increase
or decease the cost of the Fund's borrowing.
When-Issued Securities
When-issued, delayed-delivery and forward transactions generally involve
the purchase of a security with payment and delivery in the future (i.e., beyond
normal settlement). A Fund does not earn interest on such securities until
settlement and bears the risk of market value fluctuations in between the
purchase and settlement dates. New issues of stocks and bonds, private
placements and U.S. Government securities may be sold in this manner. To the
extent a Fund engages in when-issued and delayed-delivery transactions, it will
do so to acquire portfolio securities consistent with its investment objectives
and policies and not for investment leverage. A Fund may use spot and forward
currency exchange transactions to reduce the risk associated with fluctuations
in exchange rates when securities are purchased or sold on a when-issued or
delayed delivery basis.
Zero-Coupon and Pay-in-Kind Securities
A zero-coupon security has no cash coupon payments. Instead, the issuer
sells the security at a substantial discount from its maturity value. The
interest equivalent received by the investor from holding this security to
maturity is the difference between the maturity value and the purchase price.
Pay-in-kind securities are securities that pay interest in either cash or
additional securities, at the issuer's option, for a specified period. The price
of pay-in-kind securities is expected to reflect the market value of the
underlying accrued interest, since the last payment. Zero-coupon and pay-in-kind
securities are more volatile than cash pay securities. The Fund accrues income
on these securities prior to the receipt of cash payments. The Fund intends to
distribute substantially all of its income to its shareholders to qualify for
pass-through treatment under the tax laws and may, therefore, need to use its
cash reserves to satisfy distribution requirements.
Temporary Investments
When, as a result of market conditions, the Advisor determines a temporary
defensive position is warranted to help preserve capital, a Fund may without
limit temporarily retain cash, or invest in prime commercial paper, high-grade
debt securities, securities of the U.S. Government and its agencies and
instrumentalities, and high-quality money market instruments, including
repurchase agreements. The International Stock Fund may invest in such
securities issued by entities organized in the United States or any foreign
country, denominated in U.S. dollars or foreign currency. When a Fund assumes a
temporary defensive position, it is not invested in securities designed to
achieve its investment objective.
Non-Diversified
The Oregon Municipal Bond Fund and the Technology Fund are
"non-diversified," which means that they may invest a greater percentage of
their assets in the securities of a single issuer than the other Funds.
Non-diversified funds are more susceptible to risks associated with a single
economic, political, or regulatory occurrence than a more diversified portfolio
might be. Some of those issuers also
23
may present substantial credit or other risks. Similarly, the Oregon Municipal
Bond Fund may be more sensitive to adverse economic, business or political
developments in the State of Oregon and also if it invests a substantial portion
of its assets in the bonds of similar projects.
Chart of Securities and Investment Practices
CCSF CGF CISF CMCG CSCG CREF CTF CSIF
------- -------- --------- -------- -------- ------- --------- ---------
Investment Grade Securities (Baa or higher
by Moody's, BBB or higher by S&P or
believed by the Advisor to be equivalent),
other than U.S. Government obligations and
municipal securities * * * * * * * *
Non-Investment Grade Securities NA NA NA NA NA NA NA NA
Domestic Bank Obligations * * * * * * * *
U.S. Government Securities * * * * * * * *
Mortgage-Backed Securities NA NA NA NA NA NA NA NA
CMOs NA NA NA NA NA NA NA NA
Asset-Backed Securities NA NA NA NA NA NA NA NA
Floating or Variable Rate NA NA NA NA NA NA NA NA
Loan Transactions X X X X O O O O
Options & Financial Futures O O O O O O O O
Foreign Equities(1)
Developed Markets 33.3%, O 25%, O + 33.3%, O 25%, O 20%, O 33%, O 25%,+
Emerging Markets(2) X X + X X X X +
ADRs, GDRs and NASDAQ-listed 33.3%, O 25%, O + 33.3%, O 25%, O X 33%, O 25%, O
foreign securities(1)
Currency Contracts
Hedging O O 25%,+ O O O O O
Speculation X X X X X X X X
Spot Basis O O + O O O O O
Repurchase Agreements * * * * * * * *
Illiquid (exclude 144A securities from
definition of illiquid with board 15%, O 15%, O 15%, O 15%, O 15%, O 15%, O 15%, O 15%, O
supervision)
Convertible Securities/Warrants O O O + + + + +
Unseasoned/less than three years operating
history 5%(3), O 5%(3), O 5%(3), O 10%(3),+ 10%(3),+ 5%(3),+ 10%(3), O 10%(3), O
Small Companies O O O + + + + +
Dollar Roll Transactions NA NA NA NA NA NA NA NA
Swap Agreements NA NA NA NA NA NA NA NA
When-Issued Securities O O O O O O O O
Foreign Fixed Income Securities NA NA O NA NA NA NA NA
(including Foreign Bank
24
CCSF CGF CISF CMCG CSCG CREF CTF CSIF
------- -------- ------- -------- -------- ------- -------- --------
Obligations)
Zero Coupon/Pay in Kind NA NA NA NA NA NA NA NA
Real Estate (excluding REITs) X X X X X X X X
REITs + + O + + + O +
Borrowing 5%, * 5%, * 33.3%,*,* 5%,* 5%, * 5%,* 33.3%,** 33.3%,*
+ Permitted - Part of principal investment strategy
X Not permitted either as a non-fundamental or fundamental policy
O Permitted - Not a principal investment strategy
* Temporary Investment or cash management purposes
% Percentage of net assets (unless "total assets" specified) that Fund may
invest
NA Not part of investment strategy
(1)Any limitation on foreign investments includes investments in both foreign
securities purchased in foreign markets and ADRs, GDRs and NASDAQ-listed foreign
securities.
(2)ADRs, GDRs and NASDAQ-listed securities are not subject to this limitation,
even if the issuer is headquartered in, has its principal operations in, derives
its revenues from, has its principal trading market located in or was legally
organized in an emerging market country.
(3)Percentage is based on total assets.
25
CSTB CFIS CMBF CNMF CHYF CBF CDIC
-------- -------- ------- -------- -------- -------- ------
Investment Grade Securities (Baa or + + O O O + NA
higher by Moody's, BBB or higher by
S&P or believed by the Advisor to be
equivalent), other than U.S.
Government obligations and municipal
securities
Non-Investment Grade Securities 10%, O 20%, O NA NA + 10%, O NA
Domestic Bank Obligations * * * * * * +
Commercial Paper * * * * * * +
U.S. Government Securities + + * * * + +
Mortgage-Backed Securities + + NA NA O + NA
CMOs + + NA NA O + NA
Asset-Backed Securities + + NA NA O + O
Floating or Variable Rate + + O O O + O
Loan Transactions O O O X O X X
Options & Financial Futures O X + + O O X
Foreign Equities(1)
Developed Markets NA NA NA NA NA 33.3%, NA
O
Emerging Markets(2) NA NA NA NA NA X NA
ADRs, GDRs and NASDAQ-listed NA NA NA NA NA 33.3%, NA
O
foreign securities(1)
Currency Contracts
Hedging NA NA NA NA NA O NA
Speculation NA NA NA NA NA X NA
Spot Basis NA NA NA NA NA O NA
Repurchase Agreements * * * * * * *
Illiquid (excludes 144A securities from 15%, O 15%, O 15%, O 15%, O 15%, O 15%, O 10%, O
definition of illiquid with board
supervision)
Convertible Securities/Warrants O O NA NA O O NA
Unseasoned/less than three years 5%(3), O 5%(3), O NA NA 5%(3), O 5%(3), O NA
operating history
Small Companies NA NA NA NA + O NA
Dollar Roll Transactions O O NA NA O O NA
Swap Agreements O O O O O O NA
When-Issued Securities O O O O O O O
Foreign Fixed Income Securities 20%, O 20%, O NA NA 10%, O 20%, O NA
(including Foreign Bank Obligations)
Zero Coupon/Pay in Kind O O + + O O NA
Real Estate (excluding REITs) X X X X X X X
26
CSTB CFIS CMBF CNMF CHYF CBF CDIC
-------- -------- ------- -------- -------- -------- ------
REITs O O NA NA O O NA
Borrowing 33.3%, * 5%,* 33.3%,* 33.3%, * 5%, * 5%, * 33.3%, *
Municipal Bonds O O + + NA O NA
+ Permitted - Part of principal investment strategy
X Not permitted either as a non-fundamental or fundamental policy
O Permitted - Not a principal investment strategy
* Temporary Investment or cash management purposes
% Percentage of net assets (unless "total assets" specified) that Fund may
invest
NA Not part of investment strategy
(1)Any limitation on foreign investments includes investments in both foreign
securities purchased in the foreign markets, together with the purchase of ADRs,
GDRs and NASDAQ-listed foreign securities.
(2)ADRs, GDRs, and NASDAQ-listed foreign securities are not subject to this
limitation, even if the issuer is headquartered in, has its principal operations
in, derives its revenues from, has its principal trading market located in or
was legally organized in an emerging market country.
(3)Percentage is based on total assets.
27
INVESTMENT RESTRICTIONS
The Prospectus sets forth the investment goals and principal investment
strategies applicable to each Fund. The following is a list of investment
restrictions applicable to each Fund. If a percentage limitation is adhered to
at the time of an investment by a Fund, a later increase or decrease in
percentage resulting from any change in value or net assets will not result in a
violation of the restriction. Except as stated otherwise below, a Fund may not
change these restrictions without the approval of a majority of its
shareholders, which means the vote at any meeting of shareholders of a Fund of
(i) 67 percent or more of the shares present or represented by proxy at the
meeting (if the holders of more than 50 percent of the outstanding shares are
present or represented by proxy) or (ii) more than 50 percent of the outstanding
shares, whichever is less.
COLUMBIA COMMON STOCK FUND, INC.
The Common Stock Fund may not:
1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the
restrictions in paragraph 13.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of the total assets in any one
industry and (b) invest for temporary defensive purposes up to 100 percent
of the value of the total assets in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies, such as real estate
investment trusts, which operate in real estate or interests therein.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the outstanding voting
securities of that issuer to be held in the Fund.
6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of the total
assets of the Fund at market value to be invested in the securities of
that issuer (other than obligations of the U.S. Government and its
agencies and instrumentalities), with reference to 75 percent of the
assets of the Fund.
7. Issue senior securities, bonds, or debentures.
8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Fund, it might be deemed to be
an underwriter for purposes of the Securities Act of 1933.
9. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks and for extraordinary or
emergency purposes.
10. Invest its funds in the securities of any company if the
purchase, at the time thereof, would cause more than 5 percent of the
value of the Fund's total assets to be invested in companies which,
including predecessors and parents, have a record of less than three years
continuous operation.
11. Invest in companies for the purpose of exercising control or
management.
12. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales
against the box"). Such transactions may
28
only be made to protect a profit in or to attempt to minimize a loss with
respect to convertible securities. In any event, no more than 5 percent of
the value of the Fund's net assets taken at market may, at any time, be
held as collateral for such sales.
13. Buy and sell puts and calls as securities, stock index futures
or options on stock index futures, or financial futures or options on
financial futures, unless such options are written by other persons and
the options or futures are offered through the facilities of a national
securities association or are listed on a national securities or
commodities exchange.
14. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA GROWTH FUND, INC.
The Growth Fund may not:
1. Buy or sell commodities or commodity contracts.
2. Concentrate more than 25 percent of its investments in any one
industry.
3. Buy or sell real estate. (However, the Fund may buy readily
marketable securities such as real estate investment trusts.)
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase securities of any issuer when those officers and
directors of the Fund who individually own 1/2 of 1 percent of the
securities of that issuer together own 5 percent or more.
6. Issue senior securities, bonds, or debentures.
7. Underwrite securities issued by others except as it may be deemed
to be an underwriter of restricted securities.
8. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks for extraordinary or
emergency purposes.
9. Invest more than 5 percent of its total assets at cost in the
securities of companies which (with predecessor companies) have a record
of less than three years continuous operation and equity securities which
are not readily marketable.
10. Invest in companies for purposes of control or management.
11. Buy securities on margin or make short sales.
12. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
29
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA INTERNATIONAL STOCK FUND, INC.
The International Stock Fund may not:
1. Buy or sell commodities. However, the Fund may invest in futures
contracts or options on such contracts relating to broadly based stock
indices, subject to the restrictions in paragraph 13, and may enter into
foreign currency transactions.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of its assets in any one industry
and (b) invest for temporary defensive purposes up to 100 percent of the
value of its assets in securities issued or guaranteed by the United
States or its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies, such as real estate
investment trusts, which operate in real estate or interests therein.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held by the Fund.
6. Purchase the securities of any issuer (including any foreign
government issuer) if the purchase, at the time thereof, would cause more
than 5 percent of the value of the total assets of the Fund at market
value to be invested in the securities of that issuer (other than
obligations of the U.S. Government and its agencies and
instrumentalities), with reference to 75 percent of the assets of the
Fund.
7. Issue senior securities, bonds, or debentures.
8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed to be an
underwriter for purposes of the Securities Act of 1933.
9. Borrow money, except temporarily for extraordinary or emergency
purposes. For all amounts borrowed, the Fund will maintain an asset
coverage of 300 percent. The Fund will not make any additional investments
while borrowings exceed 5 percent of the Fund's total assets.
10. Invest its funds in the securities of any company if the
purchase would cause more than 5 percent of the value of the Fund's total
assets to be invested in companies which, including predecessors and
parents, have a record of less than three years continuous operation.
11. Invest in companies for the purpose of exercising control or
management.
12. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales
against the box"). Such transactions may only be made to protect a profit
in or to attempt to minimize a loss with respect to convertible
securities. In any event, no more than 5 percent of the value of the
Fund's net assets taken at market may, at any time, be held as collateral
for such sales.
13. Buy and sell puts and calls as securities, stock index futures
or options on stock index futures, or financial futures or options on
financial futures, unless such options are written by other persons and
the options or futures are offered
30
through the facilities of a recognized securities association or are
listed on a recognized securities or commodities exchange or similar
entity.
14. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA MID CAP GROWTH FUND, INC.
The Mid Cap Growth Fund may not:
1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the
restrictions in paragraph 13.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of the total assets in any one
industry and (b) invest for temporary defensive purposes up to 100 percent
of the value of the total assets in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate
investment trusts, which operate in real estate or interests therein.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Fund.
6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of the total
assets of the Fund at market value to be invested in the securities of
that issuer (other than obligations of the U.S. Government and its
agencies and instrumentalities), with reference to 75 percent of the
assets of the Fund.
7. Issue senior securities, bonds, or debentures.
8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Fund, it might be deemed to be
an underwriter for purposes of the Securities Act of 1933.
9. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks and for extraordinary or
emergency purposes.
10. Invest its funds in the securities of any company if the
purchase, at the time thereof, would cause more than 10 percent of the
value of the Fund's total assets to be invested in companies which,
including predecessors and parents, have a record of less than three years
continuous operation.
11. Invest in companies for the purpose of exercising control or
management.
31
12. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales
against the box"). Such transactions may only be made to protect a profit
in or to attempt to minimize a loss with respect to convertible
securities. In any event, no more than 10 percent of the value of the
Fund's net assets taken at market may, at any time, be held as collateral
for such sales.
13. Buy and sell puts and calls as securities, stock index futures
or options on stock index futures, or financial futures or options on
financial futures, unless such options are written by other persons and
the options or futures are offered through the facilities of a national
securities association or are listed on a national securities or
commodities exchange.
14. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given (60 days notice in the case
of non-fundamental restriction #2) to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
2. Invest less than 80% of its assets in the stocks of mid-cap
companies (those stocks with a market capitalization, at the time of
initial purchase, equal to or less than the largest stock in the Russell
Mid Cap Index), except when the Fund is taking a temporary defensive
position due to a determination by the Fund's Advisor that adverse market
conditions make it desirable to suspend temporarily the Fund's normal
investment activities.
COLUMBIA SMALL CAP GROWTH FUND, INC.
The Small Cap Growth Fund may not:
1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the
restrictions in paragraph 13.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of the total assets in any one
industry and (b) invest for temporary defensive purposes up to 100 percent
of the value of the total assets in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate
investment trusts, which operate in real estate or interests therein.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Fund.
6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of the total
assets of the Fund at market value to be invested in the securities of
that issuer (other than obligations of the U.S. Government and its
agencies and instrumentalities), with reference to 75 percent of the
assets of the Fund.
7. Issue senior securities, bonds, or debentures.
32
8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Fund, it might be deemed to be
an underwriter for purposes of the Securities Act of 1933.
9. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks and for extraordinary or
emergency purposes.
10. Invest its funds in the securities of any company if the
purchase, at the time thereof, would cause more than 10 percent of the
value of the Fund's total assets to be invested in companies which,
including predecessors and parents, have a record of less than three years
continuous operation.
11. Invest in companies for the purpose of exercising control or
management.
12. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales
against the box"). Such transactions may only be made to protect a profit
in or to attempt to minimize a loss with respect to securities held by the
Fund. In any event, no more than 10 percent of the value of the Fund's net
assets taken at market may, at any time, be held as collateral for such
sales.
13. Buy and sell puts and calls as securities, stock index futures
or options on stock index futures, or financial futures or options on
financial futures, unless such options or futures are offered through the
facilities of a national securities association or are listed on a
national securities or commodities exchange. The Fund may write call
options that are covered in accordance with rules established by the SEC.
14. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given (60 days notice in the case
of non-fundamental restriction #2) to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
2. Invest less than 80% of its assets in the stocks of small-cap
companies (those stocks with a market capitalization, at the time of
initial purchase, equal to or less than the largest stock in the S&P
SmallCap 600 Index), except when the Fund is taking a temporary defensive
position due to a determination by the Fund's investment Advisor that
adverse market conditions make it desirable to suspend temporarily the
Fund's normal investment activities.
COLUMBIA REAL ESTATE EQUITY FUND, INC.
The Real Estate Fund may not:
1. Buy or sell commodities or commodity futures contracts.
2. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies, such as real estate
investment trusts, that operate in real estate or interests therein, and
participation interests in pools of real estate mortgage loans.
3. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
33
4. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Fund.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of its total
assets at market value to be invested in the securities of that issuer
(other than obligations of the U.S. Government and its instrumentalities),
with reference to 75 percent of the assets of the Fund.
6. Purchase or retain securities of an issuer if those officers or
directors of the Fund or the Advisor who individually own more than 1/2 of
1 percent of the outstanding securities of that issuer together own more
than 5 percent of such securities.
7. Issue senior securities, bonds, or debentures.
8. Underwrite securities of other issuers, except the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed to be an
underwriter for purposes of the Securities Act of 1933.
9. Borrow money except as a temporary measure for extraordinary or
emergency purposes. The Fund's borrowings may not exceed 5 percent of its
gross assets valued at the lesser of cost or market value, nor may it
pledge, mortgage, or hypothecate assets if the market value of such assets
exceeds 10 percent of the gross assets, valued at cost, of the Fund.
10. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years continuous operation.
11. Invest in companies to exercise control or management.
12. Buy any securities or other property on margin, except for
short-term credits necessary for clearing transactions and except that
margin payments and other deposits in connection with transactions in
options, futures, and forward contracts shall not be deemed to constitute
purchasing securities on margin.
13. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such
securities. These short sales may only be made to protect a profit in or
to attempt to minimize a loss with respect to convertible securities. In
any event, no more than 10 percent of the Fund's net assets valued at
market may, at any time, be held as collateral for such sales.
14. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
15. Concentrate investments in any one industry, except that the
Fund will invest at least 65 percent of the value of its total assets in
securities of companies principally engaged in the real estate industry.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
34
COLUMBIA TECHNOLOGY FUND, INC.
The Technology Fund may not:
1. Buy or sell commodities or commodities contracts or oil, gas or
mineral programs, except that the Fund may purchase, sell or enter into
financial futures contracts and options on future contracts, foreign
currency forward contracts, foreign currency options, or any interest
rate, securities-related or foreign currency related hedging instrument,
including swap agreements and other derivative instruments, subject to
compliance with any applicable provisions of the federal securities or
commodities laws.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of the total assets in any one
industry and (b) invest for temporary defensive purposes up to 100 percent
of the value of the total assets in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate
investment trusts, which operate in real estate or interests therein.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Fund, it might be deemed to be
an underwriter for purposes of the Securities Act of 1933.
6. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks,
but only if immediately after each borrowing there is asset coverage of
300 percent, (ii) enter into transactions in options futures, options on
futures, and other derivative instruments as described in the Prospectus
and this Statement of Additional Information (the deposit of assets in
escrow in connection with the writing of covered put and call options and
the purchase of securities on a when-issued or delayed delivery basis,
collateral arrangements with respect to initial or variation margin
deposit for futures contracts and commitments entered into under swap
agreements or other derivative instruments, will not be deemed to be
pledges of the Fund's assets), (iii) enter into reverse repurchase
agreements, dollar roll transactions or economically similar transactions
to the extent its commitment under such transaction is covered by the
segregation of assets, and (iv) borrow money as a temporary measure for
extraordinary or emergency purposes provided that such borrowings do not
exceed 5 percent of the gross assets of the Fund valued at the lesser of
cost or market value, and the Fund does not pledge, mortgage, or
hypothecate assets valued at market to an extent greater than 10 percent
of the gross assets valued at cost of the Fund.
7. Invest its funds in the securities of any company if the
purchase, at the time thereof, would cause more than 10 percent of the
value of the Fund's total assets to be invested in companies which,
including predecessors and parents, have a record of less than three years
continuous operation.
8. Invest in companies for the purpose of exercising control or
management.
9. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales
against the box"). Such transactions may only be made to protect a profit
in or to attempt to minimize a loss with respect to convertible
securities. In any event, no more than 10 percent of the value of the
Fund's net assets taken at market may, at any time, be held as collateral
for such sales.
10. Buy any securities or other property on margin except for use of
short-term credit necessary for clearance of purchases and sales of
portfolio securities, but the Fund may make margin deposits in connection
with transactions in options, futures, and options on futures or purchase
or sell puts or calls, or confirmations thereof.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
35
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA STRATEGIC INVESTOR FUND, INC.
The Strategic Investor Fund may not:
1. Buy or sell commodities or commodities contracts or oil, gas or
mineral programs, except that the Fund may purchase, sell or enter into
financial futures contracts and options on future contracts, foreign
currency forward contracts, foreign currency options, or any interest
rate, securities-related or foreign currency related hedging instrument,
including swap agreements and other derivative instruments, subject to
compliance with any applicable provisions of the federal securities or
commodities laws.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of the total assets in any one
industry and (b) invest for temporary defensive purposes up to 100 percent
of the value of the total assets in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate
investment trusts, which operate in real estate or interests therein.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of the total
assets of the Fund at market value to be invested in the securities of
that issuer (other than obligations of the U.S. Government and its
agencies and instrumentalities), with reference to 75 percent of the
assets of the Fund.
6. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Fund, it might be deemed to be
an underwriter for purposes of the Securities Act of 1933.
7. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks,
but only if immediately after each borrowing there is asset coverage of
300 percent, (ii) enter into transactions in options futures, options on
futures, and other derivative instruments as described in the Prospectus
and this Statement of Additional Information (the deposit of assets in
escrow in connection with the writing of covered put and call options and
the purchase of securities on a when-issued or delayed delivery basis,
collateral arrangements with respect to initial or variation margin
deposit for futures contracts and commitments entered into under swap
agreements or other derivative instruments, will not be deemed to be
pledges of the Fund's assets), (iii) enter into reverse repurchase
agreements, dollar roll transactions or economically similar transactions
to the extent its commitment under such transaction is covered by the
segregation of assets, and (iv) borrow money as a temporary measure for
extraordinary or emergency purposes provided that such borrowings do not
exceed 5 percent of the gross assets of the Fund valued at the lesser of
cost or market value, and the Fund does not pledge, mortgage, or
hypothecate assets valued at market to an extent greater than 10 percent
of the gross assets valued at cost of the Fund.
8. Invest its funds in the securities of any company if the
purchase, at the time thereof, would cause more than 10 percent of the
value of the Fund's total assets to be invested in companies which,
including predecessors and parents, have a record of less than three years
continuous operation.
9. Invest in companies for the purpose of exercising control or
management.
10. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales
against the box"). Such transactions may
36
only be made to protect a profit in or to attempt to minimize a loss with
respect to convertible securities. In any event, no more than 10 percent
of the value of the Fund's net assets taken at market may, at any time, be
held as collateral for such sales.
11. Buy any securities or other property on margin except for use of
short-term credit necessary for clearance of purchases and sales of
portfolio securities, but the Fund may make margin deposits in connection
with transactions in options, futures, and options on futures or purchase
or sell puts or calls, or confirmations thereof.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA BALANCED FUND, INC.
The Balanced Fund may not:
1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the
restrictions in paragraph 13.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of the total assets in any one
industry and (b) invest for temporary defensive purposes up to 100 percent
of the value of the total assets in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate
investment trusts, which operate in real estate or interests therein.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the outstanding voting
securities of that issuer to be held in the Fund.
6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of the total
assets of the Fund at market value to be invested in the securities of
that issuer (other than obligations of the U.S. Government and its
agencies and instrumentalities), with reference to 75 percent of the
assets of the Fund.
7. Issue senior securities, bonds, or debentures.
8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Fund, it might be deemed to be
an underwriter for purposes of the Securities Act of 1933.
9. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks and for extraordinary or
emergency purposes.
10. Invest its funds in the securities of any company if the
purchase, at the time thereof, would cause more than 5 percent of the
value of the Fund's total assets to be invested in companies which,
including predecessors and parents, have a record of less than three years
continuous operation.
11. Invest in companies for the purpose of exercising control or
management.
37
12. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales
against the box"). Such transactions may only be made to protect a profit
in or to attempt to minimize a loss with respect to convertible
securities. In any event, no more than 5 percent of the value of the
Fund's net assets taken at market may, at any time, be held as collateral
for such sales.
13. Buy and sell puts and calls as securities, stock index futures
or options on stock index futures, or financial futures or options on
financial futures, unless such options are written by other persons and
the options or futures are offered through the facilities of a national
securities association or are listed on a national securities or
commodities exchange.
14. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA SHORT TERM BOND FUND, INC.
The Short Term Bond Fund may not:
1. Issue senior securities, bonds, or debentures.
2. Buy any securities or other property on margin except for use of
short-term credit necessary for clearance of purchases and sales of
portfolio securities, but it may make margin deposits in connection with
transactions in options, futures, and options on futures or purchase or
sell puts or calls, or confirmations thereof.
3. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks,
but only if immediately after each borrowing there is asset coverage of
300 percent, (ii) enter into transactions in options futures, options on
futures, and other derivative instruments as described in the Prospectus
and this Statement of Additional Information (the deposit of assets in
escrow in connection with the writing of covered put and call options and
the purchase of securities on a when-issued or delayed delivery basis,
collateral arrangements with respect to initial or variation margin
deposit for futures contracts and commitments entered into under swap
agreements or other derivative instruments, will not be deemed to be
pledges of the Fund's assets), (iii) enter into reverse repurchase
agreements, dollar roll transactions or economically similar transactions
to the extent its commitment under such transaction is covered by the
segregation of assets, and (iv) borrow money as a temporary measure for
extraordinary or emergency purposes provided that such borrowings do not
exceed 5 percent of the gross assets of the Fund valued at the lesser of
cost or market value, and the Fund does not pledge, mortgage, or
hypothecate assets valued at market to an extent greater than 10 percent
of the gross assets valued at cost of the Fund.
4. Concentrate investments in any industry. However, it may (a)
invest up to 25 percent of the value of its total assets in any one
industry, (b) invest up to 100 percent of the value of its total assets in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and (c) invest for temporary defensive purposes up to
80 percent of the value of its total assets in certificates of deposit
(C/D's) and bankers' acceptances with maturities not greater than one
year. C/D's and bankers' acceptances will be limited to domestic banks
that have total assets in excess of $1 billion and are subject to
regulatory supervision by the U.S. Government or state governments.
Commitments to purchase securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities on a "when-issued" basis
may not exceed 20 percent of the total assets of the Fund. Emphasis on
investments in securities of a particular industry will be shifted
whenever the Advisor determines that such action is desirable for
investment reasons. The directors will periodically review these decisions
of the Advisor.
38
5. Underwrite securities of other issuers, except the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed to be an
underwriter for purposes of the Securities Act of 1933, as amended.
6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of its total
assets at market value to be invested in the securities of that issuer
(other than obligations of the U.S. Government and its instrumentalities),
with reference to 75 percent of the assets of the Fund.
7. Buy or sell real estate. However, the Fund may purchase or hold
securities issued by companies, such as real estate investment trusts,
that deal in real estate or interests therein, and participation interests
in pool of real estate mortgage loans.
8. Buy or sell commodities or commodities contracts or oil, gas or
mineral programs, except that the Fund may purchase, sell or enter into
financial futures contracts and options on future contracts, foreign
currency forward contracts, foreign currency options, or any interest
rate, securities-related or foreign currency related hedging instrument,
including swap agreements and other derivative instruments, subject to
compliance with any applicable provisions of the federal securities or
commodities laws.
9. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Fund.
10. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
11. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years of continuous operation.
12. Invest in companies to exercise control or management.
13. Purchase or retain securities of an issuer, any of whose
officers or directors or security holders is an officer or director of the
Fund or of its advisor if, or so long as, the officers and directors of
the Fund and of its advisor together own beneficially more than 5 percent
of any class of securities of the issuer.
14. Engage in short sale of securities except to the extent that it
owns other securities convertible into an equivalent amount of such
securities. These short sales may only be made to protect a profit in or
to attempt to minimize a loss with respect to convertible securities. In
any event no more than 10 percent of the Fund's net assets valued at
market may, at any time, be held as collateral for such sales.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA FIXED INCOME SECURITIES FUND, INC.
The Fixed Income Securities Fund may not:
1. Buy or sell commodities or commodity futures contracts.
39
2. Concentrate investments in any industry. However, it may (a)
invest up to 25 percent of the value of its total assets in any one
industry, (b) invest up to 100 percent of the value of its total assets in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and (c) invest for defensive purposes up to 80 percent
of the value of its total assets in certificates of deposit (CDs) and
bankers' acceptances with maturities not greater than one year. CDs and
bankers' acceptances will be limited to domestic banks which have total
assets in excess of one billion dollars and are subject to regulatory
supervision by the U.S. Government or state governments. Commitments to
purchase securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities on a "when-issued" basis may not exceed 20
percent of the total assets of the Fund. Emphasis on investments in
securities of a particular industry will be shifted whenever the Advisor
determines that such action is desirable for investment reasons. The Board
of Directors will periodically review these decisions of the Advisor.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate
investment trusts, which operate in real estate or interests therein, and
participation interests in pools of real estate mortgage loans.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Fund.
6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of its total
assets at market value to be invested in the securities of that issuer
(other than obligations of the U.S. Government and its instrumentalities),
with reference to 75 percent of the assets of the Fund.
7. Purchase or retain securities issued by an issuer, any of whose
officers or directors or security holders is an officer or director of the
Fund or of its advisor if, or so long as, the officers and directors of
the Fund and of its advisor together own beneficially more than 5 percent
of any class of securities of the issuer.
8. Issue senior securities, bonds, or debentures.
9. Underwrite securities of other issuers, except the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed to be an
underwriter for purposes of the Securities Act of 1933.
10. Borrow money except as a temporary measure for extraordinary or
emergency purposes. Its borrowings may not exceed 5 percent of the value
of the gross assets of the Fund taken at the lesser of cost or market
value, nor may it pledge, mortgage, or hypothecate assets taken at market
to an extent greater than 10 percent of the value of the gross assets
taken at cost of the Fund.
11. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years continuous operation.
12. Invest in companies to exercise control or management.
13. Buy any securities or other property on margin, or purchase or
sell puts or calls, or combinations thereof.
14. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such
securities. These short sales may only be made to protect a profit in or
to attempt to minimize a loss with respect to convertible securities. In
any event, no more than 10 percent of the value of the Fund's net assets
taken at market may, at any time, be held as collateral for such sales.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
40
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA NATIONAL MUNICIPAL BOND FUND, INC.
The National Municipal Bond Fund may not:
1. Buy or sell real estate, but this shall not prevent the Fund from
investing in municipal obligations secured by real estate or interests
therein.
2. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
3. Purchase more than 10 percent of the voting securities of any
issuer.
4. Buy or sell commodities or commodity future contracts.
5. Issue senior securities, bonds, or debentures.
6. Sell securities short or buy any securities or other property on
margin, except for short-term credits necessary for clearing transactions.
7. Lend portfolio securities to broker-dealers or other
institutional investors if, as a result, the aggregate value of all
securities loaned exceeds 33 1/3 percent of the total assets of the Fund.
8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed an
underwriter for purposes of the Securities Act of 1933.
9. Borrow money except temporarily for extraordinary or emergency
purposes; nor may it pledge, mortgage, or hypothecate assets having a
market value greater than 10 percent of the cost of the gross assets of
the Fund. For amounts borrowed, the Fund shall maintain an asset coverage
of 300 percent for all borrowings. This restriction means that the Fund
may not borrow money in an amount exceeding 50 percent of its gross
assets. The Fund will not make any additional investments while borrowings
exceed 5 percent of the value of the Fund's total assets.
10. Invest more than 25 percent of its assets in a single industry.
COLUMBIA OREGON MUNICIPAL BOND FUND, INC.
The Oregon Municipal Bond Fund may not:
1. Buy or sell real estate, but this shall not prevent the Fund from
investing in municipal obligations secured by real estate or interests
therein.
2. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
3. Purchase more than 10 percent of the voting securities of any
issuer.
4. Buy or sell commodities or commodity future contracts.
41
5. Issue senior securities, bonds, or debentures.
6. Sell securities short or buy any securities or other property on
margin, except for short-term credits necessary for clearing transactions.
7. Lend portfolio securities to broker-dealers or other
institutional investors if, as a result, the aggregate value of all
securities loaned exceeds 33 1/3 percent of the total assets of the Fund.
8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed an
underwriter for purposes of the Securities Act of 1933.
9. Borrow money except temporarily for extraordinary or emergency
purposes; nor may it pledge, mortgage, or hypothecate assets having a
market value greater than 10 percent of the cost of the gross assets of
the Fund. For amounts borrowed, the Fund shall maintain an asset coverage
of 300 percent for all borrowings. This restriction means that the Fund
may not borrow money in an amount exceeding 50 percent of its gross
assets. The Fund will not make any additional investments while borrowings
exceed 5 percent of the value of the Fund's total assets.
10. Invest more than 25 percent of its assets in a single industry.
COLUMBIA HIGH YIELD FUND, INC.
The High Yield Fund may not:
1. Buy or sell commodities or commodity futures contracts.
2. Concentrate investments in any industry. However, it may (a)
invest up to 25 percent of the value of its total assets in any one
industry, (b) invest up to 100 percent of the value of its total assets in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and (c) invest for defensive purposes up to 80 percent
of the value of its total assets in CDs and bankers' acceptances with
maturities not greater than one year. CDs and bankers' acceptances will be
limited to domestic banks which have total assets in excess of $1 billion
and are subject to regulatory supervision by the U.S. Government or state
governments. Commitments to purchase securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities on a
"when-issued" basis may not exceed 20 percent of the total assets of the
Fund. Emphasis on investments in securities of a particular industry will
be shifted whenever the Advisor determines that such action is desirable
for investment reasons. The Board of Directors will periodically review
these decisions of the Advisor.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies, such as real estate
investment trusts, that operate in real estate or interests therein, and
participation interests in pools of real estate mortgage loans.
4. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
5. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Fund.
6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 5 percent of the value of its total
assets at market value to be invested in the securities of that issuer
(other than obligations of the U.S. Government and its instrumentalities),
with reference to 75 percent of the assets of the Fund.
7. Purchase or retain securities of an issuer if those officers or
directors of the Fund or the Advisor who individually own more than 1/2 of
1 percent of the outstanding securities of that issuer together own more
than 5 percent of such securities.
42
8. Issue senior securities, bonds, or debentures.
9. Underwrite securities of other issuers, except the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed to be an
underwriter for purposes of the Securities Act of 1933.
10. Borrow money except as a temporary measure for extraordinary or
emergency purposes. Its borrowings may not exceed 5 percent of the gross
assets of the Fund valued at the lesser of cost or market value, nor may
it pledge, mortgage, or hypothecate assets valued at market to an extent
greater than 10 percent of the gross assets valued at cost of the Fund.
11. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years continuous operation.
12. Invest in companies to exercise control or management.
13. Buy any securities or other property on margin, except for
short-term credits necessary for clearing transactions and except that
margin payments and other deposits in connection with transactions in
options, futures, and forward contracts shall not be deemed to constitute
purchasing securities on margin.
14. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such
securities. These short sales may only be made to protect a profit in or
to attempt to minimize a loss with respect to convertible securities. In
any event, no more than 10 percent of the Fund's net assets valued at
market may, at any time, be held as collateral for such sales.
15. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
COLUMBIA DAILY INCOME COMPANY
The Columbia Daily Income Company may not:
1. Borrow money to improve portfolio yield except as a temporary
measure to avoid disruptive redemptions, and not for investment purposes.
Borrowings will not exceed 33 1/3 percent of total assets and will be
repaid from the proceeds of sales of the Fund's shares or as maturities
allow.
2. Underwrite securities issued by others except as it may be deemed
to be an underwriter in a sale of restricted securities.
3. Invest more than 5 percent of its assets (exclusive of
obligations issued or guaranteed as to principal and interest by the U.S.
Government or any agency or instrumentality thereof) in the securities of
any one issuer. The Fund may invest up to 100 percent of its total assets
in obligations of U.S. banks which are members of the Federal Reserve
System. However, the Fund will not invest more than 25 percent of its
assets in any other single industry.
4. Buy or sell real estate.
5. Buy or sell commodities or commodity contracts.
43
6. Make loans, except that the Fund may (a) purchase debt
obligations which are consistent with its investment objectives and
policies; (b) enter into repurchase agreements; and (c) loan its portfolio
securities, to the fullest extent permitted under the 1940 Act.
7. Purchase common stocks, preferred stocks, warrants, or other
equity securities.
8. Purchase securities on margin.
9. Sell securities short.
10. Write or purchase put or call options.
11. Invest in the securities of other investment companies, except
those acquired as part of a merger, consolidation, or acquisition of
assets.
The following is a list of non-fundamental investment restrictions
applicable to the Fund. These restrictions can be changed by the Board, but the
change will only be effective after notice is given to shareholders of the Fund.
44
The Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 10% of its net assets would be invested in securities that are
illiquid.
Investment Restrictions Under Rule 2a-7
Rule 2a-7 under the 1940 Act requires that all portfolio securities of the
Columbia Daily Income Company have at the time of purchase a maximum remaining
maturity (as defined in the rule) of 13 months and that the Fund maintain a
dollar-weighted average portfolio maturity of not more than 90 days. Rule 2a-7
further requires that investments by a money market fund must present minimal
credit risk and, if rated, must be rated within one of the two highest rating
categories for short-term debt obligations by at least two major rating agencies
assigning a rating to the securities or issuer or, if only one rating agency has
assigned a rating, by that agency. Purchases of securities which are unrated or
rated by only one rating agency must be approved or ratified by the Board of
Directors of the Fund. Securities that are rated (or that have been issued by an
issuer that is rated with respect to a class of short-term debt obligations, or
any security within that class, comparable in priority and quality with such
securities) in the highest category by at least two major rating agencies are
designated "First Tier Securities." Securities rated in the top two categories
by at least two major rating agencies, but which are not rated in the highest
category by two or more major rating agencies, are designated "Second Tier
Securities." Securities which are unrated may be purchased only if they are
deemed to be of comparable quality to rated securities. Under Rule 2a-7, a fund
may not invest more than the greater of 1 percent of its total assets or one
million dollars, measured at the time of investment, in the securities of a
single issuer that were Second Tier Securities when acquired by the fund. In
addition, a money market fund may not under Rule 2a-7 invest more than 5 percent
of its total assets in securities that were Second Tier Securities when
acquired.
The Fund may not invest more than 5 percent of its total assets in the
securities of any one issuer, except this limitation does not apply to U.S.
Government securities and repurchase agreements thereon. The Fund may, however,
invest more than 5 percent of its total assets in the First Tier Securities of a
single issuer for up to three business days, although the Fund may not make more
than one such investment at any one time.
45
MANAGEMENT
Each Fund is managed under the supervision of its Board of Directors,
which has responsibility for overseeing decisions relating to the investment
policies and goals of the Fund. The Board of Directors of each Fund meets
quarterly to review the Fund's investment policies, performance, expenses, and
other business matters. The names, addresses and ages of the directors and
officers of the Funds, 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 director and other directorships they hold
are shown below. There is no family relationship between any of the directors.
Columbia Management Advisors, Inc. (the "Advisor"), located at 100 Federal
Street, Boston, Massachusetts 02110, is the Funds' investment advisor. The
Advisor is responsible for the Funds' management, subject to oversight by the
Funds' Boards of Directors. The Advisor is a direct wholly owned subsidiary of
Columbia Management Group, Inc. ("CMG"), which is an indirect wholly owned
subsidiary of Bank of America Corporation. Prior to April 1, 2004, CMG was an
indirect wholly owned subsidiary of FleetBoston Financial Corporation. Effective
April 1, 2004, FleetBoston Financial Corporation was acquired by Bank of America
Corporation. The Advisor, a registered investment advisor, has been an
investment advisor since 1969.
The "Columbia Funds Complex" (or "Fund Complex") consists of the following
funds:
The series of Columbia Funds Trust I, the series of Columbia Funds Trust
II, the series of Columbia Funds Trust III, the series of Columbia Funds
Trust IV, the series of Columbia Funds Trust V, the series of Columbia
Funds Trust VI, the series of Columbia Funds Trust VII, the series of
Liberty Variable Investment Trust and 8 closed-end management investment
company portfolios (the "Liberty Funds").
The series of Columbia Funds Trust VIII, the series of Columbia Funds
Trust IX, the series of Columbia Funds Trust XI, the series of SteinRoe
Variable Investment Trust (the "Stein Roe Funds").
Two closed-end management investment company portfolios named Liberty
All-Star Equity Fund and Liberty All-Star Growth Fund, Inc. (the "All-Star
Funds").
Columbia Management Multi-Strategy Hedge Fund, LLC.
Columbia Balanced Fund, Inc., Columbia Common Stock Fund, Inc., Columbia
Daily Income Company, Columbia Fixed Income Securities Fund, Inc.,
Columbia Growth Fund, Inc., Columbia High Yield Fund, Inc., Columbia
International Stock Fund, Inc., Columbia National Municipal Bond Fund,
Inc., Columbia Oregon Municipal Bond Fund, Inc., Columbia Real Estate
Equity Fund, Inc., Columbia Short Term Bond Fund, Inc., Columbia Small Cap
Growth Fund, Inc., Columbia Mid Cap Growth Fund, Inc., Columbia Strategic
Investor Fund, Inc., Columbia Technology Fund, Inc. and the series of CMG
Fund Trust (the "Columbia Funds").
The series of The Galaxy Funds (the "Galaxy Funds").
The series of Columbia Acorn Trust and the series of Wanger Advisors Trust
(the "Acorn Funds" and "WAT Funds," respectively).
46
Directors and Officers
DISINTERESTED DIRECTORS:
NUMBER OF
PORTFOLIOS IN
POSITION(s) TERM OF OFFICE AND FUND COMPLEX
NAME, ADDRESS HELD LENGTH OF TIME PRINCIPAL OCCUPATION(s) OVERSEEN OTHER DIRECTORSHIPS
AND AGE WITH FUNDS SERVED* (1) DURING PAST FIVE YEARS BY DIRECTOR (1) HELD BY DIRECTOR
- ------------------------ ------------ ------------------ -------------------------- --------------- ---------------------
Douglas A. Hacker Director Since October 2003 Executive Vice President - 118 Orbitz, Inc. (on-line
(Age 48) Strategy of United travel company)
P.O. Box 66100 Airlines (airline) since
Chicago, IL 60666 December, 2002 (formerly
President of UAL Loyalty
Services (airline) from
September, 2001 to
December, 2002; Executive
Vice President and Chief
Financial Officer of
United Airlines from
March, 1999 to September,
2001; Senior Vice
President-Finance from
March, 1993 to July,
1999).
47
NUMBER OF
PORTFOLIOS IN
POSITION(s) TERM OF OFFICE AND FUND COMPLEX
NAME, ADDRESS HELD LENGTH OF TIME PRINCIPAL OCCUPATION(s) OVERSEEN OTHER DIRECTORSHIPS
AND AGE WITH FUNDS SERVED* (1) DURING PAST FIVE YEARS BY DIRECTOR (1) HELD BY DIRECTOR
- ------------------------ ------------ ------------------ -------------------------- --------------- ---------------------
Janet Langford Kelly Director Since October 2003 Private Investor since 118 None
(Age 46) March, 2004 (formerly
9534 W. Gull Lake Drive Chief Administrative
Richland, MI 49083-8530 Officer and Senior Vice
President, Kmart Holding
Corporation (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).
Richard W. Lowry Director Since October 2003 Private Investor since 120(3) None
(Age 68) August, 1987 (formerly
10701 Charleston Drive Chairman and Chief
Vero Beach, FL 32963 Executive Officer, U.S.
Plywood Corporation
(building products
manufacturer)).
48
NUMBER OF
PORTFOLIOS IN
POSITION(s) TERM OF OFFICE AND FUND COMPLEX
NAME, ADDRESS HELD LENGTH OF TIME PRINCIPAL OCCUPATION(s) OVERSEEN OTHER DIRECTORSHIPS
AND AGE WITH FUNDS SERVED* (1) DURING PAST FIVE YEARS BY DIRECTOR (1) HELD BY DIRECTOR
- ------------------------ ------------ ------------------ -------------------------- --------------- ---------------------
Charles R. Nelson Director Served for 1 year Professor of Economics, 118 None
(Age 62) University of Washington,
Department of Economics since January, 1976; Ford
University of Washington and Louisa Van Voorhis
Seattle, WA 98195 Professor of Political
Economy, University of
Washington, since
September, 1993 (formerly
Director, Institute for
Economic Research,
University of Washington
from September, 2001 to
June, 2003) Adjunct
Professor of Statistics,
University of Washington,
since September, 1980;
Associate Editor, Journal
of Money Credit and
Banking, since September,
1993; consultant on
econometric and
statistical matters.
John J. Neuhauser Director Since October 2003 Academic Vice President 121(3,4) Saucony, Inc.
(Age 61) and Dean of Faculties (athletic footwear)
84 College Road since August, 1999, Boston
Chestnut Hill, College (formerly Dean,
MA 02467-3838 Boston College School of
Management from
September, 1977 to
September, 1999).
49
NUMBER OF
PORTFOLIOS IN
POSITION(s) TERM OF OFFICE AND FUND COMPLEX
NAME, ADDRESS HELD LENGTH OF TIME PRINCIPAL OCCUPATION(s) OVERSEEN OTHER DIRECTORSHIPS
AND AGE WITH FUNDS SERVED* (1) DURING PAST FIVE YEARS BY DIRECTOR (1) HELD BY DIRECTOR
- ------------------------ ------------ ------------------ -------------------------- --------------- ---------------------
Patrick J. Simpson Director Served for 3 years Partner, Perkins Coie 118 None
(Age 60) L.L.P. (law firm).
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Thomas E. Stitzel Director Since October 2003 Business Consultant since 118 None
(Age 68) 1999 (formerly Professor
2208 Tawny Woods Place of Finance from 1975 to
Boise, ID 83706 1999, College of Business,
Boise State University);
Chartered Financial
Analyst.
Thomas C. Theobald Director Since October 2003 Partner and Senior 118 Anixter International
(Age 67) (5) and Advisor, Chicago Growth (network support
303 W. Madison Chairman of Partners (private equity equipment
Suite 2500 the Board investing) since distributor); Ventas,
Chicago, IL 60606 September, 2004 (formerly Inc. (real estate
Managing Director, William investment trust);
Blair Capital Partners Jones Lang LaSalle
(private equity investing) (real estate
from September, 1994 to management services)
September, 2004). and Ambac Financial
(financial insurance
underwriter)
50
NUMBER OF
PORTFOLIOS IN
POSITION(s) TERM OF OFFICE AND FUND COMPLEX
NAME, ADDRESS HELD LENGTH OF TIME PRINCIPAL OCCUPATION(s) OVERSEEN OTHER DIRECTORSHIPS
AND AGE WITH FUNDS SERVED* (1) DURING PAST FIVE YEARS BY DIRECTOR (1) HELD BY DIRECTOR
- ------------------------ ------------ ------------------ -------------------------- --------------- ---------------------
Anne-Lee Verville Director Since October 2003 Retired since 1997 119(4) Chairman of the Board
(Age 59) (formerly General Manager, of Directors, Enesco
359 Stickney Hill Road Global Education Industry, Group, Inc. (designer,
Hopkinton, NH 03229 IBM Corporation (computer importer and
and technology) from 1994 distributor of
to 1997). giftware and
collectibles)
Richard L. Woolworth Director Served for 12 Retired since December 118 Northwest Natural Gas
(Age 63) years 2003 (formerly Chairman Co. (natural gas
100 S.W. Market Street and Chief Executive service provider)
#1500 Officer. The Regence Group
Portland, OR 97207 (regional health insurer);
Chairman and Chief
Executive Officer,
BlueCross BlueShield of
Oregon; Certified Public
Accountant, Arthur Young &
Company)
51
INTERESTED DIRECTOR:
NUMBER OF
PORTFOLIOS IN
POSITION(s) TERM OF OFFICE AND FUND COMPLEX
NAME, ADDRESS HELD LENGTH OF TIME PRINCIPAL OCCUPATION(s) OVERSEEN OTHER DIRECTORSHIPS
AND AGE WITH FUNDS SERVED* (1) DURING PAST FIVE YEARS BY DIRECTOR (1) HELD BY DIRECTOR
- ------------------------ ------------ ------------------ -------------------------- --------------- ---------------------
William E. Mayer(2) Director Since October Managing Partner, Park 120(3) Lee Enterprises
(Age 64) 2003 Avenue Equity Partners (print media), WR
399 Park Avenue (private equity) since Hambrecht + Co.
Suite 3204 February, 1999 (formerly (financial service
New York, NY 10022 Founding Partner, provider); First
Development Capital LLC Health (healthcare);
from November 1996 to Reader's Digest
February, 1999). (publishing);
OPENFIELD Solutions
(retail industry
technology provider)
* Each director serves for an indefinite term until the date the director
resigns, retires or is removed in accordance with the Bylaws of each Fund.
(1) As of December 31, 2003, the Columbia Complex consisted of 132 open-end and
15 closed end management investment company portfolios. In October 2003, the
trustees of the Liberty Funds and Stein Roe Funds were elected to the boards of
the Columbia Funds; simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors/trustees of the Columbia Funds were
appointed to serve as trustees of the Liberty Funds and Stein Roe Funds. The
date shown is the earliest date on which a trustee/director was elected or
appointed to the board of a Fund in the Fund 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
All-Star Funds.
(4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the
Advisor.
(5) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
52
PRINCIPAL OFFICERS:
TERM OF
POSITION OFFICE AND
NAME, ADDRESS (s) HELD LENGTH OF Principal Occupation(s)
AND AGE WITH FUNDS TIME SERVED DURING PAST FIVE YEARS
- --------------------- ----------- ----------- ---------------------------------------------------------------------
Christopher L. Wilson President Since 2004 President of the Columbia Funds, Liberty Funds and Stein Roe Funds
(Age 47) since October, 2004 (formerly President and Chief Executive Officer,
One Financial Center CDC IXIS Asset Management Services, Inc. from September, 1998 to
Boston, MA 02111 August, 2004).
J. Kevin Connaughton Treasurer Since 2000 Treasurer of the Columbia Funds since October, 2003 and of the
(Age 39) Liberty Funds, Stein Roe Funds and All-Star Funds since December,
One Financial Center 2000; Vice President of the Advisor since April, 2003 (formerly
Boston, MA 02111 President of the Columbia Funds, Liberty Funds and Stein Roe Funds
from February, 2004 to October, 2004; Chief Accounting Officer and
Controller of the Liberty Funds and of the All-Star Funds from
February, 1998 to October, 2000); Treasurer of the Galaxy Funds since
September, 2002; Treasurer, Columbia Management Multi-Strategy Hedge
Fund, LLC since December, 2002 (formerly Vice President of Colonial
Management Associates, Inc. from February, 1998 to October, 2000).
Mary Joan Hoene Senior Vice Since 2004 Senior Vice President and Chief Compliance Officer of the Columbia
(Age 54) President Funds, Liberty Funds, Stein Roe Funds and All-Star Funds since
40 West 57th Street and Chief August, 2004 (formerly Partner, Carter, Ledyard & Milburn LLP from
New York, NY 10019 Compliance January, 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP
Officer from November, 1999 to December, 2000; Vice President and Counsel,
Equitable Life Assurance Society of the United States from April,
1998 to November, 1999,).
54
Michael G. Clarke Chief Since 2004 Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein
(Age 34) Accounting Roe Funds and All-Star Funds since October, 2004 (formerly Controller
One Financial Center Officer of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star
Boston, MA 02111 Funds from May, 2004 to October, 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 & Toche LLP from May, 1997 to August, 1999).
Jeffrey R. Coleman Controller Since 2004 Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and
(Age 34) All-Star Funds since October, 2004 (formerly Vice President of CDC
One Financial Center IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC
Boston, MA 02111 Nvest Funds and Loomis Sayles Funds from 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 Secretary Since 2004 Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds
(Age 45) since December, 2004 (formerly Of Counsel, Bingham McCutchen from
One Financial Center April, 2001 to September, 2004; Executive Director and General
Boston, MA 02111 Counsel, Massachusetts Pension Reserves Investment Management Board
from September, 1997 to March, 2001).
Board of Directors
The directors of the Funds are responsible for overseeing decisions
relating to the investment policies and goals of the Funds. The Funds hire other
parties that are responsible for the day-to-day operations of the Funds, such as
the Advisor, transfer agent and custodian. The directors meet quarterly to
review the Funds' investment policies, performance, expenses, and other business
matters. The directors have created several committees to perform specific
functions for the Funds.
AUDIT COMMITTEE
Ms. Verville and Messrs. Hacker, Stitzel and Woolworth are members of the
Audit Committee of the Board of Directors of the Funds. Prior to October 7,
2003, Messrs. Woolworth, Simpson, Nelson and Mr. James C. George were members of
the Audit Committee of the Board of Directors of the Funds. Mr. George resigned
from the Board of Directors of the Funds on October 7, 2003. Messrs. Simpson and
Nelson have assumed other committee responsibilities. The Audit Committee's
functions include making recommendations to the Directors regarding the
selection and performance of the independent accountants, and reviewing matters
relative to accounting and auditing practices and procedures, accounting
records, and the internal accounting controls, of the
55
Funds and certain service providers. For the fiscal year ended August 31, 2004,
the Audit Committee convened eleven times.
GOVERNANCE COMMITTEE
Messrs. Lowry, Mayer, Simpson and Theobald are members of the Governance
Committee of the Board of Directors of the Funds. Prior to October 7, 2003, the
Funds did not have a Governance Committee. The Governance Committee's functions
include recommending to the directors nominees for independent directors
positions and for appointments to various committees, performing periodic
evaluations of the effectiveness of the Board, reviewing and recommending to the
Board policies and practices to be followed in carrying out the directors'
duties and responsibilities and reviewing and making recommendations to the
Board regarding the compensation of the directors who are not affiliated with
the Funds' investment advisor. The Governance Committee will consider candidates
for directors recommended by shareholders. Written recommendations with
supporting information should be directed to the Committee, in care of the
Funds. For the fiscal year ended August 31, 2004, the Governance Committee
convened four times.
COMPLIANCE COMMITTEE
Ms. Kelly, Messrs. Nelson and Simpson and Ms. Verville are members of the
Compliance Committee of the Board of Directors of the Funds. The Compliance
Committee's functions include providing oversight of the monitoring processes
and controls regarding the Funds. The Committee uses legal, regulatory and
internal rules, policies, procedures and standards other than those relating to
accounting matters and oversight of compliance by the Funds' investment adviser,
principal underwriter and transfer agent. For the fiscal year ended August 31,
2004, the Compliance Committee convened five times.
ADVISORY FEES & EXPENSES COMMITTEE
Ms. Kelly and Messrs. Mayer, Nelson and Neuhauser are members of the
Advisory Fees & Expenses Committee of the Board of Directors of the Funds. Prior
to October 7, 2003, the Funds did not have an Advisory Fees and Expenses
Committee. The Advisory Fees & Expenses Committee's functions include reviewing
and making recommendations to the Board as to contracts requiring approval of a
majority of the disinterested directors and as to any other contracts that may
be referred to the Committee by the Board. For the fiscal year ended August 31,
2004, the Advisory Fees & Expenses Committee convened five times.
INVESTMENT OVERSIGHT COMMITTEES
Beginning in 2004, each director of the Funds also began serving on an
Investment Oversight Committee ("IOC"). Each IOC is responsible for monitoring,
on an ongoing basis, a select group of funds in the Columbia Funds Complex and
give particular consideration to such matters as the Funds' adherence to their
investment mandates, historical performance, changes in investment processes and
personnel, and proposed changes to investment objectives. Investment personnel
who manage the Funds attend IOC meetings from time to time to assist each IOC in
its review of the Funds. Each IOC meets four times a year. The following are
members of the respective IOCs and the general categories of Funds which they
review:
IOC#1: Messrs. Lowry, Mayer and Neuhauser are responsible for reviewing
funds in the following asset categories: Large Growth
Diversified, Large Growth Concentrated, Small Growth, Outside
Managed (i.e., sub-advised), Municipal and Bank Loan.
