AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
June 15, 2005
REGISTRATION NO. 333-120783
(INVESTMENT COMPANY ACT REGISTRATION NO. 811-7024)
---------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- - - - - - - - - - -
FORM N-14
----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
-----
-----
PRE-EFFECTIVE AMENDMENT NO. / /
-----
-----
POST-EFFECTIVE AMENDMENT NO. 1 /X/
-----
(CHECK APPROPRIATE BOX OR BOXES)
---------------------------
COLUMBIA INTERNATIONAL STOCK FUND, INC.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
1-617-426-3750
---------------------------
R. SCOTT HENDERSON
COLUMBIA MANAGEMENT GROUP, INC.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
---------------------------
COPIES TO:
JOHN M. LODER, ESQUIRE CAMERON AVERY, ESQUIRE
ROPES & GRAY LLP BELL, BOYD AND LLOYD LLC
ONE INTERNATIONAL PLACE THREE FIRST NATIONAL PLAZA
BOSTON, MASSACHUSETTS 02110 70 W. MADISON STREET, SUITE 3300
CHICAGO, ILLINOIS 60602
---------------------------
It is proposed that this filing will become effective immediately upon filing
pursuant to paragraph (d) of Rule 462 under the Securities Act of 1933, as
amended. This amendment to the amended registration statement on Form N-14 of
the Columbia International Stock Fund, Inc., filed with the Commission on
December 23, 2004 (Registration No. 333-120783)(the "Registration Statement"),
is being filed to add Exhibit 12 to the Registration Statement. No other
information contained in the Registration Statement is amended, deleted or
superseded hereby.
Title of Securities Being Registered:
Class A
Class B
Class C
Class G
Class Z
Approximate Date of Proposed Offering:
As soon as practicable after this Registration Statement becomes or is declared
effective.
It is proposed that the Registrant's Registration Statement will become
effective on January 24, 2005 pursuant to Rule 488 of the Securities Act of
1933 (the "1933 Act") or on such date as the Commission, acting pursuant to
Section 8(a) of the 1933 Act, may determine.
An indefinite amount of the Registrant's securities has been registered under
the 1933 Act 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.
-2-
COLUMBIA MANAGEMENT GROUP, INC.
ONE FINANCIAL CENTER,
BOSTON, MASSACHUSETTS 02111-2621
Dear Investor:
I am writing to ask for your vote on the proposed acquisition of Columbia
International Equity Fund by Columbia International Stock Fund, Inc. At a
special meeting of shareholders on February 16, 2005, you will be asked to vote
on your fund's acquisition.
The proposed acquisition of your fund is one of several acquisitions 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 twofold. First, by merging funds with generally similar
investment strategies, Columbia can create larger, more efficient investment
portfolios. Second, by streamlining its product offering, Columbia can
concentrate its investment management and distribution resources on a more
focused group of portfolios. Columbia recommended the acquisition of your fund
to enable shareholders to invest in a larger, more efficient investment
portfolio while continuing to access a similar investment strategy.
Should your fund's merger be approved and other conditions to the acquisition
satisfied, your current fund investment will be exchanged, without immediate tax
consequences, for an equal investment (that is, dollar value) in Columbia
International Stock Fund.
The table below provides information on International Stock Fund shares you will
receive upon consummation of the acquisition:
<Table>
<Caption>
YOU WILL RECEIVE THE FOLLOWING SHARE CLASS OF
IF YOU OWN THE FOLLOWING SHARE CLASS OF INTERNATIONAL STOCK FUND UPON CONSUMMATION OF
INTERNATIONAL EQUITY FUND: THE ACQUISITION:
- --------------------------------------------------------------------------------------
Class A Class A
Class B Class B
Class C Class C
Class G Class G
Class T Class A
Class Z Class Z
</Table>
More information on the specific details and reasons for your fund's acquisition
is contained in the enclosed Prospectus/Proxy Statement. Please read it
carefully.
THE TRUSTEES OF YOUR FUND UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE
ACQUISITION OF THE INTERNATIONAL EQUITY 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
January [ ], 2005
[Job Code]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 16, 2005
COLUMBIA INTERNATIONAL EQUITY FUND
C/O COLUMBIA FUNDS TRUST XI
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
1-800-426-3750
To the shareholders of Columbia International Equity Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of Columbia
International Equity Fund will be held at 2:00 p.m. Eastern Time on Wednesday,
February 16, 2005, at the offices of Columbia International Equity Fund, One
Financial Center, Boston, Massachusetts 02111, for the following purposes:
1. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of Columbia International Equity Fund to, and the
assumption of all of the liabilities of Columbia International Equity Fund
by, Columbia International Stock Fund, Inc., in exchange for shares of
Columbia International Stock Fund, Inc., and (ii) the distribution of such
shares to the shareholders of Columbia International Equity Fund in complete
liquidation of Columbia International Equity Fund.
2. 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 Columbia International Equity Fund at the close of
business on December 1, 2004, 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
January [ ], 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.
PROSPECTUS/PROXY STATEMENT
DECEMBER 27, 2004
ACQUISITION OF THE ASSETS AND LIABILITIES OF
COLUMBIA INTERNATIONAL EQUITY FUND
C/O COLUMBIA FUNDS TRUST XI
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
TABLE OF CONTENTS
<Table>
QUESTIONS AND ANSWERS....................................... 4
PROPOSAL -- ACQUISITION OF COLUMBIA INTERNATIONAL EQUITY
FUND BY COLUMBIA INTERNATIONAL STOCK FUND, INC. .......... 16
Principal Investment Risks................................ 16
Information about the Acquisition......................... 19
GENERAL..................................................... 31
Voting Information........................................ 32
Appendix A -- Agreement and Plan of Reorganization.......... A-1
Appendix B -- Fund Information.............................. B-1
Appendix C -- Capitalization................................ C-1
Appendix D -- Information Applicable to Class A, Class B,
Class C, Class G and Class Z Shares of
International Stock Fund...................... D-1
Appendix E -- Financial Highlights for International Stock
Fund.......................................... E-1
Appendix F -- Comparison of a Massachusetts Business Trust
with an Oregon Corporation.................... F-1
</Table>
This Prospectus/Proxy Statement (the "Prospectus/Proxy Statement") contains
information you should know before voting on the Agreement and Plan of
Reorganization dated December 17, 2004, among Columbia Funds Trust XI ("Trust
XI"), on behalf of its Columbia International Equity Fund ("International Equity
Fund"), Columbia International Stock Fund, Inc. ("International Stock Fund"),
and Columbia Management Group, Inc. ("Columbia") (the "Agreement and Plan of
Reorganization") relating to the proposed acquisition of International Equity
Fund by International Stock Fund (the "Acquisition") at a Special Meeting of
Shareholders of
International Equity Fund (the "Meeting"), which will be held at 2:00 p.m.
Eastern Time on February 16, 2005, at the offices of the funds, One Financial
Center, Boston, Massachusetts 02111. The funds are each registered open-end
management investment companies. Please read this Prospectus/Proxy Statement and
keep it for future reference.
The Proposal in this Prospectus/Proxy Statement relates to the Acquisition. If
the Acquisition occurs, you will become a shareholder of International Stock
Fund. International Stock 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 countries outside the United States. If the Agreement and Plan of
Reorganization is approved by the shareholders of International Equity Fund and
the Acquisition occurs, International Equity Fund will transfer all of the
assets and liabilities attributable to each class of its shares to International
Stock Fund in exchange for shares of the same class of International Stock Fund
(except for Class T shares of International Equity Fund, which will be exchanged
for Class A shares of International Stock Fund) with the same aggregate net
asset value as the net value of assets and liabilities transferred. After that
exchange, shares of each class received by International Equity Fund will be
distributed pro rata to its shareholders of the corresponding class.
For Class A, B and C shareholders of International Equity Fund only, the
Prospectus of International Stock Fund for its Class A, B and C shares is
incorporated into this Prospectus/Proxy Statement by reference. For Class Z
shareholders of International Equity Fund only, the Prospectus of International
Stock Fund for its Class Z shares is incorporated into this Prospectus/Proxy
Statement by reference. Each prospectus of International Stock Fund has been
filed with Securities and Exchange Commission (the "SEC").
The following documents have been filed with the SEC and are also incorporated
into this Prospectus/Proxy Statement by reference:
- The Prospectuses of International Equity Fund dated February 1, 2004 as
supplemented through November 2, 2004.
- The Statement of Additional Information of International Equity Fund
dated February 1, 2004.
- The Report of Independent Registered Public Accounting Firm and the
financial statements included in the Annual Report to Shareholders of
International Equity Fund dated September 30, 2004.
2
- The Statement of Additional Information of International Stock Fund dated
December 27, 2004, relating to the Acquisition.
International Equity Fund has previously sent its Annual Report to its
shareholders. For a free copy of this report or any of the documents listed
above, you may call 1-800-426-3750, or you may write to your fund at the address
listed on the cover of this Prospectus/Proxy Statement. You may also obtain many
of these documents by accessing the Internet site for your fund at
www.columbiafunds.com. Text-only versions of all International Stock Fund and
International Equity Fund documents can be viewed online or downloaded from the
EDGAR database on the SEC's Internet site at www.sec.gov. You 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 or at the regional offices of the SEC located at 233 Broadway, New
York, NY 10279 and 175 W. Jackson Boulevard, Suite 900, Chicago, IL 60604. You
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 EITHER FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
3
QUESTIONS AND ANSWERS
THE FOLLOWING QUESTIONS AND ANSWERS PROVIDE AN OVERVIEW OF KEY FEATURES OF THE
ACQUISITION AND OF THE INFORMATION CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT.
PLEASE REVIEW THE PROSPECTUS/PROXY STATEMENT PRIOR TO CASTING YOUR VOTE. IF YOU
HAVE QUESTIONS ABOUT THE ACQUISITION, PLEASE CALL 1-800-426-3750.
1. WHAT IS BEING PROPOSED?
The Trustees of Trust XI are recommending that International Stock Fund acquire
International Equity Fund. This means that International Stock Fund would
acquire all of the assets and liabilities of International Equity Fund in
exchange for shares of International Stock Fund. If the Acquisition is approved
and completed, shareholders of International Stock Fund will receive shares of
International Stock Fund with a dollar value equal to the value of their
International Equity Fund shares on the business day prior to the closing of the
merger. The Acquisition is currently scheduled to take place on or around
February 25, 2005 or such other date as the parties may agree.
2. WHY IS THE ACQUISITION BEING PROPOSED?
The Trustees of Trust XI recommend approval of the Acquisition because it offers
shareholders of International Equity Fund the opportunity to invest in a larger
combined portfolio that has generally similar investment goals and strategies.
In reviewing the Acquisition, the Trustees also considered that, based on
estimated expense ratios as of September 30, 2004, and a commitment by Columbia
Management Advisors, Inc. ("Columbia Management") to cap total net operating
expenses for International Stock Fund, shareholders of your fund are expected to
experience a slight increase in net expenses as a result of the Acquisition. See
Question 3 for more information.
Please review "Reasons for the Acquisition and Trustees' Considerations" in the
Proposal section of this Prospectus/Proxy Statement for more information
regarding the factors considered by the Trustees.
3. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS COMPARE AND WHAT ARE
THEY ESTIMATED TO BE FOLLOWING THE ACQUISITION?
The following tables allow you to compare the sales charges, management fees and
expenses of each fund and to analyze the estimated expenses for
4
the combined fund in the first year following the Acquisition. The shareholder
fees presented below for International Stock Fund apply both before and after
giving effect to the Acquisition. 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, 12b-1 fees (if applicable) and administrative costs, including
pricing and custody services.
The Annual Fund Operating Expenses shown in the table below represent expenses
for each fund's most recent fiscal year (year ended September 30, 2004 for
International Equity Fund and August 31, 2004 for International Stock Fund) and
those projected for the combined fund after giving effect to the Acquisition and
based on pro forma combined net assets as of August 31, 2004.
Based on the expense ratios shown below, after giving effect to the fee waiver
described in footnotes 3, 9 and 10, the net expenses of each class of shares of
International Stock Fund are expected to be higher than the net expenses of the
corresponding class of shares of your fund. Your fund's current net expense
ratio is less than International Stock Fund's expected net expense ratio because
Columbia Management had previously waived voluntarily management and other fees
for your fund. Had Columbia Management not voluntarily waived such fees, your
fund's expenses would be higher than those expected for International Stock Fund
after giving effect to the waiver. Columbia Management has undertaken to
maintain the waiver described in footnote 9 through the first anniversary of the
consummation of the Acquisition, after which this arrangement may be modified or
terminated at any time, which may cause the expenses of a class of shares of
International Stock Fund to be higher than the expenses of the corresponding
class of shares of your fund.
Shareholders of International Equity Fund will not pay additional sales charges
as a result of the Acquisition, although any contingent deferred sales charge
("CDSC") applicable to share purchases made prior to the Acquisition will
continue to apply.
5
SHAREHOLDER FEES
(paid directly from your investment)
INTERNATIONAL EQUITY FUND(1)
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS T(2) CLASS G CLASS Z
Maximum sales charge (load) on
purchases (%) (as a percentage
of the offering price) 5.75 0.00 0.00 5.75 0.00 0.00
- -----------------------------------------------------------------------------------------------
Maximum deferred sales charge
(load) on redemptions (%) (as
a percentage of the lesser of
purchase price or redemption
price) 0.00 5.00 1.00 1.00(3) 5.00 0.00
- -----------------------------------------------------------------------------------------------
Redemption fee (%) (as a
percentage of amount redeemed,
if applicable) (4) (4) (4) (4) (4) 2.00(4)(5)
</Table>
INTERNATIONAL STOCK FUND(1)
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS Z
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(3) 5.00 1.00 0.00
- -----------------------------------------------------------------------------------------
Redemption fee (%) (as a percentage of amount
redeemed, if applicable) (4)(5) (4)(5) (4)(5) 2.00(4)(5)
</Table>
INTERNATIONAL STOCK FUND(1)
(PRO FORMA COMBINED)
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS G CLASS Z
Maximum sales charge (load) on purchases
(%) (as a percentage of the offering
price) 5.75 0.00 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 5.00 1.00 5.00 0.00
- -------------------------------------------------------------------------------------------
Redemption fee (%) (as a percentage of
amount redeemed, if applicable) (4)(5) (4)(5) (4)(5) (4) 2.00(4)(5)
</Table>
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid to
the transfer agent.
(2) Shareholders of Class T shares of International Equity Fund will receive
Class A shares of International Stock Fund.
6
(3) This charge applies only to certain Class A shares bought without an
initial sales charge that are sold within 18 months of purchase.
(4) There is a $7.50 charge for wiring sale proceeds to your bank.
(5) A redemption fee of 2.00% may be charged on shares that were owned for 60
days or less. For information, see "Fund Policy on Trading Fund Shares" in
Appendix D.
ANNUAL FUND OPERATING EXPENSES
(deducted directly from fund assets)
<Table>
<Caption>
DISTRIBUTION AND OTHER TOTAL ANNUAL
MANAGEMENT SERVICE (12B-1) EXPENSES FUND OPERATING
FEE (%) FEES (%) (%) EXPENSES (%)
- ----------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY
FUND
Class A 0.96(1) 0.25(2) 0.20(3)(7) 1.41(1)(3)
- ----------------------------------------------------------------------------------------------
Class B 0.96(1) 1.00 0.20(3)(7) 2.16(1)(3)
- ----------------------------------------------------------------------------------------------
Class C 0.96(1) 1.00 0.20(3)(7) 2.16(1)(3)
- ----------------------------------------------------------------------------------------------
Class T 0.96(1) 0.00 0.50(3)(5)(7) 1.46(1)(3)
- ----------------------------------------------------------------------------------------------
Class G 0.96(1) 0.95(4) 0.20(3)(7) 2.11(1)(3)
- ----------------------------------------------------------------------------------------------
Class Z 0.96(1) 0.00 0.20(3)(7) 1.16(1)(3)
- ----------------------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND
Class A 1.00(6) 0.25 0.32(7)(8) 1.57(6)(8)
- ----------------------------------------------------------------------------------------------
Class B 1.00(6) 1.00 0.32(7)(8) 2.32(6)(8)
- ----------------------------------------------------------------------------------------------
Class C 1.00(6) 1.00 0.32(7)(8) 2.32(6)(8)
- ----------------------------------------------------------------------------------------------
Class Z 1.00(6) 0.00 0.32(7)(8) 1.32(6)(8)
- ----------------------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND
(Pro Forma Combined)
Class A 0.98(9) 0.25 0.24(7)(10) 1.47(9)(10)
- ----------------------------------------------------------------------------------------------
Class B 0.98(9) 1.00 0.24(7)(10) 2.22(9)(10)
- ----------------------------------------------------------------------------------------------
Class C 0.98(9) 1.00 0.24(7)(10) 2.22(9)(10)
- ----------------------------------------------------------------------------------------------
Class G(11) 0.98(9) 0.95(4) 0.24(7)(10) 2.17(9)(10)
- ----------------------------------------------------------------------------------------------
Class Z 0.98(9) 0.00 0.24(7)(10) 1.22(9)(10)
- ----------------------------------------------------------------------------------------------
</Table>
(1) The International Equity Fund pays a management fee of 0.89% and an
administrative fee of 0.07%. Columbia Management has voluntarily agreed to
waive a portion of the management fee. If this waiver were reflected in the
table, the management fee would be 0.71% and total annual fund operating
expenses for Class A, B, C, T, G and Z shares would be 1.15%, 1.90%, 1.90%,
1.20%, 1.85% and 0.90%, respectively (taking into account the other expense
waiver discussed in footnote (3) below). This arrangement may be modified
or terminated by Columbia Management at any time.
(2) International Equity Fund may pay distribution and service (12b-1) fees up
to a maximum of 0.35% of International Equity Fund's average daily net
assets attributable to Class A shares (comprised of up to 0.10% for
distribution services and up to 0.25% for shareholder liaison services) but
will limit such fees to an aggregate of not more than 0.25% for Class A
shares during the current fiscal year.
7
(3) International Equity Fund's transfer agent has voluntarily agreed to waive
a portion of its fee. If this waiver were reflected in the table, other
expenses would be 0.19% for Class A, B, C, G and Z shares and 0.49% for
Class T shares, and total annual fund operating expenses for Class A, B, C,
T, G and Z shares would be 1.15%, 1.90%, 1.90%, 1.20%, 1.85% and 0.90%,
respectively (taking into account the management fee waiver discussed in
footnote (1) above). This arrangement may be modified or terminated at any
time.
(4) International Equity Fund may pay distribution and services (12b-1) fees up
to a maximum of 1.15% of the International Equity Fund's average daily net
assets attributable to Class G shares (comprised of up to 0.65% for
distribution services, up to 0.25% for shareholder liaison services and up
to 0.25% for administrative support services), but will limit such fees to
an aggregate of not more than 0.95% during the current fiscal year.
(5) International Equity Fund may pay shareholder service fees (which are
included in other expenses) up to a maximum of 0.50% of the International
Equity Fund's daily net assets attributable to Class T shares (comprised of
up to 0.25% for shareholder liaison services and up to 0.25% for
administrative services), but will limit such fees to an aggregate fee of
not more than 0.30% during the current fiscal year.
(6) Columbia Management has voluntarily agreed to waive 0.10% of the management
fee. If this waiver were reflected in the table, the management fee would
be 0.90% and the total annual fund operating expenses for Class A, B, C and
Z shares would be 1.36%, 2.11%, 2.11% and 1.11%, respectively (taking into
account the transfer agency fee waivers for Class A, B, C and D shares
discussed in footnote (8)). This arrangement may be modified or terminated
by Columbia Management at any time.
(7) Restated to reflect changes in contractual rates for transfer agency and
bookkeeping services effective November 1, 2003.
(8) Columbia Management has voluntarily agreed to waive 0.11% of 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, C
and Z shares would be 0.21% for each class, respectively, and total annual
fund operating expenses for Class A, B, C and Z shares would be 1.36%,
2.11%, 2.11% and 1.11%, respectively, taking into account the management
fee waiver discussed in footnote 6. This arrangement may be modified or
terminated by Columbia Management at any time.
(9) Columbia Management has voluntarily agreed to waive 0.10% of the management
fee. If the waiver were reflected in the table, the management fee would be
0.88 and the total annual fund operating expenses for Class A, B, C, G and
Z shares would be 1.26%, 2.01%, 2.01%, 1.96% and 1.01%, respectively,
taking into account the transfer agency fee waiver discussed in footnote
10. Columbia Management has undertaken to maintain this waiver through the
first anniversary of the consummation of the Acquisition, after which this
arrangement may be modified or terminated by Columbia Management at any
time.
(10) Columbia Management has voluntarily agreed to waive 0.11% of transfer
agency fees for each class A, B, C, G and Z shares, respectively. If these
waivers were reflected in the table, other expenses for Class A, B, C, G
and Z shares would be 1.26%, 2.01%, 2.01%, 1.96% and 1.01%, respectively,
taking into account the management fee waiver discussed in footnote 9. This
arrangement may be modified or terminated by Columbia Management at any
time.
(11) Because no Class G shares of International Stock Fund were outstanding
prior to the Acquisition, amounts shown are estimates for the first year
following the Acquisition.
8
EXAMPLE EXPENSES
Example Expenses help you compare the cost of investing in International Equity
Fund or International Stock Fund currently with the cost of investing in the
combined fund on a pro forma basis and also allow you to compare these costs
with the cost of investing in other mutual funds. The table does not take into
account any expense reduction arrangements discussed in the footnotes to the
Annual Fund Operating Expenses table. 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
- Class B shares convert to Class A shares after eight years
- Class G shares convert to Class A shares after eight years
EXAMPLE EXPENSES
(your actual costs may be higher or lower)
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
INTERNATIONAL EQUITY FUND
Class A $710 $ 996 $1,302 $2,169
- ----------------------------------------------------------------------------------------------
Class B: did not sell your shares $219 $ 676 $1,159 $2,303
sold all your shares at end of
period $719 $ 976 $1,359 $2,303
- ----------------------------------------------------------------------------------------------
Class C: did not sell your shares $219 $ 676 $1,159 $2,493
sold all your shares at end of
period $319 $ 676 $1,159 $2,493
- ----------------------------------------------------------------------------------------------
Class T: $715 $1,010 $1,327 $2,221
- ----------------------------------------------------------------------------------------------
Class G: did not sell your shares $214 $ 661 $1,134 $2,276
sold all your shares at end of
period $714 $1,061 $1,434 $2,276
- ----------------------------------------------------------------------------------------------
Class Z: $118 $ 368 $ 638 $1,409
INTERNATIONAL STOCK FUND
Class A $726 $1,042 $1,381 $2,335
- ----------------------------------------------------------------------------------------------
Class B: did not sell your shares $235 $ 724 $1,240 $2,468
sold all your shares at end of
period $735 $1,024 $1,440 $2,468
- ----------------------------------------------------------------------------------------------
Class C: did not sell your shares $235 $ 724 $1,240 $2,656
sold all your shares at end of
period $335 $ 724 $1,240 $2,656
- ----------------------------------------------------------------------------------------------
Class Z $134 $ 418 $ 723 $1,590
</Table>
9
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
INTERNATIONAL STOCK FUND
(pro forma combined)
Class A $716 $1,013 $1,332 $2,231
- ----------------------------------------------------------------------------------------------
Class B: did not sell your shares $225 $ 694 $1,190 $2,365
sold all your shares at end of
period $725 $ 994 $1,390 $2,365
- ----------------------------------------------------------------------------------------------
Class C: did not sell your shares $225 $ 694 $1,190 $2,554
sold all your shares at end of
period $325 $ 694 $1,190 $2,554
- ----------------------------------------------------------------------------------------------
Class G: did not sell your shares $220 $ 679 $1,164 $2,326
sold all your shares at end of
period $720 $1,079 $1,464 $2,326
- ----------------------------------------------------------------------------------------------
Class Z $124 $ 387 $ 670 $1,477
</Table>
The projected post-Acquisition pro forma Annual Fund Operating Expenses and
Example Expenses presented above are based upon numerous material assumptions,
including that (1) the current contractual agreements will remain in place; and
(2) certain fixed costs involved in operating International Equity Fund will be
eliminated. Although these projections represent good faith estimates, there can
be no assurance that any particular level of expenses or expense savings will be
achieved, because expenses depend on a variety of factors, including the future
level of fund assets, many of which are beyond the control of International
Stock Fund or Columbia.
10
4. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF INTERNATIONAL EQUITY
FUND AND INTERNATIONAL STOCK FUND COMPARE?
This table shows the investment goal and principal investment strategies of each
fund:
<Table>
<Caption>
INTERNATIONAL EQUITY FUND INTERNATIONAL STOCK FUND
INVESTMENT GOAL: International Equity INVESTMENT GOAL: International Stock
Fund seeks long-term capital Fund seeks long-term capital
appreciation appreciation.
- ----------------------------------------------------------------------------------
- - Under normal market conditions, the - Under normal market conditions, the
International Equity Fund invests at International Stock Fund invests at
least 80% of its net assets (plus any least 80% of its total assets (plus
borrowings for investment purposes) in any borrowings for investment
equity securities, primarily the purposes) in stocks issued by
equity securities of foreign issuers. companies from at least three
countries outside the United States
- - At all times, the fund's assets will
be invested in companies located in at - While the fund's investments are not
least three different foreign limited by market capitalization, the
countries. fund intends to invest primarily in
companies considered to be large and
- - Normally, no more than 20% of the well-established, based on standards
fund's total assets will be invested of the applicable country or foreign
in companies located in countries with market
emerging economies or emerging
securities markets. - The fund intends to invest principally
in the equity securities of companies
- - The fund emphasizes larger established located in the following countries or
companies, although it may invest in regions: Australia, Brazil, Canada,
companies of any size. China, Denmark, Finland, France,
Germany, Hong Kong, India, Ireland,
Italy, Japan, Mexico, The Netherlands,
New Zealand, Norway, Singapore, South
Korea, Spain, Sweden, Switzerland,
Taiwan, Thailand and the United
Kingdom.
</Table>
The following highlights the differences in certain investment strategies that
the funds use to achieve their investment goals:
- - Normally, no more than 20% of International Equity Fund's total assets will be
invested in companies located in countries with emerging economies or emerging
securities markets. International Stock Fund is not subject to such an
investment restriction.
- - International Equity Fund may purchase and sell financial futures contracts
and related options, to the extent consistent with its investment objective
and policies. By comparison, International Stock Fund may not buy and sell
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.
11
- - As a fundamental investment policy, International Stock Fund may not invest in
the securities of any company if the purchase would cause more than 5% 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. International Equity Fund is not subject to such an investment
restriction.
- - International Stock Fund has a fundamental investment restriction under which
it may not buy and sell puts and calls on securities, stock index futures or
options on stock index 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. International Equity Fund has a
non-fundamental investment restriction that precludes it from writing or
selling put options, call options, straddles, spreads or any combination
thereof, except that it may engage in writing covered call options and may
enter into closing purchase transaction with respect to such options. However,
such options must be listed on a national securities exchange and issued by
the Options Clearing Corporation, and the aggregate value of the securities
subject to such options written by International Equity Fund may not exceed
25% of the value of its net assets. In addition, International Equity Fund may
purchase and write put and call options on foreign stock indexes listed on
foreign and domestic stock exchanges for the purpose of hedging its portfolio.
- - As a non-fundamental policy, International Equity Fund may not sell securities
short, maintain a short position or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of transactions.
International Stock Fund has a fundamental investment restriction under which
the fund 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. 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% of the value
of International Stock Fund's net assets taken at market may, at any time, be
held as collateral for such sales.
- - As a fundamental policy, International Stock Fund may not invest in companies
for the purpose of exercising control or management. International Equity Fund
is subject to the same investment restriction as a non-fundamental policy.
12
- - International Equity Fund is subject to non-fundamental investment
restrictions under which (1) the fund may only purchase debt securities rated
A or higher by Moody's Investor Services, Inc. ("Moody's") or Standard &
Poor's ("S&P"), or if unrated, determined by Columbia Management to be of
comparable quality (the fund will sell promptly any security that is not rated
investment grade by either S&P or Moody's if such securities exceed 5% of the
fund's net assets); (2) the fund may only make short-term loans of portfolio
securities to borrowers deemed by Columbia Management to be of good standing
and only when, in Columbia Management's judgment, the income to be earned from
the loan justifies the attendant risks (the fund intends to limit the lending
of its portfolio securities so that, at any given time, securities loaned by a
fund represent not more than one-third of the value of its total assets); and
(3) the fund will invest no more than 10% of its net assets in real estate
investment trusts (REITs). International Stock Fund is not subject to
corresponding investment restrictions.
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.
5. WHAT CLASS OF INTERNATIONAL STOCK FUND SHARES WILL YOU RECEIVE IF THE
ACQUISITION OCCURS?
If you are a shareholder of Class A, Class B, Class C, Class G or Class Z shares
of International Equity Fund, you will receive the same class of shares of
International Stock Fund that you currently own in the International Equity
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 your current shares. The shares will also have the
same distribution, purchase and redemption procedures as your current shares.
If you are a shareholder of Class T shares of International Equity Fund, you
will receive Class A shares of the International Stock Fund. Unlike Class T
shares of International Equity Fund, Class A shares of International Stock Fund
carry a sales charge of 2% for purchases of $1 million or more. Class T shares
of International Equity Fund bought without an initial sales charge in accounts
aggregating $1 million to $25 million at the time of purchase are subject to a
1% CDSC if the shares are sold within 18 months of the time of purchase. Class A
shares of International Stock Fund aggregating $1 million or more are not
subject to such CDSCs. Class T shareholders of International Equity Fund should
see Appendix D to this Prospectus/Proxy
13
Statement for more information on Class A shares of International Stock Fund.
The shares you receive in the Acquisition will be subject to the same CDSC
applicable to your shares of International Equity Fund.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION?
The Acquisition is expected to be tax-free to you for federal income tax
purposes. This means that neither you nor International Equity Fund is expected
to recognize a gain or loss directly as a result of the Acquisition. However,
since the Acquisition will end the tax year of International Equity Fund, it may
accelerate distributions from International Equity Fund to you as a shareholder.
Specifically, International Equity 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 the Acquisition (after
reduction by any available capital loss carryforwards) or losses in the short
tax year ending on the date of the Acquisition, and will declare and pay a
distribution of such income and such gains to its shareholders on or before that
date.
The cost basis and holding period of your International Equity Fund shares are
expected to carry over to your new shares in International Stock Fund.
Certain other tax consequences are discussed below under "Federal Income Tax
Consequences."
7. WHO BEARS THE EXPENSES ASSOCIATED WITH THE ACQUISITIONS?
Columbia Management and each fund will bear a portion of the out of pocket
expenses associated with the Acquisitions, 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
Acquisitions; (2) the fees and expenses of any proxy solicitation firm retained
in connection with the Acquisitions; (3) the legal fees and expenses incurred by
the funds in connection with the Acquisitions; and (4) the Trustee's fees and
out of pocket expenses incurred as a result of the Acquisitions. The estimated
costs of the Acquisition to be borne by International Stock Fund and
International Equity Fund are approximately $17,626 and $26,869, respectively.
Should International Equity Fund's shareholders not approve the Acquisition,
Columbia Management will bear all costs associated with the Acquisition.
14
8. WHO IS ELIGIBLE TO VOTE?
Shareholders of record on December 1, 2004 are entitled to attend and vote at
the Meeting or any adjournment of the Meeting. On each proposal, all
shareholders of International Equity 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 you sign a
proxy but do not fill in a vote, your shares will be voted to approve the
Acquisition. If any other business comes before the Meeting, your shares will be
voted at the discretion of the persons named as proxies.
15
PROPOSAL -- ACQUISITION OF COLUMBIA INTERNATIONAL EQUITY FUND BY COLUMBIA
INTERNATIONAL STOCK FUND, INC.
THE PROPOSAL
You are being asked to approve the Agreement and Plan of Reorganization, a copy
of which is attached as Appendix A to this Prospectus/Proxy Statement. By
approving the Agreement and Plan of Reorganization, you are also approving the
Acquisition of International Equity Fund by International Stock Fund under the
Agreement and Plan of Reorganization.
PRINCIPAL INVESTMENT RISKS
What are the principal investment risks of International Stock Fund, and how
do they compare with those of International Equity Fund?
The principal risks associated with each fund are generally similar because the
funds have generally similar investment goals and strategies. The principal
risks of investing in International Stock Fund (the "Fund" for purposes of this
section) are described below. There are many circumstances (including additional
risks that are not described here) which could prevent the Fund from achieving
its investment goal. You may lose money by investing in the Fund.
Both Funds are subject to management risk, market risk, equity risk, the risks
associated with investing in foreign securities, the risks associated with
investing in emerging markets and market timers risk. The Funds will also be
subject to foreign currency risk and the risks associated with investing in
derivatives to the extent they invest in such derivatives. In addition, because
each Fund may invest 25% or more of its assets in the securities of companies
located in one country, each Fund is subject to country risk. International
Stock Fund may also be subject to the risks associated with investing in
convertible securities to the extent it invests in such securities. The actual
risks of investing in each Fund depend on the securities held in each Fund's
portfolio and on market conditions, both of which change over time.
Management risk means that the advisor's investment decisions might produce
losses or cause the 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 your investment. Because of
management and market risk, there is no guarantee that the Fund will achieve its
investment goal or perform favorably among comparable funds.
16
Since it purchases equity securities, the Fund is subject to equity risk. This
is the risk that stock prices will fall over short or extended periods of time.
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.
Foreign securities are subject to special risks. Foreign markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
that of domestic securities, which means that the 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.
Investment in emerging markets is subject to additional risk. The risks of
foreign investments are typically increased in less developed countries, which
are sometimes referred to as emerging markets. For example, political and
economic structures in these countries may be new and developing rapidly, which
may cause instability. These countries are also more likely to experience high
levels of inflation, deflation or currency devaluations, which could hurt their
economies and securities markets.
The Fund is also subject to foreign currency risk. In managing currency
exposure, the Fund may enter into forward currency contracts. A forward currency
contract involves an agreement to purchase or sell a specified currency at a
specified future price set at the time of the contract. When the Fund enters
into a contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. The
Fund will only enter into forward contracts for hedging and not for purposes of
speculation. Under normal market conditions, no more than 25% of the Fund's
assets may be committed to currency exchange contracts.
17
The Fund may also invest in stock futures and option contracts, which are
traditional types of derivatives. A derivative is a financial contract whose
value is based on (or "derived" from) a traditional security (such as a stock or
bond), an asset (such as a commodity like gold), or a market index (such as the
S&P 500 Index). Losses (or gains) involving derivatives can sometimes be
substantial. Some forms of derivatives, such as exchange-traded futures and
options on securities, commodities, or indexes, have been trading on regulated
exchanges for more than two decades. These types of derivatives are standardized
contracts that generally can easily be bought and sold, and whose market values
are determined and published daily. Non-standardized derivatives, on the other
hand, tend to be more specialized or complex and may be harder to value. If used
for speculation or as leveraged investments, derivatives can carry considerable
risk. The Fund will not use derivatives for speculative purposes or as leveraged
investment that may magnify gains or losses.
Convertible securities are bonds, debentures, notes, preferred stocks or other
securities that may be converted or exchanged (by the holder or by the issuer)
into shares of the underlying common stock (or cash or securities of equivalent
value) at a stated exchange ratio or predetermined price (the conversion price).
A convertible security may be called for redemption or conversion by the issuer
after a particular date and under certain circumstances (including a specified
price) established upon issue. Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar quality.
The market values of convertible securities tend to decline as interest rates
increase and, conversely, to increase as interest rates decline. However, a
convertible security's market value tends to reflect the market price of the
common stock of the issuing company when that stock price approaches or is
greater than its conversion price. As the market price of the underlying common
stock declines, the price of the convertible security tends to be influenced
more by the yield of the convertible security. Thus, it may not decline in price
to the same extent as the underlying common stock. In the event of a liquidation
of the issuing company, holders of convertible securities would be paid before
the company's common stockholders but after holders of any senior debt
obligations of the company. Consequently, the issuer's convertible securities
generally entail less risk than its common stock but more risk than its debt
obligations.
Because the Fund invests predominantly in foreign securities, the Fund may be
particularly susceptible to market timers. Market timers generally attempt to
take advantage of the way the Fund prices its shares by trading based on market
information they expect will lead to a change in the Fund's net asset value on
the next pricing day. Market timing activity may be
18
disruptive to Fund management and, since a market timer's profits are
effectively paid directly out of the Fund's assets, negatively impact the
investment returns of other shareholders. Although the fund has adopted certain
policies and methods intended to identify and to discourage frequent trading
based on this strategy, it cannot ensure that all such activity can be
identified or terminated.
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
INFORMATION ABOUT THE ACQUISITION
Terms of the Agreement and Plan of Reorganization
If approved by the shareholders of International Equity Fund, the Acquisition is
expected to occur on or around February 25, 2005, or such other date as the
parties may agree, under the Agreement and Plan of Reorganization. Please review
Appendix A to this Prospectus/Proxy Statement for more information regarding the
Agreement and Plan of Reorganization. The following is a brief summary of the
principal terms of the Agreement and Plan of Reorganization:
- - International Equity Fund will transfer all of the assets and liabilities
attributable to each class of its shares to the International Stock Fund in
exchange for shares of the same class of the International Stock Fund (except
that Class T shares of the International Equity Fund will be exchanged for
Class A shares of the International Stock Fund) with an aggregate net asset
value equal to the net value of the transferred assets and liabilities.
- - The Acquisition will close on the next business day after the time (currently
scheduled to be 4:00 p.m. Eastern Time on February 25, 2005, or such other
date and time as the parties may determine) when the net assets of each fund
are valued for purposes of the Acquisition.
- - The shares of each class of International Stock Fund received by International
Equity Fund will be distributed to the shareholders of the same class of
International Equity Fund (except that the Class T shareholders of
International Equity Fund will receive Class A shares of International Stock
Fund) pro rata in accordance with their percentage ownership of such class of
shares of International Equity Fund in full liquidation of International
Equity Fund.
- - After the Acquisition, International Equity Fund will be terminated, and its
affairs will be wound up in an orderly fashion.
19
- - The Acquisition requires approval by International Equity Fund's shareholders
and satisfaction of a number of other conditions; the Acquisition may be
terminated at any time with the approval of the Trustees of Trust XI and the
Directors of International Equity Fund.
Shareholders who object to the Acquisition will not be entitled under
Massachusetts law or the Declaration of Trust of the Trust XI to demand payment
for, or an appraisal of, their shares. However, they should be aware that the
Acquisition as proposed is not expected to result in recognition of gain or loss
to shareholders for federal income tax purposes and that, if the Acquisition is
consummated, shareholders will be free to redeem the shares which they receive
in the transaction at their current net asset value, less any applicable CDSC.
In addition, shares may be redeemed at any time prior to the consummation of the
Acquisition.
Shares You Will Receive
If the Acquisition occurs, shareholders of Class A, B, C, G and Z shares of
International Equity Fund will receive shares in International Stock Fund of the
same class that they currently own in International Equity Fund. Shareholders of
Class T shares of International Equity Fund will receive Class A shares of
International Stock Fund. In comparison to the shares you currently own, the
shares you receive will have the following characteristics:
- - They will have an aggregate net asset value equal to the aggregate net asset
value of your current shares as of the business day before the closing of the
Acquisition.
- - Except as noted below for Class T shareholders, they will bear the same sales
charges, redemption fees and CDSCs, if any, as your 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 you
purchased your International Equity Fund shares.
- - Class G shares received in the Acquisition will convert to Class A shares of
International Stock Fund at the same time that the holder's Class G shares of
International Equity Fund would have converted to Class T shares of such Fund.
- - The procedures for purchasing and redeeming your shares will not change as a
result of the Acquisition.
- - You will have the same exchange options as you currently have, although Class
T shareholders receiving Class A shares of International Stock
20
Fund may exchange their shares for Class A shares of another fund distributed
by Columbia Funds Distributor, Inc.
- - You will have voting and other rights generally similar to those you currently
have, but as a shareholder of International Stock Fund. Please see Appendix F
to this Prospectus/Proxy Statement for more information regarding the
differences between the rights of shareholders of International Equity Fund
and those of International Stock Fund.
Information concerning the capitalization of each of the funds is contained in
Appendix C to this Prospectus/Proxy Statement.
Reasons for the Acquisition and Trustees' Considerations
The Trustees of Trust XI, including all Trustees who are not "interested
persons" (as such term is defined in the Investment Company Act of 1940, as
amended) of Trust XI, Columbia Management or its affiliates have determined on
behalf of International Equity Fund that the Acquisition would be in the best
interests of International Equity Fund's shareholders and that the interests of
existing shareholders in International Equity Fund would not be diluted as a
result of the Acquisition. The Trustees have unanimously approved the Agreement
and Plan of Reorganization and the Acquisition, and recommended that fund
shareholders vote in favor of the Acquisition by approving the Agreement and
Plan of Reorganization.
Columbia proposed the Acquisition to the Trustees of Trust XI at a meeting held
on October 13, 2004 because the Acquisition is expected to create a larger fund
with an investment goal and strategies generally similar to those of
International Equity Fund.
At the meeting, the Trustees (with the advice and assistance of independent
counsel) of Trust XI considered, among other things:
1. the Acquisition as part of a continuing initiative to streamline and improve
the offerings of the Columbia funds family;
2. various potential shareholder benefits of the Acquisition;
3. the current asset level of International Equity Fund and the combined pro
forma asset level of International Stock Fund (assuming the Acquisition
occurs);
4. the historical performance results of the funds (see "Performance
Information" below), although no assurance can be given that International
Stock Fund will achieve any particular level of performance after the
Acquisition;
21
5. the investment objectives and principal investment strategies of
International Equity Fund and International Stock Fund;
6. the fact that International Stock Fund is expected to have a higher
investment advisory fee and, accordingly, higher total operating expense
ratios than International Equity Fund;
7. the historical and pro forma tax attributes of the funds and the effect of
the Acquisition on certain tax losses of the funds (see "Federal Income Tax
Consequences" below);
8. that the funds would bear at least part of the expenses associated with the
Acquisition; and
9. the potential benefits of the Acquisition to Columbia Management and its
affiliates.
If approved, the Acquisition will combine International Equity Fund's assets
with those of International Stock Fund, resulting in a combined portfolio that
is significantly larger than International Equity Fund (allowing the potential
for more efficient operation by spreading relatively fixed costs, such as audit
and legal fees, over a larger asset base). 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 Acquisition helps eliminate
overlapping products. Both funds are international 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 ending December 31, 2003, for the Class A shares of each of
International Equity Fund and International Stock Fund. They should give you 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 (if applicable to
the fund's shares). 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
22
be given that International Stock 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.
23
INTERNATIONAL EQUITY FUND (CLASS A)(1)
(BAR CHART)
<Table>
11.74% 10.74% 14.09% 21.99% 41.89% 34.76%
-2.39% -19.91% -26.89% -19.40%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
</Table>
<Table>
The Class' year-to-date total return through For period shown in bar chart:
September 30, 2004 was -0.16% Best quarter: Fourth Quarter 1999,
+24.53%
Worst quarter: Third Quarter 2002,
-20.79%
</Table>
(1) The calendar year total returns shown for Class A shares for periods prior
to November 18, 2002, the date on which Class A shares were initially
offered by the fund, include the returns of Trust Shares of the Galaxy
International Equity Fund (the "Galaxy Fund"), the predecessor to the fund.
INTERNATIONAL STOCK FUND (CLASS A)
(BAR CHART)
<Table>
5.15% 16.59% 11.47% 12.83% 57.93% 32.24%
-2.47% -22.64% -18.47% -16.10%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
</Table>
<Table>
The Class' year-to-date total return through For period shown in bar chart:
September 30, 2004 was -0.15% Best quarter: Fourth Quarter 1999,
+34.96%
Worst quarter: Third Quarter 2002,
-18.71%
</Table>
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 periods ending
24
December 31, 2003 (including applicable sales charges) for Class A, B, C, T, G
and Z shares of the International Equity Fund and for Class A, B, C and Z shares
of the International Stock Fund. These tables are intended to provide you with
some indication of the risks of investing in the funds. At the bottom of each
table, you can compare the funds' performance with one or more indices.
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.
25
INTERNATIONAL EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 2003
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS
Class A (%)
Return Before Taxes 26.10 -3.65(2) 3.22(2)
Return After Taxes on Distributions 26.28 -4.69(2) 2.13(2)
Return After Taxes on Distributions and Sale
of Fund Shares 17.32 -3.30(2) 2.35(2)
- -----------------------------------------------------------------------------
Class B (%)
Return Before Taxes 27.97 -3.37(2) 3.52(2)
Return After Taxes on Distributions 28.25 -4.26(2) 2.52(2)
Return After Taxes on Distributions and Sale
of Fund Shares 18.45 -2.98(2) 2.68(2)
- -----------------------------------------------------------------------------
Class C (%)
Return Before Taxes 31.22 -3.16(2) 3.46(2)
Return After Taxes on Distributions 31.49 -4.04(2) 2.46(2)
Return After Taxes on Distributions and Sale
of Fund Shares 20.56 -2.80(2) 2.63(2)
- -----------------------------------------------------------------------------
Class T
Return Before Taxes 26.40 -3.72(3) 3.10(3)
Return After Taxes on Distributions 26.64 -4.73(3) 2.04(3)
Return After Taxes on Distributions and Sale
of Fund Shares 17.43 -3.35(3) 2.27(3)
- -----------------------------------------------------------------------------
Class G (%)
Return Before Taxes 27.90 -3.87(3) 3.35(3)
Return After Taxes on Distributions 28.17 -4.70(3) 2.38(3)
Return After Taxes on Distributions and Sale
of Fund Shares 18.41 -3.34(3) 2.56(3)
- -----------------------------------------------------------------------------
Class Z (%)
Return Before Taxes 34.76 -2.03(4) 4.25(4)
Return After Taxes on Distributions 34.89 -3.21(4) 3.05(4)
Return After Taxes on Distributions and Sale
of Fund Shares 23.04 -2.05(4) 3.19(4)
- -----------------------------------------------------------------------------
MSCI EAFE Index 38.59 -0.05 4.47
- -----------------------------------------------------------------------------
MSCI All Country World ex. U.S. Index** 41.38 1.54 4.66
- -----------------------------------------------------------------------------
</Table>
(2) The average annual total returns shown include the returns of Prime A
Shares (for Class A shares) and Prime B Shares (for Class B Shares) of the
Galaxy Fund for periods prior to November 18, 2002, the date on which Class
A and Class B shares were initially offered by the fund. The returns shown
for Class A shares and Class B shares also include the returns of Retail A
Shares of the Galaxy Fund (adjusted, as necessary, to reflect the sales
charges applicable to Class A shares and Class B shares, respectively) for
period prior to the date of inception of Prime A and Prime B Shares
(October 31, 1998). Class A and Class B shares generally would have had
substantially similar returns to Retail A Shares because they would have
been invested in the same portfolio of securities, although returns would
have been lower to the extent that expenses for Class A and B
26
shares exceed expenses paid b Retail A Shares. The returns shown for Class
C shares include the returns of Prime B Shares of the Galaxy Fund (adjusted
to reflect the sales charge applicable to Class C shares) for periods prior
to November 18, 2002, the date on which Class C shares were initially
offered by the fund. The returns shown for Class C shares also include the
returns of Retail A shares of the Galaxy Fund (adjusted to reflect the
sales charges applicable to Class C shares) for periods prior to the date
of inception of Retail B Shares (October 31, 1998). Class C shares
generally would have had substantially similar returns because they would
have been invested in the same portfolio of securities, although the
returns would have been lower to the extent that expenses for Class C
shares exceed expenses paid by Retail A and Retail B Shares.
(3) The average annual total returns shown include the returns of Retail A
Shares (for Class T shares) and Retail B Shares (for Class G shares) of the
Galaxy Fund for periods prior to November 18, 2002, the date on which Class
T and Class G shares were initially offered by the fund. The returns shown
for Class G shares also include the returns of Retail A Shares (adjusted to
reflect the sales charges applicable to Class T shares) for periods prior
to the inception of Retail B Shares of the Galaxy Fund (October 31, 1998).
Retail A Shares of the Galaxy Fund were initially offered on December 30,
1991. Class B shares generally would have had substantially similar returns
to Retail A Shares because they would have been invested in the same
portfolio securities, although the returns would have been lower to the
extent that expenses for Class G shares exceed expenses paid by Retail A
Shares.
(4) The average annual total returns shown include returns of Trust Shares of
the Galaxy Fund for periods prior to November 18, 2002, the date on which
Class Z shares were initially offered by the Fund.
** The Morgan Stanley Capital International (MSCI) All Country World ex. U.S.
Index is an unmanaged index of global stock market performance that
includes developed and emerging markets but excludes the United States.
27
INTERNATIONAL STOCK FUND(5)
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 2003
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS
Class A (%)
Return Before Taxes 24.64 0.82 4.59
Return After Taxes on Distributions 24.78 -0.21 3.35
Return After Taxes on Distributions and Sale
of Fund Shares 16.15 0.47 3.45
- -----------------------------------------------------------------------------
Class B (%)
Return Before Taxes 26.04 1.45 5.08
Return After Taxes on Distributions 26.19 0.40 3.84
Return After Taxes on Distributions and Sale
of Fund Shares 17.07 1.02 3.89
- -----------------------------------------------------------------------------
Class C (%)
Return Before Taxes 30.14 1.79 5.09
Return After Taxes on Distributions 30.29 0.75 3.84
Return After Taxes on Distributions and Sale
of Fund Shares 19.74 1.30 3.90
- -----------------------------------------------------------------------------
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 (%)* 38.54 -0.05 4.47
- -----------------------------------------------------------------------------
MSCI AC World Free Ex US Index (%)* 41.38 1.54 4.66
</Table>
(5) Class A, Class B, Class C and Class G are newer classes of shares. Their
performance information includes returns of the fund's Class Z 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 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. Class C shares were initially offered on October 13, 2003,
Class A and B shares were initially offered on November 1, 2002, Class G
shares had not been offered by December 31, 2003, and Class Z shares were
initially offered on October 1, 1992.
* The Morgan Stanley Capital International Europe, Australasia and Far East
Index (the "MSCI EAFE Index") is an unmanaged index representing major
stock markets in Europe, Australasia and the Far East. The Morgan Stanley
Capital International All Country World Free Ex US Index (the "MSCI AC
World Free Ex US Index") is an unmanaged index representing both developed
and emerging markets of 49 countries, excluding the U.S. The adviser
intends to replace the MSCI EAFE Index with the MSCI AC World Free Ex US
Index as the fund's Broad Index, as it is more representative of the fund's
investment holdings. Unlike the fund, indices are not investments, do not
incur fees, expenses or taxes and are not professionally managed.
28
Federal Income Tax Consequences
The Acquisition is intended to be a tax-free reorganization. Ropes & Gray LLP
will deliver to International Equity Fund and International Stock 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 Acquisition will constitute a reorganization within the meaning of Section
368(a) of the Code, and International Equity Fund and International Stock 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
International Equity Fund upon the transfer of its assets to International
Stock Fund in exchange for International Stock Fund shares and the assumption
by International Stock Fund of International Equity Fund's liabilities, or
upon the distribution of International Stock Fund shares by International
Equity Fund to its shareholders in liquidation;
- - under Section 354 of the Code, no gain or loss will be recognized by
shareholders of International Equity Fund on the distribution of International
Stock Fund shares to them in exchange for their shares of International Equity
Fund;
- - under Section 358 of the Code, the aggregate tax basis of International Stock
Fund shares that International Equity Fund's shareholders receive in exchange
for their International Equity Fund shares will be the same as the aggregate
tax basis of International Equity Fund shares exchanged therefor;
- - under Section 1223(1) of the Code, an International Equity Fund shareholder's
holding period for International Stock Fund shares received will be determined
by including the holding period for International Equity Fund shares exchanged
therefor, provided that the shareholder held International Equity Fund shares
as a capital asset;
- - under Section 1032 of the Code, no gain or loss will be recognized by
International Stock Fund upon receipt of the assets transferred to
International Stock Fund in exchange for International Stock Fund shares and
the assumption by International Stock Fund of the liabilities of International
Equity Fund;
- - under Section 362(b) of the Code, International Stock Fund's tax basis in the
assets that the International Stock Fund receives from
29
International Equity Fund will be the same as International Equity Fund's tax
basis in such assets immediately prior to such exchange;
- - under Section 1223(2) of the Code, International Stock Fund's holding periods
in such assets will include International Equity Fund's holding periods in
such assets; and
- - under Section 381 of the Code, International Stock Fund will succeed to the
capital loss carryovers of the International Equity Fund, if any, but the use
by International Stock Fund of any such capital loss carryovers (and of
capital loss carryovers of the International Stock 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
Trust XI and International Stock Fund will also be based on customary
assumptions. The opinion is not 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.
Prior to the closing of the Acquisition, International Equity Fund will, and
International Stock 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
Acquisition (after reduction by any available capital loss carryforwards), if
any, through the closing of the Acquisition. Such distributions will be taxable
to shareholders.
International Stock Fund's ability to carry forward the pre-Acquisition losses
of International Equity Fund will technically be limited as a result of the
Acquisition due to the effect of loss limitation rules under applicable tax law.
The effect of this limitation, however, will depend on the amount of losses in
each fund at the time of the Acquisition. For example, based on data as of
September 29, 2004, International Equity Fund had pre-Acquisition "net losses"
(i.e., capital loss carryforwards as of last fiscal year end as adjusted by
year-to-date realized gains or losses and all unrealized gains) equal to 55% of
its net assets. At that time, International Stock Fund had net realized and
unrealized gains that exceeded its capital loss carryforwards, and hence no net
losses. If the Acquisition were to have occurred on September 29, 2004, the
combined fund would have had net losses equal to 10% of its net assets. Due to
the combined effects of loss limitation rules and the spreading of losses over a
larger asset base, the
30
amount of losses as a percentage of net assets available to shelter future
growth of International Equity Fund would have decreased from 55% to 10% (a
difference of 45 percentage points), and the same figure with respect to
International Stock Fund would have increased from 0% to 10% (a difference of 10
percentage points). In addition, International Equity Fund's pre-Acquisition
losses would have been unavailable to offset the pre-Acquisition unrealized
gains of International Stock Fund. If those unrealized gains had been recognized
as of the date of the Acquisition, the combined fund would have been required to
make a taxable distribution equal to 1.79% of its net assets to all its
shareholders. As a result, shareholders of International Equity Fund could,
under certain circumstances, pay more taxes, or pay taxes sooner, than they
would if the Acquisition had not occurred.
This description of the federal income tax consequences of the Acquisition 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 Acquisitions, including the applicability
and effect of state, local, non-U.S. and other tax laws.
THE TRUSTEES OF TRUST XI UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT AND
PLAN OF REORGANIZATION.
Required Vote for the Proposal
Approval of the Agreement and Plan of Reorganization will require the
affirmative vote of the holders of the lesser of (1) more than 50% of the
outstanding shares of International Equity Fund or (2) 67% or more of the shares
present at the meeting if more than 50% of the outstanding shares of
International Equity Fund are represented at the meeting in person or by proxy.
A vote of the shareholders of International Stock Fund is not needed to approve
the Acquisition.
GENERAL
INVESTMENT ADVISOR
Columbia Management, located at 100 Federal Street, Boston, Massachusetts 02110,
is each fund's investment advisor. Columbia Management is responsible for each
fund's management, subject to oversight by the fund's Board of Trustees. In its
duties as investment advisor, Columbia Management runs each fund's day-to-day
business, including placing all orders for the purchase and sale of the fund's
portfolio
31
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.
VOTING INFORMATION
The Trustees of Trust XI are soliciting proxies from the shareholders of
International Equity Fund in connection with the Meeting, which has been called
to be held at 2:00 p.m. Eastern Time on Wednesday, February 16, 2005, at the
funds' offices at One Financial Center, Boston, Massachusetts 02111. The meeting
notice, this Prospectus/Proxy Statement and proxy inserts are being mailed to
shareholders beginning on or about January [__], 2005.
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 International Equity Fund or by employees or agents of Columbia and
its affiliated companies. In addition, ALAMO direct Mail Services, Inc., 280
Oser Avenue, Hauppauge, NY 11788, has been engaged to assist in the solicitation
of proxies, at an estimated cost of approximately $[ ________ ].
Voting Process
You 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 insert for instructions);
or
c. In person at the Meeting.
Shareholders who owned shares on the record date, December 1, 2004, are entitled
to vote at the Meeting. For each full share of International Equity Fund that
you hold, you are entitled to one vote, and for each fractional share you hold,
you are entitled to a proportionate fractional vote. If you choose to vote by
mail or fax and you are an individual account owner,
32
please sign exactly as your name appears on the proxy insert. Either owner of a
joint account may sign the proxy insert, 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 International Stock
Fund and International Equity Fund are approximately $17,626 and $26,869,
respectively. Columbia is also bearing a portion of such costs. This portion to
be borne by Columbia is in addition to the amounts to be borne by the funds. In
the event that the shareholders of International Equity Fund do not approve the
Agreement and Plan of Reorganization or the Acquisition does not close for any
reason, Columbia will bear the costs of the failed Acquisition which would
otherwise have been borne by International Stock Fund and International Equity
Fund.
Voting and Tabulation of Proxies. 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. You can revoke your proxy by
sending a signed, written letter of revocation to the Secretary of International
Equity 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 International Equity Fund as tellers for the Meeting (the
"Tellers"). A majority of the shares of International Stock Fund 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 International
Equity Fund 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 the Proposal. "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.