56
IOC#2: Mr. Hacker and Ms. Verville are responsible for reviewing funds
in the following asset categories: Large Blend, Small Blend,
Foreign Stock, Fixed Income - Multi Sector, Fixed Income - Core
and Young Investor.
IOC#3: Messrs. Theobald and Stitzel and Ms. Kelly are responsible for
reviewing funds in the following asset categories: Large Value,
Mid Cap Value, Small Value, Asset Allocation, High Yield and
Money Market.
IOC#4: Messrs. Nelson, Simpson and Woolworth will be responsible for
reviewing Funds in the following asset categories:
Large/MultiCap Blend, Mid Cap Growth, Small Growth, Asset
Allocation, Specialty Equity and Taxable Fixed Income.
For the fiscal year ended August 31, 2004, each IOC convened three times.
The following table sets forth the dollar range of shares owned by each
director as of December 31, 2003 of (i) each individual Fund and (ii) all of the
funds in the same family of investment companies as the Funds:
DISINTERESTED DIRECTORS:
DOUGLAS A. JANET LANGFORD RICHARD W.
NAME OF FUND HACKER KELLY LOWRY
- ---------------------------- ------------- ---------------- ----------
Common Stock Fund None None None
Balanced Fund None None None
Growth Fund None None None
Mid Cap Growth Fund None $50,001-$100,000 None
Small Cap Growth Fund None None None
International Stock Fund None None None
Real Estate Equity Fund None None None
Strategic Investor Fund None None None
Technology Fund None None None
Daily Income Company None None None
Fixed Income Securities Fund None None None
Short Term Bond Fund None None None
High Yield Fund None None None
Oregon Municipal Bond Fund None None None
National Municipal Bond Fund None None None
AGGREGATE DOLLAR RANGE OF
FUND SHARES IN FUNDS
OVERSEEN BY DIRECTOR IN
FAMILY OF INVESTMENT OVER $100,000 OVER $100,000 $10,001-
COMPANIES: $50,000
57
DR. CHARLES R. JOHN J.
NAME OF FUND NELSON NEUHAUSER
- ---------------------------- ---------------- ---------
Common Stock Fund None None
Balanced Fund None None
Growth Fund None None
Mid Cap Growth Fund $50,001-$100,000 None
Small Cap Growth Fund None None
International Stock Fund $10,001-$50,000 None
Real Estate Equity Fund None None
Strategic Investor Fund None None
Technology Fund None None
Daily Income Company None None
Fixed Income Securities Fund None None
Short Term Bond Fund None None
High Yield Fund None None
Oregon Municipal Bond Fund None None
National Municipal Bond Fund None None
AGGREGATE DOLLAR RANGE OF
FUND
SHARES IN FUNDS OVERSEEN
BY
DIRECTOR IN FAMILY OF
INVESTMENT
COMPANIES: OVER $100,000 OVER
$100,000
PATRICK J. THOMAS E.
NAME OF FUND SIMPSON STITZEL
- ---------------------------- ---------------- ---------------
Common Stock Fund None None
Balanced Fund $10,001-$50,000 None
Growth Fund $50,001-$100,000 None
Mid Cap Growth Fund $1-$10,000 None
Small Cap Growth Fund None None
International Stock Fund None None
Real Estate Equity Fund None None
Strategic Investor Fund None $10,001-$50,000
Technology Fund None None
Daily Income Company None None
Fixed Income Securities Fund None None
Short Term Bond Fund None None
High Yield Fund None None
Oregon Municipal Bond Fund None None
National Municipal Bond Fund None None
AGGREGATE DOLLAR RANGE OF
FUND
58
SHARES IN FUNDS OVERSEEN
BY
DIRECTOR IN FAMILY OF
INVESTMENT COMPANIES: $50,001-$100,000 $50,001-$100,000
THOMAS C. ANNE-LEE RICHARD W.
NAME OF FUND THEOBALD VERVILLE WOOLWORTH
- ---------------------------- --------------- -------- ----------------
Common Stock Fund None None $10,001-$50,000
Balanced Fund None None None
Growth Fund None None $1-$10,000
Mid Cap Growth Fund None None $1-$10,000
Small Cap Growth Fund None None $1-$10,000
International Stock Fund None None $1-$10,000
Real Estate Equity Fund None None None
Strategic Investor Fund $10,001-$50,000 None $1-$10,000
Technology Fund None None $1-$10,000
Daily Income Company None None $50,001-$100,000
Fixed Income Securities Fund None None None
Short Term Bond Fund None None None
High Yield Fund None None None
Oregon Municipal Bond Fund None None $10,001-$50,000
National Municipal Bond Fund None None None
AGGREGATE DOLLAR RANGE OF
FUND SHARES IN FUNDS
OVERSEEN
BY DIRECTOR IN FAMILY OF
INVESTMENT COMPANIES: OVER $100,000 NONE* OVER $100,000
INTERESTED DIRECTORS:
WILLIAM E.
NAME OF FUND MAYER
- -------------------------------- ----------
Common Stock Fund None
Balanced Fund None
Growth Fund None
Mid Cap Growth Fund None
Small Cap Growth Fund None
International Stock Fund None
Real Estate Equity Fund None
Strategic Investor Fund None
Technology Fund None
Daily Income Company None
59
Fixed Income Securities Fund None
Short Term Bond Fund None
High Yield Fund None
Oregon Municipal Bond Fund None
National Municipal Bond Fund None
AGGREGATE DOLLAR RANGE OF
FUND SHARES IN FUNDS
OVERSEEN BY
DIRECTOR IN FAMILY OF
INVESTMENT COMPANIES: NONE
- ----------
* Because Ms. Verville's share ownership in the Liberty Funds is held
through her deferred compensation plan, her ownership is not required to
be disclosed.
As of December 31, 2003, none of the disinterested directors or nominees or
members of their immediate families owned any securities of the Advisor or any
other entity directly or indirectly controlling, controlled by, or under common
control with the Advisor.
Approval of Investment Advisory Contract
Each of the Funds has entered into an investment advisory contract with
the Advisor. Each investment advisory contract is subject to annual approval of
the Board of Directors, including a majority of disinterested directors. The
existing contracts for the Funds were considered and approved at in-person
meetings of the Funds' Boards of Directors held on May 12, 2004 and October 13,
2004. In determining the reasonableness of the advisory fees under each of the
contracts, the directors considered several factors, including:
- The nature and quality of services provided to the Funds'
shareholders,
- The profitability of the advisory contract for the Advisor,
- Fall-out benefits realized by the Advisor from services as advisor
to the Funds,
- A comparison of fee structures with other mutual funds, and
- The existence of economies of scale with respect to the provision of
investment advice to the Funds.
In reviewing the quality of services provided by the Advisor, the
directors reviewed the performance and expense rankings of the Funds as compared
to their peers, based upon information compiled by Lipper, Inc. The directors
reviewed the following information: (1) total expense rankings within each
Fund's expense group, (2) actual management fee rankings of each Fund within its
expense group, (3) contractual management fee rankings of each Fund within its
expense group and (4) performance rankings within each Fund's peer universe for
the one-, three-, five- and ten-year periods. In addition, the directors
reviewed data for each Fund comparing various return rankings of the Fund versus
the Fund's actual management or total expense ranking. From this information, an
overall Fund assessment ranking is made for each Fund. All of the Funds received
a satisfactory ranking by the directors.
The directors also reviewed data related to the profitability of the
Advisor with respect to its contract with each of the Funds. The directors
considered the additional benefits to the Advisor as a result of its
relationship with the Funds. The directors also considered the benefits to
affiliates of the Advisor as the result of its management of the Funds.
After considering these and other factors, and each Fund's specific
circumstances, the directors concluded that each Fund's advisory contract with
the Advisor was reasonable for such Fund and in the best interests of its
shareholders. During their deliberations, the directors requested from the
Advisor all information reasonably necessary for the directors to evaluate each
of the advisory contracts for the Funds. The disinterested directors were also
assisted by, and met separately with, their independent counsel.
See the section entitled "INVESTMENT ADVISORY AND OTHER FEES PAID TO
AFFILIATES" for further information about the Advisor and each Fund's investment
advisory contract.
60
Director Compensation:
The directors serve as directors/trustees of all open-end funds managed by
the Advisor for which each director will receive an annual retainer of $45,000
and attendance fees of $9,500 for each regular and special joint board meeting
and $1,000 for each special telephonic joint board meeting. Beginning in
December 2003, Mr. Theobald began serving as the Chairman of the Board. Mr.
Theobald receives an additional annual retainer of $40,000 for serving in this
capacity. All committee chairs, except the Audit Committee chair, receive an
annual retainer of $5,000 and Committee chairs receive $1,500 for each special
committee meeting attended on a day other than a regular joint board meeting
day. The Audit Committee chair receives an annual retainer of $10,000 and
receives $2,000 for each Audit Committee meeting. Committee members receive
$1,500 for each special committee meeting attended on a day other than a regular
joint board meeting day. Two-thirds of the director fees are allocated among the
Funds based on each Fund's relative net assets and one-third of the fees is
divided equally among the Funds.
The following table sets forth compensation earned by the Funds' directors
for the fiscal year ended August 31, 2004. No officer of the Funds received any
compensation from the Funds in 2004.
DOUGLAS A. JANET LANGFORD RICHARD W.
AGGREGATE COMPENSATION FROM FUND HACKER(2) KELLY(2) LOWRY(2)
- -------------------------------- ---------- -------------- ----------
Common Stock Fund $ 1,095 $ 1,104 $ 1,024
Balanced Fund $ 1,254 $ 1,262 $ 1,154
Growth Fund $ 1,660 $ 1,675 $ 1,521
Mid Cap Growth Fund $ 1,792 $ 1,808 $ 1,641
Small Cap Growth Fund $ 1,257 $ 1,276 $ 1,149
International Stock Fund $ 790 $ 817 $ 709
Real Estate Equity Fund $ 1,744 $ 1,762 $ 1,609
Strategic Investor Fund $ 695 $ 707 $ 629
Technology Fund $ 690 $ 701 $ 670
Daily Income Company $ 1,564 $ 1,567 $ 1,441
Fixed Income Securities
Fund $ 1,308 $ 1,312 $ 1,234
Short Term Bond Fund $ 1,164 $ 1,174 $ 1,073
High Yield Fund $ 2,782 $ 2,818 $ 2,550
Oregon Municipal Bond
Fund $ 1,337 $ 1,349 $ 1,260
National Municipal Bond
Fund $ 337 $ 341 $ 313
TOTAL COMPENSATION FROM
FUND COMPLEX: $ 127,500 $127,500 $ 143,150
61
DR. CHARLES R. JOHN J.
AGGREGATE COMPENSATION FROM FUND NELSON NEUHAUSER(2)
- -------------------------------- -------------- ------------
Common Stock Fund $ 1,103 $ 1,058
Balanced Fund $ 1,252 $ 1,192
Growth Fund $ 1,659 $ 1,569
Mid Cap Growth Fund $ 1,791 $ 1,693
Small Cap Growth Fund $ 1,261 $ 1,184
International Stock Fund $ 802 $ 729
Real Estate Equity Fund $ 1,749 $ 1,659
Strategic Investor Fund $ 696 $ 648
Technology Fund $ 712 $ 694
Daily Income Company $ 1,555 $ 1,489
Fixed Income Securities Fund $ 1,316 $ 1,277
Short Term Bond Fund $ 1,166 $ 1,108
High Yield Fund $ 2,789 $ 2,628
Oregon Municipal Bond Fund $ 1,353 $ 1,303
National Municipal Bond Fund $ 339 $ 324
TOTAL COMPENSATION FROM
FUND COMPLEX: $126,500 $ 150,026
PATRICK J. THOMAS E.
AGGREGATE COMPENSATION FROM FUND SIMPSON(3) STITZEL(2)
- -------------------------------- ---------- ----------
Common Stock Fund $ 1,148 $ 1,197
Balanced Fund $ 1,313 $ 1,341
Growth Fund $ 1,731 $ 1,769
Mid Cap Growth Fund $ 1,867 $ 1,910
Small Cap Growth Fund $ 1,300 $ 1,341
International Stock Fund $ 794 $ 843
Real Estate Equity Fund $ 1,817 $ 1,873
Strategic Investor Fund $ 715 $ 737
Technology Fund $ 722 $ 797
Daily Income Company $ 1,647 $ 1,666
Fixed Income Securities Fund $ 1,383 $ 1,438
Short Term Bond Fund $ 1,215 $ 1,252
High Yield Fund $ 2,885 $ 2,971
Oregon Municipal Bond Fund $ 1,403 $ 1,478
National Municipal Bond Fund $ 351 $ 366
TOTAL COMPENSATION FROM
FUND COMPLEX: $ 108,144 $ 135,000
THOMAS C. ANNE-LEE RICHARD W.
AGGREGATE COMPENSATION FROM FUND THEOBALD(2)(4) VERVILLE(2)(5) WOOLWORTH
- -------------------------------- -------------- -------------- ----------
Common Stock Fund $ 1,357 $ 1,305 $ 1,257
62
Balanced Fund $ 1,604 $ 1,486 $ 1,431
Growth Fund $ 2,129 $ 1,968 $ 1,886
Mid Cap Growth Fund $ 2,296 $ 2,124 $ 2,034
Small Cap Growth Fund $ 1,614 $ 1,494 $ 1,418
International Stock Fund $ 999 $ 944 $ 873
Real Estate Equity Fund $ 2,223 $ 2,073 $ 1,982
Strategic Investor Fund $ 889 $ 824 $ 781
Technology Fund $ 784 $ 835 $ 802
Daily Income Company $ 1,657 $ 1,849 $ 1,790
Fixed Income Securities Fund $ 1,614 $ 1,559 $ 1,513
Short Term Bond Fund $ 1,470 $ 1,382 $ 1,327
High Yield Fund $ 3,574 $ 3,305 $ 3,146
Oregon Municipal Bond Fund $ 1,626 $ 1,598 $ 1,541
National Municipal Bond Fund $ 421 $ 402 $ 385
TOTAL COMPENSATION FROM
FUND COMPLEX: $ 155,000 $ 149,500 $ 118,144
63
INTERESTED DIRECTORS:
WILLIAM E
AGGREGATE COMPENSATION FROM FUND MAYER(3)
- -------------------------------- ---------
Common Stock Fund $ 1,103
Balanced Fund $ 1,240
Growth Fund $ 1,633
Mid Cap Growth Fund $ 1,762
Small Cap Growth Fund $ 1,234
International Stock Fund $ 760
Real Estate Equity Fund $ 1,730
Strategic Investor Fund $ 674
Technology Fund $ 727
Daily Income Company $ 1,547
Fixed Income Securities Fund $ 1,331
Short Term Bond Fund $ 1,153
High Yield Fund $ 2,739
Oregon Municipal Bond Fund $ 1,359
National Municipal Bond Fund $ 337
TOTAL COMPENSATION FROM
FUND COMPLEX: $ 153,900
- ----------
(1) As of December 31, 2003, the Columbia Funds Complex consisted of 132
open-end and 15 closed-end management investment company portfolios.
Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth
were appointed to the Board of Trustees of the Liberty Funds and Stein Roe
Funds. Effective October 8, 2003, the Trustees of the Liberty Funds and
the Stein Roe Funds were elected as directors/Trustees of the Columbia
Funds. A single combined board of Trustees/directors now oversees all of
the Liberty Funds, Stein Roe Funds and Columbia Funds. The All-Star Funds,
Columbia Management Multi-Strategy Hedge Fund, LLC, the Galaxy Funds, the
Acorn Funds and the WAT Funds each have separate boards of
trustees/directors.
(2) Each of Ms. Verville, Ms. Kelly and Messrs. Hacker, Lowry, Mayer,
Neuhauser, Stitzel and Theobald was elected a Trustee of the Trust on
October 7, 2003. The compensation amounts for each of them reflect their
total compensation paid for service during the fiscal year ended August
31, 2004 as a Trustee or director of funds formerly known as the Liberty
Funds and Stein Roe Funds that are now part of the Columbia Funds Complex.
(3) During the fiscal year ended August 31, 2004, Mr. Simpson deferred $1,148,
$1,313, $1,731, $1,867, $1,300, $794, $1,817, $722, $1,647, $1,383,
$1,215, $2,885, $1,403 and $351 of his compensation from the Common Stock
Fund, Balanced Fund, Growth Fund, Mid Cap Growth Fund, Small Cap Growth
Fund, International Stock Fund, Real Estate Equity Fund, Technology Fund,
Daily Income Company, Fixed Income Securities Fund, Short Term Bond Fund,
High Yield Fund, Oregon Municipal Bond Fund, and National Municipal Bond
Fund, respectively, and $108,144 of his total compensation from the Fund
Complex pursuant to the deferred compensation plan.
(4) During the fiscal year ended August 31, 2004, Mr. Theobald deferred $666,
$899, $1,216, $186, $931, $586, $1,230, $229, $571, $759, $793, $2,048,
$732 and $217 of his compensation from the Common Stock Fund, Balanced
Fund, Growth Fund, Mid Cap Growth Fund, Small Cap Growth Fund,
International Stock Fund, Real Estate Equity Fund, Technology Fund, Daily
Income Company, Fixed Income Securities Fund, Short Term Bond Fund, High
Yield Fund, Oregon Municipal Bond Fund, and National Municipal Bond Fund,
respectively, and $80,000 of his total compensation from the Fund Complex
pursuant to the deferred compensation plan.
(5) During the fiscal year ended August 31, 2004, Ms. Verville deferred $407,
$550, $743, $268, $569, $361, $752, $140, $698, $464, $485, $1,251, $447
and $133 of her compensation from the Common Stock Fund, Balanced Fund,
Growth Fund, Mid Cap Growth Fund,
64
Small Cap Growth Fund, International Stock Fund, Real Estate Equity Fund,
Technology Fund, Daily Income Company, Fixed Income Securities Fund, Short
Term Bond Fund, High Yield Fund, Oregon Municipal Bond Fund, and National
Municipal Bond Fund, respectively, and $55,000 of her total compensation
from the Fund Complex pursuant to the deferred compensation plan.
Share Ownership:
As of November 30, 2004, each director and all officers and directors, as
a group, owned of record or beneficially less than 1% of the outstanding shares
of each Fund.
As of November 30, 2004, to the knowledge of the Funds, no person owned of
record or beneficially more than 5% of the outstanding shares of any Fund except
the following record owners:
BALANCED FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
FRANCES A MCCONNELL 5.08
11866 GIRDLED RD
CONCORD OH 44077-8805
BALANCED FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
J J B HILLIARD W L LYONS INC 26.85
DWIGHT P PLOWMAN
501 S 4TH ST
LOUISVILLE KY 40202-2520
NFSC FEBO 12.55
LI MEI FENG
50 NOVA DR
PIEDMONT CA 94610-1038
FIRST CLEARING, LLC 6.54
DORIS R KORNEGAY &
JOE ISAAC JT TEN
9563 BROKEN OAK BLVD
JACKSONVILLE FL 32257-8806
65
JAY H DEL GIORGIO & 5.30
PATRICIA A DEL GIORGIO TTEE
DEL GIORGIO FAMILY TRUST
U/A 03/28/1996
340 OLD MILL RD SPC 63
SANTA BARBARA CA 93110-3725
BALANCED FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
LEGG MASON WOOD WALKER INC 25.89
PO BOX 1476
BALTIMORE MD 21203-1476
UBS FINANCIAL SERVICES INC. FBO 15.69
ROBERT BREIDENBAUGH
CAROLYN BREIDENBAUGH JTWRO
369 E. CHURCH STREET
ELMHURST IL 60126-3602
JOHN WIST & 11.22
GLADYS WIST JT WROS
12111 FAITH LN
BOWIE MD 20715-2302
ATTN MUTUAL FUNDS 9.36
FISERV SECURITIES INC
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
CITIGROUP GLOBAL MARKETS, INC 8.40
HOUSE ACCOUNT
ATTN: PETER BOOTH 7TH FLOOR
333 W 34TH ST
NEW YORK NY 10001-2402
COMMON STOCK FUND-A
66
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
RELIANCE TRUST CO CUST 11.07
FBO EASTERN AVIATION FUELS
PO BOX 48449
ATLANTA GA 30362-1449
COLUMBIA TRUST COMPANY ROLL 10.46
LARRY A LEPPKE
12091 W LAKE AVE
LITTLETON CO 80127-2368
NFSC FEBO 5.83
NFS/FMTC SEP IRA
FBO ROGER B MATHERLY
2701 RIVERVIEW DR
COLONIAL BCH VA 22443-1326
COMMON STOCK FUND-B
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
CITIGROUP GLOBAL MARKETS, INC 8.08
HOUSE ACCOUNT
ATTN: PETER BOOTH 7TH FLOOR
333 W 34TH ST
NEW YORK NY 10001-2402
FIRST CLEARING LLC 7.27
MARYANNE S BOHLINGER IR TRUS
5615 LAS BRISAS DR
VERO BEACH FL 32967-7256
FIRST CLEARING CORPORATION 6.29
JOSEPH J BOHLINGER
5615 LAS BRISAS DR
VERO BEACH FL 32967-7256
67
COMMON STOCK FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
FISERV SECURITIES, INC. 45.29
ATTN: MUTUAL FUNDS DEPT
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7084
MARK R MYERS 19.85
SANDRA K MYERS
415 NORWAY ST
SILVERTON OR 97381-1244
COLUMBIA TRUST COMPANY ROLLOVER 8.23
IRA
DOROTHY J LINDBO
315 7TH ST NE
PUYALLUP WA 98372-5022
AMERICAN ENTERPRISE INVESTMENT 8.06
SVCS
PO BOX 9446
MINNEAPOLIS MN 55440-9446
ADP CLEARING & OUTSOURCING 6.40
26 BROADWAY
NEW YORK NY 10004-1703
COMMON STOCK FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
AMERICAN ENTERPRISE INVESTMENT 34.29
SVCS
PO BOX 9446
MINNEAPOLIS MN 55440-9446
68
ATTN MUTUAL FUNDS 27.53
FISERV SECURITIES INC
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
FIRST CLEARING LLC 22.25
ROY E ANGER R/O IRA
FCC AS CUSTODIAN
9130 CHERRY HILL CT
FORT MYERS FL 33908-3648
UBS FINANCIAL SERVICES INC. FBO 11.25
ZONNIE B ODOM TRUST B
CATHERINE ODOM TTEE
U/W 12/19/98
310 GRANDYS MILL RD
WILLISTON SC 29853-3106
COMMON STOCK FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
COLUMBIA TRUST CO CUSTODIAN 5.20
FBO NORTHERN ALASKA CARPENT
DEF CONTRIBUTION PP-PARTICIPA
PO BOX 1350
PORTLAND OR 97207-1350
FIXED INCOME SECURITIES FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 27.22
SPECIAL CUSTODY ACCT FOR
EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
69
MCB TRUST SERVICES CUST. FBO 17.65
MERIDIAN TRUST & INVESTMENT CO
TTEE
AMAET, P.L.L.C.