Underwriter's Addresses. The address of each 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 December 1, 2004, for each class of
International Equity Fund entitled to vote at the Meeting. It also identifies
holders of more than five percent of any class
33
of shares of each fund, and contains information about the executive officers,
Directors and/or Trustees of the funds and their shareholdings in the Funds and
the Trusts.
Adjournments; Other Business. If International Equity 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 International Equity 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 International Equity Fund intends to
present or knows that others will present is the Proposal.
34
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of December 17, 2004, is by
and among Columbia Funds Trust XI (the "Trust"), a Massachusetts business trust
established under a Declaration of Trust dated January 8, 1987, as amended, on
behalf of Columbia International Equity Fund (the "Acquiring Fund"); Columbia
International Stock Fund, Inc. (the "Acquiring Fund"), an Oregon corporation
established under Articles of Incorporation dated June 29, 1992, as amended; and
Columbia Management Group, 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"), the transfer of all of the assets of the
Acquired Fund attributable to its Class G shares in exchange for Class G shares
of Common Stock of the Acquiring Fund ("Class G Acquisitions 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 , Class T/A Acquisition
Shares and Class G 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, Class G
Acquisition Shares and the Class Z Acquisition Shares to the Class A, Class B,
Class C, Class T, Class G and Class Z shareholders, respectively, of the
Acquired Fund in
A-1
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 Trust, on behalf of 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 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, Class G 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, Class G 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, Class G 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 Acquired Fund on the closing date provided in paragraph
3.1 (the "Closing Date") and any deferred expenses,
A-2
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 Trust'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 Trust, 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; to its Class G shareholders of record ("Acquired Fund
Class G Shareholders"), determined as of the close of business on the
Valuation Date, Class G 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, Acquired Fund Class
T Shareholders and Acquired Fund Class G 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
A-3
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 Trust 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 Trust 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.
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,
A-4
using the valuation procedures set forth in the Declaration of Trust
of the Trust and the Acquiring Fund Prospectus.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be on [ ________ ], 2004, or on such other date
as the parties may agree. The Closing shall be held at 9:00 a.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 "State Street Bank and Trust
Company, custodian for Columbia International Equity 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 either the
Trust or
A-5
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 Trust. 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 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;
A-6
(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 Trust, 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 Trust or 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 neither the
Trust nor the Acquired Fund is 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 year ended
September 30, 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 dates and for the periods 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 September 30, 2004;
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(g) Since September 30, 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. Neither the
Trust nor the Acquired Fund has 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
A-8
shareholders, and is not liable for any material penalties which
could be imposed thereunder;
(j) The authorized capital of the Acquired Fund consists of Class A
shares, Class B shares, Class C shares, Class T shares, Class G
shares and Class Z shares of beneficial interest, without par value.
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 Acquired
Fund's then current prospectus or prospectuses or statement or
statements of additional information (collectively, as amended or
supplemented from time to time, the "Acquired Fund Prospectus") by
the Trust 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 after the expiration of a period of time, no options,
warrants or other rights to subscribe for or purchase, or securities
convertible into, any shares of beneficial interest of the Acquired
Fund 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
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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 insurance,
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 Trust, on behalf of 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
March 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
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giving effect to the acquisition of the assets of the Acquired Fund
pursuant to this Agreement, the 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 By-laws or of any
agreement, indenture, instrument, contract,
A-11
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 liquidation, 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 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 periods 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;
(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
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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
1,000,000,000 shares of Common Stock, no par value, of such number
of different classes as the Board of Directors may authorize from
time to time. Subject to approval by the Board of Directors of the
Acquiring Fund of the issuance of Class G shares, the outstanding
shares of Common Stock in the Acquiring Fund 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
A-13
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, Class G
and Class Z shares of Common Stock 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 consummation by
A-14
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 insurance, 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 Trust, on behalf of the Acquired Fund, each hereby
covenants and agrees with the other 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.
A-15
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 Trust, on behalf of 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 Trust 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 have
complied with all the covenants and agreements and satisfied all of
the conditions to be performed or satisfied by it under this Agreement
at or prior to the Closing Date.
6.2 The Trust shall have received a favorable opinion of Ropes & Gray LLP,
counsel to the Acquiring Fund for the transactions contemplated
hereby, dated the Closing Date and, in a form satisfactory to the
Trust, to the following effect:
(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;
A-16
(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 nonassessable Class A, Class B, Class
C, Class G 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 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;
A-17
(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
transaction 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:
7.1 The Trust, on behalf of 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 Trust and
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;
A-18
7.2 The Acquiring Fund shall have received a favorable opinion of Ropes &
Gray LLP, counsel to the Trust for the transactions contemplated
hereby, dated the Closing Date and in a form satisfactory to the
Trust, 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 By-laws
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 Trust and the Acquired Fund of their respective
obligations hereunder will not, violate the Trust's Declaration of
Trust or By-laws, or any provision of any agreement known to such
counsel to which the Trust or 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 Trust or the
Acquired Fund is a party or by which it is bound;
A-19
(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 Trust or 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 Trust or 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 Trust or the
Acquired Fund or any of their properties or assets or any person
whom the Trust or the Acquired Fund may be obligated to indemnify in
connection with such litigation, proceeding or investigation, and
neither the Trust nor the Acquired Fund is 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 transaction contemplated
thereby.
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 company taxable income for its taxable years ending on or
after September 30, [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 September 30, [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
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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 Trust 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 Trust or 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 Trust, on behalf of the Acquired Fund, shall have received a
favorable opinion of Ropes & Gray LLP satisfactory to the Trust, on
behalf of the Acquired Fund, and the Acquiring Fund shall have
received a favorable opinion of Ropes & Gray LLP
A-21
satisfactory to the Acquiring Fund, each 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;
(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;
A-22
(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 will be based on certain factual certifications made by
officers of the Trust and the Acquiring Fund and will also be based on
customary assumptions. The opinion is not a guarantee that the tax
consequences of the relevant 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 jointly 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 Trust, on behalf of 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
A-23
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 Trust, on behalf of 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 Trust, on behalf of the Acquired Fund, and the Acquiring
Fund. The expenses detailed above shall be borne [one hundred percent
(100%)] by Columbia. [COLUMBIA TO CONFIRM.]
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.
10.1 The Trust, on behalf of 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.
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 Trust. In addition, either the Acquiring Fund
or the Trust 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)
A-24
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, 2004, this Agreement shall
automatically terminate on that date unless a later date is agreed to
by both the Acquiring Fund and the Trust.
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 Trust, on
behalf 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 Columbia International Equity Fund, c/o
Columbia Funds Trust XI, One Financial Center, Boston, Massachusetts 02111, or
to Columbia International Stock Fund, Inc., 1300 S.W. Sixth Avenue, Portland,
Oregon 97207, 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
A-25
Commonwealth of Massachusetts, without giving effect to any choice or
conflicts of law rule or 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.
A-26
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 XI
on behalf of the Columbia
International
Equity Fund
By:
---------------------------------
Name:
-----------------------------
Title:
-------------------------------
ATTEST:
- ----------------------------------------
Name:
---------------------------------
Title:
-----------------------------------
COLUMBIA INTERNATIONAL STOCK FUND,
INC.
By:
---------------------------------
Name:
-----------------------------
Title:
-------------------------------
ATTEST:
- ----------------------------------------
Name:
---------------------------------
Title:
-----------------------------------
A-27
Solely for purposes of Paragraph 9.2
of the Agreement
COLUMBIA MANAGEMENT GROUP, INC.
By:
---------------------------------
Name:
-----------------------------
Title:
-------------------------------
ATTEST:
- ----------------------------------------
Name:
---------------------------------
Title:
-----------------------------------
A-28
APPENDIX B -- FUND INFORMATION
SHARES OUTSTANDING AND ENTITLED TO VOTE OF INTERNATIONAL EQUITY FUND
For each class of International Equity Fund's shares entitled to vote at the
Meeting, the number of shares outstanding as of December 1, 2004 was as follows:
<Table>
<Caption>
NUMBER OF SHARES OUTSTANDING
CLASS AND ENTITLED TO VOTE
- ----- ----------------------------
A 82,449.518
B 77,149.133
C 8,304.301
G 386,953.910
T 3,266,157.718
Z 34,189,650.232
</Table>
OWNERSHIP OF SHARES
As of December 1, 2004, each of Trust XI and International Stock Fund believes
that, as a group, the Trustees, Directors, and officers, as the case may be, of
the respective funds owned less than one percent of each class of shares of each
fund and of Trust XI as a whole. As of December 1, 2004, the following
shareholders of record owned 5% or more of the outstanding shares of the noted
class of shares of the noted Fund:
<Table>
<Caption>
PERCENTAGE OF
OUTSTANDING
PERCENTAGE OF SHARES OF CLASS
NUMBER OF OUTSTANDING OWNED UPON
FUND NAME AND ADDRESS OUTSTANDING SHARES SHARES OF CLASS CONSUMMATION
AND CLASS OF SHAREHOLDER OF CLASS OWNED OWNED OF ACQUISITION*
- --------- ------------------------- ------------------ --------------- ---------------
INTERNATIONAL
EQUITY FUND
Class A F James Shurtleff
PO Box 149
Ogdensburg, NY 13669-0149 16,086.372 19.51% 19.51%**
UBS Financial Services,
Inc. FBO
Michael Pappas
Grace Pappas JTWROS
35 Meadow Ln
Manchester, CT 06040-5545 6,338.418 7.69% 7.69%**
Class C A G Edwards & Sons Inc
FBO
Elizabeth Wolf Paules
Tier U/A DTD 9/24/97
A/C 0800-064562
1 N Jefferson Ave.
Saint Louis, MO
63103-2205 2,172.024 26.16% 26.16%
First Clearing LLC
A/C 6842-9483
Peter Prox and
10300 Amerside Court
Roswell, GA 30076-3755 1,019.937 12.28% 12.28%**
</Table>
B-1
<Table>
<Caption>
PERCENTAGE OF
OUTSTANDING
PERCENTAGE OF SHARES OF CLASS
NUMBER OF OUTSTANDING OWNED UPON
FUND NAME AND ADDRESS OUTSTANDING SHARES SHARES OF CLASS CONSUMMATION
AND CLASS OF SHAREHOLDER OF CLASS OWNED OWNED OF ACQUISITION*
- --------- ------------------------- ------------------ --------------- ---------------
LPL Financial Services
A/C 5997-3871
9785 Towne Centre Dr
San Diego, CA 92121-1968 703.700 8.47% 8.47%
Primevest Financial
Services FBO
Brian L Potter
67268649
P O Box 283
400 1st St S Ste 300
Saint Cloud, MN
56301-3661 681.968 8.21% 8.21%**
NFSC FEBO # W81-084980
NFS/FMTC IRA
FBO J Timothy Stebbins
2106 Alyssa Jade Dr
Henderson, NV 89052-7124 536.673 6.46% 6.46%**
LPL Financial Services
A/C 4629-3039
9785 Towne Centre Dr
San Diego, CA 92121-1968 526.316 6.34% 6.34%**
LPL Financial Services
A/C 3610-3007
9785 Towne Centre Dr
San Diego, CA 92121-1968 478.469 5.76% 5.76%**
Primevest Financial
Services FBO
Leslie Arendale
14042331
P O Box 283
400 1st St S Ste 300
Saint Cloud, MN
56301-3661 473.264 5.70% 5.70%
Class Z Gales & Co
Fleet Investment Services
Mutual Funds Unit-NY/RO/
TO4A
159 E Main St
Rochester, NY 14638-0001 20,077,303.199 58.72% 58.72%
Gales & Co
Fleet Investment Services
Mutual Funds Unit-NY/RO/
TO4A
159 E Main St
Rochester, NY 14638-0001 9,351,448.599 27.35% 27.35%
Gales & Co
Fleet Investment Services
Mutual Funds Unit-NY/RO/
TO4A
159 E Main St
Rochester, NY 14638-0001 3,649,003.839 10.67% 10.67%
</Table>
B-2
<Table>
<Caption>
PERCENTAGE OF
OUTSTANDING
PERCENTAGE OF SHARES OF CLASS
NUMBER OF OUTSTANDING OWNED UPON
FUND NAME AND ADDRESS OUTSTANDING SHARES SHARES OF CLASS CONSUMMATION
AND CLASS OF SHAREHOLDER OF CLASS OWNED OWNED OF ACQUISITION*
- --------- ------------------------- ------------------ --------------- ---------------
INTERNATIONAL
STOCK FUND
Class C NFSC FEBO #W71-347469
Kedar Familytrust
Ofir J Kedar
U/A 08/13/03
27862 Via Corita Way
Los Altos, CA 94022-3230 13,026.950 25.23% 25.23%
A G Edwards & Sons Inc
FBO
Shakuntla D Miller
A/C 0835-067424
1 N Jefferson Ave
Saint Louis, MO
63103-2205 3,725.091 7.22% 7.22%**
Pershing LLC
PO Box 2052
Jersey City, NJ
07303-2052 2,732.919 5.29% 5.29%**
Class Z Fleet National Bank
FBO CMC Omnibus C/C
Attn Various
PO Box 92800
Rochester NY 14692-8900 24,303,708.714 56.63% 56.63%**
Fleet National Bank
FBO CMC Omnibus C/C
Attn Various
PO Box 92800
Rochester, NY 14692-8900 5,382,102.065 12.54% 12.54%**
</Table>
* Percentage owned assuming completion of the proposed merger on February 26,
2005. Unless otherwise indicated, percentage for International Equity Fund
includes shares of International Stock Fund, Inc. owned on February 26, 2005,
and percentage for International Stock Fund, Inc. includes shares of
International Equity Fund owned on February 26, 2005.
** Does not include shares of either International Stock Fund, Inc. or
International Equity Fund owned on February 26, 2005.
B-3
APPENDIX C -- CAPITALIZATION
The following table shows on an unaudited basis the capitalization of
International Equity Fund and International Stock Fund as of October 29, 2004,
and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of International Equity Fund by International Stock Fund
at net asset value as of that date:
<Table>
<Caption>
COLUMBIA
INTERNATIONAL
COLUMBIA COLUMBIA STOCK FUND
INTERNATIONAL INTERNATIONAL PRO FORMA PRO FORMA
EQUITY FUND STOCK FUND ADJUSTMENTS COMBINED(1)
------------- ---------------- ------------ --------------
Class A
Net asset value $ 854,037 $ 25,160,823 $ 42,233,720(2)(3) $ 68,248,580
Shares outstanding 67,015 1,836,504 3,078,292(2) 4,981,811
Net asset value per
share $ 12.74 $ 13.70 $ 13.70
Class B
Net asset value $ 952,815 $ 10,439,917 $ (342)(3) $ 11,392,390
Shares outstanding 75,651 776,489 (4,761) 847,379
Net asset value per
share $ 12.59 $ 13.45 $ 13.44
Class C
Net asset value $ 103,877 $ 679,120 $ (25)(3) $ 782,972
Shares outstanding 8,297 50,317 (603) 58,011
Net asset value per
share $ 12.52 $ 13.50 $ 13.50
Class D
Net asset value $ -- $ 741,039 $ (21)(3) $ 741,018
Shares outstanding -- 54,708 -- 54,708
Net asset value per
share $ -- $ 13.55 $ -- $ 13.55
Class G
Net asset value $ 4,906,504 $ -- $ (262)(4) $ 4,906,242
Shares outstanding 392,599 -- (27,551) 365,048
Net asset value per
share $ 12.50 $ -- $ 13.44
Class T
Net asset value $ 42,236,719 $ -- $(42,236,719)(2) $ --
Shares outstanding 3,323,603 -- (3,323,603) --
Net asset value per
share $ 12.71 $ -- $ --
Class Z
Net asset value $454,708,208 $596,042,802 $ (40,846)(3) $1,050,710,164
Shares outstanding 35,112,698 43,153,108 (2,188,443) 76,077,363
Net asset value per
share $ 12.95 $ 13.81 $ 13.81
</Table>
(1) Assumes the Acquisition was consummated on October 29, 2004, and is for
information purposes only. No assurance can be given as to how many shares
of International Stock Fund will be received by the shareholders of
International Equity Fund on the date the Acquisition takes place, and the
foregoing should not be relied upon to reflect the number of shares of
International Stock Fund that actually will be received on or after such
date.
(2) Includes net assets and shares from Class T shares. Shareholders of Class T
shares will receive Class A shares on the date of the Acquisition.
(3) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $26,869 and $17,626 to be borne by International
Equity Fund and International Stock Fund, respectively.
C-1
(4) Class G shares of International Equity Fund are exchanged for new Class G
shares of International Stock Fund to be established upon consummation of
the merger. Initial per share value of Class G shares is presumed to equal
that of current Class B shares.
C-2
APPENDIX D
INFORMATION APPLICABLE TO CLASS A, CLASS B, CLASS C AND CLASS Z SHARES OF
INTERNATIONAL STOCK FUND
LITIGATION AND OTHER MATTERS
1. Columbia Management Advisors, Inc. ("CMA"), the fund's adviser, and Columbia
Funds Distributor, Inc. ("CFDI") the distributor of the Fund's shares, and
certain of their affiliates (collectively, "Columbia") have received information
requests and subpoenas from various regulatory and law enforcement authorities
in connection with their investigations of late trading and market timing in
mutual funds. Columbia has not uncovered any instances where CMA or CFDI were
knowingly involved in late trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against CMA and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil complaint in New York Supreme Court, County of New York
against CMA and CFDI alleging that CMA and CFDI had violated certain New York
anti-fraud statutes. If either CMA or CFDI is unsuccessful in its defense of
these proceedings, it could be barred from serving as an investment adviser or
distributor for any investment company registered under the Investment Company
Act of 1940, as amended (a "registered investment company"). Such results could
affect the ability of CMA, CFDI or any company that is an affiliated person of
CMA and CFDI from serving as an investment adviser or distributor for any
registered investment company, including your fund. Your fund has been informed
by CMA and CFDI that, if these results occur, they will seek exemptive relief
from the SEC to permit them to continue to serve as your fund's investment
adviser and distributor. There is no assurance that such exemptive relief will
be granted. On March 15, 2004, CMA and CFDI entered into agreements in principle
with the SEC Division of Enforcement and NYAG in settlement of the charges.
Under the agreements, CMA and CFDI agreed, inter alia, to the following
conditions: payment of $70 million in disgorgement; payment of $70 million in
civil penalties; an order requiring CMA and CFDI to cease and desist from
violations of the antifraud provisions and other provisions of the federal
securities laws; governance changes designed to maintain the independence of the
mutual fund boards of trustees and ensure compliance with securities laws and
their fiduciary duties; and retention of an independent consultant to review
CMA's and CFDI's compliance policies and procedures. The agreement requires the
D-1
final approval of the SEC. In a separate agreement with the NYAG, Columbia has
agreed to reduce mutual fund fees by $80 million over a five-year period.
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 fund.
2. On April 1, 2004, FleetBoston Financial Corporation was acquired by Bank of
America Corporation. As a result of this acquisition, CMA and CFDI are now
indirect wholly-owned subsidiaries of Bank of America Corporation.
HOW TO BUY SHARES
Your financial advisor can help you establish an appropriate investment
portfolio, buy shares and monitor your investments. When the Fund or your
financial advisor receives your purchase request in "good form," your shares
will be bought at the next calculated public offering price. "Good form" means
that you placed your order with your financial advisor or your payment has been
received and your application is complete, including all necessary signatures.
The USA Patriot Act may require us to obtain certain personal information from
you which we will use to verify your identity. If you do not provide the
information, we may not be able to open your account. If we are unable to verify
your customer information, we reserve the right to close your account or take
such other steps as we deem reasonable.
Notice to Fund Shareholders: Class D shares are closed to new investors and new
accounts. The Fund now offers Class C shares, which are subject to the same
service and distribution fees and sales charges as Class D shares except Class C
shares are not subject to a front-end sales charge. The Fund's advisor has
agreed to waive indefinitely the front-end sales charge for purchases of Class D
shares by existing Class D investors. For more information on expenses and sales
charges for Class C shares, see "The Fund -- Your Expenses" and "Your
Account -- Sales Charges" in this Prospectus.
D-2
INVESTMENT MINIMUMS
<Table>
Initial Investment $1,000
Subsequent Investments $ 50
Automatic Investment Plan* $ 50
Retirement Plan* $ 25
</Table>
- ---------------
* The initial investment minimum of $1,000 is waived on these plans.
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.
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR BUYING SHARES:
<Table>
<Caption>
METHOD INSTRUCTIONS
Through your financial advisor Your financial advisor can
help you establish your
account and buy Fund shares on
your behalf. To receive the
current trading day's price,
your financial advisor must
receive your request prior to
the close of the New York
Stock Exchange (NYSE), usually
4:00 p.m. Eastern time. Your
financial advisor may charge
you fees for executing the
purchase for you.
By check (new account) For new accounts send a
completed application and
check made payable to the Fund
and mailed to Columbia Funds
Services, Inc., P.O. Box 8081,
Boston, MA 02266-8081.
</Table>
D-3
<Table>
<Caption>
METHOD INSTRUCTIONS
By check (existing account) For existing accounts fill out
and return the additional
investment stub included in
your quarterly statement, or
send a letter of instruction
including your 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.
By exchange You or your financial advisor
may acquire shares of the Fund
for your account by exchanging
shares you own in a different
fund distributed by Columbia
Funds Distributor, Inc. for
shares of the same class 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 You may purchase shares by
wiring money from your bank
account to your Fund account.
To wire funds to your Fund
account, call 1-800-422-3737
for wiring instructions.
By electronic funds transfer You may purchase shares by
electronically transferring
money from your bank account
to your 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." You must set up
this feature prior to your
telephone request. Be sure to
complete the appropriate
section of the application.
</Table>
D-4
<Table>
<Caption>
METHOD INSTRUCTIONS
Automatic investment plan You can make monthly or
quarterly investments
automatically from your bank
account to your Fund account.
You can 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 cost You can purchase shares of the
averaging Fund for your account by
exchanging $100 or more each
month from another fund for
fund shares of the same class
at no additional cost. You
must have a current balance of
at least $5,000 in the fund
the money is coming from.
Exchanges will continue so
long as your fund balance is
sufficient to complete the
transfers. You may terminate
your 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 diversification You may automatically invest
dividends distributed by
another fund into the same
class of shares of the Fund at
no additional sales charge. To
invest your dividends in the
Fund, call 1-800-345-6611.
</Table>
SALES CHARGES
You may be subject to an initial sales charge when you purchase, or a contingent
deferred sales charge (CDSC) when you sell, 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.
D-5
CHOOSING A SHARE CLASS
Each share class has its own sales charge and expense structure. Determining
which share class is best for you depends on the dollar amount you are investing
and the number of years for which you are willing to invest. If your 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 your personal situation, your financial advisor can help you decide
which class of shares makes the most sense for you.
The Fund also offers an additional class of shares, Class Z shares, exclusively
to certain institutional and other investors. Class Z shares are made available
through a separate prospectus provided to eligible institutional and other
investors.
HOW TO SELL SHARES
Your financial advisor can help you determine if and when you should sell your
shares. You may sell shares of the fund on any regular business day that the
NYSE is open.
When the fund or your financial advisor receives your sales request in "good
form," shares will be sold at the next calculated price. "Good form" means that
money used to purchase your shares is fully collected. When selling shares by
letter of instruction, "good form" also means (i) your letter has complete
instructions, the proper signatures and Medallion Signature Guarantees, (ii) you
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 1-800-345-6611 for more information.
The fund will generally send proceeds from the sale to you within seven days
(usually on the next business day after your request is received in "good
form"). However, if you purchased your shares by check, the fund may delay
sending the proceeds from the sale of your shares for up to 15 days after your
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.
D-6
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR SELLING SHARES:
<Table>
<Caption>
METHOD INSTRUCTIONS
Through your financial advisor You may call your financial
advisor to place your sell
order. To receive the current
trading day's price, your
financial advisor must receive
your request prior to the
close of regular trading on
the NYSE, usually 4:00 p.m.
Eastern time. Your financial
advisor may charge you fees
for executing a redemption for
you.
By exchange You or your financial advisor
may sell shares 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. Class A share
exchange privileges may be
limited. Please see "How to
Exchange Shares" for more
information.
By telephone You or your financial advisor
may sell shares by telephone
and request that a check be
sent to your address of record
by calling 1-800-422-3737,
unless you have 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. You do not need to set
up this feature in advance of
your call. Certain
restrictions apply to
retirement accounts. For
details, call 1-800-799-7526.
</Table>
D-7
<Table>
<Caption>
METHOD INSTRUCTIONS
By mail You may send a signed letter
of instruction to the address
below. In your letter of
instruction, note the fund's
name, share class, account
number, and the dollar value
or number of shares you wish
to sell. 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 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 your letter of
instruction to Columbia Funds
Services, Inc., P.O. Box 8081,
Boston, MA 02266-8081.
By wire You may sell shares and
request that the proceeds be
wired to your bank. You must
set up this feature prior to
your telephone request. Be
sure to complete the
appropriate section of the
account application for this
feature.
</Table>
D-8
<Table>
<Caption>
METHOD INSTRUCTIONS
By systematic withdrawal plan You may automatically sell a
specified dollar amount or
percentage of your account on
a monthly, quarterly or
semi-annual basis and have the
proceeds sent to you if your
account balance is at least
$5,000. This feature is not
available if you hold your
shares in certificate form.
All dividend and capital gains
distributions must be
reinvested. Be sure to
complete the appropriate
section of the account
application for this feature.
By electronic funds transfer You may sell shares and
request that the proceeds be
electronically transferred to
your bank. Proceeds may take
up to two business days to be
received by your bank. You
must set up this feature prior
to your request. Be sure to
complete the appropriate
section of the account
application for this feature.
</Table>
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 Directors 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 that are deemed
material by the fund in any 28-day period, the fund will
D-9
generally 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, the fund imposes 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 generally
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
D-10
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.
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.
The fund will assess, subject to limited exceptions, a 2.00% redemption fee on
the proceeds of fund shares that are redeemed (either by selling shares or
exchanging into another Columbia Fund) within 60 days of their purchase. The
redemption fee is paid to the fund.
The redemption fee is imposed on fund shares redeemed (including redemptions by
exchange) within 60 days of purchase. In determining which shares are being
redeemed, we generally apply a first-in, first-out approach. For fund shares
acquired by exchange, the holding period prior to the exchange will not be
considered in determining whether to assess the redemption fee.
The redemption fee will not be imposed if you qualify for a waiver and the fund
has received proper notification, unless the waiver is automatic as noted below.
We'll redeem any shares that are eligible for a waiver first.
The fund shareholder won't pay an otherwise applicable redemption fee on any of
the following transactions:
- - shares sold following the death or disability (as defined in the tax code) of
the shareholder, including a registered joint owner
- - shares sold by or distributions from participant directed retirement plans,
such as 401(k), 403(b) 457, Keogh, profit sharing, and money purchase pension
accounts, where the fund does not have access to information about the
individual participant account activity, except where the fund has received an
indication that the plan administrator is able to assess the redemption fee to
the appropriate accounts (automatic)
- - shares sold by certain investment funds, including those that Columbia
Management Advisors or its affiliates may manage (automatic)
- - shares sold as part of an automatic rebalancing within an asset allocation
program or by certain wrap programs where the program sponsor has provided
assurances reasonably satisfactory to the fund that the program is not
designed to be a vehicle for market timing
D-11
- - shares sold by accounts maintained by a financial institution or intermediary
where the fund has received information reasonably satisfactory to the fund
indicating that the financial institution or intermediary maintaining the
account is unable for administrative reasons to assess the redemption fee to
underlying shareholders
- - shares sold by an account which has demonstrated a hardship, such as a medical
emergency, as determined in the absolute discretion of the fund
- - shares that were purchased by reinvested dividends (automatic)
- - the following retirement plan distributions:
- lump-sum or other distributions from a qualified corporate or self-
employed retirement plan following retirement (or following attainment
of age 59 1/2 in the case of a "key employee" of a "top heavy" plan)
- distributions from an individual retirement account (IRA) or Custodial
Account under Section 403(b)(7) of the tax code, following attainment of
age 59 1/2
The fund also has the discretion to waive the 2.00% redemption fee if the fund
is in jeopardy of failing the 90% income test or losing its RIC qualification
for tax purposes.
As described above, certain intermediaries do not assess redemption fees to
certain categories of redemptions that do not present significant market timing
concerns (such as automatic withdrawal plan redemptions). In these situations,
the fund's ability to assess redemption fees is generally limited by the
intermediary's policies and, accordingly, no redemption fees will be assessed on
such redemptions.
OTHER INFORMATION ABOUT YOUR ACCOUNT
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 (typically Monday through Friday). Shares are
not priced on days on which the NYSE is closed for trading.
When you request a transaction, it will be processed at the net asset value
(plus any applicable sales charges) next determined after your request is
received in "good form" by the distributor. In most cases, in order to receive
that day's price, the distributor must receive your order before that day's
transactions are processed. If you request a transaction through your
D-12
financial advisor, your financial advisor must receive your order by the close
of trading on the NYSE to receive that day's price.
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. This will affect the fund's net asset value on the day it is next
determined. 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.
You can find the daily prices of some share classes for the fund in most major
daily newspapers under the caption "Columbia." You can find daily prices for all
share classes by visiting www.columbiafunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other than as a result
of depreciation in share value), your account may be subject to an annual fee of
$10. The fund's transfer agent will send you written notification of any such
action and provide details on how you can add money to your account to avoid
this penalty.
SHARE CERTIFICATES Share certificates are not available for any class of shares
offered by the fund.
D-13
DIVIDENDS, DISTRIBUTIONS AND TAXES The fund has the potential to make the
following distributions:
TYPES OF DISTRIBUTIONS
<Table>
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.
</Table>
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. As a shareholder, you are entitled to a portion of the fund's
income and capital gains, generally based on the number of shares you own at the
time these distributions are declared.
DISTRIBUTION OPTIONS The fund declares and pays dividends annually and any
capital gains (including short-term capital gains) at least annually. You can
choose one of the options listed in the table below for these distributions when
you open your account. To change your distribution option, call 1-800-345-6611.
If you do not indicate on your application or at the time your account is
established your 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 your 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 your address of record
- - send the check to a third party address
- - transfer the money to your bank via electronic funds transfer
D-14
Distributions of $10 or less will automatically be reinvested in additional fund
shares. If you elect to receive distributions by check and the check is returned
as undeliverable, or if you do not cash a distribution check within six months
of the check date, the distribution will be reinvested in additional shares of
the fund and subsequent distributions will be reinvested.
TAX CONSEQUENCES Unless you are an entity exempt from income taxes or invest
under a retirement account, regardless of whether you receive your distributions
in cash or reinvest them in additional fund shares, all fund distributions are
subject to federal income tax. Depending on where you live, 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 you have held your fund shares. You will
be provided with information each year regarding the amount of ordinary income
and capital gains distributed to you for the previous year and any portion of
your distribution which is exempt from state and local taxes. Your investment in
the fund may have additional personal tax implications. Please consult your 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,
you may realize a capital gain or loss when selling and 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 Advisors, Inc. (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 Directors. 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 Management Group,
Inc. (Columbia), which is an indirect wholly owned subsidiary of FleetBoston
Financial Corporation. Columbia Management, a registered investment advisor, has
been an investment advisor since 1969.
D-15
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 MANAGER
PENELOPE L. BURGESS, a Senior Vice President of Columbia Management, is a
co-manager for the fund and has co-managed the fund since July, 2004. Ms.
Burgess has served as an equity analyst for the fund since 1997. Ms. Burgess has
been associated with Columbia Management or its predecessors since November,
1993.
DEBORAH F. SNEE, a Senior Vice President of Columbia Management, is a co-manager
for the fund and has co-managed the 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 1993-1998.
INFORMATION APPLICABLE TO CLASS A, CLASS B AND CLASS C SHARES
CLASS A SHARES Your purchase 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 your initial investment when you open your account. The sales charge
you pay on an additional investment is based on the total amount of your
purchase and the current value of your account. Shares you purchase with
reinvested dividends or other distributions are not subject to a sales charge. A
portion of the sales charge is paid as a commission to your financial advisor on
the sale of Class A shares. The amount of the sales charge differs depending on
the amount you invest as shown in the table below.
CLASS A SALES CHARGES
<Table>
<Caption>
AS A % OF % OF OFFERING
THE PUBLIC AS A % OF PRICE RETAINED
OFFERING YOUR BY FINANCIAL
AMOUNT PURCHASED PRICE INVESTMENT 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
</Table>
D-16
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 your 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
<Table>
<Caption>
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
</Table>
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 you sell your shares. You will pay the CDSC only on
shares you sell 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 you purchase with reinvested dividends or other distributions are not
subject to a CDSC. When you place an order to sell shares, the fund will
automatically sell first those shares not subject to a CDSC and then those you
have held the longest.
D-17
REDUCED SALES CHARGES FOR LARGER INVESTMENTS
A. WHAT ARE THE PRINCIPAL WAYS TO OBTAIN A BREAKPOINT DISCOUNT?
There are two principal ways you may 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 you and each member of your immediate family may be combined with
the value of your 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 your current purchase. To calculate the combined value of the
accounts, the Fund will use the shares' current public offering price.
STATEMENT OF INTENT. You also may pay a lower sales charge when purchasing
Class A shares by signing a Statement of Intent. By doing so, you 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
your Statement of Intent purchases are not completed within 13 months, you will
be charged the applicable sales charge on the amount you had invested to that
date. To calculate the total value of your Statement of Intent purchases, the
Fund will use the historic cost (i.e., dollars invested) of the shares held in
each eligible account. You must retain all records necessary to substantiate
historic costs because the Fund and your financial intermediary may not maintain
this information. Upon request, a Statement of Intent may apply to purchases
made 90 days prior to the date of 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 your "immediate
family" include your spouse, parent, step parent, legal guardian,
D-18
child, step child, father-in-law and mother-in-law. Eligible accounts include
those registered in the name of your dealer or other financial intermediary
through which you own Columbia fund shares. The value of your investment in a
Columbia money market fund held in an eligible account may be aggregated with
your 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 your account
is maintained with the Columbia family of funds. To obtain any of the above
breakpoint discounts, you must notify your financial advisor at the time you
purchase shares of the existence of each eligible account maintained by you or
your immediate family. It is the sole responsibility of your financial advisor
to ensure that you receive discounts for which you are eligible and the Fund is
not responsible for a financial advisors' failure to apply the eligible discount
to your account. You may be asked by the Fund or your financial advisor for
account statements or other records to verify your discount eligibility,
including, where applicable, records for accounts opened with a different
financial advisor and records of accounts established by members of your
immediate family. If you own shares exclusively through an account maintained
with the Fund's transfer agent, Columbia Funds Services, Inc., you will need to
provide the foregoing information to a Columbia Funds Services, Inc.
representative at the time you purchase shares.
D. HOW CAN I OBTAIN MORE INFORMATION ABOUT BREAKPOINT DISCOUNTS?
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 Your purchases of Class B shares are 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
D-19
your 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
<Table>
<Caption>
% DEDUCTED
WHEN SHARES
HOLDING PERIOD AFTER PURCHASE 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
</Table>
Commission to financial advisors is 4.00%.
Automatic conversion to Class A shares occurs eight years after purchase.
You can pay a lower CDSC and reduce the holding period 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 your financial advisor to see whether
it participates in the discount program for larger purchases. For participating
financial advisors, Rights of Accumulation apply, so that if the combined value
of the fund accounts in all classes maintained by you, your spouse or your minor
children, together with the value of your current purchase, is at or above a
discount level, your current purchase will be subject to the lower CDSC and the
applicable reduced holding period; provided that you have notified your
financial advisor in writing of the identity of such other accounts and your
relationship to the other account holders.
D-20
PURCHASES OF $250,000 TO LESS THAN $500,000:
CLASS B SALES CHARGES
<Table>
<Caption>
% DEDUCTED
WHEN SHARES
HOLDING PERIOD AFTER PURCHASE ARE SOLD
- ----------------------------- -----------
Through first year 3.00
Through second year 2.00
Through third year 1.00
Longer than three years 0.00
</Table>
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
<Table>
<Caption>
% DEDUCTED
WHEN SHARES
HOLDING PERIOD AFTER PURCHASE ARE SOLD
- ----------------------------- -----------
Through first year 3.00
Through second year 2.00
Through third year 1.00
</Table>
Commission to financial advisors is 1.75%.
Automatic conversion to Class A shares occurs three years after purchase.
If you exchange into a fund participating in the Class B share discount program
or transfer your 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. Your financial advisor will receive
the lower commission for purchases in excess of the applicable discount level.
If you exchange from a participating fund or transfer your 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.
D-21
CLASS C SHARES Your purchases of Class C shares are at Class C's net asset
value. Class C shares have no front-end sales charge, but they do carry a CDSC
of 1.00% that is applied to shares sold within the first year after they are
purchased. After holding the shares for one year, you may sell them at any time
without paying a CDSC. The distributor pays your financial advisor an up front
commission of 1% on sales of Class C shares.
CLASS C SALES CHARGES
<Table>
<Caption>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
- ----------------------------- ---------------
Through first year 1.00
Longer than one year 0.00
</Table>
HOW TO EXCHANGE SHARES
You may exchange your 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 your shares are subject to a CDSC, you will not be
charged a CDSC upon the exchange. However, when you sell the shares acquired
through the exchange, the shares sold may be subject to a CDSC, depending upon
when you originally purchased the shares you are exchanging. For purposes of
computing the CDSC, the length of time you have owned your shares will be
computed from the date of your original purchase and the applicable CDSC will be
the CDSC of the original fund. Unless your account is part of a tax-deferred
retirement plan, an exchange is a taxable event, and you may realize a gain or a
loss for tax purposes. In addition, if you acquired Class A shares of the Fund
by exchange from another Fund, you will not be permitted to exchange those
shares into another fund for 30 calendar days. You may, however, redeem those
shares at any time. The fund may terminate your exchange privilege if the
advisor determines that your 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 your
account and taxpayer identification number available when calling.
If you acquired Class A shares of the fund by exchange from another fund, you
will not be permitted to exchange those shares into another fund for 30 calendar
days, although you may redeem those shares at any time. An exchange order
received prior to the expiration of the 30-day period will not be honored.
D-22
DISTRIBUTION AND SERVICE FEES
RULE 12b-1 PLAN The fund has adopted a plan under Rule 12b-1 that permits it to
pay the fund's distributor marketing and other fees to support the sale and
distribution of Class B and C shares. The plan also permits the fund to pay your
financial advisor fees for certain services provided regarding your Class A, B
and C shares. The annual service fee may equal up to 0.25% for each of Class A,
Class B and Class C shares. The annual distribution fee may equal up to 0.75%
for each of Class B and Class C shares. Distribution and service fees are paid
out of the assets of these classes. Over time, these fees will reduce the return
on your investment and may cost you 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 you purchased your shares. See "Your Account -- Sales Charges" for
the conversion schedules applicable to Class B shares.
ADDITIONAL INTERMEDIARY COMPENSATION In addition to the commissions specified
in this prospectus, 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
funds 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.
D-23
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 YOUR
FINANCIAL SERVICE FIRM OR INTERMEDIARY FOR DETAILS ABOUT PAYMENTS IT MAY
RECEIVE.
INFORMATION APPLICABLE TO CLASS Z SHARES
ELIGIBLE INVESTORS
Only Eligible Investors may purchase Class Z shares of the fund, directly or by
exchange. The Eligible Investors described below are subject to different
minimum initial investment requirements. Eligible Investors and their applicable
investment minimums are as follows:
$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. (CFDI) (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 funds
merged with funds distributed by CFDI;
- - Any trustee or director (or family member of a trustee or director) of any
fund distributed by CFDI; and
- - Any employee (or family member of an employee) of FleetBoston Financial
Corporation or its subsidiaries.
$100,000 MINIMUM INITIAL INVESTMENT
- - Clients of broker-dealers or registered investment advisors that both
recommend the purchase of fund shares and charge such clients an asset-based
fee; and
- - Any insurance company, trust company, bank, endowment, investment company or
foundation purchasing shares for its own account.
NO MINIMUM INITIAL INVESTMENT
- - Any client of Fleet National Bank or a subsidiary (for shares purchased
through an asset management, trust, retirement plan administration or similar
arrangement with Fleet National Bank or the subsidiary);
D-24
- - A retirement plan (or the custodian for such plan) with aggregate plan assets
of at least $5 million at the time of purchase and which purchases shares
directly from CFDI or through a third party broker-dealer;
- - Investors purchasing through Columbia Management Group state tuition plans
organized under Section 529 of the Internal Revenue Code; and
- - 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.
The fund reserves the right to change the criteria for eligible investors and
these investment minimums. No minimum investment applies to accounts
participating in the automatic investment plan, however, each investment
requires a $25 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.
SALES CHARGES
Your 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 contingent deferred sales charge when
sold.
HOW TO EXCHANGE SHARES
You may exchange your shares for Class Z or Class A (only if Class Z is not
offered) shares of another fund distributed by Columbia Funds Distributor, Inc.
at net asset value. Unless your account is part of a tax-deferred retirement
plan, an exchange is a taxable event, and you may realize a gain or a loss for
tax purposes. The fund may terminate your exchange privilege if the advisor
determines that your 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 your account
and taxpayer identification number available when calling.
D-25
APPENDIX E
FINANCIAL HIGHLIGHTS FOR INTERNATIONAL STOCK FUND
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Class A, B, C or Z share (there were no Class G
shares outstanding during the periods shown in the tables). The total returns in
the table represent the rate that you would have earned (or lost) on an
investment in the fund (assuming reinvestment of all dividends and
distributions). This information 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. You can request a free
annual report by calling 1-800-426-3750.
<Table>
<Caption>
YEAR ENDED PERIOD ENDED PERIOD ENDED
AUGUST 31, AUGUST 31, DECEMBER 31,
2004 2003(A) 2002(B)
CLASS A SHARES ---------- ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD($)......... 11.34 10.05 10.04
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c)................. 0.01 0.04 (0.02)
Net realized and unrealized gain on investments,
foreign currency and foreign capital gains
tax............................................ 1.69 1.25 0.03
------ ------ ------
Total from investment operations................ 1.70 1.29 0.01
------ ------ ------
REDEMPTION FEES:
Redemption fees added to paid-in capital........ --(c)(d) -- --
------ ------ ------
NET ASSET VALUE, END OF PERIOD($)............... 13.04 11.34 10.05
Total return(%)(e).............................. 14.99(f) 12.84(g) 0.10(g)
------ ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)($)..... 24,119 21,664 20,178
Ratio of expenses to average net assets(%)(h)... 1.72 1.90(i) 1.86(i)
Ratio of net investment income (loss) to average
net assets(%)(h)............................... 0.10 0.61(i) (0.39)(i)
Waiver(%)....................................... 0.09 -- --
Portfolio turnover rate(%)...................... 90 43(g) 96
</Table>
- ---------------
(a) The fund changed its fiscal year end from December 31 to August 31.
(b) 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 $0.01 per share.
(e) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(f) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
E-1
<Table>
<Caption>
YEAR ENDED PERIOD ENDED PERIOD ENDED
AUGUST 31, AUGUST 31, DECEMBER 31,
2004 2003(A) 2002(B)
CLASS B SHARES ---------- ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD($)........ 11.23 10.02 10.04
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss(c)......................... (0.09) (0.03) (0.05)
Net realized and unrealized gain on
investments, foreign currency and foreign
capital gains tax............................. 1.67 1.24 0.03
------ ------ ------
Total from investment operations............... 1.58 1.21 (0.02)
------ ------ ------
REDEMPTION FEES:
Redemption fees added to paid-in capital....... --(c)(d) -- --
------ ------ ------
NET ASSET VALUE, END OF PERIOD($).............. 12.81 11.23 10.02
Total return(%)(e)(f).......................... 14.07 12.08(g) (0.20)(g)
------ ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)($).... 10,221 10,316 10,920
Ratio of expenses to average net
assets(%)(h).................................. 2.50 2.98(i) 3.64(i)
Ratio of net investment loss to average net
assets(%)(h).................................. (0.69) (0.47)(i) (2.17)(i)
Waiver(%)...................................... 0.18 0.11(i) 0.11(i)
Portfolio turnover rate(%)..................... 90 43(g) 96
</Table>
- ---------------
(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 $0.01 per share.
(e) Total return at net asset value assuming no contingent deferred sales
charge.
(f) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
E-2
<Table>
<Caption>
PERIOD ENDED
AUGUST 31,
2004(A)
CLASS C SHARES ------------
NET ASSET VALUE, BEGINNING OF PERIOD($)..................... 12.27
-----
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss(b)...................................... (0.01)
Net realized and unrealized gain on investments, foreign
currency and foreign capital gains tax..................... 0.60
-----
Total from investment operations............................ 0.59
-----
REDEMPTION FEES:
Redemption fees added to paid-in capital.................... --(b)(c)
-----
NET ASSET VALUE, END OF PERIOD($)........................... 12.86
Total return(%)(d)(e)(f).................................... 4.81
-----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)($)................. 632
Ratio of expenses to average net assets(%)(g)(h)............ 2.11
Ratio of net investment loss to average net
assets(%)(g)(h)............................................ (0.05)
Waiver(%)(h)................................................ 0.35
Portfolio turnover rate(%).................................. 90
</Table>
- ---------------
(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 $0.01 per share.
(d) Total return at net asset value assuming no contingent deferred sales
charge.
(e) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
E-3
<Table>
<Caption>
YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31,
AUGUST 31, AUGUST 31, ----------------------------------------
2004 2003(A) 2002(B) 2001 2000 1999
CLASS Z SHARES ---------- ------------ ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF
PERIOD($)........................... 11.40 10.05 12.03 14.77 22.81 15.45
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)........ 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............................... 1.67 1.27 (1.94) (2.74) (5.17) 9.00
------- ------- ------- ------- ------- -------
Total from investment operations..... 1.78 1.34 (1.94) (2.73) (5.21) 8.95
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income.......... (0.04) -- (0.01) (0.01) -- --
From net realized gains............. -- -- -- -- (2.83) (1.59)
Return of capital................... -- -- (0.03) -- -- --
------- ------- ------- ------- ------- -------
Total distributions.................. (0.04) -- (0.04) (0.01) (2.83) (1.59)
------- ------- ------- ------- ------- -------
REDEMPTION FEES:
Redemption fees added to paid-in
capital........................... --(c)(d) 0.01(c) -- -- -- --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD($).... 13.14 11.40 10.05 12.03 14.77 22.81
------- ------- ------- ------- ------- -------
Total return(%)(e)................... 15.65(f) 13.43(f)(g) (16.10)(f) (18.47) (22.64) 57.93
------- ------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)($)....................... 558,082 248,718 143,332 135,626 175,316 239,223
Ratio of expenses to average net
assets(%)(h)........................ 1.10 1.47(i) 1.49 1.56 1.42 1.48
Ratio of net investment income (loss)
to average net assets(%)(h)......... 0.81 1.03(i) (0.02) 0.06 (0.19) (0.35)
Waiver(%)............................ 0.18 0.12(i) 0.12 -- -- --
Portfolio turnover rate(%)........... 90 43(g) 96 130 112 94
</Table>
- ---------------
(a) The fund changed its fiscal year end from December 31 to August 31.
(b) On November 1, 2002, the existing fund shares were renamed 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 all distributions reinvested.
(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.
E-4
APPENDIX F
COMPARISON OF A MASSACHUSETTS
BUSINESS TRUST WITH AN OREGON CORPORATION
As a series of Trust XI, a Massachusetts business trust, International Equity
Fund is subject to the provisions of Trust XI's Declaration of Trust and Bylaws.
The provisions of Trust XI's Declaration of Trust and Bylaws differ in some
respects from International Stock Fund's Articles of Incorporation and Bylaws
and Chapter 60 of the Oregon Revised Statutes ("ORS"), referred to as the Oregon
Business Corporations Act ("OBCA"), which governs Oregon corporations.
The following is a summary of significant differences between (i) the
International Stock Fund's Articles of Incorporation and Bylaws and the OBCA and
(ii) Trust XI's Declaration of Trust and Bylaws and Massachusetts business trust
law. For additional information regarding all of the differences, shareholders
of International Equity Fund should refer directly to such documents, copies of
which may be obtained by contacting International Stock Fund at its address
listed on the cover of this Prospectus/Proxy Statement or toll-free at
1-800-426-3750.
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 XI's
Declaration of Trust, however, disclaims shareholder liability for acts or
obligations of Trust XI or International Equity Fund and requires that notice of
that disclaimer be given in each agreement, undertaking, or obligation entered
into or executed by Trust XI, International Equity Fund or Trust XI's Trustees.
Trust XI's Declaration of Trust provides for indemnification out of
International Equity Fund's property for all loss and expense of any shareholder
held personally liable for the obligations of the fund. Thus, the risk of a
shareholder's incurring financial loss from shareholder liability is limited to
circumstances in which International Equity Fund would be unable to meet its
obligations. The likelihood of such a circumstance is considered by
International Equity Fund's adviser to be remote.
Shareholder Voting Rights, Interests and Meetings. The shareholders of
International Equity Fund generally have different and somewhat more limited
rights to vote and to call shareholder meetings than shareholders of
International Stock Fund.
F-1
Trust XI's Declaration of Trust and International Stock Fund's Articles of
Incorporation and Bylaws give shareholders the right to call a special meeting
for the purpose of electing Trustees/directors or for any other purpose (upon
the request of the holders of 10% of the outstanding shares of the respective
fund). Directors of International Stock Fund may only be removed by the
shareholders; a Trustee of Trust XI may only be removed by the Trustees of Trust
XI.
In an election of Trustees of Trust XI, the shareholders of all funds that are
series of Trust XI vote together for a single Board of Trustees for Trust XI. In
an election of directors of International Stock Funds, only shareholders of a
particular fund vote for a Board of Directors for that fund because the funds
are separate corporations.
Neither Trust XI nor International Stock 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 XI
or International Stock Fund call special shareholder meetings from time to time.
The shareholders of Trust XI have the right to vote on a somewhat more limited
category of amendments to Trust XI's Declaration of Trust than the category of
amendments to International Stock Fund's Articles of Incorporation on which its
shareholders have the right to vote. The Trustees may amend Trust XI's
Declaration of Trust without shareholder vote to: change Trust XI's name, supply
any omission, or cure any ambiguous, defective or inconsistent provision.
The Trustees may amend Trust XI's Bylaws (except for Articles IX and X thereof,
which may only be amended by shareholders) without shareholder consent. The
shareholders of Trust XI may also amend its bylaws. The shareholders or board of
directors of International Stock Fund may amend the fund's Bylaws.
A termination of Trust XI or any series of Trust XI may be effected by action of
the Trustees by written notice to the shareholders. The shareholders of
International Stock Fund have the right to vote on a dissolution of the fund,
with a required affirmative vote of the holders of more than 50% of the
outstanding shares of International Stock Fund.
The shareholders of International Equity Fund have the right to vote on a
merger, consolidation or share exchange involving International Equity Fund to
the extent required under the 1940 Act, with a required vote of a majority of
the outstanding shares. The shareholders of International Stock Fund have the
right to vote on a merger, consolidation, share exchange or
F-2
sale of all or substantially all assets, with a required vote of a majority of
the outstanding shares.
The shareholders of International Equity Fund do not have dissenters' rights for
these types of extraordinary transactions. The OBCA provides that the
shareholders of International Stock Fund have dissenters' rights for these types
of extraordinary transactions, although such dissenters' rights may be preempted
by the 1940 Act.
The shareholders of International Equity Fund may vote together with
shareholders of other series of Trust XI on certain matters because of the
single trust structure, whereas the shareholders of International Stock 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 XI would still vote together on matters such as the
election of trustees or ratification of auditors.
Trust XI's Declaration of Trust provides that a majority consent is required for
a shareholder action taken without a meeting. International Stock Fund's Bylaws
provide that unanimous consent is required for a shareholder action taken
without a meeting.
Trust XI's Declaration of Trust provides that a quorum for a shareholder meeting
is a majority of the shares of each class outstanding and entitled to vote at
the meeting. International Stock Fund's Bylaws provide that a quorum for a
shareholder meeting is a majority of the shares entitled to vote at the meeting.
Trust XI'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. International Stock 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 International Equity Fund may put a voting proxy in place for a
duration of up to six months, compared with eleven months for shareholders of
International Stock Fund.
International Stock 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 International Equity
Fund.
Trust XI's Declaration of Trust specifically disclaims any shareholder right to
partition of the assets of International Equity Fund. No such disclaimer is
F-3
present in International Stock Fund's Articles of Incorporation, although Oregon
law limits shareholder rights in dissolution of International Stock Fund.
Director vacancies for International Stock 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 XI 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 International
Stock 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 XI are not so limited.
Directors of International Stock Fund may cause the fund to make loans to, or
guarantees for, directors. In order for Directors of International Stock Fund to
take such action, (i) it must be approved by a majority of outstanding shares,
or (ii) the board must determine that the loan or guarantee benefits the
corporation and must approve the specific loan or guarantee or a general plan
authorizing such items. Trustees of Trust XI are not explicitly authorized to
cause a fund to make loans to, or guarantees for, Trustees.
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 XI's Declaration of Trust.
Director and Trustee Liability and Indemnification. Under the OBCA and
International Stock Fund's Articles of Incorporation, the directors of
F-4
International Stock Fund are not personally liable for monetary damages to
International Stock 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 XI's Declaration of Trust, the
Trustees are liable only for 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 International
Stock 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 judgement, 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.
International Stock 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 (ii) on the basis that personal benefit was improperly received. In
addition, the fund will reimburse the expenses of an officer or director (or the
fund will pay the expenses) in advance of the final disposition of any
proceeding if the person receiving the advance furnishes to the fund (x) written
affirmation of his or her good faith belief that he or she has met with
prescribed standard of conduct and (y) a written undertaking to repay the
advance if it is determined that the person did not meet the standard of
conduct.
Pursuant to Trust XI's Declaration of Trust, Trust XI 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
F-5
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 except with respect to any matter as to which such person shall have
been adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties. Legal expenses may be paid from
time to time by Trust XI in advance of the final disposition of any such
proceeding if Trust XI receives a written undertaking by the indemnified person
to reimburse Trust XI 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.
F-6
COLUMBIA INTERNATIONAL STOCK FUND, INC.
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
December 24, 2004
This Statement of Additional Information (the "SAI") relates to the
proposed Acquisition (the "Acquisition") of Columbia International Equity Fund
(the "Acquired Fund"), a series of Columbia Funds Trust XI, 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 December 24, 2004 (the
"Prospectus/Proxy Statement") which relates to the Acquisition. As described in
the Prospectus/Proxy Statement, the Acquisition 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. 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 your Fund at One
Financial Center, Boston, Massachusetts 02111-2621, or by calling
1-800-426-3750.
-1-
TABLE OF CONTENTS
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND
AND THE ACQUIRED FUND............................................... 3
FINANCIAL STATEMENTS................................................... 3
APPENDIX A............................................................. A-1
-2-
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND AND THE ACQUIRED FUND.
Attached hereto as Appendix A is the Statement of Additional Information of the
Acquiring Fund dated January 1, 2004.
Further information about the Acquired Fund is contained in the Statement of
Additional Information for the Acquired Fund dated February 1, 2004, which is
available upon request and without charge by writing to the Acquired Fund at One
Financial Center, Boston, Massachusetts 02111-2621, or by calling
1-800-426-3750.
FINANCIAL STATEMENTS.
This SAI is accompanied by the Annual Report for the 12 months ended August 31,
2004 of the Acquiring Fund, which report contains historical financial
information regarding the Acquiring Fund. Such report has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
This SAI is accompanied by the Annual Report for the 12 months ended September
30, 2004 of the Acquired Fund, which report contains historical financial
information regarding the Acquired Fund. Such report has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
Pro forma financial statements of the Acquiring Fund for the Acquisition are
provided on the following pages.
-3-
COLUMBIA INTERNATIONAL EQUITY FUND
AND
COLUMBIA INTERNATIONAL STOCK FUND, INC.
PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
-4-
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2004 (UNAUDITED)
NOTE 1. ORGANIZATION
Columbia International Stock Fund (the "Acquiring Fund"), is a diversified
open-end management investment company registered under the Investment Company
Act of 1940, as amended.
INVESTMENT GOAL
The Fund seeks long-term capital appreciation by investing in stocks issued by
companies from at least three countries outside the United States.
FUND SHARES
The Fund may issue an unlimited number of shares. The Fund currently 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.
NOTE 2. BASIS OF COMBINATION
The accompanying pro-forma financial statements are presented to show the effect
of the proposed merger of Columbia International Equity Fund ("Target Fund"), by
the Acquiring Fund as if such merger had occurred on September 1, 2004.
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 Portfolio and Statement of Assets and Liabilities of the Target
and Acquiring Funds have been combined to reflect balances as of August 31,
2004. The Statement of Operations of the Target and Acquiring Funds has been
combined to reflect twelve months ended August 31, 2004. Columbia Management
Advisers, Inc. expects that all of the securities held by the Target Fund would
comply with the investment goal and strategies of the Acquiring Fund.
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-combined periods will
not be re-stated.
The accompanying pro-forma 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 dated August 31, 2004 and
September 30, 2004, respectively.
The following notes refer to the accompanying pro-forma financial statements as
if the above mentioned merger of the Target Fund by the Acquiring Fund had
occurred on September 1, 2004.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Funds in the
preparation of their financial statements.