700 17TH STREET
SUITE 300
DENVER CO 80202-3531
MCB TRUST SERVICES CUST. FBO 5.29
MERIDIAN TRUST & INVESTMENT CO
TTEE
LAWLER-WOOD, LLC
700 17TH STREET
SUITE 300
DENVER CO 80202-3531
FIXED INCOME SECURITIES FUND-B
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
CITIGROUP GLOBAL MARKETS, INC 5.25
HOUSE ACCOUNT
ATTN: PETER BOOTH 7TH FLOOR
333 W 34TH ST
NEW YORK NY 10001-2402
FIXED INCOME SECURITIES FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
LPL FINANCIAL SERVICES 22.80
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
LEGG MASON WOOD WALKER INC 22.01
PO BOX 1476
BALTIMORE MD 21202
70
MERRILL LYNCH PIERCE FENNER & 9.19
SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR #97RD7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
AMERICAN ENTERPRISE INVESTMENT SVCS 9.03
PO BOX 9446
MINNEAPOLIS MN 55440-9446
LPL FINANCIAL SERVICES 6.53
9785 TOWNE CENTRE DRIVE
SAN DIEGO CA 92121-1968
FIXED INCOME SECURITIES FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
COLUMBIA TRUST COMPANY SEP IRA 7.39
EDWARD J HANNAN
12 MILLER LN
TROY NY 12180-9615
LPL FINANCIAL SERVICES 6.96
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
ADP CLEARING & OUTSOURCING 6.86
26 BROADWAY
NEW YORK NY 10004-1703
PERSHING LLC 6.21
PO BOX 2052
JERSEY CITY NJ 07303-2052
71
A G EDWARDS & SONS INC FBO 5.13
HOUSING AUTHORITY
1 N JEFFERSON AVE
SAINT LOUIS MO 63103-2205
FIXED INCOME SECURITIES FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 13.91
SPECIAL CUSTODY ACCT FOR
EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
GROWTH FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
MERRILL LYNCH PIERCE FENNER &
SMITH 26.06
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR #97RD7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
LPL FINANCIAL SERVICES 13.64
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
COLUMBIA TRUST COMPANY ROLLOVER 11.38
IRA
HUBERTA WEGBREIT
534 FREEDOM BLVD
COATESVILLE PA 19320-1562
72
LPL FINANCIAL SERVICES 11.10
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
UBS FINANCIAL SERVICES INC. FBO 7.15
UBS-FINSVC CDN FBO
MARTHA SUZANNE BRIGNAC BELL
P.O. BOX 3321
WEEHAWKEN NJ 07086-8154
AMERICAN ENTERPRISE INVESTMENT SVCS 5.02
PO BOX 9446
MINNEAPOLIS MN 55440-9446
GROWTH FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
LPL FINANCIAL SERVICES 21.42
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
FIRST CLEARING LLC 20.33
ROY E ANGER R/O IRA
FCC AS CUSTODIAN
9130 CHERRY HILL CT
FORT MYERS FL 33908-3648
MERRILL LYNCH PIERCE FENNER & 14.87
SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
73
LPL FINANCIAL SERVICES 11.48
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
ATTN MUTUAL FUNDS 10.65
FISERV SECURITIES INC
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
ATTN MUTUAL FUNDS 5.51
FISERV SECURITIES INC
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
UBS FINANCIAL SERVICES INC. FBO 5.14
UBS-FINSVC CDN FBO
STEPHEN W THOMAS
P.O.BOX 3321,
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
GROWTH FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
FLEET NATIONAL BANK 10.34
FBO COLUMBIA OMNIBUS C/C
ATTN VARIOUS ACCTS
PO BOX 92800
ROCHESTER NY 14692-8900
CHARLES SCHWAB & CO INC 5.03
SPECIAL CUSTODY ACCT FOR
EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
74
HIGH YIELD FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 40.97
SPECIAL CUSTODY ACCT FOR
EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FTC & CO ATTN DATALYNX # 022 5.95
PO BOX 173736
DENVER CO 80217-3736
HIGH YIELD FUND-B
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
CITIGROUP GLOBAL MARKETS, INC. 7.40
HOUSE ACCOUNT
ATTN: PETER BOOTH 7TH FLOOR
333 W 34TH ST
NEW YORK NY 10001-2402
HIGH YIELD FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
---------------- -------------------------------------------
MERRILL LYNCH PIERCE FENNER & 23.96
SMITH
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 3
JACKSONVILLE FL 32246-6484
HIGH YIELD FUND-D
75
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
MERRILL LYNCH PIERCE FENNER & SMITH 11.84
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
CITIGROUP GLOBAL MARKETS, INC. 9.27
HOUSE ACCOUNT
ATTN: PETER BOOTH 7TH FLOOR
333 W 34TH ST
NEW YORK NY 10001-2402
HIGH YIELD FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
FLEET NATIONAL BANK 5 36.50
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
CHARLES SCHWAB & CO INC 17.86
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FLEET NATIONAL BANK 9.65
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
INTERNATIONAL STOCK FUND-C
76
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
NFSC FEBO 25.23
KEDAR FAMILY TRUST
OFIR J KEDAR
U/A 08/13/03
27862 VIA CORITA WAY
LOS ALTOS CA 94022-3230
A G EDWARDS & SONS INC FBO 7.22
SHAKUNTLA D MILLER
1 N JEFFERSON AVE
SAINT LOUIS MO 63103-2205
PERSHING LLC 5.29
PO BOX 2052
JERSEY CITY NJ 07303-2052
INTERNATIONAL STOCK FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
ATTN MUTUAL FUNDS 5.14
FISERV SECURITIES INC
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
GREG KOYLE 5.03
ESNET MANAGEMENT GROUP LLC
R D THOMPSON
1024 RIVER HAVEN CIRCLE
OREM UT 84097-6680
INTERNATIONAL STOCK FUND-Z
77
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
FLEET NATIONAL BANK 56.62
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 12.54
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
MID CAP GROWTH FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 14.55
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
MID CAP GROWTH FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
MERRILL LYNCH PIERCE FENNER & SMITH 12.36
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR #97RD7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
RAYMOND JAMES & ASSOC INC 6.75
FBO GOSS TR
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
78
MORGAN STANLEY DW INC FBO 5.91
LEIGH FLOWE FINLEY
HARBORSIDE FINANCIAL CNTR PLAZA 3
JERSEY CITY NJ 07311
PERSHING LLC 5.81
PO BOX 2052
JERSEY CITY NJ 07303-2052
NFSC FEBO # C9C-178799 5.06
CAPITAL FORTRESS INTL TRUST
FIRST FIDELITY TRUST LTD TTEE
RG SOLOMON ARCADE STE 11
605 MAIN STREET
ST KITTS/NEVIS
MID CAP GROWTH FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
EDWARD D JONES AND COF/A/O 8.72
BEULAH MAE JONES MITCHELL TTEE
U/A DTD 6/5/96
PO BOX 2500
MARYLAND HTS MO 63043-8500
ADP CLEARING & OUTSOURCING 7.66
26 BROADWAY
NEW YORK NY 10004-1703
MID CAP GROWTH FUND-G
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
COLUMBIA TRUST COMPANY ROLLOVER IRA 5.02
JUAN ROSAI
25 CRESTVIEW DR
NORTH HAVEN CT 06473-3002
MID CAP GROWTH FUND-Z
79
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
FLEET NATIONAL BANK 11.78
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
CHARLES SCHWAB & CO INC 10.77
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FLEET NATIONAL BANK 5.13
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
NATIONAL MUNICIPAL BOND FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
PERSHING LLC 33.99
PO BOX 2052
JERSEY CITY NJ 07303-2052
MERRILL LYNCH PIERCE FENNER & SMITH 9.07
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
NATIONAL MUNICIPAL BOND FUND-B
80
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
COLUMBIA TRUST COMPANY 18.24
CRAIGR COMPANY INC
CRAIG R RUSERT
57 FORSYTH ST NW APT 13D
ATLANTA GA 30302-2210
RAYMOND JAMES & ASSOC INC 14.30
FBO LENOIR EL
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
FISERV SECURITIES, INC 7.73
ATTN: MUTUAL FUNDS
ONE COMMERCE SQUARE
2005 MARKET ST STE 1200
PHILADELPHIA PA 19103-7084
CORINNE ROUDI TOD 7.66
BENEFICIARY INFORMATION ON FILE
1 MILLBROOK RD
WINSTED CT 06098-3917
ADP CLEARING & OUTSOURCING 7.37
26 BROADWAY
NEW YORK NY 10004-1703
NFSC FEBO 6.29
LUCILLE C PAQUIN
DENISE T SZYMCZUK
428 IRON MINE HILL RD
N SMITHFIELD RI 02896-8163
NATIONAL MUNICIPAL BOND FUND-C
81
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
UBS FINANCIAL SERVICES INC. FBO 18.23
WALTER J GESE
RONALD W GESE JTWROS
3711 W HEROY AVE
SPOKANE WA 99205-1817
UBS FINANCIAL SERVICES INC. FBO 17.44
COLLEEN J MCNICHOLS
4327 S MAGNOLIA ST
SPOKANE WA 99203-4328
UBS FINANCIAL SERVICES INC. FBO 14.75
PAUL H MEIER AND
LORA R MEIER TEN IN COMMON
2105 N BELT ST
SPOKANE WA 99205-4043
UBS FINANCIAL SERVICES INC. FBO 12.03
JUNE R. EDWARDS TTEE
JUNE R. EDWARDS REV LVG TR
U/A DTD 4/17/98
2313 VENTANA XING
MARIETTA GA 30062-7749
LPL FINANCIAL SERVICES 11.15
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
UBS FINANCIAL SERVICES INC. FBO 6.70
BETTY M. BREWSTER
10412 E 24TH AVE
SPOKANE WA 99206-3306
MERRILL LYNCH PIERCE FENNER & SMITH 5.60
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR #97RD7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
82
UBS FINANCIAL SERVICES INC. FBO 5.41
JUNE R EDWARDS SUCC TTEE
CHARLES F EDWARDS REV
TRUST U/A DTD 4/17/98
2313 VENTANA XING
MARIETTA GA 30062-7749
NATIONAL MUNICIPAL BOND FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
J J B HILLIARD W L LYONS INC 25.69
MARY MASON COMMUNITY
501 S 4TH ST
LOUISVILLE KY 40202-2520
PERSHING LLC 24.05
PO BOX 2052
JERSEY CITY NJ 07303-2052
FIRST CLEARING CORP 13.01
DANIEL ANDREUCCI &
JEANNE P ANDREUCCI
1657 CONNOR RD
SOUTH PARK PA 15129-9036
ADP CLEARING & OUTSOURCING 11.57
FBO 236-21831-19
26 BROADWAY
NEW YORK NY 10004-1703
LPL FINANCIAL SERVICES 6.26
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
ADP CLEARING & OUTSOURCING 6.16
26 BROADWAY
NEW YORK NY 10004-1703
83
ADP CLEARING & OUTSOURCING 6.05
26 BROADWAY
NEW YORK NY 10004-1703
JOHN WIST & 5.00
GLADYS WIST JT WROS
12111 FAITH LN
BOWIE MD 20715-2302
NATIONAL MUNICIPAL BOND FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
FLEET NATIONAL BANK 20.86
FBO COLUMBIA OMNIBUS C/C
ATTN VARIOUS ACCTS
PO BOX 92800
ROCHESTER NY 14692-8900
OREGON MUNICIPAL BOND FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
WAYNE BARKER 26.59
15646 SEASIDE CT
BROOKINGS OR 97415-9531
CHARLES SCHWAB & CO INC CUST 10.45
ATTN MUTUAL FUNDS DEPT
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
AMERICAN ENTERPRISE INVESTMENT SVCS 10.01
PO BOX 9446
MINNEAPOLIS MN 55440-9446
84
INTERRA CLEARING SERVICES FBO 5.70
DAVID A JOHNSON
JANET M JOHNSON
JTWROS TEN/WROS
7885 NE TODD DR
CORVALLIS OR 97330-9683
DAIN RAUSCHER INC FBO 5.27
LOIS O KOCHIS
989 NW SPRUCE AVE APT 226
CORVALLIS OR 97330-2178
OREGON MUNICIPAL BOND FUND-B
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
DAIN RAUSCHER INC FBO 15.07
GILLICI F JACKSON
GILLICI F JACKSON REVOC LIV TRUST
U/A DTD 09/01/1998
611 NW 30TH ST
CORVALLIS OR 97330-5144
AMERICAN ENTERPRISE INVEST SVCS 8.47
PO BOX 9446
MINNEAPOLIS MN 55440-9446
AMERICAN ENTERPRISE INVEST SVCS 8.44
PO BOX 9446
MINNEAPOLIS MN 55440-9446
DAIN RAUSCHER INC FBO 6.74
RUTH C LEAR
GM LEAR IRREV LIV TRUST
U/A DTD 09/13/1989
440 NW ELKS DR APT 101
CORVALLIS OR 97330-3747
85
DEAN WITTER FBO 5.90
RELLA PANTENBURG &
PO BOX 250
NEW YORK NY 10008-0250
NFSC FEBO 5.28
ROBERT E WILLIAMS TTEE
ROBERT WILLIAMS REVOC LIV TRUST
U/A 6/18/98
14404 SE WEBSTER RD APT 325
PORTLAND OR 97267-1972
OREGON MUNICIPAL BOND FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
PIPER JAFFRAY & CO. 34.31
800 NICOLLET MALL
MINNEAPOLIS MN 55402-7000
RAYMOND JAMES & ASSOC INC 16.73
FBO SAUNDERS BARNEY
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
RAYMOND JAMES & ASSOC INC 14.68
FBO WESTENHOUSE H
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
MERRILL LYNCH PIERCE FENNER & SMITH 12.82
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR #97RD7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
86
RAYMOND JAMES & ASSOC INC 5.99
FBO HALL MV
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
OREGON MUNICIPAL BOND FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
DAIN RAUSCHER INC FBO 21.59
LEWIS F ROTH
LEWIS F ROTH REVOCLIVTRUST
U/A DTD 07/31/1991
4798 BECKER CIR SE
ALBANY OR 97322-7139
LPL FINANCIAL SERVICES 13.36
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
PERSHING LLC 12.42
PO BOX 2052
JERSEY CITY NJ 07303-2052
DAIN RAUSCHER INC FBO 11.13
RUTH LEAR
RUTH C LEAR TRUST
U/A DTD 09/13/1989
440 NW ELKS DR APT 101
CORVALLIS OR 97330-3747
LPL FINANCIAL SERVICES 10.97
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
87
NFSC FEBO 6.77
FREDERICK A J KINGERY
FREDERICK A J KINGERY
U/A 11/27/1995
4163 SW GREENLEAF CT
PORTLAND OR 97221-3271
AMERICAN ENTERPRISE INVESTMENT SVCS 6.15
FBO 304417451
PO BOX 9446
MINNEAPOLIS MN 55440-9446
AMERICAN ENTERPRISE INVESTMENT SVCS 6.11
FBO 307349171
P.O BOX 9446
MINNEAPOLIS MN 55440-9446
OREGON MUNICIPAL BOND FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 7.06
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
REAL ESTATE EQUITY FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 37.16
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
88
NATIONWIDE TRUST CO FSB 15.52
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
REAL ESTATE EQUITY FUND-B
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
MERRILL LYNCH PIERCE FENNER & SMITH 5.12
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
REAL ESTATE EQUITY FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
ADP CLEARING & OUTSOURCING 8.13
26 BROADWAY
NEW YORK NY 10004-1703
REAL ESTATE EQUITY FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2004
- ---------------- -------------------------------------------
FIRST CLEARING, LLC 7.26
ARNI L NASHBAR AND
8911 BLOOMFIELD BLVD
SARASOTA FL 34238-4452
REAL ESTATE EQUITY FUND-Z
89
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
CHARLES SCHWAB & CO INC 27.57
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FLEET NATIONAL BANK 18.12
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 5.49
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
SHORT TERM BOND FUND-A
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
CHARLES SCHWAB & CO INC 18.83
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
90
SHORT TERM BOND FUND-C
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
MERRILL LYNCH PIERCE FENNER & SMITH 11.98
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR #97RD7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
SHORT TERM BOND FUND-G
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
MELODY J WILDER 8.69
4 WINDSOR ST
HAVERHILL MA 01830-4127
FIRST CLEARING LLC 6.60
THERESA BADICS
JT WROS
9 ELMWOOD DR
MILLTOWN NJ 08850-1636
ADP CLEARING & OUTSOURCING 5.59
26 BROADWAY
NEW YORK NY 10004-1703
ADP CLEARING & OUTSOURCING 5.05
26 BROADWAY
NEW YORK NY 10004-1703
SHORT TERM BOND FUND-Z
91
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
FLEET NATIONAL BANK 2 55.39
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 11.82
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 6.32
FBO CMC OMNIBUS R/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
SMALL CAP GROWTH FUND-Z
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
CHARLES SCHWAB & CO INC 8.32
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
SAXON AND CO 8.29
OMNIBUS
PO BOX 7780-1888
PHILADELPHIA PA 19182-0001
STANDARD INSURANCE COMPANY 7.24
P11D ATTN SEPARATE ACCOUNT A
1100 SW 6TH AVE
PORTLAND OR 97204-1020
STRATEGIC INVESTOR FUND-A
92
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
CHARLES SCHWAB & CO INC 14.55
SPECIAL CUSTODY A/C FOR BENFT CUST
ATTN MUTUAL FUNDS
101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4122
CHARLES SCHWAB & CO INC 9.50
SPECIAL CUSTODY A/C FOR BENFT CUST
ATTN MUTUAL FUND
101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4122
STRATEGIC INVESTOR FUND-C
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
MERRILL LYNCH PIERCE FENNER & SMITH 8.15
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATOR #97RD7
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
STRATEGIC INVESTOR FUND-D
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
CITIGROUP GLOBAL MARKETS, INC. 34.11
HOUSE ACCOUNT
ATTN: PETER BOOTH 7TH FLOOR
333 W 34TH ST
NEW YORK NY 10001-2402
STRATEGIC INVESTOR FUND-Z
93
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
CHARLES SCHWAB & CO INC 10.11
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
COLUMBIA TRUST CO AGENT 5.96
FBO US NATURAL RESOURCES AND
FRIEDRICH AIR COND PEN PL-EMPLEE
RE CTC #100453
PO BOX 1350
PORTLAND OR 97207-1350
TECHNOLOGY FUND-A
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
SEI PRIVATE TRUST CO 9.99
C/O WACHOVIA- PREMIER
ATTN MUTUAL FUND ADMIN
ONE FREEDOM VALLEY DRIVE
OAKS PA 19456
NFSC FEBO 9.32
R LEE RIGNEY
224 CEDAR ST
ENGLEWOOD NJ 07631-3131
MERRILL LYNCH PIERCE FENNER & SMITH 6.02
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION #97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
94
TECHNOLOGY FUND-C
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
NFSC FEBO 7.55
WALLACE W SCHOOLER
4480 SCHOOLER RD
CRIDERSVILLE OH 45806-9727
UBS FINANCIAL SERVICES INC. FBO 7.51
UBS-FINSVC CDN FBO
T MCCULLOUGH STROTHER
P.O.BOX 3321,
1000 HARBOR BLVD
WEEHAWKEN NJ 07086-6761
TECHNOLOGY FUND-D
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
LPL FINANCIAL SERVICES 48.03
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
COLUMBIA TRUST COMPANY 19.34
THOMASVILLE HOME FURNISHINGS OF AZ
BRANDON D LEVALLEY
18971 CAMINITO CANTILENA #19
SAN DIEGO CA 92128-6166
RAYMOND JAMES & ASSOC INC 7.90
FBO BARNETT IRA
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
CITIGROUP GLOBAL MARKETS, INC. 6.63
HOUSE ACCOUNT
ATTN: PETER BOOTH 7TH FLOOR
333 W 34TH ST
NEW YORK NY 10001-2402
95
USAA INVESTMENT MANAGEMENT CO 5.06
9800 FREDERICKSBURG RD
SAN ANTONIO TX 78288-0001
TECHNOLOGY FUND-Z
PERCENT OF SHARES HELD AT NOVEMBER
NAME AND ADDRESS 30, 2004
- ----------------------------------- --------
CHARLES SCHWAB & CO INC 8.88
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
96
PROXY VOTING POLICY AND PROCEDURES
Each Fund has delegated to the Advisor the responsibility to vote proxies
relating to portfolio securities held by the Fund.
The Advisor's policy is to vote all proxies for each client's securities
in a manner considered by the Advisor to be in the best interest of its clients,
including the Fund and its shareholders, without regard to any benefit to the
Advisor or its affiliates. The Advisor examines each proposal and votes against
the proposal, if, in its judgment, approval or adoption of the proposal would be
expected to impact adversely the current or potential market value of the
issuer's securities. The Advisor also examines each proposal and votes the
proxies against the proposal, if, in its judgment, the proposal would be
expected to effect adversely the best interest of the Fund. The Advisor
determines the best interest of the Fund in light of the potential economic
return on the Fund's investment.
The Advisor addresses potential material conflicts of interest by having
predetermined voting guidelines. For those proposals that require special
consideration or in instances where special circumstances may require varying
from the predetermined guideline, the Advisor's Proxy Committee determines the
vote in the best interest of the Fund, without consideration of any benefit to
the Advisor, its affiliates, or its other clients or certain other persons. A
member of the Proxy Committee is prohibited from voting on any proposal with
respect to which he or she has a conflict of interest by reason of a direct
relationship with the issuer or other party affected by a given proposal.
Persons making recommendations to the Proxy Committee or its members are
required to disclose to the Committee any relationship with a party making a
proposal or other matter known to the person that would create a potential
conflict of interest.
The Advisor has three classes of proxy proposals. The first two classes
are predetermined guidelines to vote for or against specific proposals, unless
otherwise directed by the Proxy Committee. The third class is proposals
requiring special consideration by the Proxy Committee. In addition, the Proxy
Committee considers requests to vote on proposals in the first two classes other
than according to the predetermined guidelines.
The Advisor generally votes in favor of proposals related to the following
matters: selection of auditors (unless the auditor receives more than 50% of its
revenues from non-audit activities from the company and its affiliates),
election of directors (unless the proposal gives management the ability to alter
the size of the board without shareholder approval), different persons for
chairman of the board /chief executive officer (unless, in light of the size of
the company and the nature of its shareholder base, the role of chairman and CEO
should not be held by different persons), compensation (if provisions are
consistent with standard business practices), debt limits (unless proposed
specifically as an anti-takeover action), indemnification (unless for negligence
and or breaches of fiduciary duty), meetings, name of company, principal office
(unless the purpose is to reduce regulatory or financial supervision), reports
and accounts (if the certifications required by the Sarbanes-Oxley Act of 2002
have been provided), par value, shares (unless proposed as an anti-takeover
action), share repurchase programs, independent committees, and equal
opportunity employment.
The Advisor generally votes against proposals related to the following
matters: super majority voting, cumulative voting, preferred stock, warrants,
rights, poison pills, reclassification of common stock and meetings held by
written consent.
The Advisor gives the following matters special consideration: new
proposals, proxies of investment company shares (other than election of
directors, selection of accountants), mergers/acquisitions (proposals
97
where a hostile merger/acquisition is apparent or where the Advisor represents
ownership in more than one of the companies involved), shareholder proposals
(other than those covered by the predetermined guidelines), executive/director
compensation (other than those covered by the predetermined guidelines),
pre-emptive rights, and proxies of international issuers which block securities
sales between submission of a proxy and the meeting (proposals for these
securities are voted only on the specific instruction of the Proxy Committee and
to the extent practicable in accordance with predetermined guidelines).
In addition, if a portfolio manager or other party involved with an
Advisor client or a Fund account concludes that the interest of the client or
the Fund requires that a proxy be voted on a proposal other than according to
the predetermined guidelines, he or she may request that the Proxy Committee
consider voting the proxy differently. If any person (or entity) requests the
Proxy Committee (or any of its members) to vote a proxy other than according to
a predetermined guideline, that person must furnish to the Proxy Committee a
written explanation of the reasons for the request and a description of the
person's (or entity's) relationship with the party proposing the matter to
shareholders or any other matter known to the person that would create a
potential conflict of interest.
The Proxy Committee may vary from the predetermined guideline if it
determines that voting on the proposal according to the predetermined guideline
would be expected to impact adversely the current or potential market value of
the issuer's securities or to effect adversely the best interest of the client.
References to the best interest of a client refer to the interest of the client
in terms of the potential economic return on the client's investment. In
determining the vote on any proposal, the Proxy Committee does not consider any
benefit other than benefits to the owner of the securities to be voted.
The Advisor's Proxy Committee is composed of operational and investment
representatives of its regional offices as well as senior representatives of
equity investments, equity research, compliance and legal. During the first
quarter of each year, the Proxy Committee reviews all guidelines and establishes
guidelines for expected new proposals. In addition to these reviews and its
other responsibilities described above, it's the Proxy Committee's functions
include annual review of it's the Advisor's Proxy Voting Policy and Procedures
to ensure consistency with internal policies and regulatory agency policies, and
to develop and modify voting guidelines and procedures as it deems appropriate
or necessary.
The Advisor uses Institutional Shareholder Services ("ISS"), a third party
vendor, to implement its proxy voting process. ISS provides proxy analysis,
record keeping services and vote disclosure services.
The actual voting records of the Funds relating to their portfolio
securities during the 12-month period ended June 30, 2004 are available without
charge, upon request, by calling 1-800-426-3750, or by accessing the SEC's
website at http://www.sec.gov.
DISCLOSURE OF PORTFOLIO INFORMATION
The Board of Directors and Trustees of the Columbia funds have adopted
policies with respect to the disclosure of the funds' portfolio holdings by the
funds, Columbia Management, or their affiliates. These policies provide that the
Funds' portfolio holdings information generally may not be disclosed to any
party prior to (1) the day next following the posting of such information on the
Funds' website at www.columbiafunds.com, (2) the day next following the filing
of the information with the SEC in a required filing, or (3) for money
98
market funds, such information is publicly available to all shareholders upon
request on the fifth business day after each calendar month-end. Certain limited
exceptions pursuant to the Funds' policies are described below. The
Directors/Trustees shall be updated as needed regarding the Funds' compliance
with the policies, including information relating to any potential conflicts of
interest between the interests of a Fund's shareholders and those of Columbia
Management and its affiliates. The Funds' policies prohibit Columbia Management
and the Fund's other service providers from entering into any agreement to
disclose fund portfolio holdings information in exchange for any form of
consideration. These policies apply to disclosures to all categories of persons,
including, without limitation, individual investors, institutional investors,
intermediaries that distribute the Funds' shares, third-party service providers,
rating and ranking organizations and affiliated persons of the fund.
PUBLIC DISCLOSURES
Each Fund's portfolio holdings are currently disclosed to the public
through required filings with the SEC and, for equity and fixed income funds, on
the fund's website at www.columbiafunds.com. Each Fund files its portfolio
holdings with the SEC for each fiscal quarter on Form N-CSR (with respect to
each annual period and semi-annual period) and Form N-Q (with respect to the
first and third quarters of a Fund's fiscal year). Shareholders may obtain a
Fund's Forms N-CSR and N-Q filings on the SEC's website at www.sec.gov. In
addition, a Fund's Forms N-CSR and N-Q filings may be reviewed and copied at the
SEC's public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's website or the operation of the
public reference room.
The equity and fixed income Columbia funds also currently make portfolio
information publicly available at www.columbiafunds.com, as disclosed in the
following table:
FREQUENCY OF
TYPE OF FUND INFORMATION PROVIDED DISCLOSURE DATE OF WEB POSTING
- ------------------ ----------------------- ------------ --------------------------
Equity Funds Full portfolio holdings Monthly 30 calendar days after
information. month-end.
Fixed Income Funds Full portfolio holdings Quarterly 60 calendar days after the
information. quarter-end
The scope of the information provided relating to a Fund's portfolio that
is made available on the website may change from time to time without prior
notice.
For Columbia's money market funds, a complete list of a fund's portfolio
holdings shall be publicly available on a monthly basis on the fifth business
date after month-end. Shareholders may request such information by writing or
calling the Funds' distributor, Columbia Funds Distributor, at 800-426-3750, One
Financial Center, Boston, Massachusetts 02111-2621.
A Fund, Columbia Management or their affiliates may include portfolio
holdings information that has already been made public through a web posting or
SEC filing in marketing literature and other communications to shareholders,
advisors or other parties, provided that the information is disclosed no earlier
than the day after the date the information is disclosed publicly.
OTHER DISCLOSURES
99
Each Fund's policies provide that non-public disclosures of a Fund's
portfolio holdings may be made if (1) the Fund has a legitimate business purpose
for making such disclosure, (2) the Fund's chief executive officer authorizes
such non-public disclosure of information, and (3) the party receiving the
non-public information enters into a confidentiality agreement, which includes a
duty not to trade on the non-public information.
Each Fund periodically discloses its portfolio information on a
confidential basis to various service providers that require such information in
order to assist the Fund with its day-to-day business affairs. In addition to
Columbia Management and its affiliates, these service providers include any
sub-custodians of the Fund's securities, the fund's independent registered
public accounting firm, legal counsel, and financial printer, currently Bowne,
Inc., and the Funds' proxy voting service, currently Institutional Shareholder
Services. These service providers are required to keep such information
confidential, and are prohibited from trading based on the information or
otherwise using the information except as necessary in providing services to the
Funds. A Fund may also disclose portfolio holdings information to broker/dealers
and certain other entities related to potential transactions and management of
the Fund, provided that reasonable precautions, including limitations on the
scope of the portfolio holdings information disclosed, are taken to avoid any
potential misuse of the disclosed information.
Certain clients of the Funds' investment adviser may follow a strategy
similar to that of a Fund, and have access to portfolio holdings information for
their account. It is possible that such information could be used to infer
portfolio holdings information relating to the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES PROVIDED BY AFFILIATES
The investment advisor to each of the Funds is Columbia Management
Advisors, Inc. (the "Advisor"). Effective October 31, 2002, the Advisor
succeeded to the business of Columbia Funds Management Company ("CFMC"), the
former advisor to the Funds and an entity under common control with the Advisor.
The transfer to the Advisor did not result in a change in the actual control or
management of the advisory business of CFMC. The Advisor has entered into an
investment contract with each Fund. Pursuant to the investment contract, the
Advisor provides research, advice, and supervision with respect to investment
matters and determines which securities to purchase or sell and what portion of
the Fund's assets to invest.
The Advisor provides office space and pays all executive salaries and
executive expenses of the Fund. The Fund assumes its costs relating to corporate
matters, cost of services to shareholders, transfer and dividend paying agent
fees, custodian fees, legal and auditing expenses, disinterested director fees,
taxes and governmental fees, interest, brokers' commissions, transaction
expenses, cost of stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase, or redemption of its shares, expenses of
registering or qualifying its shares for sale, transfer taxes, and all other
expenses of preparing its registration statement, prospectuses, and reports.
Information regarding the advisory fee payable to the Advisor including
any waivers or offsets applicable to such Fund is set forth in the prospectus
for each Fund. For the following Funds, the advisory fee is calculated as a
percentage of net assets that declines as net assets increase, as follows:
Growth Fund 0.75% of the Fund's first $200 million of net assets;
0.625% of the next $300 million of net assets; and
0.50% of net assets in excess of $500 million.
Daily Income Company 0.50% of the Fund's first $500 million of net assets;
0.45% of the next $500 million of net assets; and
0.40% of net assets in excess of $1 billion.
Mid Cap Growth Fund 1.00% of the Fund's first $500 million of net assets; and
0.75% of net assets in excess of $500 million.
International Stock
Fund 1.00% of the Fund's first $500 million of net assets;
100
0.95% of the next $500 million of net assets; and
0.90% of net assets in excess of $1 billion.
Advisory fees paid by each of the Funds for each of the last three fiscal years
were as follows:
FUND 2004 2003* 2002
- ---------------------------- ----------- ----------- -----------
Common Stock Fund $ 2,366,388 $ 1,648,054 $ 3,238,954
Growth Fund $ 5,482,681 $ 3,414,673 $ 5,819,523
International Stock Fund $ 4,953,878 $ 1,398,948 $ 1,375,061
Mid Cap Growth Fund $ 8,813,801 $ 5,318,563 $ 6,341,031
Small Cap Growth Fund $ 7,019,787 $ 3,458,104 $ 5,936,461
Real Estate Fund $ 7,214,201 $ 4,042,456 $ 5,602,888
Technology Fund $ 361,947 $ 79,533 $ 98,750
Strategic Investor Fund $ 2,576,915 $ 1,276,121 $ 2,087,191
Balanced Fund $ 3,002,434 $ 2,135,099 $ 4,095,196
Short Term Bond Fund $ 2,678,339 $ 1,618,065 $ 506,173
Fixed Income Securities Fund $ 2,099,971 $ 1,882,651 $ 2,477,847
National Municipal Bond Fund $ 76,297 $ 56,611 $ 73,374
Oregon Municipal Bond Fund $ 2,338,697 $ 1,719,382 $ 2,513,517
High Yield Fund $10,523,463 $ 4,977,940 $ 2,629,803
Daily Income Company $ 3,704,497 $ 3,195,776 $ 5,671,913
- ------------
*The Funds changed their fiscal year end from December 31 to August 31 in 2003.
Information provided is for the eight-month period ended August 31, 2003.
A portion of the Advisor's fees are used to pay financial intermediaries
for services they provide to investors who invest in the Funds through such
financial intermediary. For the fiscal year ended August 31, 2004, the fiscal
period ended August 31, 2003 and the fiscal year ended December 31, 2002, the
Advisor and its affiliates paid $6,264,897, $2,206,111 and $2,953,946,
respectively, to financial intermediaries on behalf of the Funds.
Columbia Funds Services, Inc. ("CFS") acts as transfer agent and dividend
crediting agent for each Fund. Its address is P.O. Box 1722, Boston,
Massachusetts 02105-1722. CFS has retained the services of Boston Financial Data
Services to assist it in performing its transfer agent functions. It records and
disburses dividends for the Funds. Each Fund pays the transfer agent an annual
charge per open account as follows:
Equity Funds $28.00
Fixed Income Funds $34.00
Money Market Funds $33.50
Each Fund will also pay for certain reimbursable out-of-pocket expenses as set
forth in the agreement. There is no minimum aggregate fee payable by any Fund to
CFS for transfer agent services. For certain classes of certain Funds, CFS has
agreed to waive transfer agency fees in amounts and for periods more fully
described in the relevant prospectus.
The transfer agent fees paid to CFS for the fiscal year ended August 31,
2004 under each transfer agent agreement were $892,202 for the Common Stock
Fund, $1,870,176 for the Growth Fund, $293,604 for the International Stock Fund,
$1,271,432 for the Mid Cap Growth Fund, $821,652 for the Small Cap Growth Fund,
$1,379,521 for the Real Estate Fund, $173,580 for the Technology Fund, $481,050
for the Strategic Investor Fund, $1,155,136 for the Balanced Fund, $567,877 for
the Short Term Bond Fund, $816,669 for the Fixed Income Securities Fund,
$249,210 for the Oregon Municipal Bond Fund, $1,855,910 for the High Yield Fund,
$1,299,719 for the Daily Income Company and $23,793 for the National Municipal
Bond Fund. The transfer agent fees paid by the International Stock Fund, Mid Cap
Growth Fund and Strategic Investor Fund are net of transfer agent fees waived by
CFD.