SECURITY VALUATION
Equity securities are valued at the last sale price on the principal exchange on
which they trade, except for securities traded on the NASDAQ, which are valued
at the NASDAQ official close price. Unlisted securities or listed securities
for which there were no sales during the day are valued at the closing bid price
on such exchanges or over-the-counter markets.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Foreign securities are generally valued at the last sale price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
(Funds') shares are determined as of such times. Foreign currency exchange
rates are generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally,
events affecting the values of such foreign securities and such exchange rates
may occur between the times at which they are determined and the close of the
customary trading session of the NYSE, which would not be reflected in the
computation of the Funds' net asset value. If events materially affecting the
values of such foreign securities occur and it is determined that market
quotations are not reliable, then these foreign securities will be valued at
their fair value using procedures approved by the Board of Trustees.
The Funds may use a systematic fair valuation model provided by an independent
third party to value securities, principally traded in foreign markets, in order
to adjust for possible stale pricing that may occur between the close of the
foreign exchanges and the time for fair valuation. If a security is valued at a
"fair value," such value is likely to be different from the last quoted market
price for the security Investments for which market quotations are not readily
available, or quotations which management believes are not appropriate, are
valued at fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
REPURCHASE AGREEMENTS
The Funds may engage in repurchase agreement transactions with institutions that
each Fund's investment advisor has determined are creditworthy. Each Fund,
through its custodian, receives delivery of underlying securities
collateralizing a repurchase agreement. Collateral is at least equal, at all
times, to the value of the repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty. These risks include possible delays or
restrictions upon each Fund's ability to dispose of the underlying securities
and a possible decline in the value of the underlying securities during the
period while the Fund seeks to assert its rights.
DETERMINATION OF CLASS NET ASSET VALUES
All income, expenses (other than class-specific expenses, as shown on the
Statement of Operations) and realized and unrealized gains (losses), are
allocated to each class of each Fund on a daily basis, based on the relative net
assets of each class, for purposes of determining the net asset value of each
class.
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.
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 value of the Target Fund divided by the net asset value per share of the
Acquiring Fund as of August 31, 2004. The pro-forma number of shares
outstanding, by class, for the combined entity consists of the following at
August 31, 2004.
Shares of Additional Shares Total Shares
Acquiring Fund Assumed Issued Outstanding
Class of Shares Pre-Combination with Merger Post Combination
- --------------- --------------- ----------------- ----------------
Class A 1,849,706 3,218,124 5,067,830
Class B 797,769 69,357 867,126
Class C 49,113 7,576 56,689
Class G - 380,148 380,148
Class Z 42,471,114 32,743,754 75,214,868
NOTE 5. LEGAL PROCEEDINGS
Columbia, the Distributor, and certain of their affiliates (collectively, "The
Columbia Group") have received information requests and subpoenas from various
regulatory and law enforcement authorities in connection with their
investigations of late trading and market timing in mutual funds as well as
other industry wide issues. The Columbia Group has not uncovered any instances
where Columbia or the Distributor were knowingly involved in late trading of
mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and the Distributor, alleging that they had
violated certain provisions of the federal securities laws in connection with
trading activity in mutual fund shares. Also on February 24, 2004, the New York
Attorney General ("NYAG") filed a civil complaint in New York Supreme Court,
County of New York against Columbia and the Distributor alleging that Columbia
and the Distributor had violated certain New York anti-fraud statutes. If
either Columbia or the Distributor is unsuccessful in its defense of these
proceedings, it could be barred from serving as an investment advisor or
distributor for any investment company registered under the Investment Company
Act of 1940, as amended (a "registered investment company"). Such results could
prevent Columbia, the Distributor or any company that is an affiliated person of
Columbia and the Distributor from serving as an investment advisor or
distributor for any registered investment company, including your fund. Your
fund has been informed by Columbia and the Distributor that, if these results
occur, they will seek exemptive relief from the SEC to permit them to continue
to serve as your fund's investment advisor and distributor. There is no
assurance that such exemptive relief will be granted. On March 15, 2004,
Columbia and the Distributor entered into agreements in principle with the
SEC Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and the Distributor agreed, among other things, to the
following conditions: payment of $70 million in disgorgement; payment of $70
million in civil penalties; an order requiring Columbia and the Distributor to
cease and desist from violations of the antifraud provisions and other
provisions of the federal securities laws; governance changes designed to
maintain the independence of the mutual fund boards of trustees and ensure
compliance with securities laws and their fiduciary duties; and retention of an
independent consultant to review Columbia's and the Distributor's compliance
policies and procedures. The agreement requires the final approval of the SEC.
In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc
of America Capital Management, LLC have agreed to collectively reduce mutual
fund fees by $160 million over a five-year period.
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.
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). More than 300 cases (including those filed against
entities unaffiliated with the funds, their Boards and/or FleetBoston and its
affiliated entities) have been consolidated in a multi-district proceeding and
transferred to the Federal District Court in Maryland. Recently, certain
Columbia funds and affiliated entities have been named as defendants in several
derivative actions under various sections of the Investment Company Act of 1940,
as amended, alleging, among other things, that the fees and expenses paid by
those funds are excessive. The funds and the other defendants to these actions,
including Columbia and various of its affiliates, certain other mutual funds
advised by Columbia and its affiliates, and various directors of such funds,
have denied these allegations and are contesting the plaintiffs' claims. These
suits and certain regulatory investigations 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 funds.
For the twelve months ended August 31, 2004, Columbia has assumed legal,
consulting services and Trustees' fees incurred by the Funds in connection with
these matters.
Pro-forma Combining
Statement of Assets & Liabilities
As of August 31, 2004 (Unaudited)
Columbia Columbia Columbia
International International International
Equity Fund Stock Fund Stock Fund
------------- ------------- -------------------
Pro- forma
Target Fund Acquiring Adjustments Pro -forma Combined
------------- ------------- ----------- -------------------
ASSETS
Investments, at cost $ 447,175,983 $ 557,030,399 $ - $ 1,004,206,382
------------- ------------- -------- ---------------
Investments, at value $ 480,743,359 $ 598,724,613 $ - $ 1,079,467,972
Cash 943 627 - 1,570
Foreign currency (cost of $67,443, $48,999, $-, $116,442,
respectively) 67,656 49,167 - 116,823
Receivable for: - -
Investments sold 1,713,088 885,098 - 2,598,186
Fund shares sold 557,804 579,863 - 1,137,667
Interest 800 1,184 - 1,984
Dividends 1,027,685 1,217,846 - 2,245,531
Foreign tax reclaims 408,447 279,912 - 688,359
Deferred Trustees' compensation plan 20,982 2,089 - 23,071
------------- ------------- -------- ---------------
Total Assets 484,540,764 601,740,399 - 1,086,281,163
LIABILITIES
Payable for:
Investments purchased 5,351,626 6,757,019 - 12,108,645
Fund shares repurchased 373,649 407,990 - 781,639
Investment advisory fee 252,475 437,196 - 689,671
Administration fee 24,834 - - 24,834
Transfer agent fee 77,717 42,762 - 120,479
Pricing and bookkeeping fees 8,613 13,420 - 22,033
Trustees' fees - 1,115 - 1,115
Audit fee 23,264 26,010 - 49,274
Custody fee 38,684 59,602 - 98,286
Distribution and service fees 15,387 14,916 - 30,303
Deferred Trustees' fees 20,982 2,089 - 23,071
Foreign capital gains tax payable 183,306 152,481 - 335,787
Other liabilities 27,305 34,532 44,495 (g) 106,332
------------- ------------- -------- ---------------
Total Liabilities 6,397,842 7,949,132 44,495 14,391,469
------------- ------------- -------- ---------------
NET ASSETS $ 478,142,922 $ 593,791,267 $(44,495)(g) 1,071,889,694
------------- ------------- -------- ---------------
COMPOSITION OF NET ASSETS
Paid-in capital $ 747,841,871 $ 582,376,931 $ - $ 1,330,218,802
Undistributed net investment income 4,396,769 2,274,226 (44,495)(g) 6,626,500
Accumulated net realized loss (307,504,846) (32,499,115) - (340,003,961)
Net unrealized appreciation (depreciation) on:
Investments 33,567,376 41,694,214 - 75,261,590
Foreign currency translations 25,059 14,178 - 39,237
Foreign capital gains tax (183,307) (69,167) - (252,474)
------------- ------------- -------- ---------------
NET ASSETS $ 478,142,922 $ 593,791,267 $(44,495) $ 1,071,889,694
------------- ------------- -------- ---------------
CLASS A (d) (e)
Net assets $ 757,765 $ 24,118,642 $ 41,203,920 $ 66,080,327
Shares outstanding 62,383 1,849,706 3,155,741 5,067,830
Net asset value per share (a) $ 12.15 $ 13.04 $ - $ 13.04
Maximum sales charge 5.75% 5.75% - 5.75%
Maximum offering price per share (b) $ 12.89 $ 13.84 $ - $ 13.84
------------ ------------ ------------ ------------
CLASS T (e)
Net assets $ 41,206,994 $ - $(41,206,994) $ -
Shares outstanding 3,401,627 - (3,401,627) -
Net asset value per share (a) $ 12.11 $ - $ - $ -
Maximum sales charge 5.75%
Maximum offering price per share (b) $ 12.85 $ - $ - $ -
------------ ------------ ------------ ------------
CLASS B (d)
Net assets $ 888,953 $ 10,221,053 $ (353) $ 11,109,653
Shares outstanding 73,957 797,769 (4,600) 867,126
Net asset value and offering price per share (a) $ 12.02 $ 12.81 $ - $ 12.81
------------ ------------ ------------ ------------
CLASS C (d)
Net assets $ 97,466 $ 631,698 $ (24) $ 729,140
Shares outstanding 8,157 49,113 (581) 56,689
Net asset value and offering price per share (a) $ 11.95 $ 12.86 $ - $ 12.86
------------ ------------ ------------ ------------
CLASS D
Net assets $ - $ 737,642 $ (22) $ 737,620
Shares outstanding - 57,148 - 57,148
Net asset value and offering price per share (a) $ - $ 12.91 $ - $ 12.91
------------ ------------ ------------ ------------
CLASS G (f)
Net assets $ 4,888,975 $ - $ (275) $ 4,888,700
Shares outstanding 409,937 - (29,789) 380,148
Net asset value and offering price per share (a) $ 11.93 $ - $ - $ 12.86
------------ ------------ ------------ ------------
CLASS Z (d)
Net assets $430,302,769 $558,082,232 $ (40,747) $988,344,254
Shares outstanding 34,875,324 42,471,114 (2,131,570) 75,214,868
Net asset value, offering and redemption price per share (c) $ 12.34 $ 13.14 $ - $ 13.14
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
(c) Redemption price per share is equal to net asset value less any applicable
redemption fees.
(d) Class A, B, C and Z shares of Columbia International Equity Fund are
exchanged for Class A, B, C and Z shares of Columbia International Stock Fund,
respectively, based on the net asset value per share of Columbia International
Stock Fund's Class A,B,C, and Z shares, respectively, at the time of the merger.
(e) Class T shares of Columbia International Equity Fund are exchanged for new
Class A shares of Columbia International Stock Fund, based on the net asset
value per share of Columbia International Stock Fund's Class A shares at the
time of the merger.
(f) Class G shares of Columbia International Equity Fund are exchanged for new
Class G shares of Columbia International Stock Fund, based on the net asset
value per share of Columbia International Stock Fund's Class C shares at the
time of the merger.
(g) Adjustment reflects one time proxy, accounting, legal and other costs of the
reorganization as approved by the Board of Trustees of $26,869 and $17,626 to
be borne by Columbia International Equity Fund and Columbia International Stock
Fund, respectively.
Pro-forma Combining
Statement of Operations
For the Twelve Months Ended August 31, 2004 (Unaudited)
Columbia Columbia
International International
Equity Fund Stock Fund
------------- -------------
Pro-forma Pro-forma
Target Fund Acquiring Adjustments Combined
------------- ------------- ----------- ----------
INVESTMENT INCOME
Dividends $ 9,796,054 $ 10,502,144 $ - $ 20,298,198
Interest 135,672 225,992 - 361,664
Foreign withholding tax (1,010,719) (1,235,663) - (2,246,382)
------------ ------------ --------- ------------
Total Investment Income 8,921,007 9,492,473 - 18,413,480
------------ ------------ --------- ------------
EXPENSES
Investment advisory fee 4,168,359 4,953,878 283,838 9,406,075 (a)
Administration fee 312,763 - (312,763) - (a)
Distribution fee: -
Class B 4,655 83,878 - 88,533 (a)
Class C 633 2,845 - 3,478 (a)
Class D - 5,532 - 5,532 (a)
Class G 34,379 - - 34,379 (c)(g)
Service fee:
Class A 1,595 61,658 111,567 174,820 (a)(f)
Class B 1,546 27,959 - 29,505 (a)
Class C 211 948 - 1,159 (a)
Class D - 1,834 - 1,834 (a)
Class G 15,866 - - 15,866 (c)(g)
Class T 133,888 - (133,888) - (f)
Transfer agent fee:
Class A 1,324 104,768 (16,715) 89,377 (b)(f)
Class B 967 60,592 (46,470) 15,089 (b)
Class C 313 1,099 (762) 650 (b)
Class D - 3,907 (2,964) 943 (b)
Class G 1,574 - 5,188 6,762 (e)(g)
Class T 70,555 - (70,555) - (f)
Class Z 280,730 594,779 243,531 1,119,040 (e)
Pricing and bookkeeping fees 95,006 136,442 (65,209) 166,239 (b)
Trustees' fees 22,501 9,503 (14,834) 17,170 (b)
Custody fee 16,665 321,832 238,999 577,496 (e)
Audit fee 41,981 38,483 (45,464) 35,000 (b)
Non-recurring costs (see Note 5) 22,951 27,108 - 50,059
Other expenses 46,322 237,460 13,114 296,896 (e)
------------ ------------ --------- ------------
Total Expenses 5,274,784 6,674,505 186,613 12,135,902
Expenses waived/reimbursed by Investment Advisor (1,167,611) (373,733) 577,547 (963,797)(a)
Fees waived by Transfer Agent:
Class A (61) (6,795) (70,065) (76,921)(d)(f)
Class B (66) (12,299) (621) (12,986)(d)
Class C (182) (976) 598 (560)(d)
Class D - (3,670) 2,859 (811)(d)
Class G (9,289) - 3,470 (5,819)(d)(g)
Class T (37,491) - 37,491 - (f)
Class Z (32,002) (447,801) (483,277) (963,080)(d)
Custody earnings credit (968) (833) - (1,801)
Non-recurring cost assumed by Investment Advisor (see Note 5) (22,951) (27,108) - (50,059)
------------ ------------ --------- ------------
Net Expenses 4,004,163 5,801,290 254,615 10,060,068
------------ ------------ --------- ------------
Net Investment Income 4,916,844 3,691,183 (254,615) 8,353,412
------------ ------------ --------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX
Net realized gain (loss) on:
Investments 67,371,248 31,660,421 - 99,031,669
Foreign currency transactions (1,359,051) (1,008,219) - (2,367,270)
Foreign capital gains tax (1,497,512) (985,510) - (2,483,022)
------------ ------------ --------- ------------
Net realized gain 64,514,685 29,666,692 - 94,181,377
Net change in unrealized appreciation/depreciation on:
Investments (9,170,160) 12,529,973 - 3,359,813
Foreign currency translations 64,426 95,740 - 160,166
Foreign capital gains tax 769,234 304,088 - 1,073,322
------------ ------------ --------- ------------
Net change in unrealized appreciation/depreciation (8,336,500) 12,929,801 - 4,593,301
------------ ------------ --------- ------------
Net Gain 56,178,185 42,596,493 - 98,774,678
------------ ------------ --------- ------------
Net Increase in Net Assets from Operations $ 61,095,029 $ 46,287,676 $(254,615) $107,128,090
============ ============ ========= ============
(a) Based on the contract in effect for Columbia International Stock Fund, the
surviving fund.
(b) Reflects elimination of duplicate expenses achieved as a result of merging
funds.
(c) Based on the contract in effect for Columbia International Stock Fund's new
Class G shares.
(d) Based on voluntary fee waiver currently in effect for Columbia International
Stock Fund, the surviving fund.
(e) Adjustment to realign Columbia International Equity Fund's fees to Columbia
International Stock Fund's current fee structure.
(f) Class T shares of Columbia International Equity Fund are exchanged for new
Class A shares of Columbia International Stock Fund.
(g) Class G shares of Columbia International Equity Fund are exchanged for new
Class G shares of Columbia International Stock Fund.
Pro-forma Combining
Investment Portfolio
August 31, 2004 (unaudited)
Columbia Columbia
International International
Equity Fund Stock Fund
% of Net Assets Target Fund Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
------------------- ---------------------
SHARES VALUE ($) SHARES VALUE ($)
------------------- ---------------------
COMMON STOCKS
95.3%
CONSUMER DISCRETIONARY 15.0%
Auto Components 0.8%
Denso Corp. 148,100 3,669,518 181,700 4,502,035
Auto Components Total 3,669,518 4,502,035
Automobiles 2.9%
Renault SA 86,041 6,943,664 100,341 8,097,700
Toyota Motor Corp. 188,600 7,478,092 228,300 9,052,218
Automobiles Total 14,421,756 17,149,918
Hotels, Restaurants & Leisure 2.8%
Accor SA 90,670 3,846,270 104,400 4,428,704
Carnival Corp. 68,400 3,132,036 80,000 3,663,200
Compass Group PLC 388,100 2,185,555 467,838 2,634,593
InterContinental Hotels Group PLC 178,859 1,831,452 302,965 3,102,253
OPAP SA 120,620 2,307,327 148,860 2,847,527
Hotels, Restaurants & Leisure Total 13,302,640 16,676,277
Household Durables 2.5%
Funai Electric Co., Ltd. 17,000 2,393,987 20,000 2,816,455
Koninklijke (Royal) Philips Electronics NV 158,121 3,670,349 194,900 4,524,073
Matsushita Electric Industrial Co., Ltd. 347,000 4,699,277 420,000 5,687,886
Nitori Co., Ltd. - - 42,750 2,734,519
Household Durables Total 10,763,613 15,762,933
Media 2.9%
Dentsu, Inc. 692 1,679,475 742 1,800,825
JC Decaux SA (a) 164,500 3,223,793 116,700 2,287,031
News Corp., Ltd. 262,200 2,052,184 437,400 3,423,437
Pearson PLC 314,500 3,526,874 338,200 3,792,651
Reuters Group PLC 308,500 1,789,486 380,300 2,205,969
WPP Group PLC 219,000 1,968,333 349,000 3,136,749
Media Total 14,240,145 16,646,662
Multiline Retail 2.0%
Metro AG (a) 77,265 3,602,052 93,688 4,367,684
Seiyu Ltd. (a) 499,000 1,310,142 691,000 1,814,245
Takashimaya Co., Ltd. 260,000 2,389,128 288,000 2,646,418
Wal-Mart de Mexico SA de CV, Series V 753,600 2,402,005 913,000 2,910,072
Multiline Retail Total 9,703,327 11,738,419
Specialty Retail 0.5%
Aoyama Trading Co., Ltd. 63,300 1,536,623 64,500 1,565,754
Nitori Co., Ltd. 38,150 2,440,278 - -
Specialty Retail Total 3,976,901 1,565,754
Textiles, Apparel & Luxury Goods 0.6%
Burberry Group PLC 468,900 3,074,268 544,846 3,572,196
Textiles, Apparel &
Luxury Goods Total 3,074,268 3,572,196
CONSUMER DISCRETIONARY TOTAL 73,152,168 87,614,194
CONSUMER STAPLES 10.2%
Beverages 1.7%
Diageo PLC 354,330 4,378,393 606,450 7,493,795
ITO EN Ltd. 35,900 1,555,496 44,200 1,915,124
SABMiller PLC 116,699 1,454,968 144,820 1,805,573
Beverages Total 7,388,857 11,214,492
Food & Staples Retailing 0.7%
Aeon Co., Ltd. 58,900 969,203 71,300 1,173,246
Aeon Co., Ltd., New Shares 58,900 983,752 71,300 1,190,858
William Morrison Supermarkets PLC 526,742 1,720,889 588,442 1,922,465
Food & Staples Retailing Total 3,673,844 4,286,569
Food Products 4.1%
Ajinomoto Co., Inc. 199,000 2,255,736 245,000 2,777,162
Columbia International
Stock Fund
Pro Forma Combined
- ----------------------------------------------------------------------------------------------------------------------
--------------------------
SHARES VALUE ($)
--------------------------
COMMON STOCKS
CONSUMER DISCRETIONARY
Auto Components
Denso Corp. 329,800 8,171,553
Auto Components Total 8,171,553
Automobiles
Renault SA 186,382 15,041,364
Toyota Motor Corp. 416,900 16,530,310
Automobiles Total 31,571,674
Hotels, Restaurants & Leisure
Accor SA 195,070 8,274,974
Carnival Corp. 148,400 6,795,236
Compass Group PLC 855,938 4,820,148
InterContinental Hotels Group PLC 481,824 4,933,705
OPAP SA 269,480 5,154,854
Hotels, Restaurants & Leisure Total 29,978,917
Household Durables
Funai Electric Co., Ltd. 37,000 5,210,442
Koninklijke (Royal) Philips Electronics NV 353,021 8,194,422
Matsushita Electric Industrial Co., Ltd. 767,000 10,387,163
Nitori Co., Ltd. 42,750 2,734,519
Household Durables Total 26,526,546
Media
Dentsu, Inc. 1,434 3,480,300
JC Decaux SA (a) 281,200 5,510,824
News Corp., Ltd. 699,600 5,475,621
Pearson PLC 652,700 7,319,525
Reuters Group PLC 688,800 3,995,455
WPP Group PLC 568,000 5,105,082
Media Total 30,886,807
Multiline Retail
Metro AG (a) 170,953 7,969,736
Seiyu Ltd. (a) 1,190,000 3,124,387
Takashimaya Co., Ltd. 548,000 5,035,546
Wal-Mart de Mexico SA de CV, Series V 1,666,600 5,312,077
Multiline Retail Total 21,441,746
Specialty Retail
Aoyama Trading Co., Ltd. 127,800 3,102,377
Nitori Co., Ltd. 38,150 2,440,278
Specialty Retail Total 5,542,655
Textiles, Apparel & Luxury Goods
Burberry Group PLC 1,013,746 6,646,464
Textiles, Apparel & Luxury Goods Total 6,646,464
CONSUMER DISCRETIONARY TOTAL 160,766,362
CONSUMER STAPLES
Beverages
Diageo PLC 960,780 11,872,188
ITO EN Ltd. 80,100 3,470,620
SABMiller PLC 261,519 3,260,541
Beverages Total 18,603,349
Food & Staples Retailing
Aeon Co., Ltd. 130,200 2,142,449
Aeon Co., Ltd., New Shares 130,200 2,174,610
William Morrison Supermarkets PLC 1,115,184 3,643,354
Food & Staples Retailing Total 7,960,413
Food Products
Ajinomoto Co., Inc. 444,000 5,032,898
Columbia Columbia
International International
Equity Fund Stock Fund
% of Net Assets Target Fund Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
------------------- ---------------------
SHARES VALUE ($) SHARES VALUE ($)
------------------- ---------------------
Cadbury Schweppes PLC 282,099 2,273,685 346,930 2,796,216
Nestle SA, Registered Shares 36,944 8,770,799 44,797 10,635,163
Unilever PLC 751,620 6,470,041 897,120 7,722,524
Food Products Total 19,770,261 23,931,065
Household Products 2.7%
Kao Corp. 190,000 4,695,111 233,000 5,757,688
Reckitt Benckiser PLC 308,200 8,136,546 370,420 9,779,167
Household Products Total 12,831,657 15,536,855
Tobacco 1.0%
Imperial Tobacco Group PLC 218,092 4,828,317 268,797 5,950,870
Tobacco Total 4,828,317 5,950,870
CONSUMER STAPLES TOTAL 48,492,936 60,919,851
ENERGY 9.6%
Energy Equipment & Services 0.2%
Saipem S.p.A. 114,000 1,210,142 141,500 1,502,062
Energy Equipment & Services Total 1,210,142 1,502,062
Oil & Gas 9.4%
BP PLC, ADR 1,200,740 10,733,898 259,430 13,931,391
EnCana Corp. 137,600 5,619,618 159,800 6,526,271
ENI S.p.A. 584,681 12,007,280 685,050 14,068,504
Fortum Oyj 166,600 2,346,083 204,600 2,881,205
Norsk Hydro ASA 34,100 2,133,346 38,280 2,394,853
PTT Public Co., Ltd. 949,400 3,422,083 788,100 2,840,682
Shell Transport & Trading Co., PLC 476,500 3,497,958 569,000 4,176,995
Total SA 32,680 6,396,911 39,790 7,788,650
Oil & Gas Total 46,157,177 54,608,551
ENERGY TOTAL 47,367,319 56,110,613
FINANCIALS 22.2%
Commercial Banks 14.2%
Anglo Irish Bank Corp., PLC 149,600 2,494,822 206,000 3,435,383
Banco Popolare di Verona e Novara 164,400 2,714,945 211,600 3,494,418
Banco Popular Espanol SA 50,800 2,762,203 60,780 3,304,856
Bank of Ireland 191,198 2,582,163 231,680 3,128,880
Barclays PLC 905,300 8,435,494 965,610 8,997,457
BNP Paribas SA 38,457 2,343,437 47,554 2,897,776
Credit Agricole SA 225,670 5,716,292 306,871 7,773,139
Credit Suisse Group 61,532 1,932,520 76,212 2,393,572
Danske Bank A/S 101,600 2,461,181 160,000 3,875,875
Deutsche Bank AG, Registered Shares 17,061 1,165,892 21,098 1,441,767
Erste Bank der oesterreichischen Sparkassen AG 62,520 2,388,921 77,309 2,954,016
Hansabank Ltd. 249,147 2,088,412 252,357 2,115,319
HBOS PLC 184,020 2,263,700 328,150 4,036,698
Kookmin Bank (a) 89,900 2,872,305 97,500 3,134,183
Lloyds TSB Group PLC 306,810 2,316,689 366,200 2,765,136
Mitsubishi Tokyo Financial Group, Inc. 405 3,668,128 487 4,410,811
Mizuho Financial Group, Inc. 629 2,562,106 755 3,075,342
National Bank of Greece SA 107,081 2,355,145 125,190 2,753,435
Royal Bank of Scotland Group PLC 243,545 6,819,628 255,071 7,142,374
Skandinaviska Enskilda Banken AB, Class A 251,600 3,552,462 312,200 4,408,103
Societe Generale 26,000 2,235,835 41,900 3,603,133
Sumitomo Mitsui Financial Group, Inc. 383 2,332,200 461 2,807,165
Commercial Banks Total 68,064,480 83,948,838
Diversified Financial Services 1.6%
ING Groep NV 309,300 7,606,368 379,140 9,323,887
Diversified Financial Services Total 7,606,368 9,323,887
Insurance 4.1%
Aegon NV 110,900 1,192,659 137,134 1,474,789
Allianz AG 36,871 3,570,508 45,593 4,415,128
Axa 115,300 2,374,917 185,880 3,828,704
Irish Life & Permanent PLC 204,800 3,128,306 196,100 3,012,174
Millea Holdings, Inc. 349 4,848,530 423 5,876,585
Mitsui Sumitomo Insurance Co., Ltd. 235,000 2,096,146 322,000 2,872,166
T&D Holdings, Inc. 60,500 2,768,520 65,000 2,974,444
Insurance Total 19,979,586 24,453,990
Real Estate 2.3%
Cadbury Schweppes PLC 629,029 5,069,901
Nestle SA, Registered Shares 81,741 19,405,962
Unilever PLC 1,648,740 14,192,565
Food Products Total 43,701,326
Household Products
Kao Corp. 423,000 10,452,799
Reckitt Benckiser PLC 678,620 17,915,713
Household Products Total 28,368,512
Tobacco
Imperial Tobacco Group PLC 486,889 10,779,187
Tobacco Total 10,779,187
CONSUMER STAPLES TOTAL 109,412,787
ENERGY
Energy Equipment & Services
Saipem S.p.A. 255,500 2,712,204
Energy Equipment & Services Total 2,712,204
Oil & Gas
BP PLC, ADR 1,460,170 24,665,289
EnCana Corp. 297,400 12,145,889
ENI S.p.A. 1,269,731 26,075,784
Fortum Oyj 371,200 5,227,288
Norsk Hydro ASA 72,380 4,528,199
PTT Public Co., Ltd. 1,737,500 6,262,765
Shell Transport & Trading Co., PLC 1,045,500 7,674,953
Total SA 72,470 14,185,561
Oil & Gas Total 100,765,728
ENERGY TOTAL 103,477,932
FINANCIALS
Commercial Banks
Anglo Irish Bank Corp., PLC 355,600 5,930,205
Banco Popolare di Verona e Novara 376,000 6,209,363
Banco Popular Espanol SA 111,580 6,067,059
Bank of Ireland 422,878 5,711,043
Barclays PLC 1,870,910 17,432,951
BNP Paribas SA 86,011 5,241,213
Credit Agricole SA 532,541 13,489,431
Credit Suisse Group 137,744 4,326,092
Danske Bank A/S 261,600 6,337,056
Deutsche Bank AG, Registered Shares 38,159 2,607,659
Erste Bank der oesterreichischen Sparkassen AG 139,829 5,342,937
Hansabank Ltd. 501,504 4,203,731
HBOS PLC 512,170 6,300,398
Kookmin Bank (a) 187,400 6,006,488
Lloyds TSB Group PLC 673,010 5,081,825
Mitsubishi Tokyo Financial Group, Inc. 892 8,078,939
Mizuho Financial Group, Inc. 1,384 5,637,448
National Bank of Greece SA 232,271 5,108,580
Royal Bank of Scotland Group PLC 498,616 13,962,002
Skandinaviska Enskilda Banken AB, Class A 563,800 7,960,565
Societe Generale 67,900 5,838,968
Sumitomo Mitsui Financial Group, Inc. 844 5,139,365
Commercial Banks Total 152,013,318
Diversified Financial Services
ING Groep NV 688,440 16,930,255
Diversified Financial Services Total 16,930,255
Insurance
Aegon NV 248,034 2,667,448
Allianz AG 82,464 7,985,636
Axa 301,180 6,203,621
Irish Life & Permanent PLC 400,900 6,140,480
Millea Holdings, Inc. 772 10,725,115
Mitsui Sumitomo Insurance Co., Ltd. 557,000 4,968,312
T&D Holdings, Inc. 125,500 5,742,964
Insurance Total 44,433,576
Real Estate
Mitsubishi Estate Co., Ltd. 396,000 4,489,217 480,000 5,441,475
Sun Hung Kai Properties Ltd. 549,000 5,126,322 737,000 6,881,784
Swire Pacific Ltd., Series A 168,000 1,191,779 208,000 1,475,536
Real Estate Total 10,807,318 13,798,795
FINANCIALS TOTAL 106,457,752 131,525,510
HEALTH CARE 10.9%
Health Care Equipment & Supplies 2.3%
Nobel Biocare Holding AG 11,158 1,581,810 14,880 2,109,458
Smith & Nephew PLC 847,092 7,663,394 887,110 8,025,425
Synthes, Inc. 22,700 2,435,865 28,200 3,026,053