The Advisor performs certain administrative services for the Funds
pursuant to a Pricing, Bookkeeping and Fund Administration Agreement (the
"Agreement"). Under the terms of the Agreement, the Advisor (a) provides fund
accounting and financial reporting oversight of State Street Bank and Trust, who
provides the daily fund accounting and financial reporting services; (b)
maintains and preserves in a secure manner the accounting records of the Funds;
(c) provides fund administration, including daily prospectus, investment
restrictions and 1940 Act compliance review, tax and distribution management,
expense budgeting, performance reporting and statistical analysis, and board
reporting; and (d) provides disaster planning. For the services rendered by the
Advisor, each Fund has agreed to pay a minimum of $25,000 plus two basis points
for fund accounting and $19,965 for financial reporting, with a maximum combined
fee of $150,000. The Advisor will also be compensated for certain out-of-pocket
expenses. The amount paid under this agreement to each of the Funds is set forth
in the Funds' Annual Report, which is incorporated by reference into this
Statement of Additional Information.
101
Columbia Funds Distributor, Inc. fka Liberty Funds Distributor, Inc.
("CFD"), a registered securities broker and a member of the National Association
of Securities Dealers, Inc., whose address is One Financial Center Boston, MA
02111-2621, is the principal underwriter for the Funds, and is authorized under
a distribution agreement with each Fund to sell shares of the Fund. CFD has no
obligation to buy the Funds' shares, and purchases the Funds' shares only upon
receipt of orders from authorized financial services firms ("FSFs") or
investors.
For the fiscal years ended August 31, 2004 and August 31, 2004, the
following sales charges were paid by shareholders in respect to Class A, D and T
shares*:
CLASS A CLASS D CLASS T
------- ------- -------
2004 2003 2004 2003 2004 2003
---------- ---------- ---------- ---------- ---------- ----------
Common Stock Fund $ 10,774 $ 1,059 $ 476 $ 636 -- --
Growth Fund $ 134,649 $ 20,398 $ 0 $ 2,221 -- --
International Stock Fund $ 44,752 $ 10,013 $ 89 $ 505 -- --
Mid Cap Growth Fund $ 58,047 $ 6,808 $ 382 $ 2,756 $ 1,845 $ 1,155
Real Estate Equity Fund $ 212,798 $ 75,728 $ 5,756 $ 25,272 -- --
Technology Fund $ 48,422 $ 9,239 $ 359 $ 26 -- --
Strategic Investor Fund $ 652,526 $ 11,042 $ 25 $ 1,888 -- --
Balanced Fund $ 26,350 $ 13,472 $ 729 $ 4,152 -- --
Short Term Bond Fund $ 186,605 $ 271,445 $ 11,286 $ 126,488 $ 599 $ 1,915
Fixed Income Securities Fund $ 35,897 $ 40,896 $ 374 $ 27,930 -- --
National Municipal Bond Fund $ 24,717 $ 12,057 $ 0 $ 4,101 -- --
Oregon Municipal Bond Fund $ 18,602 $ 63,121 $ 966 $ 7,760 -- --
High Yield Fund $ 790,974 $1,410,289 $ 46,454 $ 728,950 -- --
*Class D shares closed to new investors effective October 13, 2003, and the
front-end sales charge of 1.00% is waived effective October 13, 2003.
For the fiscal years ended August 31, 2003 and August 31, 2004, CFD, as
Distributor, retained the following fees:
COMMON STOCK FUND*
Class A Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate initial sales charges on Fund share sales $10,774 $ 1,059
Initial sales charges retained by CFD $ 1,847 $ 166
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 2,263 $ 7
102
Class C Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 441 $ 0
Class D Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 163 $ 0
*Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
GROWTH FUND*
Class A Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate initial sales charges on Fund share sales $134,649 $20,398
Initial sales charges retained by CFD $ 4,875 $ 2,534
Aggregate contingent deferred sales charges (CDSC) $ 9 $ 1,109
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 8,136 $ 215
Class C Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 326 $ 0
Class D Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 31 $ 50
103
Class G Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $21,312 $19,518
*Class A, B, D and G shares were initially offered on November 1, 2002 and Class
C shares were initially offered on October 13, 2003.
INTERNATIONAL STOCK FUND*
Class A Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate initial sales charges on Fund share sales $44,752 $ 10,013
Initial sales charges retained by CFD $ 7,736 $ 7,096
Aggregate contingent deferred sales charges (CDSC) $ 19 $ 2,087
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $19,281 $19,114
Class C Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 136 $ 0
Class D Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 28 $ 106
*Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
MID CAP GROWTH FUND*
Class A Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate initial sales charges on Fund share sales $ 58,047 $ 6,808
Initial sales charges retained by CFD $ 9,271 $ 1,056
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 22
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $12,291 $1,098
104
Class C Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 264 $ 0
Class D Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 21 $ 119
Class G Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 2,954 $ 1,636
*Class A, B, D and G shares were initially offered on November 1, 2002 and Class
C shares were initially offered in October 13, 2003.
REAL ESTATE EQUITY FUND*
Class A Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate initial sales charges on Fund share sales $ 212,798 $ 75,728
Initial sales charges retained by CFD $ 32,403 $ 11,048
Aggregate contingent deferred sales charges (CDSC) $ 25,000 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $23,444 $ 1,450
Class C Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 2,004 $ 0
105
Class D Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 4,273 $ 122
*Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
TECHNOLOGY FUND*
Class A Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate initial sales charges on Fund share sales $48,422 $ 9,239
Initial sales charges retained by CFD $ 8,022 $ 151
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $40,538 $ 154
Class C Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 883 $ 0
Class D Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $ 11 $ 58
*Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
STRATEGIC INVESTOR FUND*
Class A Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate initial sales charges on Fund share sales $ 652,526 $ 11,042
Initial sales charges retained by CFD $ 93,760 $ 1,674
Aggregate contingent deferred sales charges (CDSC) $ 487 $ 280
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
------- -------
Aggregate CDSC on Fund redemptions retained by CFD $26,530 $ 6,849
106
Class C Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 1,230 $ 0
Class D Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 12 $ 92
*Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
BALANCED FUND*
Class A Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate initial sales charges on Fund share sales 26,350 $ 13,472
Initial sales charges retained by CFD $ 4,251 $ 1,584
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 77
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 15,155 $ 4,927
Class C Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 282 $ 0
Class D Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 9 $ 150
*Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
107
SHORT TERM BOND FUND*
Class A Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate initial sales charges on Fund share sales $ 186,605 $ 271,445
Initial sales charges retained by CFD $ 26,594 $ 34,079
Aggregate contingent deferred sales charges (CDSC) $ 47,962 $ 953
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 128,706 $ 52,350
Class C Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 10,221 $ 0
Class D Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 8,888 $ 16,823
Class G Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 3,392 $ 5,151
Class T Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 1 $ 0
*Class A, B, D and G shares were initially offered on November 1, 2002 and Class
C shares were initially offered on October 13, 2003.
FIXED INCOME SECURITIES FUND*
Class A Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate initial sales charges on Fund share sales 35,897 $ 40,896
Initial sales charges retained by CFD $ 4,706 $ 4,172
Aggregate contingent deferred sales charges (CDSC) $ 728 $ 0
On Fund redemptions retained by CFD
108
Class B Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 26,284 $ 6,586
Class C Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 576 $ 0
Class D Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 208 $ 2,841
* Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
NATIONAL MUNICIPAL BOND FUND*
Class A Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate initial sales charges on Fund share sales 24,717 $ 12,057
Initial sales charges retained by CFD $ 3,549 $ 1,276
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 1,512 $ 0
Class C Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 955 $ 0
Class D Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 29 $ 121
* Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
109
OREGON MUNICIPAL BOND FUND*
Class A Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate initial sales charges on Fund share sales $ 18,602 $ 63,121
Initial sales charges retained by CFD $ 2,240 $ 6,909
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 9,564 $ 625
Class C Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 685 $ 0
Class D Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 119 $ 2,100
* Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
HIGH YIELD FUND*
Class A Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate initial sales charges on Fund share sales $790,974 $ 1,410,289
Initial sales charges retained by CFD $ 96,270 $ 158,986
Aggregate contingent deferred sales charges (CDSC) $ 66,541 $ 8,066
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 297,129 $ 73,004
Class C Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 32,727 $ 0
110
Class D Shares
Fiscal year ended,
2004 2003
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 39,786 $ 42,091
* Class A, B and D shares were initially offered on November 1, 2002 and Class C
shares were initially offered on October 13, 2003.
The Advisor, CFD and CFS are wholly owned subsidiaries of Columbia
Management Group, Inc., which is an indirect wholly owned subsidiary of Bank of
America Financial Corporation ("Bank of America"). Bank of America and its
affiliates provide a wide range of banking, financial, and investment products
and services to individuals and businesses. Their principal activities include
customer and commercial banking, mortgage lending and servicing, trust
administration, investment management, retirement plan services, brokerage and
clearing services, securities underwriting, private and corporate financing and
advisory activities, and insurance services.
PORTFOLIO TRANSACTIONS
Each Fund, other than the Strategic Investor Fund, will not generally
invest in securities for short-term capital appreciation but, when business and
economic conditions, market prices, or the Fund's investment policy warrant,
individual security positions may be sold without regard to the length of time
they have been held. This may result in a higher portfolio turnover rate and
increase a Fund's transaction costs, including brokerage commissions. To the
extent short-term trades result in gains on securities held less than one year,
shareholders will be subject to taxes at ordinary income rates. See "TAXES" in
this Statement of Additional Information.
The Funds may purchase their portfolio securities through a securities
broker and pay the broker a commission, or they may purchase the securities
directly from a dealer which acts as principal and sells securities directly for
its own account without charging a commission. The purchase price of securities
purchased from dealers serving as market makers will include the spread between
the bid and asked prices. The Funds may also purchase securities from
underwriters, the price of which will include a commission or discount paid by
the issuer to the underwriter. There is generally no stated commission in the
case of fixed income securities that are traded in the over-the-counter market,
but the price paid by a Fund usually includes an undisclosed dealer commission
or mark-up.
Prompt execution of orders at the most favorable price will be the primary
consideration of the Funds in transactions where fees or commissions are
involved. Additional factors considered by the Advisor in selecting brokers to
execute a transaction include the: (i) professional capability of the executing
broker and the value and quality of the brokerage services provided; (ii) size
and type of transaction; (iii) timing of transaction in the context of market
prices and trends; (iv) nature and character of markets for the security to be
purchased or sold; (v) the broker's execution efficiency and settlement
capability; (vi) the broker's experience and financial stability and the
execution services it renders to the Advisor on a continuing basis; and (vii)
reasonableness of commission. The Funds recently adopted policies prohibiting a
Fund from directing commissions to any broker-dealer for sale of the Fund's
shares.
Research, statistical, and other services offered by the broker also may
be taken into consideration in selecting broker-dealers. These services may
include: advice concerning the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or the purchasers or sellers of securities; and furnishing analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategies, and performance of accounts. A commission in
excess of the amount of a commission another broker or dealer would have charged
for effecting a transaction may be paid by a Fund if the Advisor determines in
good faith that the commission is reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of either that
particular transaction or management's overall responsibilities with respect to
the Fund.
The Advisor receives a significant amount of proprietary research from a
number of brokerage firms, in most cases on an unsolicited basis. The Advisor
does not make any commitments to allocate brokerage for proprietary research.
The value of that research, however, is considered along with other factors in
the selection of brokers. This research is considered supplemental to the
Advisor's own internal research and does not, therefore, materially reduce the
overall expenses incurred by the Advisor for its research. On a semi-annual
basis, the Advisor's research analysts and portfolio managers participate in a
detailed internal survey regarding the value of proprietary research and the
skills or contributions made by the various brokerage analysts to the Advisor's
investment process. Firms are then confidentially ranked based on that survey.
Brokerage allocations are then made, as much as reasonably possible, based on
those rankings.
111
The Advisor may use a Fund's commissions to acquire third party research
or products that are not available through its full-service brokers. In these
arrangements, the Advisor pays an executing broker a commission equal to the
average rate paid on all other trades and achieves what it believes is best
execution on the trade. The executing broker then uses a portion of the
commission to pay for a specific research service or product provided to the
Advisor. Proposed research to be acquired in this manner must be approved by the
Advisor's Soft Dollar Committee which is responsible for determining that the
research provides appropriate assistance to the Advisor in connection with its
investment management of the Funds and that the price paid with broker
commissions is fair and reasonable.
The receipt of proprietary and third party research services or products
from brokers or dealers might be useful to the Advisor and its affiliates in
rendering investment management services to the Funds or other clients.
Conversely, research provided by brokers or dealers who have executed orders on
behalf of other clients of the Advisor and its affiliates might be useful to the
Advisor in carrying out its obligations to a Fund.
Total brokerage commissions paid (agency only) by each of the respective
Funds for each of the last three fiscal years were:
FUND 2004 2003* 2002
---- ----------- ----------- ----------
Common Stock Fund $2,038,302 $1,511,696 $2,190,926
Growth Fund $3,656,405 $3,916,262 $5,689,484
Mid Cap Growth Fund $4,568,079 $2,792,191 $2,756,879
Small Cap Growth Fund $4,182,561 $2,274,813 $2,664,649
Real Estate Fund $1,006,065 $1,359,961 $ 852,884
Balanced Fund $1,984,251 $1,432,505 $1,960,887
Technology Fund $1,103,735 $ 528,962 $ 296,070
Strategic Investor Fund $1,457,139 $ 950,489 $2,297,858
International Stock Fund $2,219,092 $ 576,027 $ 697,867
*The Funds changed their fiscal year end from December 31 to August 31 in
2003. Information provided is for the eight-month period ended August 31,
2003.
No agency brokerage commissions were paid by the Fixed Income Securities
Fund, High Yield Fund, International Stock Fund, National Municipal Bond Fund,
Short Term Bond Fund, Daily Income Company or the Oregon Municipal Bond Fund
during the last three years. Of the commissions paid in 2004, the Common Stock
Fund paid $354,660, the Growth Fund paid $449,811, the Mid Cap Growth Fund paid
$363,965, the Small Cap Growth Fund paid $310,350, the Balanced Fund paid
$393,314, the Real Estate Fund paid $22,043, the Strategic Investor Fund paid
$102,594, and the Technology Fund paid $52,458 to acquire third-party research
or products.
At August 31, 2004, the Funds held securities of their regular brokers or
dealers as set forth below:
FUND BROKER/DEALER VALUE
COMMON STOCK FUND JP MORGAN CHASE CO $ 7,560,255
CITIGROUP INC. $ 7,438,314
MORGAN STANLEY $ 4,870,080
MARSH MCLENNAN CO INC $ 2,484,764
EDWARDS A.G. INC $ 1,725,088
E*TRADE GROUP INC $ 1,724,592
GROWTH FUND MERRILL LYNCH & CO INC $10,760,449
CITIGROUP INC $ 8,511,377
112
FUND BROKER/DEALER VALUE
INTERNATIONAL STOCK FUND AXA $ 3,828,704
CREDIT SUISSE GROUP $ 2,393,572
MID CAP GROWTH FUND E*Trade Group Inc $ 5,478,878
SMALL CAP GROWTH FUND AFFILIATED MANAGERS GROUP $ 7,705,265
REAL ESTATE EQUITY FUND NONE
TECHNOLOGY FUND NONE
STRATEGIC INVESTOR FUND JP MORGAN CHASE & CO $ 5,153,316
CITIGROUP INC $ 3,027,700
MORGAN STANLEY $ 2,536,500
PIPER JAFFRAY $ 1,502,035
NOMURA HOLDINGS INC- ADR $ 1,388,000
MARSH & MCLENNAN CO INC $ 1,228,975
NIKKO CORDIAL CORP. $ 679,682
BALANCED FUND CITIGROUP INC $ 9,091,438
JP MORGAN CHASE & CO $ 8,980,658
MORGAN STANLEY $ 6,274,903
MARSH & MCLENNAN CO INC $ 2,641,179
WACHOVIA CORP $ 1,802,624
EDWARDS (A.G.) $ 1,645,094
E*TRADE GROUP INC. $ 1,255,748
MERRILL LYNCH & CO INC $ 1,011,960
LEHMAN BROTHERS HOLDINGS $ 812,800
GOLDMAN SACHS $ 746,609
SHORT TERM BOND FUND JP MORGAN CHASE & CO $ 4,021,320
113
FUND BROKER/DEALER VALUE
WACHOVIA CORP. $ 3,708,542
LEHMAN BROTHERS HOLDINGS $ 3,058,030
CITIGROUP INC $ 2,845,071
BEAR STEARNS CO INC $ 2,761,096
MORGAN STANLEY DEAN $ 2,636,775
GOLDMAN SACHS $ 2,612,429
CREDIT SUISSE FB USA INC $ 2,525,171
MERRILL LYNCH & CO $ 2,457,097
FIXED INCOME SECURITIES FUND CITIGROUP, INC. $ 3,572,899
JP MORGAN CHASE & CO $ 2,684,393
WACHOVIA CORP $ 2,651,807
MERRILL LYNCH & CO $ 1,907,545
BEAR STEARNS $ 1,736,305
GOLDMAN SACHS $ 1,553,348
MORGAN STANLEY $ 1,476,052
LEHMAN BROTHERS HOLDINGS $ 1,016,000
NATIONAL MUNICIPAL BOND FUND NONE
OREGON MUNICIPAL BOND FUND NONE
COLUMBIA HIGH YIELD FUND NONE
COLUMBIA DAILY INCOME COMPANY DEUTSCHE BANK FINANCIAL $14,990,533
CITICORP/COMMERCIAL CR GROUP INC $14,483,766
MERRILL LYNCH & CO. $12,787,493
MORGAN STANLEY DEAN WITTER CO. $11,599,020
114
FUND BROKER/DEALER VALUE
GOLDMAN SACHS GROUP $ 7,975,822
MORGAN, J P CHASE $ 6,013,183
Provided each Fund's Board of Directors is satisfied that the Fund is
receiving the most favorable price and execution available, the Advisor may
consider the sale of the Fund's shares as a factor in the selection of brokerage
firms to execute its portfolio transactions. The placement of portfolio
transactions with brokerage firms who sell shares of a Fund is subject to rules
adopted by the National Association of Securities Dealers, Inc. The Advisor may
use research services provided by and allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, to the extent
permitted by law or order of the SEC, financial institutions that are affiliated
with the Advisor, if the Advisor believes that the quality of the transaction
and the commission are comparable to what they would be with other qualified
brokerage firms. During the years listed, the Funds periodically used Robertson
Stephens and Fleet Institutional Trading, affiliated broker-dealers of the
Advisor that were disbanded in 2004, to execute purchase and sale orders. During
2004, the Funds periodically used W.R. Hambrecht, an affiliated broker-dealer of
the Advisor to execute purchase and sale orders.
The aggregate dollar amount of brokerage commissions paid to Robertson
Stephens for the fiscal years 2002, 2003, and 2004 is as follows:
FUND 2004 2003* 2002
---- -------- -------- --------
Small Cap Growth Fund $ 0 $ 0 $ 0
Balanced Fund $ 0 $ 0 $ 9,330
Mid Cap Growth Fund $ 0 $ 0 $ 0
Growth Fund $ 0 $ 0 $ 3,460
Real Estate Equity Fund $ 0 $ 0 $ 0
Strategic Investor Fund $ 0 $ 0 $ 11,510
Common Stock Fund $ 0 $ 0 $ 2,020
The aggregate dollar amount of brokerage commissions paid to Fleet
Institutional Trading for fiscal years 2003 and 2004 is as follows:
FUND 2004 2003*
---- -------- -------
Balanced Fund $ 0 $ 0
Strategic Investor Fund $ 5,125 $ 34,125
Common Stock Fund $ 0 0 $ 0
*The Funds changed their fiscal year end from December 31 to August 31 in
2003. Information provided for 2003 is for the eight-month period ended
August 31, 2003.
The aggregate dollar amount of brokerage commissions paid to W.R.
Hambrecht for the fiscal year 2004 is as follows:
FUND 2004
---- -------
Small Cap Growth Fund $ 1,365
Mid Cap Growth Fund $ 9,785
Growth Fund $25,250
Strategic Investor Fund $ 1,500
For all years, the aggregate dollar amount of purchase and sale
transactions and total broker commissions were less than 1% of each Fund's total
purchase and sale transactions and broker commissions. In addition to agency
transactions, the Funds may purchase securities from an underwriting syndicate
in which an affiliate is a member of the underwriting syndicate. Such trades
will be executed in accordance with the rules and regulations of the 1940 Act,
as well as procedures adopted by the Funds.
Buy and sell orders of a Fund may be aggregated by the Advisor with other
trades made at the regional trading desk at which the trade is completed with
those of other Funds or accounts or other investment pools managed by the
Advisor or affiliates of the Advisor to achieve best execution, and, on the
average, lower brokerage commission costs. Orders are aggregated only if the
Advisor, in the exercise of its investment discretion, believes such aggregation
is consistent with its duty to seek best execution and if each client involved
in the order is treated fairly and on an equitable basis. Each client that
participates in an aggregated order will typically participate at the average
share price for all transactions in that order, with all transaction costs
shared on a pro rata basis. Absent unusual circumstances, an aggregated order
that is only partially completed by the Advisor will be allocated to each client
on a pro rata basis based on the percentage
115
of the combined order actually filled. Notwithstanding the above, the Advisor
may execute buy and sell orders for clients and take action in performance of
its duties with respect to any of its clients that may differ from actions taken
with respect to another client with similar investment policies and objectives,
so long as the Advisor shall, to the extent practical, allocate investment
opportunities to clients over a period of time on a fair and equitable basis and
in accordance with applicable law.
Allocations among accounts managed by the Advisor of investments in
initial and secondary public offerings ("IPOs and "SPOs," jointly "POs") are
made pursuant to Guidelines (the "Guidelines") established by the Advisor. The
Guidelines establish which accounts are eligible to participate in a particular
PO and what level of participation is permitted. After eligible accounts are
identified, each manager receives, on behalf of his or her accounts, a pro rata
share of such allocation. The allocation by the manager among his or her
accounts is further divided among such accounts on a pro rata basis. A manager
may decline to participate in an offering, or may elect to not have all accounts
participate, even if his or her accounts are eligible to participate pursuant to
the guidelines if he or she believes that the PO is not appropriate for his or
her accounts or an individual account. A manager who declines to participate
must document the basis of his or her decision not to participate. Over time,
allocations to eligible accounts for which an PO opportunity is appropriate will
be made on a fair and equitable basis.
The Advisor, CFD and the Funds maintain a Code of Ethics pursuant to Rule
17j-1 under the 1940 Act (the "Ethics Code") that sets forth general and
specific standards relating to the securities trading activities of all their
employees. The Ethics Code does not prohibit employees from purchasing
securities that may be purchased or held by the Funds, but is intended to ensure
that all employees conduct their personal transactions in a manner that does not
interfere with the portfolio transactions of the Funds or the Advisor's other
clients or take unfair advantage of their relationship with the Advisor. The
specific standards in the Ethics Code include, among others, a requirement that
trades of all access persons be pre-cleared; a prohibition on investing in
initial public offerings; required pre-approval of an investment in private
placements; a prohibition on portfolio managers trading in a security five
business days before or after a trade in the same security by an account over
which the manager exercises investment discretion; and a prohibition on
realizing any profit on the trading of a security held less than 60 days.
Certain securities and transactions, such as U.S. Treasuries and purchases of
options on securities indexes or securities under an automatic dividend
reinvestment plan, are exempt from the restrictions in the Ethics Code because
they present little or no potential for abuse. In addition to the trading
restrictions, the Ethics Code contains reporting obligations that are designed
to ensure compliance and allow the Advisor's Ethics Committee to monitor that
compliance.
The Advisor and the Funds have also adopted an Insider Trading Policy. The
Insider Trading Policy prohibits any employee from trading, either personally or
on behalf of others (including a client account), on the basis of material
nonpublic information. All employees are required to certify each year that they
have read and complied with the provisions of the Ethics Code and the Insider
Trading Policy.
116
CAPITAL STOCK AND OTHER SECURITIES
Each Fund is an Oregon corporation and was organized in the year set forth
below opposite its name.
FUND DATE
---- ----
Common Stock Fund 1991
Growth Fund 1967
International Stock Fund 1992
Mid Cap Growth Fund 1985
Small Cap Growth Fund 1996
Real Estate Fund 1994
Technology Fund 2000
Strategic Investor Fund 2000
Balanced Fund 1991
Short Term Bond Fund 1986
Fixed Income Securities Fund 1983
National Municipal Bond Fund 1999
Oregon Municipal Bond Fund 1984
High Yield Fund 1993
Daily Income Company 1974
Each Fund offers some or all of the following classes of shares pursuant
to a Rule 18f-3 Plan (the "Plan") adopted by the Directors in accordance with
the 1940 Act: Class A, B, C, D, G, T and Z. Shares of each class of a Fund
represent an equal pro rata interest in the Fund and, generally, have identical
voting, dividend, liquidation, and other relative rights, preferences,
limitations, and terms and conditions, except that: (1) each class has a
different designation, (2) each class of shares bears any expenses attributable
to a class as set forth in the Plan and the relevant Prospectus, (3) each class
has exclusive voting rights on any matter submitted to shareholders that relates
solely to it or its distribution and service plan adopted under Rule 12b-1, if
any, and (4) each class has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. In addition, each class has the particular features described
below. The differences among the classes of the Funds are subject to change by
action of the Board of Directors of each Fund and to the extent permitted by the
1940 Act and each Fund's articles of incorporation and bylaws. All issued and
outstanding shares of a Fund are fully paid and nonassessable. Shares have no
preemptive rights. Fractional shares have the same rights proportionately as
full shares. The shares of a Fund do not have cumulative voting rights, which
means that the holders of more than 50 percent of the shares of the Fund, voting
for the election of directors, can elect all the directors.
Except as indicated in Appendix I, Class G shares of a Fund (other than
the Growth Fund) automatically convert into Class T shares of the same Fund at
the time disclosed in the relevant Fund's Prospectus for Class T and G shares.
Class G shares of the Growth Fund automatically convert into Class A shares of
that Fund at the time disclosed in the Fund's Prospectus for Class G shares.
Class B shares automatically convert into Class A shares of the same Fund at the
time disclosed in the relevant Fund's Prospectus for Class A, B, C and D shares.
Shares of Class A, D and T shares are offered with a front-end sales
charge, payable at the time of purchase, unless waived as set forth in the
Prospectus for such Fund. Class B, C and G shares are offered without a
front-end sales charge, but are subject to a contingent deferred sales charge
depending on the length of time the shares are held. Class A, C, D and T shares
held for fewer than 18 months (12 months in the case of Class C and D) after
purchase are subject to a 1.00% contingent deferred sales charge. A detailed
description of these various sales charges can be found in the Prospectus for
the relevant class. Class T shares received in connection with a fund merger are
subject to a contingent deferred sales charge if redeemed within 12 months of
the original purchase.
Any reference to the phrase "vote of a majority of the outstanding voting
securities of the Fund" means the vote at any meeting of shareholders of a Fund
of (i) 67 percent or more of the shares present or represented by proxy at the
meeting, if the holders of more than 50 percent of the outstanding shares are
present or represented by proxy, or (ii) more than 50 percent of the outstanding
shares, whichever is less.
117
DISTRIBUTION AND SERVICING
RULE 12B-1 DISTRIBUTION PLAN
The Directors have approved a plan pursuant to Rule 12b-1 under the 1940
Act (the "12b-1 Plan") for the Funds' Class A, B, C, D and G shares. Under the
12b-1 Plan, each Fund pays CFD a monthly service fee at an annual rate of up to
0.25% of the Fund's net assets attributed to Class A, B, C and D shares. Each
Fund may also pay CFD monthly a distribution fee at an annual rate of 0.10% of
the Fund's daily net assets attributed to Class A shares and up to 0.75% of the
Fund's average daily net assets attributable to Class B, C and D shares. The
Funds' Board of Directors currently limits payments under the 12b-1 Plan for
Class A shares to 0.25% annually. Also under the 12b-1 Plan, the Growth Fund,
Mid Cap Growth Fund and Short Term Bond Fund pay CFD a monthly service fee at an
annual rate of up to 0.50% of the Fund's net assets attributed to Class G
shares, made up of up to 0.25% for certain shareholder services ("Shareholder
Liaison Services") and up to 0.25% for administrative services ("Administrative
Support Services"). The Growth Fund, Mid Cap Growth Fund and Short Term Bond
Fund also pay CFD monthly a distribution fee at an annual rate of up to 0.65% of
the Fund's average daily net assets attributed to Class G shares.