Health Care Equipment & Supplies Total 11,681,069 13,160,936
Pharmaceuticals 8.6%
AstraZeneca PLC 126,600 5,855,043 145,300 6,719,887
Chugai Pharmaceutical Co., Ltd. 225,500 3,334,365 277,000 4,095,872
GlaxoSmithKline PLC 390,284 7,991,734 478,450 9,797,084
Novartis AG, Registered Shares 135,840 6,302,836 160,260 7,435,899
Sanofi-Aventis SA 90,360 6,441,293 107,930 7,693,766
Takeda Pharmaceutical Co., Ltd. 165,200 7,495,359 202,600 9,192,250
Teva Pharmaceutical Industries Ltd., ADR 146,400 3,989,400 215,400 5,869,650
Pharmaceuticals Total 41,410,030 50,804,408
HEALTH CARE TOTAL 53,091,099 63,965,344
INDUSTRIALS 9.4%
Building Products 0.5%
Wienerberger AG 63,689 2,317,482 78,755 2,865,696
Building Products Total 2,317,482 2,865,696
Commercial Services & Supplies 1.0%
Randstad Holding NV 134,400 4,112,541 205,218 6,279,520
Commercial Services & Supplies Total 4,112,541 6,279,520
Construction & Engineering 2.0%
JGC Corp. 341,000 3,281,969 392,000 3,772,820
Shimizu Corp. 551,000 2,446,467 586,000 2,601,869
Vinci SA 32,710 3,507,072 50,900 5,457,352
Construction & Engineering Total 9,235,508 11,832,041
Electrical Equipment 0.5%
Siemens AG, Registered Shares 35,279 2,425,342 42,778 2,940,880
Electrical Equipment Total 2,425,342 2,940,880
Industrial Conglomerates 1.2%
Hutchison Whampoa Ltd. 307,000 2,420,245 380,000 2,995,743
NIWS Co., Ltd. 420 1,232,431 475 1,393,821
Smiths Group PLC 183,351 2,305,377 225,978 2,841,351
Industrial Conglomerates Total 5,958,053 7,230,915
Machinery 2.7%
Atlas Copco AB, Class B 129,400 4,206,200 212,100 6,894,398
Heidelberger Druckmaschinen AG 78,700 2,332,227 92,000 2,726,364
Linde AG 48,500 2,610,011 49,400 2,658,444
Volvo AB, Class B 71,100 2,445,266 135,200 4,649,788
Machinery Total 11,593,704 16,928,994
Road & Rail 0.5%
Canadian National Railway Co. 58,417 2,667,201 70,785 3,231,899
Road & Rail Total 2,667,201 3,231,899
Trading Companies & Distributors 0.7%
Mitsubishi Corp. 351,000 3,655,753 413,000 4,301,498
Trading Companies & Distributors Total 3,655,753 4,301,498
Transportation Infrastructure 0.3%
BAA PLC - - 289,700 2,907,820
Transportation Infrastructure Total - 2,907,820
INDUSTRIALS TOTAL 41,965,584 58,519,263
INFORMATION TECHNOLOGY 3.6%
Electronic Equipment & Instruments 1.8%
Keyence Corp. 18,800 3,883,509 10,500 2,168,981
Tandberg ASA 253,500 2,270,426 302,600 2,710,181
Mitsubishi Estate Co., Ltd. 876,000 9,930,692
Sun Hung Kai Properties Ltd. 1,286,000 12,008,106
Swire Pacific Ltd., Series A 376,000 2,667,315
Real Estate Total 24,606,113
FINANCIALS TOTAL 237,983,262
HEALTH CARE
Health Care Equipment & Supplies
Nobel Biocare Holding AG 26,038 3,691,268
Smith & Nephew PLC 1,734,202 15,688,819
Synthes, Inc. 50,900 5,461,918
Health Care Equipment & Supplies Total 24,842,005
Pharmaceuticals
AstraZeneca PLC 271,900 12,574,930
Chugai Pharmaceutical Co., Ltd. 502,500 7,430,237
GlaxoSmithKline PLC 868,734 17,788,818
Novartis AG, Registered Shares 296,100 13,738,735
Sanofi-Aventis SA 198,290 14,135,059
Takeda Pharmaceutical Co., Ltd. 367,800 16,687,609
Teva Pharmaceutical Industries Ltd., ADR 361,800 9,859,050
Pharmaceuticals Total 92,214,438
HEALTH CARE TOTAL 117,056,443
INDUSTRIALS
Building Products
Wienerberger AG 142,444 5,183,178
Building Products Total 5,183,178
Commercial Services & Supplies
Randstad Holding NV 339,618 10,392,061
Commercial Services & Supplies Total 10,392,061
Construction & Engineering
JGC Corp. 733,000 7,054,789
Shimizu Corp. 1,137,000 5,048,336
Vinci SA 83,610 8,964,424
Construction & Engineering Total 21,067,549
Electrical Equipment
Siemens AG, Registered Shares 78,057 5,366,222
Electrical Equipment Total 5,366,222
Industrial Conglomerates
Hutchison Whampoa Ltd. 687,000 5,415,988
NIWS Co., Ltd. 895 2,626,252
Smiths Group PLC 409,329 5,146,728
Industrial Conglomerates Total 13,188,968
Machinery
Atlas Copco AB, Class B 341,500 11,100,598
Heidelberger Druckmaschinen AG 170,700 5,058,591
Linde AG 97,900 5,268,455
Volvo AB, Class B 206,300 7,095,054
Machinery Total 28,522,698
Road & Rail
Canadian National Railway Co. 129,202 5,899,100
Road & Rail Total 5,899,100
Trading Companies & Distributors
Mitsubishi Corp. 764,000 7,957,251
Trading Companies & Distributors Total 7,957,251
Transportation Infrastructure
BAA PLC 289,700 2,907,820
Transportation Infrastructure Total 2,907,820
INDUSTRIALS TOTAL 100,484,847
INFORMATION TECHNOLOGY
Electronic Equipment & Instruments
Keyence Corp. 29,300 6,052,490
Tandberg ASA 556,100 4,980,607
Columbia International
Stock Fund
Pro Forma Combined
- ----------------------------------------------------------------------------------------------------------------------
--------------------------
SHARES VALUE ($)
--------------------------
TDK Corp. 49,400 3,297,994 78,000 5,207,359
Electronic Equipment &
Instruments Total 9,451,929 10,086,521
Office Electronics 1.0%
Canon, Inc. 96,700 4,645,832 118,700 5,702,795
Office Electronics Total 4,645,832 5,702,795
Semiconductors & Semiconductor Equipment 0.8%
Samsung Electronics Co., Ltd. 9,831 3,880,284 11,500 4,539,036
Semiconductors & Semiconductor
Equipment Total 3,880,284 4,539,036
INFORMATION TECHNOLOGY TOTAL 17,978,045 20,328,352
MATERIALS 4.6%
Chemicals 3.4%
BASF AG 98,100 5,315,104 112,200 6,079,049
L'Air Liquide SA 22,586 3,552,484 36,410 5,726,819
Novozymes A/S, Class B 27,150 1,144,630 33,300 1,403,911
Syngenta AG 68,702 6,184,634 77,136 6,943,872
Chemicals Total 16,196,852 20,153,651
Construction Materials 0.7%
Cemex SA de CV 123,700 3,500,710 149,900 4,242,170
Construction Materials Total 3,500,710 4,242,170
Paper & Forest Products 0.5%
UPM-Kymmene Oyj 139,800 2,679,614 112,100 2,148,675
Paper & Forest Products Total 2,679,614 2,148,675
MATERIALS TOTAL 22,377,176 26,544,496
TELECOMMUNICATION SERVICES 6.2%
Diversified Telecommunication Services 3.8%
Belgacom SA (a) 73,300 2,453,560 90,300 3,022,598
Bharti Tele-Ventures Ltd. (a) - - 798,500 2,410,898
Deutsche Telekom AG, Registered Shares (a) 66,605 1,166,477 82,495 1,444,765
France Telecom SA 142,800 3,399,975 160,300 3,816,639
Nippon Telegraph & Telephone Corp. 633 2,762,111 778 3,394,822
TDC A/S 73,000 2,582,084 89,700 3,172,780
Telecom Italia S.p.A. 801,154 2,408,599 983,791 2,957,681
Telefonaktiebolaget LM Ericsson, ADR (a) 99,000 2,676,960 122,000 3,298,880
Diversified Telecommunication
Services Total 17,449,766 23,519,063
Wireless Telecommunication Services 2.4%
NTT DoCoMo, Inc. 1,872 3,502,202 2,193 4,102,740
Vodafone Group PLC 3,383,400 7,732,210 4,566,860 10,436,815
Wireless Telecommunication
Services Total 11,234,412 14,539,555
TELECOMMUNICATION SERVICES TOTAL 28,684,178 38,058,618
UTILITIES 3.6%
Electric Utilities 3.1%
E.ON AG 104,746 7,457,030 127,010 9,042,039
National Grid Transco PLC 609,600 5,127,552 750,736 6,314,694
Scottish Power PLC 337,026 2,450,700 408,384 2,969,583
Electric Utilities Total 15,035,282 18,326,316
Gas Utilities 0.5%
Centrica PLC 528,700 2,354,975 651,700 2,902,850
Gas Utilities Total 2,354,975 2,902,850
UTILITIES TOTAL 17,390,257 21,229,166
----------- -----------
Total Common Stocks 456,956,514 564,815,407
Preferred Stocks 0.9%
CONSUMER DISCRETIONARY 0.9%
Automobiles 0.9%
Porsche AG 7,300 4,458,845 9,000 5,497,206
Automobiles Total 4,458,845 5,497,206
Columbia
International
Stock Fund
Pro Forma Combined
- -----------------------------------------------------------------------------------------------------------------
------------------------------
SHARES VALUE ($)
------------------------------
TDK Corp. 127,400 8,505,353
Electronic Equipment &
Instruments Total 19,538,450
Office Electronics
Canon, Inc. 215,400 10,348,627
Office Electronics Total 10,348,627
Semiconductors & Semiconductor Equipment
Samsung Electronics Co., Ltd. 21,331 8,419,320
Semiconductors & Semiconductor
Equipment Total 8,419,320
INFORMATION TECHNOLOGY TOTAL 38,306,397
MATERIALS
Chemicals
BASF AG 210,300 11,394,153
L'Air Liquide SA 58,996 9,279,303
Novozymes A/S, Class B 60,450 2,548,541
Syngenta AG 145,838 13,128,506
Chemicals Total 36,350,503
Construction Materials
Cemex SA de CV 273,600 7,742,880
Construction Materials Total 7,742,880
Paper & Forest Products
UPM-Kymmene Oyj 251,900 4,828,289
Paper & Forest Products Total 4,828,289
MATERIALS TOTAL 48,921,672
TELECOMMUNICATION SERVICES
Diversified Telecommunication Services
Belgacom SA (a) 163,600 5,476,158
Bharti Tele-Ventures Ltd. (a) 798,500 2,410,898
Deutsche Telekom AG, Registered Shares (a) 149,100 2,611,242
France Telecom SA 303,100 7,216,614
Nippon Telegraph & Telephone Corp. 1,411 6,156,933
TDC A/S 162,700 5,754,864
Telecom Italia S.p.A. 1,784,945 5,366,280
Telefonaktiebolaget LM Ericsson, ADR (a) 221,000 5,975,840
Diversified Telecommunication
Services Total 40,968,829
Wireless Telecommunication Services
NTT DoCoMo, Inc. 4,065 7,604,942
Vodafone Group PLC 7,950,260 18,169,025
Wireless Telecommunication
Services Total 25,773,967
TELECOMMUNICATION SERVICES TOTAL 66,742,796
UTILITIES
Electric Utilities
E.ON AG 231,756 16,499,069
National Grid Transco PLC 1,360,336 11,442,246
Scottish Power PLC 745,410 5,420,283
Electric Utilities Total 33,361,598
Gas Utilities
Centrica PLC 1,180,400 5,257,825
Gas Utilities Total 5,257,825
UTILITIES TOTAL 38,619,423
--------------
Total Common Stocks 1,021,771,921
Preferred Stocks
CONSUMER DISCRETIONARY
Automobiles
Porsche AG 16,300 9,956,051
Automobiles Total 9,956,051
CONSUMER
DISCRETIONARY
TOTAL 4,458,845 5,497,206 9,956,051
- -----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks 4,458,845 5,497,206 9,956,051
PAR $ PAR $ PAR $
Short-Term Obligations 4.5%
Repurchase agreement
with State Street
Bank & Trust Co.
dated 08/31/04, due
09/01/04 at 1.49%,
collateralized by a
U.S. Treasury Note
maturing
02/15/20 Market Value
$ 19,718,025
(repurchase proceeds
$19,328,800) 19,328,000 19,328,000 19,328,000 19,328,000
Repurchase agreement
with State Street
Bank & Trust Co.
dated 08/31/04, due
09/01/04 at 1.5%,
collateralized
by a
U.S. Treasury Note
maturing 06/15/09,
Market Value
$28,981,125
(repurchase proceeds
$28, 413,184) 28,412,000 28,412,000 28,412,000 28,412,000
-----------------------------------------------------------------------------------------------------
Total Short-Term
Obligations
at Market and Cost 19,328,000 28,412,000 47,740,000
-----------------------------------------------------------------------------------------------------
Total Investments
at Market 100.7% 480,743,359 598,724,613 1,079,467,972
Other Assets &
Liabilities, Net -0.7% (2,627,306) (4,950,972) (7,578,278)
-----------------------------------------------------------------------------------------------------
Net Assets 100.0% $ 478,116,053 $ 593,773,641 $1,071,889,694
-----------------------------------------------------------------------------------------------------
Total Investments
at Cost $ 447,175,983(b) $ 557,030,399(c) $1,004,206,382
(a) Non-income
producing
security.
(b) Cost for both
financial statement
and federal income
tax purposes is
the same.
(c)Cost for federal
income tax
purposes is
$558,824,342.
APPENDIX A
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
Supplement to Statement of Additional Information dated January 1, 2004
(Replacing Supplement dated March 31, 2004)
The following sections describing Directors and Officers under Management are
restated in entirety. All references to Joseph R. Palombo therein and within the
Management section of the statement of additional information have been omitted.
<Table>
<Caption>
Directors and Officers
DISINTERESTED DIRECTORS:
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Address Held and Length of Principal Occupation(s) Overseen Other Directorships
and Age with Funds Time Served*(1) During Past Five Years By Trustee(1) Held by Trustee
------------- ---------- ------------- ---------------------- ------------- -------------------
Douglas A. Hacker (Age 48) Director Since Executive Vice President - Strategy 118 Orbitz, Inc. (on-
P.O. Box 66100 October 2003 of United Airlines (airline) since line travel company)
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).
Janet Langford Kelly Director Since Private Investor since March, 2004 118 None
(Age 46) October 2003 (formerly Chief Administrative
9534 W. Gull Lake Drive Officer and Senior Vice President,
Richland, MI 49083-8530 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).
</Table>
<Table>
<Caption>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Address Held and Length of Principal Occupation(s) Overseen Other Directorships
and Age with Funds Time Served*(1) During Past Five Years By Trustee(1) Held by Trustee
------------- ---------- ------------- ---------------------- ------------ -------------------
Richard W. Lowry (Age 68) Director Since Private Investor since August, 1987 120(3) None
10701 Charleston Drive October 2003 (formerly Chairman and Chief
Vero Beach, FL 32963 Executive Officer, U.S. Plywood
Corporation (building products
manufacturer)).
Charles R. Nelson (Age 62) Director Served for Professor of Economics, University 118 None
Department of Economics 1 year of Washington, since January, 1976;
University of Washington Ford 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 (Age 61) Director Since Academic Vice President and Dean of 121(3),(4) Saucony, Inc.
84 College Road October 2003 Faculties since August, 1999, (athletic footwear)
Chestnut Hill, MA Boston College (formerly Dean, Boston
02467-3838 College School of Management from
September, 1977 to September, 1999).
Patrick J. Simpson (Age 60) Director Served for Partner, Perkins Coie L.L.P. 118 None
1120 N.W. Couch Street 3 years (law firm).
Tenth Floor
Portland, OR 97209-4128
Thomas E. Stitzel (Age 68) Director Since Business Consultant since 1999 118 None
2208 Tawny Woods Place October 2003 (formerly Professor of Finance
Boise, ID 83706 from 1975 to 1999, College of
Business, Boise State University);
Chartered Financial Analyst.
Thomas C. Theobald Director and Since Partner and Senior Advisor, Chicago 118 Anixter International
(Age 67) (5) Chairman of October 2003 Growth Partners (private equity (network support
303 W. Madison the Board investing) since September, 2004 equipment
Suite 2500 (formerly Managing Director, William distributor); Ventas,
Chicago, IL 60606 Blair Capital Partners (private equity Inc. (real estate
investing) from September, 1994 to investment trust);
September, 2004). Jones Lang LaSalle
(real estate
management services)
and MONY Group (life
insurance)
Anne-Lee Verville (Age 59) Director Since Retired since 1997 (formerly General 119(4) Chairman of the Board
359 Stickney Hill Road October 2003 Manager, Global Education Industry, IBM of Directors, Enesco
Hopkinton, NH 03229 Corporation (computer and technology) Group, Inc.(designer,
from 1994 to 1997). importer and
distributor of
giftware and
collectibles)
</Table>
<Table>
<Caption>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Address Held and Length of Principal Occupation(s) Overseen Other Directorships
and Age with Funds Time Served*(1) During Past Five Years By Trustee(1) Held by Trustee
------------- ---------- ------------- ---------------------- ------------- ---------------
Richard L. Woolworth Director Served for 12 Retired since December 2003 118 Northwest Natural Gas
(Age 63) years (formerly Chairman and Chief Co. (natural gas
100 S.W. Market Street Executive Officer, The Regence Group service provider)
#1500 (regional health insurer); Chairman
Portland, OR 97207 and Chief Executive Officer,
BlueCross BlueShield of Oregon;
Certified Public Accountant, Arthur
Young & Company)
</Table>
INTERESTED DIRECTOR:
<Table>
<Caption>
Number of
Portfolios in
Position(s) Term of Office Fund Complex
Name, Address Held and Length of Principal Occupation(s) Overseen Other Directorships
and Age with Funds Time Served*(1) During Past Five Years By Director(1) Held by Director
------------- ---------- ------------- ---------------------- ------------ ---------------
William E. Mayer(2)(Age 64) Director Since Managing Partner, Park Avenue 120(3) Lee Enterprises
399 Park Avenue October 2003 Equity Partners (private equity) (print media), WR
Suite 3204 since February, 1999 (formerly Hambrecht + Co.
New York, NY 10022 Founding Partner, Development (financial service
Capital LLC from November 1996 provider); First
to February, 1999). Health (healthcare);
Reader's Digest
(publishing);
OPENFIELD Solutions
(retail industry
technology provider)
</Table>
* 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.
PRINCIPAL OFFICERS:
<Table>
<Caption>
Term of
Office and
Name, Address Position(s) Length of Time Principal Occupation(s)
and Age with Funds Served During Past Five Years
------- ----------- ------ ----------------------
Christopher L. Wilson (Age 47) President Since President of the Columbia Funds, Liberty Funds and Stein Roe
One Financial Center 2004 Funds since October, 2004 (formerly President and Chief
Boston, MA 02111 Executive Officer, CDC IXIS Asset Management Services, Inc. from
September, 1998 to August, 2004).
J. Kevin Connaughton (Age 39) Treasurer Since Treasurer of the Columbia Funds since October, 2003 and of the
One Financial Center 2000 Liberty Funds, Stein Roe Funds and All-Star Funds since
Boston, MA 02111 December, 2000; Vice President of the Advisor since April, 2003
(formerly 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 (Age 54) Senior Vice Since Senior Vice President and Chief Compliance Officer of the
40 West 57th Street President 2004 Columbia Funds, Liberty Funds and Stein Roe Funds since August,
New York, NY 10019 and Chief 2004; Chief Compliance Officer of the All-Star Funds since
Compliance 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999
Officer to December, 2000; Vice President and Counsel, Equitable Life
Assurance Society of the United States from April, 1998 to
November, 1999,).
Michael G. Clarke (Age 34) Chief Since Chief Accounting Officer of the Columbia Funds, Liberty Funds,
One Financial Center Accounting 2004 Stein Roe Funds and All-Star Funds since October, 2004
Boston, MA 02111 Officer (formerly Controller of the Columbia Funds, Liberty Funds, Stein
Roe Funds and 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
and Stein Roe Funds from February, 2001 to June, 2002; Assistant
Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star
Funds from August, 1999 to February, 2001; Audit Manager,
Deloitte & Touche LLP from May, 1997 to August, 1999).
Jeffrey R. Coleman (Age 34) Controller 2004 Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds
One Financial Center and All-Star Funds since October, 2004 (formerly Vice President
Boston, MA 02111 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).
David A. Rozenson (Age 50) Secretary 2003 Secretary of the Columbia Funds, Liberty Funds, Stein Roe Funds
One Financial Center and All-Star Funds since December, 2003; Senior Counsel, Bank
Boston, MA 02111 of America Corporation (formerly FleetBoston Financial
Corporation) since January, 1996; Associate General Counsel,
Columbia Management Group since November, 2002.
COL-35/377T-1004 October 21, 2004
</Table>
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
Supplement to Statement of Additional Information dated January 1, 2004
Effective July 1, 2004, the paragraph entitled "Exchanges for Affiliates of CFD"
in the section "PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES" of the
Statement of Additional Information is deleted.
July 1, 2004 COL-35/277S-0704
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
Supplement to Statement of Additional Information dated January 1, 2004
The following paragraphs describing Swap Agreements is added to the section
"INVESTMENTS HELD AND INVESTMENT PRACTICES USED BY THE FUNDS," on page 9 of the
statement of additional information.
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 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.
The chart on page 16 of the Statement of Additional Information is
changed to note that the Columbia Oregon Municipal Bond Fund and the Columbia
National Municipal Bond Fund may enter into Swap Agreements as an investment
strategy.
May 14, 2004 G-35/912R-0504
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.
1
TABLE OF CONTENTS
DESCRIPTION OF THE FUNDS..................................................................... 3
INVESTMENT RESTRICTIONS...................................................................... 17
MANAGEMENT................................................................................... 34
INVESTMENT ADVISORY AND OTHER SERVICES PROVIDED BY AFFILIATES................................ 66
PORTFOLIO TRANSACTIONS....................................................................... 75
CAPITAL STOCK AND OTHER SECURITIES........................................................... 78
DISTRIBUTION AND SERVICING................................................................... 79
PURCHASE, REDEMPTION AND PRICING OF SHARES................................................... 83
CUSTODIAN.................................................................................... 89
INDEPENDENT AUDITORS......................................................................... 90
TAXES........................................................................................ 90
FINANCIAL STATEMENTS......................................................................... 98
APPENDIX I................................................................................... 99
January 1, 2004
2
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"). 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:
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 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.
4
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.
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.
5
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 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.
6
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.
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.
7
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.
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
8
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").
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.
9
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.
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
10
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 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
11
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.
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.
12
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.
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
13
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 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 10%, 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 10%, 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 15%, O 15%, O 15%, O 15%, O 15%, O 15%, O 15%, O 15%, O
definition of illiquid with board
supervision)
Convertible Securities/Warrants O O O + + + + +
Unseasoned/less than three years 5%(3),O 5%(3),O 5%(3),O 10%(3), + 10%(3),+ 5%(3), + 10%(3), O 10%(3), O
operating history
Small Companies O O O + + + + +
Dollar Roll Transactions 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 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%, *
14
+ 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.
15
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 10%, 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 + NA
Floating or Variable Rate + + NA NA O + NA
Loan Transactions O O O X O X X
Options & Financial Futures O X X X O O X
Foreign Equities(1)
Developed Markets NA NA NA NA NA 33.3%, O NA
Emerging Markets(2) NA NA NA NA NA X NA
ADRs, GDRs and NASDAQ-listed NA NA NA NA NA 33.3%, O NA
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), + 5%(3), O NA
operating history
Small Companies NA NA NA NA + O NA
Dollar Roll Transactions O O NA NA 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
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.
16
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 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.
17
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.
18
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
19
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.
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
20
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.
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.
21
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.
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.
22
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.
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.
23
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.
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.
24
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 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.
25
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.
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.
26
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.
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.
27
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.
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.
28
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.
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.
29
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.
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.
30
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.
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.
31
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.
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.
32
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.
(The Fund, however, will be invested in short-term debt obligations maturing
within 12 months.) 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.
Investment policies of the Fund are in certain circumstances more
restrictive than the restrictions under Rule 2a-7. In particular, investments by
the Fund are restricted to the following:
1. Securities issued or guaranteed as to principal and interest by
the U.S. Government or issued or guaranteed by agencies or
instrumentalities thereof and repurchase agreements relating to these
securities.
2. Commercial paper which, if rated by S&P or Moody's is rated A-1
by S&P and Prime 1 by Moody's or, if not rated, is determined to be of
comparable quality by the Board of Directors of the Fund.
3. Other corporate debt securities with remaining maturities of less
than 12 months, including bonds and notes, of an issuer that has received
ratings from S&P and Moody's for its other short-term debt obligations as
described in paragraph 2 above, where such corporate debt securities are
comparable in priority and security to the rated short-term debt
obligations or, if no ratings are available, where such corporate debt
securities are determined to be of comparable quality under procedures
approved by the Board of Directors of the Fund.
4. Obligations of U.S. banks that are members of the Federal Reserve
System and have capital surplus and undivided profits as of the date of
their most recent published financial statements in excess of $100 million
and are determined by the Board of Directors of the Fund to be of
comparable quality to the obligations described in paragraphs 2 or 3
above. Currently these obligations are CDs, bankers' acceptances, and
letters of credit.
These four investment restrictions applicable to the Fund are also
non-fundamental, which means they can be changed by the Board. Any change,
however, will only be effective after notice is given to shareholders of the
Fund.
33
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.
Directors and Officers
DISINTERESTED DIRECTORS:
NUMBER OF
PORTFOLIOS
TERM OF IN FUND OTHER
POSITION(S) OFFICE AND PRINCIPAL COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH LENGTH OF OCCUPATION(S) OVERSEEN BY HELD BY
AND AGE FUNDS TIME SERVED* DURING PAST 5 YEARS DIRECTOR** DIRECTOR
- --------------------- ---------- ------------- -------------------- ----------- --------------
Douglas A. Hacker(1) Director Since Executive Vice 124 None
P.O. Box 66100 October 2003 President-- Strategy
Chicago, IL 60666 of United Airlines
(48 years old) (airline) since
December 2002
(formerly
President of UAL
Loyalty Services
from September
2001 to December
2002; Executive
Vice President and
Chief Financial
Officer from July
1999 to September
2001, and Senior
Vice President and
Chief Financial
Officer from July
1994 to July 1999
of United
Airlines).