CFD has also voluntarily agreed to waive a portion of the Short Term Bond
Fund Class C and Class D distribution fees so that these fees do not exceed
0.40% annually of the Class C's and Class D's average daily net assets. For the
National Municipal Bond Fund and Oregon Municipal Bond Fund, CFD has voluntarily
agreed to waive a portion of its Class C and Class D distribution fees so that
these fees do not exceed 0.65% annually of Class C's and Class D's average daily
net assets. For the Fixed Income Securities Fund and High Yield Fund, the
Distributor has voluntarily agreed to waive a portion of its Class C and Class D
distribution fees so that these fees do not exceed 0.85% annually of the Class
C's and Class D's average daily net assets.
The monthly service and distribution fees shall be used by CFD to cover
expenses and activities primarily intended to result in the sale of Fund shares.
These expenses and activities may include but are not limited to: (a) direct
out-of-pocket promotional expenses incurred by CFD in advertising and marketing
Fund shares; (b) expenses incurred in connection with preparing, printing,
mailing, and distributing or publishing advertisements and sales literature; (c)
expenses incurred in connection with printing and mailing prospectuses and
Statements of Additional Information to other than current shareholders; (d)
periodic payments or commissions to one or more securities dealers, brokers,
financial institutions and other industry professionals ("Service
Organizations") with respect to the Funds' shares beneficially owned by
customers for whom the Service Organization is the shareholder of record; (e)
the direct and indirect cost of financing the payments or expenses included in
(a) and (d) above; or (f) such other services as may be construed by any court
or governmental agency or commission, including the SEC, to constitute
distribution services under the 1940 Act or rules and regulations thereunder.
Shareholder Liaison Services may include the following services provided
by financial services firms ("FSFs"): (a) aggregating and processing purchase
and redemption requests and placing net purchase and redemption orders with CFD;
(b) processing dividend payments; (c) providing sub-accounting with respect to
Class T shares or the information necessary for sub-accounting; and (d)
providing periodic mailings to customers. Administrative Support Services may
include the following services provided by FSFs: (a) providing customers with
information as to their positions in Class G shares; (b) responding to customer
inquiries; and (c) providing a service to invest the assets of customers in
Class G shares.
CFD may use the entire amount of such fees to defray the cost of
commissions and service fees paid to FSFs and for certain other purposes. Since
the distribution and service fees are payable regardless of CFD's expenses, CFD
may realize a profit from the fees. The 12b-1 Plan authorizes the Advisor to
make payments out of its own funds for distribution or services costs.
At this time, the total Class G service and distribution fees have been
limited to 0.95% for the Growth Fund and Mid Cap Growth Fund and 0.80% for the
Short Term Bond Fund. These limitations may be modified or terminated by the
Board of Directors at any time.
SHAREHOLDER SERVICES PLAN
The Board of Directors has approved a Shareholder Services Plan (the
"Services Plan") for Class T shares of the Mid Cap Growth Fund and the Short
Term Bond Fund. Under the Services Plan, these two Funds may pay FSFs a monthly
service fee up to an annual rate of 0.50% of the Fund's net assets attributed to
Class T shares beneficially owned by the customers of the FSFs, made up of 0.25%
for Shareholder Liaison Services and 0.25% for Administrative Support Services,
to compensate FSFs for providing services to beneficial owners of Class T
shares. At this time, the fees payable by the holders of Class T shares pursuant
to the Services Plan have been
118
limited to 0.30% for the Mid Cap Growth Fund and 0.15% for the Short Term Bond
Fund. The Services Plan provides that the FSFs will waive the fees to the extent
that net investment income attributable to Class T shares earned in the
applicable period is less than the fees due for such period.
TERMS OF THE 12B-1 AND SERVICES PLAN
CFD has advised the Funds that the 12b-1 Plan and the Services Plan could
be significant factors in the growth and retention of the Funds' assets,
resulting in a more advantageous expense ratio, increased investment flexibility
and a greater ability to attract and retain research and portfolio management
talent, which could benefit each class of the Funds' shareholders. The 12b-1
Plan and the Services Plan will continue in effect from year to year so long as
their continuance is specifically approved at least annually by a vote of the
Directors, including the Directors who are not interested persons of a Fund and
have no direct or indirect financial interest in the operation of the 12b-1 Plan
or the Services Plan or in any related agreements ("Independent Directors"),
and, with respect to the 12b-1 Plan, cast in person at a meeting called for the
purpose. All material amendments of the 12b-1 Plan or the Services Plan must be
approved by the Directors in the manner provided in the foregoing sentence. The
12b-1 Plan may not be amended to increase the fee materially without approval by
vote of a majority of the outstanding voting securities of the relevant class of
shares. The 12b-1 Plan and the Services Plan may be terminated at any time by
vote of a majority of the Independent Directors or, with respect to the 12b-1
Plan, by vote of a majority of the outstanding voting securities of the relevant
class of shares. The continuance of the 12b-1 Plan and the Services Plan will
only be effective if the selection and nomination of the Directors who are not
interested persons of the Funds is effected by such Independent Directors.
The Funds' 12b-1 Plan monthly service and distribution fees paid to CFD
for the period ended August 31, 2004 were (Class C shares were not available
until October 13, 2003):
SERVICE FEE DISTRIBUTION FEE
--------------------------------------------------- -------------------------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS G CLASS T CLASS B CLASS C CLASS D CLASS G
-------- -------- ------- -------- ------- ------- -------- ------- -------- -------
Common Stock Fund $ 1,533 $ 4,005 $ 80 $ 348 -- -- $ 12,052 $ 242 $ 1,049 --
Growth Fund $ 12,228 $ 4,527 $ 260 $ 710 $43,644 -- $ 13,582 $ 779 $ 2,114 $94,563
International Stock Fund $ 61,658 $ 27,959 $ 948 $ 1,834 -- -- $ 83,878 $ 2,845 $ 5,532 --
Mid Cap Growth Fund $ 13,691 $ 12,878 $ 735 $ 1,874 $ 2,309 $ 87,984 $ 38,634 $ 2,206 $ 5,635 $ 5,005
Real Estate Equity Fund $ 70,852 $ 20,950 $ 2,912 $ 10,632 -- -- $ 62,850 $ 8,738 $ 31,895 --
Technology Fund $ 4,349 $ 6,186 $ 609 $ 93 -- -- $ 18,559 $ 1,830 $ 279 --
Strategic Investor Fund $189,017 $ 26,135 $11,132 $ 1,863 -- -- $ 78,695 $33,396 $ 5,589 --
Balanced Fund $ 4,349 $ 14,169 $ 1,090 $ 1,486 -- -- $ 42,507 $ 3,270 $ 4,458 --
Short Term Bond Fund $ 74,475 $ 63,644 $ 4,260 $ 38,815 $ 1,979 $ 37,561 $190,933 $12,776 $116,445 $ 8,592
Fixed Income Securities $ 22,484 $ 11,353 $ 252 $ 5,779 -- -- $ 34,061 $ 755 $ 17,339 --
Fund
National Municipal Bond $ 2,286 $ 1,861 $ 1,469 $ 1,171 -- -- $ 5,491 $ 4,423 $ 3,514 --
Fund
Oregon Municipal Bond Fund $ 7,100 $ 3,054 $ 302 $ 1,970 -- -- $ 9,166 $ 908 $ 5,927 --
High Yield Fund $675,162 $253,964 $29,162 $256,091 -- -- $761,891 $87,485 $768,275 --
Sales-related expenses of CFD relating to the Funds were:
COMMON STOCK FUND Fiscal Year Ended August 31, 2004
Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 5,833 $21,018 $ 857 $ 248
Allocated cost of sales
material relating to the Fund
(including printing, mailing
and other promotion
expenses) $ 816 $ 470 $ 52 $ 30
Allocated travel,
entertainment and other $ 3,140 $ 1,806 $ 198 $ 114
expenses
119
Fiscal Year Ended August 31, 2004
GROWTH FUND Class A Shares Class B Shares Class C Shares Class D Shares Class G Shares
-------------- -------------- -------------- -------------- --------------
Fees to FSFs $ 15,162 $ 45,723 $ 2,619 $ 589 $ 47,090
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 1,372 $ 929 $ 190 $ 60 $ 1,453
Allocated travel, entertainment and
other expenses $ 5,277 $ 3,572 $ 731 $ 231 $ 5,589
Fiscal Year Ended August 31, 2004
INTERNATIONAL STOCK FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $71,072 $ 91,225 $ 5,994 $ 1,856
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 4,027 $ 2,847 $ 454 $ 175
Allocated travel, entertainment and
other expenses $15,493 $ 10,952 $ 1,747 $ 675
Fiscal Year Ended August 31, 2004
MID CAP GROWTH FUND Class A Shares Class B Shares Class C Shares Class D Shares Class G Shares Class T Shares
-------------- -------------- -------------- -------------- -------------- --------------
Fees to FSFs $ 87,836 $ 60,643 $ 4,533 $ 4,174 $ 2,483 $ 0
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 5,084 $ 1,496 $ 599 $ 99 $ 114 $ 1,505
Allocated travel, entertainment and
other expenses $ 19,556 $ 5,756 $ 2,304 $ 382 $ 439 $ 5,788
Fiscal Year Ended August 31, 2004
REAL ESTATE EQUITY FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 78,242 $ 185,005 $ 28,713 $ 9,196
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 37,415 $ 4,318 $ 2,247 $ 1,070
Allocated travel, entertainment and
other expenses $143,932 $ 16,613 $ 8,642 $ 4,118
120
Fiscal Year Ended August 31, 2004
TECHNOLOGY FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 2,063 $ 70,710 $ 6,665 $ 76
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 3,184 $ 1,579 $ 646 $ 53
Allocated travel, entertainment and
other expenses $ 12,248 $ 6,074 $ 2,484 $ 205
Fiscal Year Ended August 31, 2004
STRATEGIC INVESTOR FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 261,326 $ 580,986 $ 119,556 $ 11,533
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 38,930 $ 13,387 $ 13,642 $ 44
Allocated travel, entertainment and
other expenses $ 149,762 $ 51,497 $ 52,478 $ 171
Fiscal Year Ended August 31, 2004
BALANCED FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 4,358 $ 80,318 $ 7,153 $ 1,180
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 855 $ 1,909 $ 541 $ 96
Allocated travel, entertainment and
other expenses $ 3,290 $ 7,344 $ 2,080 $ 371
Fiscal Year Ended August 31, 2004
SHORT TERM BOND FUND Class A Shares Class B Shares Class C Shares Class D Shares Class G Shares Class T Shares
-------------- -------------- -------------- -------------- -------------- --------------
Fees to FSFs $ 152,630 $ 168,050 $ 31,938 $ 38,684 $ 2,152 $ 0
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 20,072 $ 3,851 $ 2,305 $ 1,395 $ 46 $ 861
Allocated travel, entertainment and
other expenses $ 77,215 $ 14,815 $ 8,868 $ 5,365 $ 175 $ 3,313
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Fiscal Year Ended August 31, 2004
FIXED INCOME SECURITIES FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 36,369 $ 34,182 $ 3,450 $ 3,998
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 5,888 $ 835 $ 160 $ 73
Allocated travel, entertainment and
other expenses $ 22,649 $ 3,212 $ 615 $ 282
Fiscal Year Ended August 31, 2004
NATIONAL MUNICIPAL BOND FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 2,227 $ 9,256 $ 6,797 $ 861
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 942 $ 209 $ 474 $ 56
Allocated travel, entertainment and
other expenses $ 3,622 $ 804 $ 1,822 $ 215
Fiscal Year Ended August 31, 2004
OREGON MUNICIPAL BOND FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 17,114 $ 17,357 $ 2,681 $ 2,802
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 2,140 $ 479 $ 289 $ 160
Allocated travel, entertainment and
other expenses $ 8,233 $ 1,843 $ 1,113 $ 616
Fiscal Year Ended August 31, 2004
HIGH YIELD FUND Class A Shares Class B Shares Class C Shares Class D Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 952,130 $ 843,370 $ 341,820 $ 199,432
Allocated cost of sales material
relating to the Fund (including
printing, mailing and other promotion
expenses) $ 233,596 $ 21,196 $ 21,357 $ 11,473
Allocated travel, entertainment and
other expenses $ 898,620 $ 81,540 $ 82,160 $ 44,137
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PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASES AND REDEMPTIONS
A detailed discussion of how you may purchase, redeem and exchange each
class of shares in a Fund is discussed in the Prospectus applicable to such
class. The following information and policies are supplemental to that found in
the applicable Prospectus.
Each Fund will generally accept unconditional orders for shares to be
executed at the public offering price based on the NAV per share next determined
after the order is placed in good order. The public offering price is the NAV
plus the applicable sales charge, if any. In the case of orders for purchase of
shares placed through FSFs, the public offering price will be determined on the
day the order is placed in good order, but only if the FSF receives the order
prior to the time at which shares are valued and transmits it to a Fund before
the Fund processes that day's transactions. If the FSF fails to transmit before
a Fund processes that day's transactions, the customer's entitlement to that
day's closing price must be settled between the customer and the FSF. If the FSF
receives the order after the time at which the Fund values its shares, the price
will be based on the NAV determined as of the close of the New York Stock
Exchange ("Exchange") on the next day it is open. If funds for the purchase of
shares are sent directly to CFS, they will be invested at the public offering
price next determined after receipt in good order. Payment for shares of a Fund
must be in U.S. dollars; if made by check, the check must be drawn on a U.S.
bank.
Each Fund receives the entire NAV of shares sold. For shares subject to an
initial sales charge, CFD's commission is the sales charge shown in the Fund's
Prospectus less any applicable FSF discount. The FSF discount is the same for
all FSFs, except that CFD retains the entire sales charge on any sales made to a
shareholder who does not specify a FSF on the Investment Account Application
("Application"), and except that CFD may from time to time reallow additional
amounts to all or certain FSFs. CFD generally retains some or all of any
asset-based sales charge (distribution fee) or contingent deferred sales charge.
Such charges generally reimburse CFD for any up-front and/or ongoing commissions
paid to FSFs.
Checks presented for the purchase of shares of a Fund which are returned
by the purchaser's bank or checkwriting privilege checks for which there are
insufficient funds in a shareholder's account to cover redemption may subject
such purchaser or shareholder to a $15 service fee for each check returned.
Checks must be drawn on a U.S. bank and must be payable in U.S. dollars.
Travelers checks, gifts checks, credit card convenience checks, credit cards,
cash and bank counter (starter checks) are not accepted.
CFS acts as the shareholder's agent whenever it receives instructions to
carry out a transaction on the shareholder's account. Upon receipt of
instructions that shares are to be purchased for a shareholder's account, the
designated FSF will receive the applicable sales commission. Shareholders may
change FSFs at any time by written notice to CFS, provided the new FSF has a
sales agreement with CFD.
Shares credited to an account are transferable upon written instructions
in good order to CFS and may be redeemed as described in the Prospectus.
Certificates will not be issued. Shareholders may send any certificates to CFS
for deposit to their account.
CFD may, at its expense, provide special sales incentives (such as cash
payments in addition to the commissions specified in the Funds' applicable
Prospectus) to FSFs that agree to promote the sale of shares of the Funds or
other funds that CFD distributes. At its discretion, CFD may offer special sales
incentives only to selected FSFs or to FSFs who have previously sold or expect
to sell significant amounts of the Funds' shares.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed
or eliminated at any time.
AUTOMATIC INVESTMENT PLAN. As a convenience to investors, shares of the
Funds may be purchased through the Automatic Investment Plan. Preauthorized
monthly electronic funds transfers for a fixed amount of at least $50 ($25 for
Individual Retirement Accounts ("IRAs")) are used to purchase a Fund's shares at
the public offering price next determined after CFD receives the proceeds from
the transfer. If your Automatic Investment Plan purchase is by electronic funds
transfer, you may request the Automatic Investment Plan purchase for any day.
Further information and application forms are available from FSFs or from CFD.
AUTOMATED DOLLAR COST AVERAGING. The Automated Dollar Cost Averaging
program allows you to exchange $100 or more on a monthly basis from any mutual
fund distributed by CFD in which you have a current balance of at least $5,000
into the same class of
123
shares of up to five other funds. Complete the Automated Dollar Cost Averaging
section of the Application. There is no charge for exchanges made pursuant to
the Automated Dollar Cost Averaging program. Sales charges may apply if
exchanging from a money market fund. Exchanges will continue so long as your
Fund balance is sufficient to complete the transfers. Your normal rights and
privileges as a shareholder remain in full force and effect. Thus you can buy
any Fund, exchange between the same class of shares by written instruction or by
telephone exchange if you have so elected and withdraw amounts from any Fund,
subject to the imposition of any applicable CDSC or sales charges.
Any additional payments or exchanges into your Fund will extend the time
of the Automated Dollar Cost Averaging program.
An exchange is generally a capital sale transaction for federal income tax
purposes. You may terminate your program, change the amount of the exchange
(subject to the $100 minimum), or change your selection of Funds, by telephone
or in writing; if in writing by mailing your instructions to Columbia Funds
Services, Inc. P.O. Box 8081, Boston, MA 02266-8081.
You should consult your FSF to determine whether or not the Automated
Dollar Cost Averaging program is appropriate for you.
TAX-SHELTERED RETIREMENT PLANS. CFD offers prototype tax-qualified plans,
including Profit-Sharing Plans for individuals, corporations, employees and the
self-employed. The minimum initial Retirement Plan investment is $25. Columbia
Trust Company serves as Trustee of CFD prototype plans and charges a $20 annual
fee. Detailed information concerning these Retirement Plans and copies of the
Retirement Plans are available from CFD.
Participants in non-CFD prototype Retirement Plans (other than IRAs) also
are charged a $20 annual fee unless the plan maintains an omnibus account with
CFS. Participants in CFD prototype Plans (other than IRAs) who liquidate the
total value of their account may also be charged a $20 close-out processing fee
payable to CFS. The fee is in addition to any applicable CDSC. The fee will not
apply if the participant uses the proceeds to open a CFD IRA Rollover account in
any Fund, or if the Plan maintains an omnibus account.
Consultation with a competent financial and tax advisor regarding these
Retirement Plans and consideration of the suitability of Fund shares as an
investment under the Employee Retirement Income Security Act of 1974 or
otherwise is recommended.
TELEPHONE ADDRESS CHANGE SERVICES. By calling CFS, shareholders or their
FSF of record may change an address on a recorded telephone line. Confirmations
of address change will be sent to both the old and the new addresses. Telephone
redemption privileges by check are suspended for 30 days after an address change
is effected. Please have your account and taxpayer identification number
available when calling.
CASH CONNECTION. Dividends and any other distributions, including
Systematic Withdrawal Plan (SWP) payments, may be automatically deposited to a
shareholder's bank account via electronic funds transfer. Shareholders wishing
to avail themselves of this electronic transfer procedure should complete the
appropriate sections of the Application.
AUTOMATIC DIVIDEND DIVERSIFICATION. The automatic dividend diversification
reinvestment program (ADD) generally allows shareholders to have all
distributions from a Fund automatically invested in the same class of shares of
another Fund. An ADD account must be in the same name as the shareholder's
existing open account with the particular Fund. Call CFS for more information at
1-800-345-6611.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
CFD offers several plans by which an investor may obtain reduced initial
or contingent deferred sales charges. These plans may be altered or discontinued
at any time.
RIGHT OF ACCUMULATION (CLASS A, B AND T ONLY). Reduced sales charges on
Class A, B and T shares can be effected by combining a current purchase with
prior purchases of shares of all classes of the funds distributed by CFD. The
applicable sales charge is based on the combined total of:
1. The current purchase; and
2. The value at the public offering price at the close of business
on the previous day of all shares (of any class) of funds distributed by
CFD held by the shareholder, the shareholder's spouse or the shareholder's
minor children (except shares of any money market fund, unless such shares
were acquired by exchange from Class A or Class T shares of another
non-money market fund).
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CFD must be promptly notified of each purchase which entitles a
shareholder to a reduced sales charge. Such reduced sales charge will be applied
upon confirmation of the shareholder's holdings by CFS. A Fund may terminate or
amend this Right of Accumulation.
STATEMENT OF INTENT (CLASS A AND CLASS T SHARES ONLY). Any person may
qualify for reduced sales charges on purchases of Class A and T shares made
within a thirteen-month period pursuant to a Statement of Intent ("Statement").
A shareholder may include, as an accumulation credit toward the completion of
such Statement, the value of all shares (of any class) of funds distributed by
CFD held by the shareholder on the date of the Statement (except shares of any
money market fund, unless such shares were acquired by exchange from Class A or
Class T shares of another non-money market fund). The value is determined at the
public offering price on the date of the Statement. Purchases made through
reinvestment of distributions do not count toward satisfaction of the Statement.
During the term of a Statement, CFS will hold shares in escrow to secure
payment of the higher sales charge applicable to Class A or Class T shares
actually purchased. Dividends and capital gains will be paid on all escrowed
shares and these shares will be released when the amount indicated has been
purchased. A Statement does not obligate the investor to buy or a Fund to sell
the amount of the Statement.
If a shareholder exceeds the amount of the Statement and reaches an amount
which would qualify for a further quantity discount, a retroactive price
adjustment will be made at the time of expiration of the Statement. The
resulting difference in offering price will purchase additional shares for the
shareholder's account at the applicable offering price. As a part of this
adjustment, the FSF shall return to CFD the excess commission previously paid
during the thirteen-month period.
If the amount of the Statement is not purchased, the shareholder shall
remit to CFD an amount equal to the difference between the sales charge paid and
the sales charge that should have been paid. If the shareholder fails within
twenty days after a written request to pay such difference in sales charge, CFS
will redeem that number of escrowed Class A or T shares to equal such
difference. The additional amount of FSF discount from the applicable offering
price shall be remitted to the shareholder's FSF of record.
Additional information about and the terms of Statements of Intent are
available from your FSF, or from CFS at 1-800-345-6611.
REINSTATEMENT PRIVILEGE. An investor who has redeemed Class A, B, C, D, G
or T shares may, upon request, reinstate within one year a portion or all of the
proceeds of such sale in shares of Class A of any Fund at the NAV next
determined after CFS receives a written reinstatement request and payment.
Investors who desire to exercise this privilege should contact their FSF or CFS.
Shareholders may exercise this privilege an unlimited number of times. Exercise
of this privilege does not alter the Federal income tax treatment of any capital
gains realized on the prior sale of Fund shares, but to the extent any such
shares were sold at a loss, some or all of the loss may be disallowed for tax
purposes. Consult your tax advisor.
PRIVILEGES OF FINANCIAL SERVICES FIRMS. Class A shares of certain Funds
may be sold at NAV to registered representatives and employees of FSFs
(including their affiliates) that are parties to dealer agreements or other
sales arrangements with CFD; and such persons' families and their beneficial
accounts.
PRIVILEGES OF CERTAIN SHAREHOLDERS. Any shareholder eligible to buy Class
Z shares may purchase Class A shares of any fund distributed by CFD at NAV in
those cases where a Class Z share is not available. Qualifying shareholders will
not be subject to any Class A initial sales charge or CDSC; however, they will
be subject to the annual Rule 12b-1 service fee.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES ("CDSCS") (CLASSES A, B, C, D,
G AND T, EXCEPT AS NOTED) CDSCs may be waived on redemptions in the following
situations with the proper documentation:
1. Death. CDSCs may be waived on redemptions within one year (no
such limit for G and T shares) following the death of (i) the sole
shareholder on an individual account, (ii) a joint tenant where the
surviving joint tenant is the deceased's spouse (no spousal requirement
for G and T shares), or (iii) the beneficiary of a Uniform Gifts to Minors
Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account. If, upon the occurrence of one of the foregoing, the account is
transferred to an account registered in the name of the deceased's estate,
the CDSC will be waived on any redemption from the estate account
occurring within one year after the death. If the shares are not redeemed
within one year of the death (except for G and T shares), they will remain
subject to the applicable CDSC, when redeemed from the transferee's
account. If the account is transferred to a new registration and then a
redemption is requested, the applicable CDSC will be charged.
2. Systematic Withdrawal Plan (SWP). CDSCs may be waived on
redemptions occurring pursuant to a monthly, quarterly or semi-annual SWP
established with CFS, to the extent the redemptions do not exceed, on an
annual basis, 12% of the account's value, so long as at the time of the
first SWP redemption the account had had distributions reinvested for a
period at least equal to the period of the SWP (e.g., if it is a quarterly
SWP, distributions must have been reinvested at least for the three-month
period prior to the first SWP redemption). Otherwise, CDSCs will be
charged on SWP redemptions until this requirement
125
is met; this requirement does not apply if the SWP is set up at the time
the account is established, and distributions are being reinvested. See
below under "How to Sell Shares - Systematic Withdrawal Plan."
3. Disability. CDSCs may be waived on redemptions occurring within
one year after the sole shareholder on an individual account or a joint
tenant on a spousal joint tenant account becomes disabled (as defined in
Section 72(m)(7) of the Code). To be eligible for such waiver, (i) the
disability must arise AFTER the purchase of shares AND (ii) the disabled
shareholder must have been under age 65 at the time of the initial
determination of disability. If the account is transferred to a new
registration and then a redemption is requested, the applicable CDSC will
be charged.
4. Death of a trustee. CDSCs may be waived on redemptions occurring
upon dissolution of a revocable living or grantor trust following the
death of the sole trustee where (i) the grantor of the trust is the sole
trustee and the sole life beneficiary, (ii) death occurs following the
purchase AND (iii) the trust document provides for dissolution of the
trust upon the trustee's death. If the account is transferred to a new
registration (including that of a successor trustee), the applicable CDSC
will be charged upon any subsequent redemption.
5. Returns of excess contributions. CDSCs may be waived on
redemptions required to return excess contributions made to retirement
plans or individual retirement accounts, so long as the FSF agrees to
return the applicable portion of any commission paid by CFD.
6. Qualified Retirement Plans. CDSCs may be waived on redemptions
required to make distributions from qualified retirement plans following
normal retirement (as stated in the document). CDSCs also will be waived
on SWP redemptions made to make required minimum distributions from
qualified retirement plans that have invested in funds distributed by CFD
for at least two years.
The CDSC also may be waived where the FSF agrees to return all or an
agreed upon portion of the commission earned on the sale of the shares being
redeemed.
HOW TO SELL SHARES
Shares may also be sold on any day the Exchange is open, either directly
to a Fund or through the shareholder's FSF. Sale proceeds generally are sent
within seven days (usually on the next business day after your request is
received in good form). However, for shares recently purchased by check, a Fund
may delay selling or delay sending proceeds from your shares for up to 15 days
in order to protect the Fund against financial losses and dilution in net asset
value caused by dishonored purchase payment checks.
To sell shares directly to a Fund, send a signed letter of instruction or
stock power form to CFS, along with any certificates for shares to be sold. The
sale price is the net asset value (less any applicable CDSC) next calculated
after a Fund receives the request in proper form. Signatures must be guaranteed
by a bank, a member firm of a national stock exchange or another eligible
guarantor that participates in the Medallion Signature Guarantee Program. Stock
power forms are available from FSFs, CFS and many banks. Additional
documentation may required for sales by corporations, agents, fiduciaries,
surviving joint owners and individual retirement account holders and other legal
entities. Call CFS for more information at 1-800-345-6611.
FSFs must receive requests before the time at which a Fund's shares are
valued to receive that day's price. FSFs are responsible for furnishing all
necessary documentation to CFS and may charge for this service.
SYSTEMATIC WITHDRAWAL PLAN. The shareholder may establish a SWP. A
specified dollar amount or percentage of the then current net asset value of the
shareholder's investment in any Fund designated by the shareholder will be paid
monthly, quarterly or semi-annually to a designated payee. The amount or
percentage the shareholder specifies is run against available shares and
generally may not, on an annualized basis, exceed 12% of the value, as of the
time the shareholder makes the election, of the shareholder's investment.
Withdrawals from Class B, Class C and Class D shares of the Fund under a SWP
will be treated as redemptions of shares purchased through the reinvestment of
Fund distributions, or, to the extent such shares in the shareholder's account
are insufficient to cover Plan payments, as redemptions from the earliest
purchased shares of such Fund in the shareholder's account. No CDSCs apply to a
redemption pursuant to a SWP of 12% or less, even if, after giving effect to the
redemption, the shareholder's account balance is less than the shareholder's
base amount. Qualified plan participants who are required by Internal Revenue
Service regulation to withdraw more than 12%, on an annual basis, of the value
of their Class B, Class C and Class D share account may do so but may be subject
to a CDSC ranging from 1% to 5% of the amount withdrawn in excess of 12%
annually. If a shareholder wishes to participate in a SWP, the shareholder must
elect to have all of the shareholder's income dividends and other Fund
distributions payable in shares of the Fund rather than in cash.
126
A shareholder or a shareholder's FSF of record may establish a SWP account
by telephone on a recorded line. However, SWP checks will be payable only to the
shareholder and sent to the address of record. SWPs from retirement accounts
cannot be established by telephone.
A shareholder may not establish a SWP if the shareholder holds shares in
certificate form. Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is ordinarily
disadvantageous because of duplicative sales charges. For this reason, a
shareholder may not maintain a plan for the accumulation of shares of a Fund
(other than through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may result in a
gain or loss for tax purposes, may involve the use of principal and may
eventually use up all of the shares in a shareholder's account.
A Fund may terminate a shareholder's SWP if the shareholder's account
balance falls below $5,000 due to any transfer or liquidation of shares other
than pursuant to the SWP. SWP payments will be terminated on receiving
satisfactory evidence of the death or incapacity of a shareholder. Until this
evidence is received, CFS will not be liable for any payment made in accordance
with the provisions of a SWP.
The cost of administering SWPs for the benefit of shareholders who
participate in them is borne by a Fund as an expense of all shareholders.
Shareholders whose positions are held in "street name" by certain FSFs may
not be able to participate in a SWP. If a shareholder's Fund shares are held in
"street name," the shareholder should consult his or her FSF to determine
whether he or she may participate in a SWP. The SWP on accounts held in street
name must be made payable to the back office via the NSCC.
TELEPHONE REDEMPTIONS. All Fund shareholders and/or their FSFs are
automatically eligible to redeem up to $100,000 of the Fund's shares by calling
1-800-345-6611 toll-free any business day between 9:00 a.m. and the close of
trading of the Exchange (normally 4:00 p.m. Eastern time). Transactions received
after 4:00 p.m. Eastern time will receive the next business day's closing price.
Telephone redemptions by check and ACH are limited to a total of $100,000 in a
30-day period. Redemptions that exceed $100,000 may be accomplished by placing a
wire order trade through a broker, to a pre-existing bank account, or furnishing
a signature guaranteed request. Signatures must be guaranteed by either a bank,
a member firm of a national stock exchange or another eligible guarantor that
participates in the Medallion Signature Guarantee Program. CFS will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Telephone redemptions are not available on accounts with an address
change in the preceding 30 days and proceeds and confirmations will only be
mailed or sent to the address of record unless the redemption proceeds are being
sent to a pre-designated bank account. Shareholders and/or their FSFs will be
required to provide their name, address and account number. FSFs will also be
required to provide their broker number. All telephone transactions are
recorded. A loss to a shareholder may result from an unauthorized transaction
reasonably believed to have been authorized. Certain restrictions may apply to
retirement plan accounts.
CHECKWRITING (COLUMBIA DAILY INCOME FUND ONLY). Shares may be redeemed by
check if a shareholder has previously completed an Application and Signature
Card. CFS will provide checks to be drawn on Boston Safe Deposit and Trust
Company (the "Bank"). These checks may be made payable to the order of any
person in the amount of not less than $250 for shares of the Daily Income Fund
and not more than $100,000. The shareholder will continue to earn dividends on
shares until a check is presented to the Bank for payment. At such time a
sufficient number of full and fractional shares will be redeemed at the next
determined net asset value to cover the amount of the check. Certificate shares
may not be redeemed in this manner.
Shareholders utilizing checkwriting drafts will be subject to the Bank's
rules governing checking accounts. There is currently no charge to the
shareholder for the use of checks, however, you may incur customary fees for
services such as a stop payment request or a request for copies of a check. The
shareholder should make sure that there are sufficient shares in his or her open
account to cover the amount of any check drawn since the net asset value of
shares will fluctuate. If insufficient shares are in the shareholder's open
account, the check will be returned marked "insufficient funds" and no shares
will be redeemed; the shareholder will be charged a $15 service fee for each
check returned. It is not possible to determine in advance the total value of an
open account because prior redemptions and possible changes in net asset value
may cause the value of an open account to change. Accordingly, a check
redemption should not be used to close an open account. In addition, a check
redemption, like any other redemption, may give rise to taxable capital gains.
NON CASH REDEMPTIONS. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of a Fund's net asset
value, the Fund may make the payment or a portion of the payment with portfolio
securities held by that Fund instead of cash, in which case the redeeming
shareholder may incur brokerage and other costs in selling the securities
received.
127
DISTRIBUTIONS
Distributions are invested in additional shares of the same class of a
Fund at net asset value unless the shareholder elects to receive cash.
Regardless of the shareholder's election, distributions of $10 or less will not
be paid in cash, but will be invested in additional shares of the same class of
the Fund at net asset value. Undelivered distribution checks returned by the
post office will be reinvested in your account. If a shareholder has elected to
receive dividends and/or capital gain distributions in cash and the postal or
other delivery service selected by CFS is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks. Shareholders may reinvest all or
a portion of a recent cash distribution without a sales charge. No charge is
currently made for reinvestment.
Shares of Funds that pay daily dividends (Short Term Bond Fund, Fixed
Income Securities Fund, Oregon Municipal Bond Fund, National Municipal Bond
Fund, High Yield Yield and the Daily Income Company) will be earned starting the
day after the Fund receives payments for the shares.
HOW TO EXCHANGE SHARES
Shares of a Fund may be exchanged for the same class of shares of the
other continuously offered funds (with certain exceptions) distributed by CFD on
the basis of the NAVs per share at the time of exchange. Class D shares may be
exchanged for Class C shares. Class Z shares may be exchanged for Class A shares
of the other funds that are not offering Class Z shares. Class G shares can be
exchanged for Class B shares, but once exchanged into Class B cannot be
reexchanged back into Class G. Class T shares can be exchanged for Class A
shares, but once exchanged into Class A cannot be reexchanged back into Class T.
The prospectus of each Fund describes its investment objective and policies, and
shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange. Shares of certain of these
funds are not available to residents of all states. Consult CFS before
requesting an exchange.
By calling CFS, shareholders or their FSF of record may exchange among
accounts with identical registrations, provided that the shares are held on
deposit. During periods of unusual market changes or shareholder activity,
shareholders may experience delays in contacting CFS by telephone to exercise
the telephone exchange privilege. Because an exchange involves a redemption and
reinvestment in another fund, completion of an exchange may be delayed under
unusual circumstances, such as if the fund suspends repurchases or postpones
payment for the Fund shares being exchanged in accordance with federal
securities law. CFS will also make exchanges upon receipt of a written exchange
request and share certificates, if any. If the shareholder is a corporation,
partnership, agent, or surviving joint owner, CFS may require customary
additional documentation. Prospectuses of the other funds are available from the
CFD Literature Department by calling 1-800-426-3750.
A loss to a shareholder may result from an unauthorized transaction
reasonably believed to have been authorized. No shareholder is obligated to use
the telephone to execute transactions.
Consult your FSF or CFS. In all cases, the shares to be exchanged must be
registered on the records of the Fund in the name of the shareholder desiring to
exchange.
An exchange is generally a capital sale transaction for federal income tax
purposes. The exchange privilege may be revised, suspended or terminated at any
time.
The Funds also reserve the right to close a shareholder account if the
shareholder's actions are deemed to be detrimental to the Fund or its
shareholders, including, without limitation, violating the exchange policy set
forth in its Prospectus. If a Fund redeems shares, payment will be made promptly
at the current net asset value. A redemption may result in a realized capital
gain or loss.
PRICING OF SHARES
The net asset value ("NAV") per share of each Fund is determined by the
Advisor, under procedures approved by the directors, as of the close of regular
trading (normally 4:00 p.m. New York time) on each day the NYSE is open for
business and at other times determined by the directors. The NAV per share is
computed by dividing the value of all assets of the Fund, less its liabilities,
by the number of shares outstanding.
A Fund may suspend the determination of the NAV of a Fund and the right of
redemption for any period (1) when the NYSE is closed, other than customary
weekend and holiday closings, (2) when trading on the NYSE is restricted, (3)
when an emergency exists as a result of which sale of securities owned by the
Fund is not reasonably practicable or it is not reasonably practicable for the
Fund to
128
determine the value of the Fund's assets, or (4) as the SEC may by order permit
for the protection of security holders, provided the Fund complies with rules
and regulations of the SEC, which govern as to whether the conditions prescribed
in (2) or (3) exist. The NYSE observes the following holidays: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
For purposes of calculating the NAV of a Fund's shares, the following
procedures are utilized whenever applicable. Each Fund's equity securities are
valued at the last sale price on the securities exchange or national securities
markets at which such securities primarily are traded. Securities not listed on
an exchange or national securities market, or securities in which there were no
transactions, are valued using the last bid price. Each Fund purchasing debt
securities uses market value to value such securities as quoted by an
independent pricing service, dealers who are market makers in the securities or
by procedures and guidelines approved by the Funds' Board of Directors. Market
values are generally based on the average of bid and ask prices, or by reference
to other securities with comparable ratings, interest rates and maturities.
Certain securities for which daily market quotations are not readily available,
or for which the Advisor believes the quotations do not accurately value the
security in question, may be fair valued by the Advisor, pursuant to guidelines
established by the Funds' Board of Directors.
Investments in the Daily Income Company and other temporary cash
investments are carried at values deemed best to reflect their fair values as
determined in good faith by the Advisor, under procedures adopted by the Funds'
Board of Directors. These values are based on cost, adjusted for amortization of
discount or premium and accrued interest, unless unusual circumstances indicate
that another method of determining fair value should be used.
The value of assets or liabilities initially expressed in a foreign
currency will, on a daily basis, be converted into U.S. dollars. Foreign
securities will generally be valued based upon the most recent closing price on
their principal exchange, or based upon the most recent price obtained by the
Fund, if the security is not priced on an exchange, even if the close of that
exchange or price determination is earlier than the time of the Funds' NAV
calculation. In the case of such foreign security, if an event that is likely to
affect materially the value of a portfolio security occurs between the time the
foreign price is determined and the time the Fund's NAV is calculated, it may be
necessary to value the security in light of that event.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02101 acts as the Funds' general custodian, for
both domestic and foreign securities. Through June 2002, U.S. Bank N.A. acted as
the general custodian for the Funds (except the International Stock Fund) with
respect to domestic securities and J.P. Morgan Chase & Co. acted as the general
custodian for the International Stock Fund and provided custody services to
those Funds that invest in foreign securities. The Custodian holds securities
and cash of the Funds, receives and pays for securities purchased, delivers
against payment securities sold, receives and collects income from investments,
makes all payments covering expenses of the Funds, and performs other
administrative duties, all as directed by authorized officers of the Advisor.
The Custodian does not exercise any supervisory function in the purchase and
sale of portfolio securities or payment of dividends.
Portfolio securities purchased in the United States are maintained in the
custody of the Custodian. Portfolio securities purchased outside the United
States by the Funds are maintained in the custody of foreign banks, trust
companies, or depositories that have sub-custodian arrangements with the
Custodian (the "foreign sub-custodians"). Each of the domestic and foreign
custodial institutions that may hold portfolio securities of the Funds has been
approved by the Board of Directors of the Funds or, in the case of foreign
securities, by the Custodian, as a delegate of the Board of Directors, all in
accordance with regulations under the 1940 Act.
The Advisor determines whether it is in the best interest of the Funds and
their shareholders to maintain a Fund's assets in each of the countries in which
the Fund invests ("Prevailing Market Risk"). The review of Prevailing Market
Risk includes an assessment of the risk of holding a Fund's assets in a country,
including risks of expropriation or imposition of exchange controls. In
evaluating the foreign sub-custodians, the Board of Directors, or its delegate,
will review the operational capability and reliability of the foreign
sub-custodian. With respect to foreign investments and the selection of foreign
sub-custodians, however, there is no assurance that the Funds, and the value of
their shares, will not be adversely affected by acts of foreign governments,
financial or operational difficulties of the foreign sub-custodians,
difficulties and cost of obtaining jurisdiction over, or enforcing judgments
against, the foreign sub-custodians, or the application of foreign law to a
Fund's foreign sub-custodial arrangement. Accordingly, an investor should
recognize that the risks involved in holding assets abroad are greater than
those associated with investing in the United States.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of each Fund for the period ended August 31,
2004, the selected per share data and ratios under the caption "Financial
Highlights," and the report of PricewaterhouseCoopers LLP, independent
registered public accounting firm, are included in the 2004 Annual Report to
Shareholders of the Funds. PricewaterhouseCoopers LLP, 125 High Street, Boston,
Massachusetts, 02110, in addition to examining the financial statements of the
Funds, assists in the review of the tax returns of the Funds and in certain
other matters.
TAXES
FEDERAL INCOME TAXES
Each Fund intends and expects to meet continuously the tests for
qualification as a regulated investment company under Part I of Subchapter M of
the Code. Each Fund believes it satisfies the tests to qualify as a regulated
investment company. If a Fund were to fail to qualify as a "regulated investment
company" in any year, it would incur a regular federal corporate income tax on
all of its taxable income, whether or not distributed, and distributions would
generally be taxable as ordinary dividend income to the shareholders.
To qualify as a regulated investment company for any taxable year, each
Fund must, among other things:
(a) derive at least 90 percent of its gross income from dividends;
interest; payments with respect to securities loans; gains from the sale or
other disposition of stock, securities, or foreign currencies; other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies; or net income from an interest in qualified publicly traded
partnerships (the "90 Percent Test"); and
(b) diversify its holdings so that, at the end of each quarter of its
taxable year, (i) 50 percent or more of the value of the assets of the Fund
consists of cash, government securities, securities of other regulated
investment companies and other securities limited, in respect of any one issuer
of such other securities, to an amount not greater than 5 percent of the value
of the assets of the Fund and 10 percent of the outstanding voting securities of
such issuer, and (ii) not more than 25 percent of the value of the assets of the
Fund is invested in either the securities (other than government securities or
securities of other regulated investment companies) of any one issuer or of two
or more issuers that the Fund "controls" within the meaning of Section 851 of
the Code and that meet certain requirements or the securities of one or more
qualified publicly traded partnerships (the "Diversification Test"). In
addition, a Fund must file, or have filed, a proper election with the Internal
Revenue Service.
Part I of Subchapter M of the Code will apply to a Fund during a taxable
year only if it meets certain additional requirements. Among other things, the
Fund must: (a) have a deduction for dividends paid (without regard to capital
gain dividends and exempt interest dividends) at least equal to the sum of 90
percent of its investment company taxable income (computed without any deduction
for dividends paid) and 90 percent of its tax-exempt interest (net of expenses
attributable to such interest), and (b) either (i) have been subject to Part I
of Subchapter M for all taxable years ending on or after November 8, 1983 or
(ii) as of the close of the taxable year have no earnings and profits
accumulated in any taxable year to which Part I of Subchapter M did not apply.
A regulated investment company that meets the requirements described above
is taxed only on its "investment company taxable income," which generally equals
the undistributed portion of its ordinary net income and any excess of net
short-term capital gain over net long-term capital loss. In addition, any excess
of net long-term capital gain over net short-term capital loss that is not
distributed as a "capital gain dividend" is taxed to a Fund at corporate capital
gain tax rates. The policy of each Fund is to apply capital loss carry-forwards
as a deduction against future capital gains before making a capital gain
distribution to shareholders. Under rules that are beyond the scope of this
discussion, certain capital losses and certain net foreign currency losses
resulting from transactions occurring in November and December of a taxable year
may be taken into account either in that taxable year or in the following
taxable year.
If any net capital gains (i.e. the excess of net long-term capital gains
over net short-term capital losses) are retained by a Fund, requiring federal
income taxes to be paid thereon by the Fund, the Fund may elect to treat such
capital gains as having been distributed to shareholders. In the case of such an
election, shareholders will be taxed on such amounts as long-term capital gains,
will be able to claim
130
their proportional share of the federal income taxes paid by the Fund on such
gains as credits against their own federal income tax liabilities, and generally
will be entitled to increase the adjusted tax basis of their shares in the Fund
by the differences between their pro rata shares of such gains and their tax
credits.
SPECIAL ASPECTS OF 90 PERCENT TEST WITH RESPECT TO FOREIGN CURRENCY. For
purposes of the 90 Percent Test, foreign currency gains that are not directly
related to a Fund's principal business of investing in stocks or securities (or
options and futures with respect to stock or securities) may be excluded from
qualifying income by regulation. No such regulations, however, have been issued.
Unless an exception applies, a Fund may be required to recognize some
income with respect to foreign currency contracts under the mark-to-market rules
of Section 1256 even though that income is not realized. Special rules under
Sections 1256 and 988 of the Code determine the character of any income, gain,
or loss on foreign currency contracts.
OREGON MUNICIPAL BOND FUND AND NATIONAL MUNICIPAL BOND FUND. In certain
cases, Subchapter M permits the character of tax-exempt interest received and
distributed by a regulated investment company to flow through for federal tax
purposes as tax-exempt interest to its shareholders, provided that 50 percent or
more of the value of its assets at the end of each quarter is invested in
tax-exempt assets such as municipal bonds. For purposes of this Statement of
Additional Information, the term "municipal bonds" refers to obligations that
pay interest that is tax-exempt under Section 103 of the Code. For purposes of
this Statement of Additional Information, the term "tax-exempt interest" refers
to interest that is not includable in gross income for federal income tax
purposes. As discussed below, however, tax-exempt interest may result in an
increase in the taxes of the recipient because of the alternative minimum tax,
the environmental tax, the branch profits tax, or under other provisions of the
Code that are beyond the scope of this Statement of Additional Information. The
Oregon Municipal Bond Fund and the National Municipal Bond Fund intend to have
at least 50 percent of the value of their total assets at the close of each
quarter of their taxable year consist of obligations the interest on which is
not includable in gross income for federal income tax purposes under Section 103
of the Code. As a result, the Oregon Municipal Bond Fund's and the National
Municipal Bond Fund's dividends payable from net tax-exempt interest earned from
municipal bonds should qualify as exempt-interest dividends.
Distributions properly designated by the Oregon Municipal Bond Fund and
the National Municipal Bond Fund as representing net tax-exempt interest
received on municipal bonds (including municipal bonds of Guam, Puerto Rico, and
certain other issuers) will not be includable by shareholders in gross income
for federal income tax purposes (except for shareholders who are, or are related
to, "substantial users," as discussed below). Distributions representing net
taxable interest received by the Oregon Municipal Bond Fund and the National
Municipal Bond Fund from sources other than municipal bonds, representing the
excess of net short-term capital gain over net long-term capital loss, or
representing taxable accrued market discount on the sale or redemption of
municipal bonds, will be taxable to shareholders as ordinary income.
Any capital loss realized upon the redemption of shares of the Oregon
Municipal Bond Fund and the National Municipal Bond Fund six months or less from
the date of purchase of the shares and following receipt of an exempt-interest
dividend will be disallowed to the extent of such exempt-interest dividend.
Section 852(b)(4) of the Code contains special rules on the computation of a
shareholder's holding period for this purpose.
Dividends derived from any investments other than tax-exempt bonds and any
distributions of short-term capital gains are taxable to shareholders as
ordinary income. Any distributions of long-term capital gains will in general be
taxable to shareholders as long-term capital gains (generally subject to a
maximum 15 percent tax rate for shareholders who are individuals) regardless of
the length of time fund shares are held. As described below, as a result of 2003
legislation, qualified dividend income distributions to individual shareholders
generally are taxed at the same rate that applies to long-term capital gains.
A tax-exempt fund may at times purchase tax-exempt securities at a
discount and some or all of this discount may be included in the fund's ordinary
income which will be taxable when distributed. Any market discount recognized on
a tax-exempt bond purchased after April 30, 1993, with a term at time of issue
of one year or more is taxable as ordinary income. A market discount bond is a
bond acquired in the secondary market at a price below its "stated redemption
price" (in the case of a bond with original issue discount, its "revised issue
price").
Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the Oregon Municipal Bond Fund and the National Municipal
Bond Fund will not be deductible for federal income tax purposes. Under rules
issued by the Internal Revenue Service, the purchase of such shares may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of shares. Special rules that are
beyond the scope of this Statement of Additional Information limit the deduction
of interest paid by financial institutions. Investors with questions regarding
these issues should consult their tax advisors.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 will be items of tax preference and must be included
in alternative minimum taxable income for the purpose of determining liability,
if any, for the 26-28 percent alternative
131
minimum tax for individuals and the 20 percent alternative minimum tax for
corporations. Furthermore, the alternative minimum taxable income for
corporations includes an adjustment equal to 75 percent of the excess of
"adjusted current earnings" over the corporation's other federal alternative
minimum taxable income (computed without regard to "adjusted current earnings"
and without regard to any "alternative tax net operating loss"). See Section
56(g) of the Code. For the purpose of alternative minimum tax for corporations,
all exempt-interest dividends, less any interest expense incurred to purchase or
carry shares paying exempt interest dividends, must be taken into account as
"adjusted current earnings." In addition, exempt-interest dividends paid to
corporate investors may be subject to tax under the environmental tax, which
applies at the rate of 0.12 percent on the excess of the "modified alternative
minimum taxable income" of the corporation over $2 million. See Section 59A of
the Code.
In some cases, exempt-interest dividends paid by the Oregon Municipal Bond
Fund and the National Municipal Bond Fund may indirectly affect the amount of
Social Security benefits or railroad retirement benefits that are taxable income
to an investor. See Section 86 of the Code.
Certain foreign corporations may be subject to the "branch profits tax"
under Section 884 of the Code. The receipt of dividends from the Oregon
Municipal Bond Fund and the National Municipal Bond Fund may increase the
liability of the foreign corporation under the branch profits tax, even if such
dividends are generally tax-exempt.
"Substantial users" (or persons related thereto) of facilities financed by
certain governmental obligations are not allowed to exclude from gross income
interest on such obligations. "Substantial user" is defined under U.S. Treasury
Regulations to include a non-exempt person (i) who regularly uses a part of such
facilities in his or her trade or business and whose gross revenues derived with
respect to the facilities financed by the issuance of bonds are more than 5
percent of the total revenues derived by all users of such facilities, (ii) who
occupies more than 5 percent of the usable area of such facilities or (iii) for
whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners, and an S
corporation and its shareholders. No investigation as to the substantial users
of the facilities financed by bonds in the Oregon Municipal Bond Fund's and the
National Municipal Bond Fund's portfolios will be made by the Oregon Municipal
Bond Fund and the National Municipal Bond Fund. Potential investors who may be,
or may be related to, substantial users of such facilities should consult their
tax advisors before purchasing shares of the Oregon Municipal Bond Fund or the
National Municipal Bond Fund.
At the respective times of issuance of the municipal bonds, opinions
relating to the validity thereof and to the exemption of interest thereon from
federal income tax generally were or will be rendered by bond counsel engaged by
the respective issuing authorities. The Oregon Municipal Bond Fund and the
National Municipal Bond Fund will not make any review of the issuance of the
municipal bonds or of the basis for such opinions. An opinion concerning
tax-exempt interest generally assumes continuing compliance with applicable
standards and restrictions. Certain circumstances or actions by an issuer after
the date of issuance can cause interest on municipal bonds to become includable
in gross income. In some cases, the interest on such bonds could become taxable
from the date of issuance. The Oregon Municipal Bond Fund and the National
Municipal Bond Fund will not monitor any issuers or any municipal bonds to
attempt to ensure that the interest remains tax-exempt.
If either the Oregon Municipal Bond Fund or the National Municipal Bond
Fund declares dividends attributable to taxable interest it has received, it
intends to designate as taxable the same percentage of the day's dividend that
the actual taxable income earned on that day bears to total income earned on
that day. Thus, the percentage of the dividend designated as taxable, if any,
may vary from day to day.
Shares of the Oregon Municipal Bond Fund and the National Municipal Bond
Fund generally would not be a suitable investment for a tax-exempt institution,
a tax-exempt retirement plan, or an individual retirement account. To the extent
that such an entity or account is tax-exempt, no additional benefit would result
from receiving tax-exempt dividends.
From time to time, proposals have been introduced before Congress to
restrict or eliminate the federal income tax exemption for interest on municipal
bonds. Similar proposals may be introduced in the future. If such a proposal
were enacted, the availability of municipal bonds for investment by the Oregon
Municipal Bond Fund and the National Municipal Bond Fund and the value of
portfolio securities held by the these Funds would be affected.
HEDGING TRANSACTIONS. If a Fund engages in hedging transactions, including
hedging transactions in options, futures contracts, and straddles, or other
similar transactions, it will be subject to special tax rules (including
constructive sale, mark-to-market, straddle, wash sale, and short sale rules),
the effect of which may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's securities, convert
long-term capital gains into short-term capital gains or convert short-term
capital losses into long-term capital losses. These rules could therefore affect
the amount, timing and character of distributions to shareholders. Each Fund
will endeavor to make any available elections pertaining to such transactions in
a manner believed to be in the best interests of each Fund.
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Certain of a Fund's hedging activities (including its transactions, if
any, in foreign currencies or foreign currency-denominated instruments) are
likely to produce a difference between its book income and its taxable income
(or, with respect to a tax-exempt Fund, the sum of its net tax-exempt and
taxable income). If a Fund's book income exceeds its taxable income (or, with
respect to a tax-exempt Fund, its tax-exempt income), the distribution (if any)
of such excess will be treated as (i) a dividend to the extent of the Fund's
remaining earnings and profits (including earnings and profits arising from
tax-exempt income), (ii) thereafter as a return of capital to the extent of the
recipient's basis in the shares, and (iii) thereafter as gain from the sale or
exchange of a capital asset. If a Fund's book income is less than its taxable
income (or, for a tax-exempt Fund, the sum of its net tax-exempt and taxable
income), the Fund could be required to make distributions exceeding book income
to qualify as a regulated investment company that is accorded special tax
treatment.
OTHER FUNDS. Shareholders of Funds other than the Oregon Municipal Bond
Fund and the National Municipal Bond Fund are taxed on distributions of net
investment income, or of any excess of net short-term capital gain over net
long-term capital loss, as ordinary income. Income distributions to corporate
shareholders from the Common Stock Fund, the Growth Fund, the Strategic Investor
Fund, the International Stock Fund, the Mid Cap Growth Fund, and the Balanced
Fund may qualify, in whole or part, for the federal income tax
dividends-received deduction, depending on the amount of qualifying dividends
received by the Fund. Qualifying dividends may include those paid to a Fund by
domestic corporations but do not include those paid by foreign corporations. The
dividends-received deduction equals 70 percent of qualifying dividends received
from a Fund by a shareholder, and is subject to a holding period requirement. In
addition, qualifying dividends are includable in adjusted current earnings for
purposes of computing the corporate alternative minimum tax. However,
distributions from the Daily Income Company, the Fixed Income Securities Fund,
the Short Term Bond Fund and the High Yield Fund are unlikely to so qualify
because the income of these Funds consists largely or entirely of interest
rather than dividends. In addition, to the extent the Real Estate Fund's income
is derived from interest and distributions from real estate investment trusts
("REITs"), distributions from that Fund will not qualify for the
dividends-received deduction. Distributions of any excess of net long-term
capital gain over net short-term capital loss from a Fund are ineligible for the
dividends-received deduction.
GENERAL CONSIDERATIONS. Distributions from a Fund (other than
exempt-interest dividends) will be taxable to shareholders as ordinary income to
the extent derived from the Fund's investment income and net short-term gains.
Distributions properly designated by any Fund as representing the excess of net
long-term capital gain over net short-term capital loss are taxable to
shareholders at the applicable long-term capital gains rate, regardless of the
length of time the shares of the Fund have been held by shareholders. For
noncorporate taxpayers, the highest rate that applies to long-term capital gains
is lower than the highest rate that applies to ordinary income; however, as a
result of 2003 legislation, for taxable years beginning on or before December
31, 2008 qualified dividend income distributions to individuals generally are
taxed at the same rate that applies to long-term capital gains, subject to
holding period requirements with respect to shareholders and the Funds as well
as other requirements. For this purpose, long-term capital gain rates apply to
the extent that the Fund receives dividends from domestic or qualifying foreign
corporations and the Fund meets holding period and other requirements.
Generally, a dividend received from a foreign corporation will not be treated as
qualified dividend income if the foreign corporation is (a) not eligible for the
benefits of a comprehensive income tax treaty with the United States (with the
exception of dividends paid on stock of such a foreign corporation readily
tradable on an established securities market in the United States) or (b)
treated as a passive foreign investment company or, for taxable years of foreign
corporations beginning on or before December 31, 2004, as a foreign personal
holding company or a foreign investment company. If the aggregate qualified
dividends received by a Fund during any taxable year are 95 percent or more of
its gross income, then 100 percent of the Fund's dividends (other than properly
designated capital gain dividends) will be eligible to be treated as qualified
dividend income. For this purpose, the only gain included in the term "gross
income" is the excess of net short-term capital gain over net long-term capital
loss. Any loss that is realized and allowed on redemption of shares of the Fund
six months or less from the date of purchase of the shares and following the
receipt of a capital gain dividend will be treated as a long-term capital loss
to the extent of the capital gain dividend. For this purpose, Section 852(b)(4)
of the Code contains special rules on the computation of a shareholder's holding
period.
Long term capital gains rates have been temporarily reduced, in general,
to 15 percent, with lower rates applying to taxpayers in the 10-percent and
15-percent rate brackets for taxable years beginning on or before December 31,
2008.
The sale, exchange or redemption of Fund shares may give rise to a gain or
loss. In general, any gain realized upon a taxable disposition of shares will be
treated as long-term capital gain if the shares have been held for more than 12
months. Otherwise the gain on the sale, exchange or redemption of shares will be
treated as short-term capital gain. In general, any loss realized upon a taxable
disposition of shares will be treated as long-term capital loss if the shares
have been held more than 12 months, and otherwise as a short-term capital loss.