Janet Langford Director Since Executive Vice 124 None
Kelly(1) October 2003 President-- Corporate
3100 West Beaver Road Development and
Troy, MI 48084-3163 Administration,
(46 years old) General Counsel and
Secretary,
Kellogg
Company (food
manufacturer)
since
September
1999;
(formerly
Senior Vice
President,
Secretary and
General
Counsel, Sara
Lee
Corporation
(branded,
packaged,
34
consumer-products
manufacturer)
from January
1995 to
September
1999).
Richard L. Director Since Private investor 124 None
Lowry(1)(2) October 2003 since August 1987
10701 Charleston Dr. (formerly Chairman
Vero Beach, FL 32963 and Chief Executive
(67 years old) Officer, U.S.
Plywood
Corporation
(building
products
manufacturer)).
Charles R. Nelson(1) Director Served for 1 Professor of 124 None
Department of year Economics,
Economics University of
University of Washington, since
Washington January 1976; Ford
Seattle, WA 98195 and Louisa Van
(61 years old) Voorhis Professor
of Political
Economy,
University of
Washington, since
September 1993;
Director,
Institute for
Economic Research,
University of
Washington, since
September 2001;
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. Director Since Academic Vice 127 Saucony, Inc.
Neuhauser(1)(2)(3) October 2003 President and Dean (athletic
84 College Road of Faculties since footwear).
Chestnut Hill, MA August 1999, Boston
02467-3838 College (formerly
(60 years old) Dean, Boston
College School of
Management from
September 1977 to
September 1999).
Patrick J. Simpson(1) Director Served for 3 Lawyer, Perkins 124 None
1211 S.W. 5th Avenue Years Coie LLP.
Suite 1500
Portland, OR 97204
(59 years old)
35
Thomas E. Stitzel(1) Director Since Business consultant 124 None
2208 Tawny Woods Pl. October 2003 since 1999
Boise, ID 83706 (formerly Professor
(67 years old) of Finance from
1975 to 1999 and
Dean from 1977 to
1991, College of
Business, Boise
State University);
Chartered
Financial Analyst.
Thomas C. Theobald(1) Director Since Managing Director, 124 Anixter
27 West Monroe October 2003 William Blair International
Street, Capital Partners (network
Suite 3500 (private equity support
Chicago, IL 60606 investing) since equipment
(66 years old) September 1994. distributor),
Jones
Lang
LaSalle
(real
estate
management
services),
MONY
Group
(life
insurance)
and
Ventas,
Inc.
(healthcare
REIT).
Anne-Lee Director Since Author and speaker 125 Chairman of
Verville(1)(3) October 2003 on educational the Board,
359 Stickney Hill Rd. systems needs Enesco Group,
Hopkinton, NH 03229 (formerly General Inc.
(58 years old) Manager, Global (designed,
Education imported and
Industry from distributed
1994 to 1997, giftware and
and President, collectibles).
Applications
Solutions
Division from
1991 to 1994,
IBM
Corporation
(global
education and
global
applications)).
Richard L. Director Served for Chairman/CEO, The 124 The Regence
Woolworth(1) 12 Years Regence Group (a Group,
100 S.W. Market St. healthcare Regence
#1500 maintenance BlueCross
Portland, OR 97207 organization). BlueShield of
(62 years old) Oregon; NW
Natural, a
natural gas
service
provider
36
INTERESTED DIRECTORS:
NUMBER OF
PORTFOLIOS
TERM OF IN FUND OTHER
POSITION(S) OFFICE AND PRINCIPAL COMPLEX DIRECTORSHIPS
NAME, ADDRESS HELD WITH LENGTH OF OCCUPATION(S) OVERSEEN BY HELD BY
AND AGE FUNDS TIME SERVED DURING PAST 5 YEARS DIRECTOR** DIRECTOR
- -------------------- ---------- ------------ -------------------- ----------- -----------------
William E. Director Since Managing Partner, 126 Lee
Mayer(1)(2)(4) October 2003 Park Avenue Equity Enterprises
399 Park Avenue Partners (private (print media),
Suite 3204 equity) since February WR Hambrecht +
New York, NY 10022 1999 (formerly Founding Co.
(63 years old) partner, Development (financial
Capital LLC from service
November 1996 to provider),
February 1999). First Health
(healthcare)
and the Reader's
Digest
Association,
Inc.(publishing).
Joseph R. Director Director Executive Vice 125 None
Palombo(2)(4) and Since President and Chief
245 Summer Street President October 2003; Operating Officer of
Boston, MA 02210 President CMG since December
(50 years old) since 2001; Director,
October 2003 Executive Vice
President and Chief
Operating
Officer of the Advisor
since April 2003
(formerly Chief
Operations Officer of
Mutual Funds, Liberty
Financial Companies,
Inc. from August 2000 to
November, 2001; Vice
President of the
Portland based Columbia
Funds from January 2003
to October 2003;
Executive Vice
President of Stein Roe
& Farnham Incorporated
(Stein Roe) from April
1999 to April 2003;
Director of Colonial
Management Associates,
Inc. from April 1999 to
April 2003; Director of
Stein Roe from
September 2000 to April
2003); President of
Liberty Funds and
Galaxy Funds since
February 2003 (formerly
Vice President from
September 2002 to
February 2003); Manager
of Stein Roe Floating
Rate Limited Liability
Company since October
37
2000 (formerly Vice
President of Liberty
Funds from April, 1999
to August 2000; Chief
Operating Officer and
Chief Compliance
Officer, Putnam Mutual
Funds from December 1993
to March 1999).
- ----------
* 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.
** "Fund Complex" consists of the Funds and all other registered funds managed
by the Advisor and its affiliates and is referred to as the "Columbia Funds
Complex." As of December 1, 2003, the Columbia Funds Complex consisted of
the 15 Funds, 14 open-end management investment company portfolios of CMG
Fund Trust, approximately 85 open-end and closed-end management investment
company portfolios formerly known as the Liberty Funds family of funds, 2
closed-end management investment portfolios known as the All-Star Funds, the
Multi Strategy Hedge Fund, LLC and the Galaxy Funds.
(1) Includes service during 2002 as a director or trustee of the Funds, Funds of
CMG Fund Trust and the group of funds formerly known as the Liberty Funds.
On October 7, 2003, the boards of trustees of the Liberty Funds and the
boards of trustees/directors of CMG Fund Trust and the Funds were
effectively combined into a single board for the Liberty Funds, CMG Fund
Trust and the Funds. The All-Star Funds, Galaxy Funds, and Multi Strategy
Hedge Fund, part of the Columbia Funds Complex, have separate boards of
directors.
(2) Mr. Lowry, Mr. Neuhauser and Mr. Mayer each serve as directors of the
Liberty All-Star Funds, currently consisting of two funds, which are advised
by an affiliate of the Advisor.
(3) Mr. Neuhauser and Mrs. Verville serve as disinterested directors of Columbia
Management Multi-Strategy Hedge Fund, LLC, which is managed by the Advisor.
Mr. Palombo is an interested director of Columbia Management Multi-Strategy
Hedge Fund, LLC.
(4) "Interested person" as defined by the 1940 Act. Mr. Mayer is an interested
person because of his affiliation with WR Hambrecht + Co. WR Hambrecht + Co.
is a registered broker-dealer and over the past six months the Funds have,
from time to time, used WR Hambrecht + Co. to execute portfolio
transactions. Mr. Palombo is an interested person as a director and officer
of the Advisor and shareholder of the ultimate parent of the Advisor.
OTHER PRINCIPAL OFFICERS: (1)
POSITION(S)
HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S)
NAME AND AGE FUNDS SERVED DURING PAST 5 YEARS
- ------------------------ ---------------- ------------------------ -----------------------------------
Vicki L. Benjamin (42) Controller/ Since October 2003 Controller of the Liberty Funds and
One Financial Center Chief Accounting of the Liberty All-Star Funds since
Boston, MA 02111 Officer May 2002; Chief Accounting Officer
of the Liberty Funds and Liberty
All-Star Funds since June 2001;
Controller and Chief Accounting
Officer of the Galaxy Funds since
September 2002 (formerly Vice
President and Principal Accounting
Officer of the Funds from July
2003 to October 2003); Vice
President, Corporate Audit, State
Street Bank and Trust Company from
May 1998 to April 2001; Audit
Manager from July 1994 to June 1997;
Senior Audit Manager from July 1997
to May 1998, Coopers & Lybrand, LLP.
38
POSITION(S)
HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S)
NAME AND AGE FUNDS SERVED DURING PAST 5 YEARS
- ------------------------ ---------------- ------------------------ -----------------------------------
J. Kevin Connaughton (39) Treasurer/ Since October 2003 Treasurer of Liberty Funds, Liberty
245 Summer Street Chief Financial All-Star Funds, Stein Roe Funds and
Boston, MA 02110 Officer Galaxy Funds; Senior Vice President
of Liberty Funds Group LLC. Prior
to his current positions,
Mr. Connaughton was Chief Financial
Officer of the Funds from December
2002 to October 2003, Controller
of Liberty Funds, Liberty All-Star
Funds and Stein Roe Funds; Vice
President of Liberty Funds Group
LLC and Colonial Management
Associates, Inc.; Senior Tax
Manager, Coopers & Lybrand LLP.
David A. Rozenson (49) Secretary Since October 2003 Secretary of the Liberty All-Star
One Financial Center Funds since December 2003;
Boston, MA 02111 Associate General Counsel of
Columbia Management Group since
November 2002; Senior Counsel of
FleetBoston Financial Corporation
since January 1996.
(1)These are the principal officers of the Funds in addition to Mr. Palombo.
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 Funds and certain service
providers. For the fiscal year ended August 31, 2003, the Audit Committee
convened one time.
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.
39
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.
INVESTMENT OVERSIGHT COMMITTEES
Beginning in 2004, each director of the Funds also will serve on an
Investment Oversight Committee ("IOC"). Each IOC will be responsible for
monitoring, on an ongoing basis, a select group of funds in the Columbia Funds
Complex and will 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 will attend IOC meetings
from time to time to assist each IOC in its review of the Funds. Each IOC will
meet four times a year. The following are members of the respective IOCs and the
general categories of Funds which they will review:
IOC #1: Messrs. Lowry, Mayer and Neuhauser will be
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.
IOC #2: Messrs. Hacker and Palombo and Ms. Verville will be
responsible for reviewing Funds in the following
asset categories: Large Blend, Small Blend, Foreign
Stock, Fixed Income - Multi Sector and Fixed Income -
Core.
IOC#3: Messrs. Theobald and Stitzel and Ms. Kelly will be
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 Blend, Mid Cap Growth, Small
Growth, Asset Allocation, Specialty Equity, Taxable
Fixed Income and Money Market.
The following table sets forth the dollar range of shares owned by each
director as of July 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 COMPANIES: OVER $100,000 OVER $100,000 $10,001-$50,000
40
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 $1-$10,000 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
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 None None $1-$10,000
Technology Fund None None None
Daily Income Company None None Over $100,000
Fixed Income Securities Fund None None None
41
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. JOSEPH A.
NAME OF FUND MAYER PALOMBO
- -------------------------------- ---------- ---------
Common Stock Fund None None
Balanced Fund None None
Growth Fund None None
Mid Cap Growth Fund None None
Small Cap Growth Fund None None
International Stock Fund None 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: NONE 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 July 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 a separate investment advisory contract
with the Advisor. The investment advisory contract is subject to annual approval
by the Board of Directors, including a majority of disinterested directors. The
existing contracts were last considered and approved at an in-person meeting
held in April 2003. In determining the reasonableness of the advisory fees under
the contract, the directors considered several factors, including:
- The nature and quality of services provided to the Funds' shareholders,
- A comparison of the fee structures of other mutual funds,
- The profitability of the advisory contract for the Advisor,
- Fall-out benefits realized by the Advisor from service as advisor to the
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 examined the performance of the Funds compared to other mutual funds
with similar investment objectives and against one or more securities indices
that were considered appropriate. Performance over one-, three- and five-year
periods for each Fund was reviewed as well as rankings and ratings from Lipper
Inc. In
42
addition, the directors assessed the day-to-day management of the Funds,
reviewing information provided at the meeting at which the contract was approved
and at earlier meetings during the fiscal year. The directors considered the
quality of the administrative services provided by the Advisor and its
affiliates to the Funds and the financial and other resources of the Advisor and
its parent companies.
The directors reviewed overall expense ratios of the Funds, including the
aggregate expenses of the Funds to their net assets, as well as to the Funds'
management fee. The directors considered an independent report from Lipper Inc.
detailing the expense ratios of comparable funds with similar investment
objectives, strategy, size and distribution methods.
The directors reviewed data related to the profitability of the Advisor
with respect to its contracts with the Funds and considered the additional
benefits to the Advisor as a result of its relationship with the Funds,
including soft dollar benefits. The directors also considered the benefits to
affiliates of the Advisor as the result of its management of the Funds,
including Columbia Trust Company, which prior to October 18, 2002 served as
transfer agent for the Funds and Columbia Funds Services, Inc. fka Liberty Funds
Services, Inc. ("CFS,") the Funds' current transfer agent, as well as fees
received by the Advisor for services it provides pursuant to a Pricing,
Bookkeeping and Administration Agreement and certain brokerage firms affiliated
with the Advisor which executed trades for the Funds from time to time.
After considering these and other factors, and each Fund's specific
circumstances, the directors concluded that the advisory contract of each Fund
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
advisory contract. 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 the Funds' investment advisory contract.
Director Compensation:
The directors serve as directors/trustees of all open-end funds managed by
the Advisor for which each director (except Mr. Palombo) 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, 2003(1). No officer of the Funds received
any compensation from the Funds in 2003.
JAMES C. DOUGLAS A. JANET LANGFORD RICHARD W.
AGGREGATE COMPENSATION FROM FUND GEORGE(2) HACKER(3) KELLY(3) LOWRY(3)
- -------------------------------- --------- ---------- -------------- ----------
Common Stock Fund $2,860 None None None
Balanced Fund $3,831 None None None
Growth Fund $1,127 None None None
Mid Cap Growth Fund $3,375 None None None
Small Cap Growth Fund $2,341 None None None
International Stock Fund $3,941 None None None
Real Estate Equity Fund $4,151 None None None
Strategic Investor Fund $2,413 None None None
Technology Fund $1,244 None None None
Daily Income Company $3,968 None None None
Fixed Income Securities Fund $1,654 None None None
Short Term Bond Fund $ 215 None None None
High Yield Fund $3,009 None None None
Oregon Municipal Bond Fund $3,620 None None None
National Municipal Bond Fund $ 595 None None None
TOTAL COMPENSATION FROM
FUND COMPLEX: $42,750 $80,750 $69,750 $82,750
43
DR. CHARLES R. JOHN J.
AGGREGATE COMPENSATION FROM FUND NELSON(4)(5) NEUHAUSER (3)
- -------------------------------- ------------ -------------
Common Stock Fund $ 2,793 None
Balanced Fund $ 3,742 None
Growth Fund $ 1,101 None
Mid Cap Growth Fund $ 3,296 None
Small Cap Growth Fund $ 2,286 None
International Stock Fund $ 3,849 None
Real Estate Equity Fund $ 4,054 None
Strategic Investor Fund $ 2,357 None
Technology Fund $ 1,215 None
Daily Income Company $ 3,875 None
Fixed Income Securities Fund $ 1,615 None
Short Term Bond Fund $ 210 None
High Yield Fund $ 2,939 None
Oregon Municipal Bond Fund $ 3,536 None
National Municipal Bond Fund $ 581 None
TOTAL COMPENSATION FROM
FUND COMPLEX: $ 122,733 $94,876
PATRICK J. THOMAS E.
AGGREGATE COMPENSATION FROM FUND SIMPSON(4) STITZEL(3)
- -------------------------------- ---------- ---------
Common Stock Fund $ 2,793 None
Balanced Fund $ 3,742 None
Growth Fund $ 1,101 None
Mid Cap Growth Fund $ 3,296 None
Small Cap Growth Fund $ 2,286 None
International Stock Fund $ 3,849 None
Real Estate Equity Fund $ 4,054 None
Strategic Investor Fund $ 2,357 None
Technology Fund $ 1,215 None
Daily Income Company $ 3,875 None
Fixed Income Securities Fund $ 1,615 None
Short Term Bond Fund $ 210 None
High Yield Fund $ 2,939 None
Oregon Municipal Bond Fund $ 3,536 None
National Municipal Bond Fund $ 581 None
TOTAL COMPENSATION FROM
FUND COMPLEX: $41,750 $69,750
THOMAS C. ANNE-LEE RICHARD W.
AGGREGATE COMPENSATION FROM FUND THEOBALD(3) VERVILLE(3) WOOLWORTH(4)
- -------------------------------- ----------- ----------- ------------
Common Stock Fund None None $ 2,793
Balanced Fund None None $ 3,742
Growth Fund None None $ 1,101
Mid Cap Growth Fund None None $ 3,296
Small Cap Growth Fund None None $ 2,286
International Stock Fund None None $ 3,849
Real Estate Equity Fund None None $ 4,054
Strategic Investor Fund None None $ 2,357
Technology Fund None None $ 1,215
Daily Income Company None None $ 3,875
Fixed Income Securities Fund None None $ 1,615
Short Term Bond Fund None None $ 210
High Yield Fund None None $ 2,939
Oregon Municipal Bond Fund None None $ 3,536
National Municipal Bond Fund None None $ 581
TOTAL COMPENSATION FROM
FUND COMPLEX: $74,250 $89,500 $41,750
44
INTERESTED DIRECTORS:
WILLIAM E. JOSEPH A.
AGGREGATE COMPENSATION FROM FUND MAYER(3) PALOMBO(6)
- -------------------------------- ---------- ----------
Common Stock Fund None None
Balanced Fund None None
Growth Fund None None
Mid Cap Growth Fund None None
Small Cap Growth Fund None None
International Stock Fund None 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
TOTAL COMPENSATION FROM
FUND COMPLEX: $85,250 NONE
- ----------
(1) 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.
(2) Mr. George resigned as a director of the Funds on October 7, 2003.
(3) Each of Ms. Verville, Ms. Kelly and Messrs. Hacker, Lowry, Mayer,
Neuhauser, Palombo, Stitzel and Theobald was elected a director of each of
the Funds on October 7, 2003 and did not serve as a director of any Fund
during the period January 1, 2003 through August 31, 2003. The total
compensation amounts for each of them reflect their total compensation paid
for service during the period January 1, 2003 through August 31, 2003 as a
trustee or director of funds in the Liberty Funds family of funds now
referred to as the Columbia Funds Complex.
(4) These amounts reflect the total compensation earned by each director for
his service to the Columbia Funds (which as of August 31, 2003 was
comprised of the 15 Funds and 12 portfolios of the CMG Fund Trust) for the
fiscal year ended August 31, 2003. Information includes compensation
Messrs. George, Nelson, Simpson and Woolworth received as trustees of CMG
Fund Trust which is also advised by the Advisor. Dr. Nelson was elected as
a trustee of the CMG Fund Trust on January 27, 2003. In some cases, a
director may have elected to receive his compensation at the end of the
year.
(5) Dr. Nelson's total compensation includes compensation for his service as an
independent trustee of the funds formerly known as the Liberty Funds.
(6) Mr. Palombo does not receive compensation because he is an employee of the
Advisor.
Share Ownership:
As of November 30, 2003, 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, 2003, 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:
45
BALANCED FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FRANCES A MCCONNELL 11.33%
11866 GIRDLED RD
CONCORD OH 44077-8805
BALANCED FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
J J B HILLIARD W L LYONS INC 77.67%
DWIGHT P PLOWMAN
A/C 7357-0516
501 S 4TH ST
LOUISVILLE KY 40202-2520
US CLEARING CORP 7.78%
FBO 236-21831-19
26 BROADWAY
NEW YORK NY 10004-1703
LORANDA B HURST 5.84%
40750 SW LAURELWOOD RD
GASTON OR 97119-8534
BALANCED FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FIRST CLEARING CORP 32.47%
A/C 7531-2533
STEPHEN A KRISO PA
PENSION TRUST FUND
165 BELL AVE
HASBROUCK HTS NJ 07604-1419
LEGG MASON WOOD WALKER INC 9.02%
277-05514-28
PO BOX 1476
BALTIMORE MD 21203-1476
FIRST CLEARING, LLC 8.16%
A/C 5617-6696
VINCENT MASTRIA
6714 ARNO WAY
BOYNTON BEACH FL 33437-7318
FIRST CLEARING CORP 7.93%
A/C 7531-2532
STEPHEN A KRISO MD PA
PENSION TRUST FUND DTD 12/1/73
165 BELL AVE
HASBROUCK HTS NJ 07604-1419
46
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FIRST CLEARING CORP 6.37%
A/C 8587-5612
RENNIE W VERBEEK R/O IRA
FCC CUST
219 HAYDEN RD
GROTON MA 01450-2031
UBS FINANCIAL SERVICES INC. FBO 5.26%
ROBERT BREIDENBAUGH
CAROLYN BREIDENBAUGH JTWROS
369 E. CHURCH STREET
ELMHURST IL 60126-3602
BALANCED FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 11.06%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