However, any loss realized upon a taxable disposition of shares held for six
months or less will be treated as long-term, rather than short-term, capital
loss to the extent of any long-term capital gain distributions received by the
shareholder with respect to those shares. All or a portion of any loss realized
upon a taxable disposition of shares will be disallowed if other shares are
purchased within 30 days before or after the disposition. In such a case, the
basis of the newly-purchased shares will be adjusted to reflect the disallowed
loss.
A portion of the income distributions from the Real Estate Fund will
include a tax return of capital because of the nature of the distributions
received by the Fund from its holdings in REITs. A tax return of capital is a
nontaxable distribution that reduces the tax cost basis of your shares in the
Real Estate Fund. The effect of a return of capital is to defer your tax
liability on that portion of your income
133
distributions until you sell your shares of the Real Estate Fund. There is no
recognition of gain or loss unless the return of capital exceeds the cost basis
in the shares.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of capital. Such distributions are likely to
occur in respect of shares purchased at a time when a Fund's net asset value
reflects gains that are either unrealized, or realized but not distributed. Such
realized gains may be required to be distributed even when a Fund's net asset
value also reflects unrealized losses. A distribution may be taxable to a
shareholder even if the distribution reduces the net asset value of the shares
held below their cost (and is in an economic sense a return of the shareholder's
capital). This tax result is most likely when shares are purchased shortly
before an annual distribution of capital gains or other earnings. This tax
result is extremely unlikely in the case of the Daily Income Company, which
distributes its earnings daily and has few or no capital gains.
Distributions of taxable net investment income and net realized capital
gains will be taxable as described above, whether paid in shares or in cash.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. Within 60 days after the close of each calendar
year, each Fund issues to each shareholder a statement of the federal income tax
status of all distributions, including a statement of the prior calendar year's
distributions which the Fund has designated to be treated as long-term capital
gain and, in the case of the Oregon Municipal Bond Fund and the National
Municipal Bond Fund, as tax-exempt interest, or in the case of the Real Estate
Fund, as a tax return of capital. The ratio of tax-exempt income to total net
investment income earned during the year may be substantially different from the
ratio of tax-exempt income to total net investment income earned during any
particular portion of the year. Thus, a shareholder who holds shares for only a
part of the year may be allocated more or less tax-exempt dividends than would
be the case if the allocation were based on the ratio of tax-exempt income to
total net investment income actually earned while a shareholder.
Each Fund is generally required to obtain from its shareholders a
certification of the shareholder's taxpayer identification number and certain
other information. Each Fund generally will not accept an investment to
establish a new account that does not comply with this requirement. With respect
to amounts paid through 2010, if a shareholder fails to certify such number and
other information, or upon receipt of certain notices from the Internal Revenue
Service, the Fund may be required to withhold 28 percent of any reportable
interest or dividends, or redemption proceeds, payable to the shareholder, and
to remit such sum to the Internal Revenue Service, for credit toward the
shareholder's federal income taxes. The backup withholding rate will be 31
percent for amounts paid after December 31, 2010. A shareholder's failure to
provide a social security number or other tax identification number may subject
the shareholder to a penalty of $50 imposed by the Internal Revenue Service. In
addition, that failure may subject the Fund to a separate penalty of $50. This
penalty will be charged against the shareholder's account, which will be closed.
Closure of the account may result in a capital gain or loss.
If a Fund declares a dividend in October, November, or December payable to
shareholders of record on a certain date in such a month and pays the dividend
during January of the following year, the shareholders will be taxed as if they
had received the dividend on December 31 of the year in which the dividend was
declared. Thus, a shareholder may be taxed on the dividend in a taxable year
prior to the year of actual receipt.
A special tax may apply to a Fund if it fails to make enough distributions
during the calendar year. The required distributions for each calendar year
generally equal the sum of (a) 98 percent of the ordinary income for the
calendar year plus (b) 98 percent of the capital gain net income for the
one-year period that ends on October 31 during the calendar year (or for the
calendar year itself if the Fund so elects), plus (c) an adjustment relating to
any shortfall for the prior taxable year. If the actual distributions are less
than the required distributions, a tax of 4 percent applies to the shortfall.
The Code allows the deduction by certain individuals, trusts, and estates
of "miscellaneous itemized deductions" only to the extent that such deductions
exceed 2 percent of adjusted gross income. The limit on miscellaneous itemized
deductions will not apply, however, with respect to the expenses incurred by any
"publicly offered regulated investment company." Each Fund believes that it is a
publicly offered regulated investment company because its shares are
continuously offered pursuant to a public offering (within the meaning of
Section 4 of the Securities Act of 1933, as amended). Therefore, the limit on
miscellaneous itemized deductions should not apply to expenses incurred by any
of the Funds.
The Funds may purchase zero coupon bonds (or other discounted debt
securities) and payment-in-kind ("PIK") bonds. With respect to zero coupon
bonds, a Fund recognizes original-issue-discount income ratably over the life of
the bond even though the Fund receives no payments on the bond until the bond
matures. With respect to PIK bonds, a Fund recognizes interest income equal to
the fair market value of the bonds distributed as interest. Because a Fund must
distribute 90 percent of its income to remain qualified as a registered
investment company, a Fund may be forced to liquidate a portion of its portfolio
(possibly at a time when it is not advantageous to do so) to generate cash to
distribute to its shareholders with respect to original-issue-discount income
from zero coupon bonds and interest income from PIK bonds.
134
A Fund's transactions in foreign currencies, foreign currency-denominated
debt securities, certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned.
FOREIGN INCOME TAXES
The International Stock Fund invests in the securities of foreign
corporations and issuers. To a lesser extent, the Common Stock Fund, the Growth
Fund, the Mid Cap Growth Fund, the Small Cap Growth Fund, the Real Estate Fund,
the Technology Fund, the Strategic Investor Fund, the Balanced Fund, and the
High Yield Fund also may invest in such foreign securities. Foreign countries
may impose income taxes, generally collected by withholding, on foreign-source
dividends and interest paid to a Fund. These foreign taxes will reduce a Fund's
distributed income and a Fund's return. The Funds generally expect to incur,
however, no foreign income taxes on gains from the sale of foreign securities.
The United States has entered into income tax treaties with many foreign
countries to reduce or eliminate the foreign taxes on certain dividends and
interest received from corporations in those countries. The Funds intend to take
advantage of such treaties where possible. It is impossible to predict with
certainty the effective rate of foreign taxes that will be paid by a Fund since
the amount invested in particular countries will fluctuate and the amounts of
dividends and interest relative to total income will fluctuate.
U.S. FOREIGN TAX CREDITS OR DEDUCTIONS FOR SHAREHOLDERS OF THE
INTERNATIONAL STOCK FUND. Section 853 of the Code allows a regulated investment
company to make a special election relating to foreign income taxes if more than
50 percent of the value of the company's total assets at the close of its
taxable year consists of stock or securities in foreign corporations and the
company satisfies certain holding period requirements. The International Stock
Fund generally expects, if necessary, to qualify for and to make the election
permitted under Section 853 of the Code. Although the International Stock Fund
intends to meet the requirements of the Code to "pass through" such foreign
taxes, there can be no assurance that the Fund will be able to do so. The
International Stock Fund will elect under Section 853 of the Code only if it
believes that it is in the best interests of its shareholders to do so. None of
the other Columbia Funds that may invest in foreign securities will qualify
under Section 853 of the Code.
If the International Stock Fund elects pursuant to Section 853,
shareholders of that Fund will be required to include in income (in addition to
other taxable distributions) and will be allowed a credit or deduction for,
their pro rata portions of the qualifying income taxes paid by the Fund to
foreign countries. A shareholder's use of the credits resulting from the
election will be subject to limits of Section 904 of the Code, including a
holding period requirement. In general, those limits will prevent a shareholder
from using foreign tax credits to reduce U.S. taxes on U.S. source income. Each
shareholder should discuss the use of foreign tax credits and the Section 904
limits with the shareholder's tax advisor.
No deduction for foreign taxes may be claimed under the Code by individual
shareholders who do not elect to itemize deductions on their federal income tax
returns, although such a shareholder may claim a credit for foreign taxes and in
any event will be treated as having taxable income in the amount of the
shareholder's pro rata share of foreign taxes paid by the Fund.
Each year, the International Stock Fund will provide a statement to each
shareholder showing the amount of foreign taxes for which a credit or a
deduction may be available.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. Investment by a Fund
in certain "passive foreign investment companies" ("PFICs") could subject the
Fund to a U.S. federal income tax (including interest charges) on distributions
received from the company or on proceeds received from the disposition of shares
in the company, which tax cannot be eliminated by making distributions to fund
shareholders. However, the Fund may be able to elect to treat a PFIC as a
"qualified electing fund," in which case the Fund will be required to include
its share of the company's income and net capital gain annually, regardless of
whether it receives any distribution from the company. Alternatively, the Fund
may make an election to mark the gains (and, to a limited extent, losses) in
such holdings "to the market" as though it had sold and repurchased its holdings
in those PFICs on the last day of the Fund's taxable year. Such gains and losses
are treated as ordinary income and loss. The qualified electing fund and
mark-to-market elections may have the effect of accelerating the recognition of
income (without the receipt of cash) and increasing the amount required to be
distributed for the Fund to avoid taxation. Making either of these elections
therefore may require a Fund to liquidate other investments (including when it
is not advantageous to do so) in order to meet its distribution requirement,
which also may accelerate the recognition of gain and affect a Fund's total
return. It is anticipated that any taxes on a Fund with respect to investments
in PFICs would be insignificant.
135
INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS
Dividends from the Real Estate Fund will generally not be treated as
qualified dividend income.
The Real Estate Fund, and to a lesser extent certain other Funds (see
"INVESTMENTS HELD AND INVESTMENT PRACTICES BY THE FUND"), may invest in REITs
that hold residual interests in real estate mortgage investment conduits
("REMICs"). Under Treasury regulations that have not yet been issued, but may
apply retroactively, a portion of the Real Estate Fund's income from a REIT that
is attributable to the REIT's residual interest in a REMIC (referred to in the
Code as an "excess inclusion") will be subject to federal income tax in all
events. These regulations are also expected to provide that excess inclusion
income of a regulated investment company, such as the Real Estate Fund, will be
allocated to shareholders of the regulated investment company in proportion to
the dividends received by such shareholders, with the same consequences as if
the shareholders held the related REMIC residual interest directly.
In general, excess inclusion income allocated to shareholders (i) cannot
be offset by net operating losses (subject to a limited exception for certain
thrift institutions), (ii) will constitute unrelated business taxable income to
entities (including a qualified pension plan, an individual retirement account,
a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on
unrelated business income, thereby potentially requiring such an entity that is
allocated excess inclusion income, and otherwise might not be required to file a
tax return, to file a tax return and pay tax on such income, and (iii) in the
case of a foreign shareholder, will not qualify for any reduction in U.S.
federal withholding tax. In addition, if at any time during any taxable year a
"disqualified organization" (as defined in the Code) is a record holder of a
share in a regulated investment company, then the regulated investment company
will be subject to a tax equal to that portion of its excess inclusion income
for the taxable year that is allocable to the disqualified organization,
multiplied by the highest federal income tax rate imposed on corporations. The
Real Estate Fund does not intend to invest in REITs, a substantial portion of
the assets of which consists of residual interests in REMICs.
STATE INCOME TAXES
FUNDS THAT INVEST IN U.S. GOVERNMENT SECURITIES. Many states grant
tax-free status to dividends paid to shareholders of mutual funds from interest
income earned by the fund from direct obligations of the U.S. government.
Investments in mortgage-backed securities (including GNMA, FNMA and FHLMC
securities) and repurchase agreements collateralized by U.S. government
securities do not qualify as direct federal obligations in most states.
Shareholders should consult with their own tax advisors about the applicability
of state and local intangible property, income or other taxes to their fund
shares and distributions and redemption proceeds received from the Fund.
NATIONAL MUNICIPAL BOND FUND. Distributions from this Fund may be exempt
from the income tax of a state, if the distributions are derived from tax-exempt
interest paid on the municipal securities of that state or its political
subdivisions. Those distributions may not be exempt from another state's income
tax, however. In addition, distributions derived from capital gains generally
will be subject to state income tax. Shareholders of the National Municipal Bond
Fund should consult their tax advisors regarding whether any portion of
distributions received from that Fund is exempt from state income tax, because
exemption may depend upon whether the shareholder is an individual, subject to
tax in any given state, the residence of the individual, and the particular
state tax treatment of mutual funds.
OREGON MUNICIPAL BOND FUND. Individuals, trusts, and estates will not be
subject to the Oregon personal income tax on distributions from the Oregon
Municipal Bond Fund that are derived from tax-exempt interest paid on the
municipal bonds of Oregon and its political subdivisions and certain other
issuers (including Puerto Rico and Guam). However, individuals, trusts, and
estates that are subject to Oregon personal income tax generally are also
subject to the Oregon personal income tax on distributions from the Oregon
Municipal Bond Fund that are derived from other types of income, including
interest on the municipal bonds of states other than Oregon. Furthermore, it is
expected that corporations subject to the Oregon corporation excise or income
tax will be subject to that tax on income from the Oregon Municipal Bond Fund,
including income that is exempt for federal purposes. Shares of the Oregon
Municipal Bond Fund will not be subject to Oregon property tax. Additional
discussion regarding local taxes, and the tax rules of states other than Oregon,
are beyond the scope of this discussion.
Oregon generally taxes corporations on interest income from municipal
bonds. The Oregon Municipal Bond Fund is a corporation. However, ORS 317.309(2)
provides that a regulated investment company may deduct from such interest
income the exempt-interest dividends that are paid to shareholders. The Oregon
Municipal Bond Fund expects to distribute its interest income so that it will
not be liable for Oregon corporation excise or income taxes.
136
The Oregon Municipal Bond Fund and the National Municipal Bond Fund will
report annually to its shareholders the percentage and source, on a
state-by-state basis, of interest income on municipal bonds received by the Fund
during the preceding year.
SHORT TERM BOND FUND AND FIXED INCOME FUND. Individuals, trusts, and
estates will not be subject to Oregon personal income tax on dividends properly
designated by the Short Term Bond Fund as derived from interest on U.S.
Government obligations. See ORS 316.683. If a shareholder pays deductible
interest on debt incurred to carry shares of the Short Term Bond Fund, the
amount of the tax-exempt dividends for state tax purposes will be reduced. If a
shareholder sells shares of the Short Term Bond Fund at a loss after holding
them for six months or less, the loss will be disallowed for state purposes to
the extent of any state tax-exempt dividend received by the shareholder. Local
taxes, and the tax rules of states other than Oregon, are beyond the scope of
this discussion.
GENERAL INFORMATION
Capital gains distributed to shareholders of both the Oregon Municipal
Bond Fund and the National Municipal Bond Fund will generally be subject to
state and local taxes. Further discussion regarding the state and local tax
consequences of investments in the Funds are beyond the scope of the tax
discussions in the Prospectus and this Statement of Additional Information.
ADDITIONAL INFORMATION
The foregoing summary and the summary included in the Prospectus under
"Distributions and Taxes" of tax consequences of investment in the Funds are
necessarily general and abbreviated. No attempt has been made to present a
complete or detailed explanation of tax matters. Furthermore, the provisions of
the statutes and regulations on which they are based are subject to change,
prospectively or retroactively, by legislative or administrative action. Local
taxes are beyond the scope of this discussion. Prospective investors in the
Funds are urged to consult their own tax advisors regarding specific questions
as to federal, state, or local taxes.
Recent Tax Shelter Reporting Regulations. Under recently promulgated
Treasury regulations, if a shareholder recognizes a loss under Section 165 of
the Code with respect to shares of $2 million or more for an individual
shareholder or $10 million or more for a corporate shareholder, the shareholder
must file with the Internal Revenue Service a disclosure statement on Form 8886.
Direct shareholders of portfolio securities are in many cases excepted from this
reporting requirement, but under current guidance, shareholders of a regulated
investment company are not excepted. Future guidance may extend the current
exception from this reporting requirement to shareholders of most or all
regulated investment companies. The fact that a loss is reportable under these
regulations does not affect the legal determination of whether the taxpayer's
treatment of the loss is proper. Shareholders should consult their tax advisors
to determine the applicability of these regulations in light of their individual
circumstances.
This discussion applies only to general U.S. shareholders. Foreign
investors and U.S. shareholders with particular tax issues or statuses should
consult their own tax advisors regarding the special rules that may apply to
them.
FINANCIAL STATEMENTS
The Funds' most recent Annual and Semi-Annual Reports to shareholders are
separate documents supplied with this Statement of Additional Information. The
financial statements, accompanying notes and report of independent registered
public accounting firm appearing in the Annual Reports, and the financial
statements and accompanying notes appearing in the Semi-Annual Report are
incorporated by reference into this Statement of Additional Information.
137
APPENDIX I
INFORMATION APPLICABLE TO CERTAIN CLASS G SHAREHOLDERS
Except as set forth below, Contingent Deferred Sales Charges ("CDSCs") and
conversion schedules are described in the Prospectuses.
The following table describes the CDSC schedule applicable to Class G
shares received by former Galaxy Growth Fund II and Galaxy Short-Term Bond Fund
shareholders in exchange for Retail B Shares purchased prior to January 1, 2001:
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
- ----------------------------- ---------------
Through first year 5.00
Through second year 4.00
Through third year 3.00
Through fourth year 3.00
Through fifth year 2.00
Through sixth year 1.00
Longer than six years None
Class G shares received in exchange for Galaxy Short-Term Bond Fund Retail
B Shares that were purchased prior to January 1, 2001 will automatically convert
to Class T shares six years after purchase.
Class G shares received in exchange for Galaxy Growth Fund II Retail B
Shares that were purchased prior to January 1, 2001 will automatically convert
to Class A shares six years after purchase.
The following table describes the CDSC schedule applicable to Class G
shareholders whose Galaxy Large Cap Growth Fund Retail B Shares were acquired in
connection with the reorganization of the Pillar Funds:
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
- ----------------------------- ---------------
Through first year 5.50
Through second year 5.00
Through third year 4.00
Through fourth year 3.00
Through fifth year 2.00
Through sixth year 1.00
Through the seventh year None
Longer than seven years None
If you acquired Retail B Shares of the Galaxy Large Cap Growth Fund in
connection with the reorganization of the Pillar Funds, your Class G shares will
automatically convert to Class B shares eight years after you purchased the
Pillar Fund Class B shares you held prior to the reorganization.
138
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
THREE CONVENIENT WAYS TO VOTE YOUR PROXY.
YOU CAN VOTE YOUR PROXIES OVER THE INTERNET, BY TELEPHONE OR BY
FAX - IT'S EASY AND CONFIDENTIAL.
INTERNET, TELEPHONE AND FAX VOTING ARE AVAILABLE 24 HOURS A DAY,
SEVEN DAYS A WEEK.
IF YOU ARE VOTING BY INTERNET, TELEPHONE OR FAX, YOU SHOULD NOT
MAIL YOUR PROXY CARD.
VOTE BY INTERNET:
- READ THE PROXY STATEMENT AND HAVE YOUR PROXY CARD AVAILABLE.
- GO TO HTTPS://VOTE.PROXY-DIRECT.COM AND FOLLOW THE ON SCREEN
DIRECTIONS.
VOTE BY TELEPHONE:
- READ THE PROXY STATEMENT AND HAVE YOUR PROXY CARD AVAILABLE.
- WHEN YOU ARE READY TO VOTE, CALL TOLL FREE 1-866-241-6192.
- FOLLOW THE RECORDED INSTRUCTIONS PROVIDED TO CAST YOUR VOTE.
VOTE BY FAX:
- FAX YOUR EXECUTED PROXY TO US TOLL FREE AT 1-888-796-9932
ANYTIME.
IF YOU HAVE ANY QUESTIONS OR CONCERNS, PLEASE CALL
1-866-270-3134 FROM 9:00 A.M. TO 11:00 P.M. EDT MONDAY THROUGH
FRIDAY, AND SATURDAYS FROM 12:00 TO 6:00 P.M.
YOU MAY RECEIVE ADDITIONAL PROXIES FOR OTHER ACCOUNTS. THESE ARE
NOT DUPLICATES; YOU SHOULD SIGN AND RETURN EACH PROXY IN ORDER
FOR YOUR VOTES TO BE COUNTED.
Please detach at perforation before mailing.
COLUMBIA MANAGEMENT PROXY
COLUMBIA FUNDS TRUST VII
COLUMBIA NEWPORT TIGER FUND
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 9, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The signers of this
proxy hereby appoint each of __________, _________________, ____________ and
_________________ as proxies of the signers, with full power of substitution, to
vote all shares at the Special Meeting of Shareholders to be held at One
Financial Center, Boston, Massachusetts, on September 9, 2005 and at any
adjournments, as specified herein and in accordance with their best judgment, on
any other business that may properly come before the meeting.
Your vote is important, no matter how many shares you own. Please vote on the
reverse side of this proxy card and sign in the space(s) provided. Return your
completed proxy card in order for your votes to be counted.
VOTE VIA THE INTERNET: HTTPS://VOTE.PROXY-DIRECT.COM
VOTE VIA THE TELEPHONE: 1-866-241-6192
----------------------------------------------------
999 9999 9999 999
----------------------------------------------------
NOTE: Please sign exactly as name or names appear hereon. Joint
owners should each sign personally. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in corporate name
by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
----------------------------------------------------
Shareholder sign here
----------------------------------------------------
Co-owner sign here
----------------------------------------------------
Date
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BELOW
AND, ABSENT DIRECTION, WILL BE VOTED FOR THE PROPOSALS LISTED BELOW. THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER
MATTER.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSALS:
PLEASE MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: [X]
FOR AGAINST ABSTAIN
1. Proposal to approve an Agreement and Plan of [ ] [ ] [ ]
Reorganization with respect to the acquisition
of Columbia Newport Tiger Fund by Columbia
International Stock Fund, Inc.
2. Proposal to elect the following nominees as Trustees of Columbia Funds
Trust I:
Mr. Hacker Ms. Kelly
Mr. Lowry Mr. Mayer
Mr. Nelson Mr. Neuhauser
Mr. Simpson Mr. Stitzel
Mr. Theobald Ms. Verville
Mr. Woolworth
FOR ALL NOMINEES [ ] WITHHOLD FROM ALL NOMINEES [ ]
FOR ALL NOMINEES EXCEPT [ ]_________________________
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided above)
MARK BOX AT RIGHT FOR ADDRESS CHANGE AND NOTE NEW ADDRESS BELOW. [ ]
- -------------------------------------
- -------------------------------------
PART C. OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Oregon law and the articles of incorporation and bylaws of the Registrant
provide that any director or officer of the Registrant may be indemnified by the
Registrant against all expenses incurred by him in connection with any claim,
action, suit or proceeding, civil or criminal, by reason of his being an
officer, director, employee or agent of the Registrant to the fullest extent not
prohibited by the Oregon Business Corporation Act and the Investment Company Act
of 1940 and related regulations and interpretations of the Securities and
Exchange Commission.
Insofar as reimbursement or indemnification for expenses incurred by a director
or officer in legal proceedings arising under the Securities Act of 1933 may be
permitted by the above provisions or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such reimbursement
or indemnification is against public policy as expressed in the Act and
therefore unenforceable. In the event that any claim for indemnification under
the above provisions is asserted by an officer or director in connection with
the securities being registered, the Registrant, unless in the opinion of its
counsel the matter has already been settled by controlling precedent, will
(except insofar as such claim seeks reimbursement of expenses paid or incurred
by an officer or director in the successful defense of any such action, suit, or
proceeding or claim, issue, or matter therein) submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant's directors and officers are also named insureds under an
insurance policy issued by ICI Mutual Insurance Company.
ITEM 16. EXHIBITS
(1)(a) Registrant's Articles of Incorporation. (1)
(1)(b) Amended and Restated Articles of Incorporation. (2)
(1)(c) Articles of Amendment to the Amended and Restated Articles of
Incorporation. (2)
(1)(d) Articles of Amendment to the Amended and Restated Articles of
Incorporation. (3)
(2) Restated Bylaws. (1)
(3) Not applicable.
(4) Agreement and Plan of Reorganization - Constitutes Exhibit A
to Part A hereof.
(5) Specimen Stock Certificate. (1)
(6)(a) Investment Advisory Contract. (1)
(6)(b) Amendment No. 1 to the Investment Advisory Contract. (3)
(7) Distribution Agreement. (4)
(8) Not applicable.
(9) Master Custodian Agreement with State Street Bank & Trust Co.
(5)
(10)(a) Form of Rule 12b-1 Plan as amended. (3)
(10)(b) Form of Rule 18f-3 Plan as amended. (3)
(11) Form of opinion of Stoel Rives LLP, including consent.*
(12) Opinion of Ropes & Gray LLP as to tax matters - To be filed by
Post-Effective Amendment.
(13)(a) Shareholders' Servicing and Transfer Agent Agreement. (4)
(13)(b) Pricing, Bookkeeping and Fund Administration Agreement. (3)
(13)(c) Amendment No. 1 to Pricing, Bookkeeping and Fund
Administrative Agreement - Incorporated by reference to
Post-Effective Amendment No. 17 to the Registrant's
Registration Agreement on Form N-1A under the Securities Act
of 1933 and the Investment Company Act of 1940 (File Nos.
33-48994 and 811-7024).
(14)(a) Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm to Columbia International Stock Fund,
Inc. *
(14)(b) Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm to Columbia Newport Tiger Fund.*
(15) Not applicable.
(16) Powers of Attorney.*
(17) Not applicable.
*********************
* Filed herewith.
(1) Incorporated herein by reference to Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A,
File No. 33-48994, filed February 23, 1998.
(2) Incorporated herein by reference to Post-Effective Amendment
No. 15 to Registrant's Registration Statement on Form N-1A,
File No. 33-48994, filed May 1, 2003.
(3) Incorporated herein by reference to Post-Effective Amendment
No. 17 to Registrant's Registration Statement on Form N-1A,
File No. 33-48994, filed October 10, 2003.
(4) Incorporated herein by reference to Post-Effective Amendment
No. 21 to the Columbia Mid Cap Growth Fund, Inc.'s, formerly
Columbia Special Fund, Inc., Registration Statement on Form
N-1A, File No. 333-91934, filed on October 28, 2002.
(5) Incorporated herein by reference to the Registrant's
Registration Statement on Form N-14, File No. 333-91914, filed
on July 3, 2002.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) under the Securities Act of 1933,
as amended (the "1933 Act"), the reoffering prospectus will
contain the information called for by the applicable
registration form for re-offerings by persons who may be
deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (a) above will be filed as a part of
an amendment to this Registration Statement and will not be
used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and
the offering of the securities at that time shall be deemed to
be the initial bona fide offering of them.
******************
SIGNATURES
As required by the Securities Act of 1933, this registration statement has been
signed on behalf of the registrant, in the City of Boston and The Commonwealth
of Massachusetts on this tenth day of, June, 2005.
COLUMBIA INTERNATIONAL STOCK FUND, INC.
By: Christopher L. Wilson, President
As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated:
SIGNED: TITLE: DATE:
- --------------------------------- ------------------------------------- -------------
/S/ Christopher L. Wilson President (Chief Executive Officer) June 10, 2005
- ---------------------------------
Christopher L. Wilson
/S/ J. Kevin Connaughton Treasurer (Principal Financial Officer) June 10, 2005
- ---------------------------------
J. Kevin Connaughton
/S/ Michael G. Clarke Chief Accounting Officer (Principal June 10, 2005
- --------------------------------- Accounting Officer)
Michael G. Clarke
/S/ Douglas A. Hacker Trustee June 10, 2005
- ---------------------------------
Douglas A. Hacker
/S/ Janet Langford Kelly Trustee June 10, 2005
- ---------------------------------
Janet Langford Kelly
/S/ Richard W. Lowry Trustee June 10, 2005
- ---------------------------------
Richard W. Lowry
/S/ William S. Mayer Trustee June 10, 2005
- ---------------------------------
William S. Mayer
/S/ Dr. Charles R. Nelson Trustee June 10, 2005
- ---------------------------------
Dr. Charles R. Nelson
/S/ John J. Neuhauser Trustee June 10, 2005
- ---------------------------------
John J. Neuhauser
/S/ Patrick J. Simpson Trustee June 10, 2005
- ---------------------------------
Patrick J. Simpson
/S/ Thomas E. Stitzel Trustee June 10, 2005
- ---------------------------------
Thomas E. Stitzel
/S/ Thomas C. Theobald Trustee June 10, 2005
- ---------------------------------
Thomas C. Theobald
/S/ Anne Lee Verville Trustee June 10, 2005
- ---------------------------------
Anne Lee Verville
/S/ Richard L. Woolworth Trustee June 10, 2005
- ---------------------------------
Richard L. Woolworth
By: /s/ Vincent P. Pietropaolo
--------------------------
As Attorney-in-Fact
June 10, 2005
EXHIBIT LIST
(11) FORM OF OPINION OF STOEL RIVES
(14) CONSENT OF PWC - INT'L FUND
(16) Powers of Attorney