COMMON STOCK FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
US CLEARING CORP 15.46%
FBO 210-92171-13
26 BROADWAY
NEW YORK NY 10004-1703
COLUMBIA TRUST COMPANY ROLLOVER IRA 10.59%
LARRY A LEPPKE
12091 W LAKE AVE
LITTLETON CO 80127-2368
NFSC FEBO # EBP-443280 9.41%
NFS/FMTC SEP IRA
FBO ROGER B MATHERLY
2701 RIVERVIEW DR
COLONIAL BCH VA 22443-1326
AMERICAN ENTERPRISE INVESTMENT SVCS 8.33%
FBO 573612971
PO BOX 9446
MINNEAPOLIS MN 55440-9446
GAIL A SEVERSON 6.36%
137 BUSHEY RD
PITTSFIELD MA 01201-4432
47
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
UBS FINANCIAL SERVICES INC. FBO 6.13%
VIRGINIA WOOTEN HUDSON
80 STONEHAVEN CIRCLE
JACKSON TN 38305-1944
NFSC FEBO # W82-088994 5.49%
NFS/FMTC IRA
FBO MICHAEL P KAHRS
4316 E CAPISTRANO AVE
PHOENIX AZ 85044-1314
COLUMBIA TRUST COMPANY ROTH IRA 5.36%
ALLISON J KIRCHMER
4407 MOUNTAIN COVE DR
CHARLOTTE NC 28216-7787
COMMON STOCK FUND-B
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
WEXFORD CLEARING SERVICES CORP FBO 8.67%
ADVEST INC C/F
JAMES TORREGIANI
FOLEY TORREGIANI INCORPORATED SEP
STRATFORD CT 06614
MERRILL LYNCH PIERCE FENNER & SMITH 6.83%
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 6.16%
00166G04417
333 WEST 34TH ST - 3RD FLOOR
NEW YORK NY 10001-2402
LPL FINANCIAL SERVICES 5.62%
A/C 3926-8322
9785 TOWNE CENTRE DRIVE
SAN DIEGO CA 92121-1968
BEAR STEARNS SECURITIES CORP 5.04%
FBO 459-10042-15
1 METROTECH CTR N
BROOKLYN NY 11201-3870
48
COMMON STOCK FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
AMERICAN ENTERPRISE INVESTMENT SVCS 28.32%
FBO 223912391
PO BOX 9446
MINNEAPOLIS MN 55440-9446
ATTN MUTUAL FUNDS 22.62%
FISERV SECURITIES INC
FAO 17669748
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
WACHOVIA SECURITIES, LLC FBO 17.49%
MR ROY E ANGER
IRA ROLLOVER DTD 02/27/03
9130 CHERRY HILL CT
FT MYERS FL 33908-3648
UBS FINANCIAL SERVICES INC. FBO 8.84%
ZONNIE B ODOM TRUST B
CATHERINE ODOM TTEE
U/W 12/19/98
310 GRANDY'S MILL ROAD
WILLISTON SC 29853-3106
US CLEARING CORP 7.11%
FBO 172-05150-12
26 BROADWAY
NEW YORK NY 10004-1703
UBS FINANCIAL SERVICES INC. 5.52%
BARBARA LAIN ROTH IRA
1102 PHILLIPS AVE
DAYTON OH 45410-2633
UBS FINANCIAL SERVICES INC. FBO 5.52%
LAURENCE LAIN
ROTH IRA
1102 PHILLIPS AVE.
DAYTON OH 45410-2633
COMMON STOCK FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 8.86%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
49
FIXED INCOME SECURITIES FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
US CLEARING CORP 67.72%
FBO 157-10630-13
26 BROADWAY
NEW YORK NY 10004-1703
AMERICAN ENTERPRISE INVESTMENT SVCS 27.05%
FBO 150355871
PO BOX 9446
MINNEAPOLIS MN 55440-9446
FIXED INCOME SECURITIES FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
US CLEARING CORP 7.03%
FBO 237-09094-14
26 BROADWAY
NEW YORK NY 10004-1703
RAYMOND JAMES & ASSOC INC 5.45%
FBO GEMPP IRA
BIN # 77533040
880 CARILLON PKWY
ST PETERSBURG FL 33716-1100
FIXED INCOME SECURITIES FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 11.26%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
WELLS FARGO BANK MN NA FBO 7.71%
WF AGENCY A/C 12097802
ATTN: MUTUAL FUND OPS
PO BOX 1533
MINNEAPOLIS MN 55480-1533
WELLS FARGO BANK MN NA FBO 6.86%
NW DEF COMP MANAGED FIX INC FD
ATTN: MUTUAL FUND OPS
P.O. BOX 1533
MINNEAPOLIS MN 55480-1533
50
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
NATIONAL FINANCIAL SERVICES LLC FOR 5.51%
THE EXCLUSIVE BENEFIT OF OUR
CUSTOMERS
200 LIBERTY ST
ONE WORLD FINANCIAL CENTER
NEW YORK NY 10281-1003
GROWTH FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
UBS FINANCIAL SERVICES INC. 6.96%
UBS FINANCIAL SERVICES INC. FBO
FBO PETER PEFF
1000 HARBOR BLVD
PO BOX 3321
WEEHAWKEN NJ 07086-8154
GROWTH FUND-B
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
PERSHING LLC 8.79%
P.O. BOX 2052
JERSEY CITY NJ 07303-2052
RBC DAIN RAUSCHER CUST 5.62%
EDWARD D DUDLEY
A/C # 5308-0016
SEGREGATED R/O IRA
905 9TH ST
ALTAVISTA VA 24517-1607
GROWTH FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FIRST CLEARING LLC 34.40%
A/C 3014-8172
PAUL E EKLOF
CONDUIT IRA
191 CRYSTAL AVENUE
STATEN ISLAND NY 10302-2525
UBS FINANCIAL SERVICES INC. 13.47%
SUSAN R BRIGANCE &
JAMES R BRIGANCE JTWROS
11650 HIGHLAND COLONY DRIVE
ROSWELL GA 30075-2197
LPL FINANCIAL SERVICES 8.78%
A/C 1142-8796
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
WACHOVIA SECURITIES, LLC FBO 8.33%
MR ROY E ANGER
IRA ROLLOVER DTD 02/27/03
9130 CHERRY HILL CT
FT MYERS FL 33908-3648
51
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
COLUMBIA TRUST COMPANY 7.27%
MORRISON & HEAD LP
CHET W MORRISON
9903 SAUSALITO DRIVE
AUSTIN TX 78759-6103
MERRILL LYNCH PIERCE FENNER & SMITH 6.09%
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION # 97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
GROWTH FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FLEET NATIONAL BANK 7.97%
FBO COLUMBIA OMNIBUS C/C
ATTN VARIOUS ACCTS
PO BOX 92800
ROCHESTER NY 14692-8900
HIGH YIELD FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 42.29%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
HIGH YIELD FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
MERRILL LYNCH PIERCE FENNER & SMITH 21.94%
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION
4800 DEER LAKE DR E FL 3
JACKSONVILLE FL 32246-6484
PERSHING LLC 6.87%
PO BOX 2052
JERSEY CITY NJ 07303-2052
HIGH YIELD FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
MERRILL LYNCH PIERCE FENNER & SMITH 11.43%
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION # 97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
52
HIGH YIELD FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 24.78%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FLEET NATIONAL BANK 24.14%
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
NATIONAL FINANCIAL SERVICES LLC FOR 14.01%
THE EXCLUSIVE BENEFIT OF OUR
CUSTOMERS
200 LIBERTY ST
ONE WORLD FINANCIAL CENTER
NEW YORK NY 10281-1003
FLEET NATIONAL BANK 8.95%
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
INTERNATIONAL STOCK FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
JORDAN R KUHR 22.38%
3 SOPHIA ST
MONSEY NY 10952-2010
A G EDWARDS & SONS INC FBO 7.63%
NELPHISON DEALMEIDA
DEFBENE
A/C 0405-257459
1 N JEFFERSON AVE
SAINT LOUIS MO 63103-2287
A G EDWARDS & SONS INC CUST 5.59%
FBO DARWIN P EUTO
ROLLOVER IRA
506 BRENDA DR
ALBEMARLE NC 28001-9711
LPL FINANCIAL SERVICES 5.02%
A/C 2024-5103
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
53
INTERNATIONAL STOCK FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
ATTN MUTUAL FUNDS 5.02%
FISERV SECURITIES INC
FAO 17521163
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
INTERNATIONAL STOCK FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FLEET NATIONAL BANK 41.52%
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 12.05%
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 5.00%
FBO CMC OMNIBUS R/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
MID CAP GROWTH FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
ATTN MUTUAL FUNDS 61.12%
FISERV SECURITIES INC
FAO 17434316
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
LPL FINANCIAL SERVICES 18.19%
A/C 1250-5374
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
LPL FINANCIAL SERVICES 17.63%
A/C 2377-7452
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
54
MID CAP GROWTH FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
EDWARD D JONES & CO F/A/O 6.39%
BEULAH MAE JONES MITCHELL TTEE
U/A DTD 6/5/96 FOR
EDJ # 277-03316-1-5
PO BOX 2500
MARYLAND HTS MO 63043-8500
US CLEARING CORP 5.61%
FBO 236-21936-13
26 BROADWAY
NEW YORK NY 10004-1703
US CLEARING CORP 5.10%
FBO 599-12682-19
26 BROADWAY
NEW YORK NY 10004-1703
MID CAP GROWTH FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 9.92%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FLEET NATIONAL BANK 9.16%
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
STANDARD INSURANCE COMPANY 5.58%
ATTN: SEPARATE ACCOUNT A/P11D
1100 SW SIXTH AVENUE
PORTLAND OR 97204-1020
NATIONAL MUNICIPAL BOND FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
NFSC FEBO # W16-094595 8.46%
JENNIFER BERKELEY
31 VIRGINIA RD
MAPLEWOOD NJ 07040-1232
DOROTHY W POWERS 8.12%
12011 N 52ND ST
TAMPA FL 33617-1443
55
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
PERSHING LLC 7.10%
PO BOX 2052
JERSEY CITY NJ 07303-2052
LPL FINANCIAL SERVICES 6.47%
A/C 6910-8052
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
UBS FINANCIAL SERVICES INC. 6.46%
ROBERT R BRAUN TRUSTEE
EVA BRAUN TESTATRUST
DTD 2-12-91
PO BOX 183
HUMPHREY NE 68642-0183
UBS FINANCIAL SERVICES INC. 6.27%
CARRIE SHANLE TTEE
RYSTROM FAMILYTRUST
DTD 8-19-94
3914 25TH ST APT 20
COLUMBUS NE 68601-2275
PERSHING LLC 5.98%
PO BOX 2052
JERSEY CITY NJ 07303-2052
AMERICAN ENTERPRISE INVESTMENT SVCS 5.78%
FBO 217284721
PO BOX 9446
MINNEAPOLIS MN 55440-9446
NATIONAL MUNICIPAL BOND FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
ATTN BLUNT WHITE 57.38%
WEXFORD SECURITIES LLC FBO
PEOPLES BANK ESCROW AGENT
DAVID G LATTIZORI
ESCROW ACCOUNT
NORWICH CT 06360
UBS FINANCIAL SERVICES INC FBO 8.10%
WALTER J GESE
RONALD W GESE JTWROS
3711 W HEROY AVE
SPOKANE WA 99205-1817
UBS FINANCIAL SERVICES INC FBO 7.98%
COLLEEN J MCNICHOLS
4327 S MAGNOLIA ST
SPOKANE WA 99203-4328
56
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
UBS FINANCIAL SERVICES INC FBO 6.79%
PAUL H MEIER &
LORA R MEIER TIC
2105 N BELT ST
SPOKANE WA 99205-4043
UBS FINANCIAL SERVICES INC FBO 5.50%
JUNE R EDWARDS TTEE
JUNE R EDWARDS REVOCLIVTRUST
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, 2003
---------------- -------------------------------------------
J J B HILLIARD W L LYONS INC 21.65%
MARY MASON COMMUNITY
A/C 6085-8209
501 S 4TH ST
LOUISVILLE KY 40202-2520
PERSHING LLC 20.10%
PO BOX 2052
JERSEY CITY NJ 07303-2052
FIRST CLEARING CORP 10.56%
A/C 1155-7195
DANIEL ANDREUCCI &
JEANNE P ANDREUCCI
1657 CONNOR RD
SOUTH PARK PA 15129-9036
US CLEARING CORP 9.40%
FBO 236-21831-19
26 BROADWAY
NEW YORK NY 10004-1703
MERRILL LYNCH PIERCE FENNER & SMITH 6.05%
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION # 97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
US CLEARING CORP 5.10%
FBO 599-10131-10
26 BROADWAY
NEW YORK NY 10004-1703
LPL FINANCIAL SERVICES 5.08%
A/C 7755-7245
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
57
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
US CLEARING CORP 5.01%
FBO 592-08498-16
26 BROADWAY
NEW YORK NY 10004-1703
NATIONAL MUNICIPAL BOND FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
GUNILLA FINROW 8.50%
80 E ROANOKE ST APT 7
SEATTLE WA 98102-3242
FLEET NATIONAL BANK 6.55%
FBO COLUMBIA OMNIBUS C/C
ATTN VARIOUS ACCTS
PO BOX 92800
ROCHESTER NY 14692-8900
OREGON MUNICIPAL BOND FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
RAYMOND JAMES & ASSOC INC 98.03%
FBO SAUNDERS BARNEY
BIN # 52187574
880 CARILLON PK WY
ST PETERSBURG FL 33716-1100
OREGON MUNICIPAL BOND FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
DAIN RAUSCHER INC FBO 20.72%
LEWIS F ROTH
LEWIS F ROTH REVOCLIVTRUST
U/A DTD 07/31/1991
4798 BECKER CIR SE
ALBANY OR 97322-7139
LPL FINANCIAL SERVICES 12.82%
A/C 3538-3593
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
PERSHING LLC 12.46%
PO BOX 2052
JERSEY CITY NJ 07303-2052
DAIN RAUSCHER INC FBO 11.04%
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 10.53%
A/C 3925-8809
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
58
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
AMERICAN ENTERPRISE INVESTMENT SVCS 6.56%
FBO 307349171
PO BOX 9446
MINNEAPOLIS MN 55440-9446
NFSC FEBO # 0C3-185612 6.49%
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 6.17%
FBO 304417451
PO BOX 9446
MINNEAPOLIS MN 55440-9446
OREGON MUNICIPAL BOND FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 6.80%
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, 2003
---------------- -------------------------------------------
FTC & CO 42.88%
A/C # 00087
DATALYNX
PO BOX 173736
DENVER CO 80217-3736
CHARLES SCHWAB & CO INC 23.58%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
NATIONWIDE TRUST CO FSB 7.15%
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
REAL ESTATE EQUITY FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FIRST CLEARING CORPORATION 33.77%
A/C 6966-9056
GEORGE J SAVINE JR
JUDY M SAVINE
108 JOSPEN CT
ALTOONA PA 16602-7525
59
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FIRST CLEARING LLC 14.09%
A/C 8695-3358
CALVIN WELLS
6500 SHARON HILLS RD
CHARLOTTE NC 28210-7047
LPL FINANCIAL SERVICES 10.61%
A/C 3262-4438
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
A G EDWARDS & SONS INC CUST 8.40%
FBO FREDERICK C NOYES ROTH IRA
191 LYONS PLAIN RD
WESTON CT 06883-2408
REAL ESTATE EQUITY FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FIRST CLEARING LLC 5.66%
A/C 6326-2843
ARNI L NASHBAR AND
8911 BLOOMFIELD BLVD
SARASOTA FL 34238-4452
REAL ESTATE EQUITY FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 32.75%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FLEET NATIONAL BANK 13.10%
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
NATIONAL FINANCIAL SERVICES LLC FOR 10.95%
THE EXCLUSIVE BENEFIT OF OUR
CUSTOMERS
200 LIBERTY ST
ONE WORLD FINANCIAL CENTER
NEW YORK NY 10281-1003
FLEET NATIONAL BANK 5.41%
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
60
SHORT TERM BOND FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO 15.85%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
PERSHING LLC 7.67%
PO BOX 2052
JERSEY CITY NJ 07303-2052
US CLEARING CORP 5.03%
FBO 102-59241-17
26 BROADWAY
NEW YORK NY 10004-1703
MERRILL LYNCH PIERCE FENNER & SMITH 5.02%
FOR THE SOLE BENEFIT OF
ITS CUSTOMERS
ATTN FUND ADMINISTRATION # 97E96
4800 DEER LAKE DR E FL 2
JACKSONVILLE FL 32246-6484
SHORT TERM BOND FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
A G EDWARDS & SONS INC FBO 8.79%
JOHN R KILGORE
SOLE PROPRIETOR
A/C 0331-288985
1 N JEFFERSON AVE
SAINT LOUIS MO 63103-2287
J J B HILLIARD W L LYONS INC 5.50%
DWIGHT P PLOWMAN
A/C 7357-0516
501 S 4TH ST
LOUISVILLE KY 40202-2520
CITIGROUP GLOBAL MARKETS INC. 5.49%
00164723617
333 WEST 34TH STREET - 3RD FLOOR
NEW YORK NY 10001-2402
SHORT TERM BOND FUND-G
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
MELODY J WILDER 5.44%
4 WINDSOR ST
HAVERHILL MA 01830-4127
61
SHORT TERM BOND FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
FLEET NATIONAL BANK 45.11%
FBO CMC OMNIBUS C/C
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 16.42%
FBO CMC OMNIBUS C/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
FLEET NATIONAL BANK 9.64%
FBO CMC OMNIBUS R/R
ATTN VARIOUS
PO BOX 92800
ROCHESTER NY 14692-8900
SMALL CAP GROWTH FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
SAXON AND CO 12.54%
OMNIBUS
PO BOX 7780-1888
PHILADELPHIA PA 19182-0001
CHARLES SCHWAB & CO INC 7.55%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
NORTHERN TRUST CO TTEE 6.60%
INTERMOUNTAIN HEALTH CARE 401K
PO BOX 92994
CHICAGO IL 60675-2994
WELLS FARGO BANK MN NA 5.54%
FBO DESERET MUTUAL FUND
THRIFT PLAN 401K
PO BOX 1533
MINNEAPOLIS MN 55479-0001
STANDARD INSURANCE COMPANY 5.52%
ATTN: SEPARATE ACCOUNT A/P11D
1100 SW SIXTH AVENUE
PORTLAND OR 97204-1020
STRATEGIC INVESTOR FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 18.40%
SPECIAL CUSTODY A/C FOR BENFT CUST
ATTN MUTUAL FUND
101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4122
62
STRATEGIC INVESTOR FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
LPL FINANCIAL SERVICES 27.11%
A/C 5009-1080
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
ATTN MUTUAL FUNDS 24.08%
FISERV SECURITIES INC
FAO 14261804
ONE COMMERCE SQUARE
2005 MARKET STREET SUITE 1200
PHILADELPHIA PA 19103-7008
AMERICAN ENTERPRISE INVESTMENT SVCS 23.70%
FBO 305941131
PO BOX 9446
MINNEAPOLIS MN 55440-9446
A G EDWARDS & SONS 13.23%
BARBARA R GRIFFITH
SEP IRA ACCOUNT
41 CANYON CREST DR
CORONA DL MAR CA 92625-1142
STRATEGIC INVESTOR FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CITIGROUP GLOBAL MARKETS INC 24.54%
00112C36359
333 W 34TH ST FL 3
NEW YORK NY 10001-2402
LPL FINANCIAL SERVICES 5.93%
A/C 4599-4330
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
STRATEGIC INVESTOR FUND-Z
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
CHARLES SCHWAB & CO INC 12.23%
SPECIAL CUSTODY ACCT FOR EXCLUSIVE
OF CUSTOMERS
ATTN: MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
NATIONAL FINANCIAL SERVICES LLC FOR 6.45%
THE EXCLUSIVE BENEFIT OF OUR
CUSTOMERS
ONE WORLD FINANCIAL CENTER
200 LIBERTY ST
NEW YORK NY 10281-1003
63
TECHNOLOGY FUND-A
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
AMERICAN ENTERPRISE INVESTMENT SVCS 20.85%
FBO 315840141
PO BOX 9446
MINNEAPOLIS MN 55440-9446
COLUMBIA TRUST COMPANY IRA 6.42%
MICHAEL KAMENITSKY
165 NORTH ST
WALLINGFORD CT 06492-3247
TECHNOLOGY FUND-C
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
US CLEARING CORP 61.18%
FBO 597-12870-15
26 BROADWAY
NEW YORK NY 10004-1703
US CLEARING CORP 14.98%
FBO 157-10947-11
26 BROADWAY
NEW YORK NY 10004-1703
E*TRADE CLEARING LLC 11.54%
A/C 1195-4855
ROBERT J CAVESE
PO BOX 989030
SACRAMENTO CA 95798-9030
TECHNOLOGY FUND-D
NAME AND ADDRESS PERCENT OF SHARES HELD AT NOVEMBER 30, 2003
---------------- -------------------------------------------
LPL FINANCIAL SERVICES 28.94%
A/C 1120-6690
9785 TOWNE CENTRE DR
SAN DIEGO CA 92121-1968
AMERICAN ENTERPRISE INVESTMENT SVCS 26.74%
FBO 312174581
PO BOX 9446
MINNEAPOLIS MN 55440-9446
COLUMBIA TRUST COMPANY 20.70%
THOMASVILLE HOME FURNISHINGS OF AZ
BRANDON D LEVALLEY
18971 CAMINITO CANTILENA # 19
SAN DEIGO CA 92128
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
64
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 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.
65
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.
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; 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 2003* 2002 2001
---- ----------- ----------- -----------
Common Stock Fund $ 1,648,054 $ 3,238,954 $ 4,439,013
Growth Fund $ 3,414,673 $ 5,819,523 $ 8,377,937
International Stock Fund $ 1,398,948 $ 1,375,061 $ 1,534,669
Mid Cap Growth Fund $ 5,318,563 $ 6,341,031 $ 7,790,604
Small Cap Growth Fund $ 3,458,104 $ 5,936,461 $ 5,137,830
Real Estate Fund $ 4,042,456 $ 5,602,888 $ 3,752,707
Technology Fund $ 79,533 $ 98,750 $ 103,027
Strategic Investor Fund $ 1,276,121 $ 2,087,191 $ 543,893
Balanced Fund $ 2,135,099 $ 4,095,196 $ 5,191,548
Short Term Bond Fund $ 1,618,065 $ 506,173 $ 227,831
Fixed Income Securities Fund $ 1,882,651 $ 2,477,847 $ 2,158,251
National Municipal Bond Fund $ 56,611 $ 73,374 $ 59,637
Oregon Municipal Bond Fund $ 1,719,382 $ 2,513,517 $ 2,395,099
High Yield Fund $ 4,977,940 $ 2,629,803 $ 1,089,470
Daily Income Company $ 3,195,776 $ 5,671,913 $ 5,765,043
- ------------
*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.
66
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 periods ended August 31, 2003 and
December 31, 2002 and 2001, the Advisor and its affiliates paid $2,206,111,
$2,953,946 and $2,184,122, 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, 2003 under each transfer agent agreement were $649,429 for the Common Stock
Fund, $1,211,805 for the Growth Fund, $626,710 for the International Stock Fund,
$1,137,543 for the Mid Cap Growth Fund, $770,117 for the Small Cap Growth Fund,
$1,394,860 for the Real Estate Fund, $100,361 for the Technology Fund, $405,361
for the Strategic Investor Fund, $861,349 for the Balanced Fund, $349,807 for
the Short Term Bond Fund, $661,730 for the Fixed Income Securities Fund,
$329,673 for the Oregon Municipal Bond Fund, $1,256,455 for the High Yield Fund,
$1,181,362 for the Daily Income Company and $17,644 for the National Municipal
Bond Fund.
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 $19,565 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.
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 December 31, 2002 and August 31, 2003, the
following sales charges were paid by shareholders in respect to Class A, D and T
shares:
CLASS A CLASS D CLASS T
------- ------- -------
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
Common Stock Fund $ 1,059 $ 28 $ 636 $ 25 -- --
Growth Fund $ 20,398 $ 209 $ 2,221 $ 727 -- --
International Stock Fund $ 10,013 $ 1,083 $ 505 $ 391 -- --
Mid Cap Growth Fund $ 6,808 $ 1,911 $ 2,756 $ 1,670 $ 1,155 $ 52
Real Estate Equity Fund $ 75,728 $ 8,850 $ 25,272 $ 3,507 -- --
Technology Fund $ 9,239 -- $ 26 -- -- --
Strategic Investor Fund $ 11,042 -- $ 1,888 $ 112 -- --
Balanced Fund $ 13,472 -- $ 4,152 $ 4,560 -- --
Short Term Bond Fund $ 271,445 $ 57,528 $ 126,488 $ 46,560 $ 1,915 $ 5
Fixed Income Securities Fund $ 40,896 $ 18,748 $ 27,930 $ 3,026 -- --
National Municipal Bond Fund $ 12,057 $ 474 $ 4,101 $ 47 -- --
Oregon Municipal Bond Fund $ 63,121 $ 13,688 $ 7,760 $ 4,783 -- --
High Yield Fund $1,410,289 $ 186,189 $ 728,950 $ 140,212 -- --
67
For the fiscal years ended December 31, 2002 and August 31, 2003, CFD, as
Distributor, retained the following fees:
COMMON STOCK FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $1,059 $ 28
Initial sales charges retained by CFD $ 166 $ 4
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 7 $ 250
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 0 $ 0
*Class A, B and D shares were initially offered on November 1, 2002.
GROWTH FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $20,398 $ 209
Initial sales charges retained by CFD $ 2,534 $ 27
Aggregate contingent deferred sales charges (CDSC) $ 1,109 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 215 $ 0
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 50 $ 0
68
Class G Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $19,518 $2,921
*Class A, B, D and G shares were initially offered on November 1, 2002.
INTERNATIONAL STOCK FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $10,013 $1,083
Initial sales charges retained by CFD $ 7,096 $ 156
Aggregate contingent deferred sales charges (CDSC) $ 2,087 $ 0**
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $19,114 $2,725
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 106 $ 34
*Class A, B and D shares were initially offered on November 1, 2002. **Rounds to
less than one.
MID CAP GROWTH FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $ 6,808 $1,911
Initial sales charges retained by CFD $ 1,056 $ 252
Aggregate contingent deferred sales charges (CDSC) $ 22 $ 1
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 1,098 $1,757
69
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 119 $ 0
Class G Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 1,636 $ 59
*Class A, B, D and G shares were initially offered on November 1, 2002.
REAL ESTATE EQUITY FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $75,728 $8,850
Initial sales charges retained by CFD $11,048 $1,257
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 1,450 $ 0
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 122 $ 0
*Class A, B and D shares were initially offered on November 1, 2002.
TECHNOLOGY FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $ 9,239 $ 0
Initial sales charges retained by CFD $ 151 $ 0
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
70
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 154 $ 0
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 58 $ 0
*Class A, B and D shares were initially offered on November 1, 2002.
STRATEGIC INVESTOR FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $11,042 $ 0
Initial sales charges retained by CFD $ 1,674 $ 47
Aggregate contingent deferred sales charges (CDSC) $ 280 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 6,849 $ 853
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 92 $ 0
*Class A, B and D shares were initially offered on November 1, 2002.
BALANCED FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $13,472 $ 0
Initial sales charges retained by CFD $ 1,584 $ 0
Aggregate contingent deferred sales charges (CDSC) $ 77 $ 0
On Fund redemptions retained by CFD
71
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 4,927 $ 250
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 150 $ 0
*Class A, B and D shares were initially offered on November 1, 2002.
SHORT TERM BOND FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $271,445 $57,528
Initial sales charges retained by CFD $ 34,079 $ 6,688
Aggregate contingent deferred sales charges (CDSC) $ 953 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $52,350 $ 718
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $16,823 $ 92
Class G Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 5,151 $ 0
*Class A, B, D and G shares were initially offered on November 1, 2002.
72
FIXED INCOME SECURITIES FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $40,896 $18,748
Initial sales charges retained by CFD $ 4,172 $ 2,252
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 6,586 $ 83
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 2,841 $ 0
*Class A, B and D shares were initially offered on November 1, 2002.
NATIONAL MUNICIPAL BOND FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $12,057 $ 474
Initial sales charges retained by CFD $ 1,276 $ 5
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 0 $ 0
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 121 $ 0
*Class A, B and D shares were initially offered on November 1, 2002.
73
OREGON MUNICIPAL BOND FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $63,121 $13,688
Initial sales charges retained by CFD $ 6,909 $ 584
Aggregate contingent deferred sales charges (CDSC) $ 0 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 625 $2,476
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $ 2,100 $ 246
*Class A, B and D shares were initially offered on November 1, 2002.
HIGH YIELD FUND*
Class A Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate initial sales charges on Fund share sales $1,410,289 $186,189
Initial sales charges retained by CFD $ 158,986 $ 10,152
Aggregate contingent deferred sales charges (CDSC) $ 8,066 $ 0
On Fund redemptions retained by CFD
Class B Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $73,004 $1,194
Class D Shares
Fiscal year ended,
2003 2002
---- ----
Aggregate CDSC on Fund redemptions retained by CFD $42,091 $ 2
*Class A, B, and D shares were initially offered on November 1,2002.
The Advisor, CFD and CFS are wholly owned subsidiaries of Columbia
Management Group, Inc., which is an indirect wholly owned subsidiary of
FleetBoston Financial Corporation ("Fleet"). Fleet and its affiliates provide a
wide range of banking, financial, and
74
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.
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.
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. 75
75
Total brokerage commissions paid (agency only) by each of the respective
Funds for each of the last three fiscal years were:
FUND 2003* 2002 2001
---- ----- ---- ----
Common Stock Fund $1,511,696 $2,190,926 $2,035,596
Growth Fund $3,916,262 $5,689,484 $3,889,565
Mid Cap Growth Fund $2,792,191 $2,756,879 $3,044,514
Small Cap Growth Fund $2,274,813 $2,664,649 $1,012,497
Real Estate Fund $1,359,961 $ 852,884 $ 982,759
Balanced Fund $1,432,505 $1,960,887 $1,668,686
Technology Fund $ 528,962 $ 296,070 $ 55,309
Strategic Investor Fund $ 950,489 $2,297,858 $ 915,632
*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 2003, the Common Stock
Fund paid $255,445, the Growth Fund paid $246,863, the Mid Cap Growth Fund paid
$136,871, the Small Cap Growth Fund paid $164,384, the Balanced Fund paid
$233,506, the Real Estate Fund paid $40,668, the Strategic Investor Fund paid
$54,858, and the Technology Fund paid $28,744 to acquire third-party research or
products.
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, to execute purchase and sale orders. The aggregate dollar amount of
brokerage commissions paid to Robertson Stephens for the fiscal years 2001,
2002, and 2003 is as follows:
FUND 2003* 2002 2001
---- ----- ---- ----
Small Cap Growth Fund $ 0 $ 0 $ 300
Balanced Fund $ 0 $ 9,330 $ 6,300
Mid Cap Growth Fund $ 0 $ 0 $ 7,312
Growth Fund $ 0 $ 3,460 $ 28,880
Real Estate Equity Fund $ 0 $ 0 $ 15,612
Strategic Investor Fund $ 0 $ 11,510 $ 2,400
Common Stock Fund $ 0 $ 2,020 $ 0
The aggregate dollar amount of brokerage commissions paid to Fleet
Institutional Trading for fiscal years 2002 and 2003 is as follows:
FUND 2003* 2002
---- ----- ----
Balanced Fund $ 0 $ 750
Strategic Value Fund $ 34,125 $ 23,875
Common Stock Fund $ 0 $ 1,000
*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.
76
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 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.
77
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.
78
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 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 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 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
79
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 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, 2003 were (Class C shares were not available
until October 13 and, accordingly, no fees were paid to CFD by Class C shares
for the period ended August 31, 2003):
SERVICE FEE DISTRIBUTION FEE
----------- ----------------
CLASS A CLASS B CLASS D CLASS G CLASS T CLASS B CLASS D CLASS G
------- ------- ------- ------- ------- ------- ------- -------
Common Stock Fund $ 243 $ 586 $ 103 -- -- $ 1,763 $ 310 --
Growth Fund $ 6,158 $ 656 $ 317 $ 27,619 -- $ 1,974 $ 955 $ 60,094
International Stock Fund $ 33,220 $ 16,772 $ 926 -- -- $ 50,314 $ 2,779 --
Mid Cap Growth Fund $ 3,951 $ 6,146 $ 961 $ 1,471 $ 53,629 $ 18,438 $ 2,884 $ 3,187
Real Estate Equity Fund $ 8,682 $ 4,868 $ 3,093 -- -- $ 14,683 $ 9,358 --
Technology Fund $ 268 $ 713 $ 15 -- -- $ 2,141 $ 45 --
Strategic Investor Fund $ 90,202 $ 4,448 $ 817 -- -- $ 13,343 $ 2,452 --
Balanced Fund $ 627 $ 3,214 $ 965 -- -- $ 9,659 $ 2,895 --
Short Term Bond Fund $ 40,856 $ 33,762 $ 21,747 $ 1,831 $ 29,593 $101,746 $ 65,542 $ 7,934
Fixed Income Securities Fund $ 6,743 $ 5,877 $ 3,334 -- -- $ 17,681 $ 10,050 --
National Municipal Bond Fund $ 437 $ 674 $ 460 -- -- $ 2,029 $ 1,384 --
Oregon Municipal Bond Fund $ 1,732 $ 1,233 $ 1,173 -- -- $ 3,700 $ 3,518 --
High Yield Fund $187,307 $ 99,160 $116,805 -- -- $298,743 $350,413 --
Sales-related expenses of CFD relating to the Funds were:
COMMON STOCK FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $801 $17,018 $ 982
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $113 $ 415 $ 119
Allocated travel, entertainment and other
expenses $315 $ 1,152 $ 331
80
GROWTH FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares Class G Shares
-------------- -------------- -------------- --------------
Fees to FSFs $ 7,538 $19,898 $ 2,254 $ 9,890
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 993 $ 419 $ 270 $ 1,296
Allocated travel, entertainment and other
expenses $ 2,756 $ 1,163 $ 748 $ 3,597
INTERNATIONAL STOCK FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $37,861 $45,751 $1,232
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 2,177 $ 1,813 $ 151
Allocated travel, entertainment and other
expenses $ 6,041 $ 5,030 $ 419
MID CAP GROWTH FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares Class G Shares Class T Shares
-------------- -------------- -------------- -------------- --------------
Fees to FSFs $ 4,177 $89,158 $3,075 $533 $ 0
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 7,590 $ 947 $ 369 $105 $1,300
Allocated travel, entertainment and other
expenses $21,061 $ 2,627 $1,023 $293 $3,608
REAL ESTATE EQUITY FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $28,889 $137,484 $25,520
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $11,847 $ 3,253 $ 3,229
Allocated travel, entertainment and other
expenses $32,876 $ 9,028 $ 8,960
TECHNOLOGY FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $197 $48,010 $104
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $340 $ 1,142 $ 14
Allocated travel, entertainment and other
expenses $945 $ 3,170 $ 39
STRATEGIC INVESTOR FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $71,685 $30,081 $2,297
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 1,968 $ 844 $ 246
Allocated travel, entertainment and other
expenses $ 5,462 $ 2,342 $ 683
81
BALANCED FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $1,411 $99,207 $4,165
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 399 $ 2,380 $ 501
Allocated travel, entertainment and other
expenses $1,108 $ 6,604 $1,390
SHORT TERM BOND FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares Class G Shares Class T Shares
-------------- -------------- -------------- -------------- --------------
Fees to FSFs $121,751 $713,268 $149,838 $708 $ 0
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 42,543 $ 20,665 $ 17,539 $ 48 $ 926
Allocated travel, entertainment and other
expenses $118,055 $ 57,346 $ 48,669 $135 $2,570
FIXED INCOME SECURITIES FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $42,926 $105,543 $29,105
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 8,953 $ 2,953 $ 3,530
Allocated travel, entertainment and other expenses $24,845 $ 8,195 $ 9,794
NATIONAL MUNICIPAL BOND FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $32,257 $14,999 $ 4,195
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $ 385 $ 375 $ 491
Allocated travel, entertainment and other
expenses $ 1,069 $ 1,040 $ 1,363
OREGON MUNICIPAL BOND FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $1,581 $27,711 $6,544
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $1,929 $ 782 $ 773
Allocated travel, entertainment and other
expenses $5,353 $ 2,171 $2,146
HIGH YIELD FUND
Fiscal Year Ended August 31, 2003
Class A Shares Class B Shares Class D Shares
-------------- -------------- --------------
Fees to FSFs $367,134 $2,606,094 $866,400
Allocated cost of sales material relating to the
Fund (including printing, mailing and other
promotion expenses) $218,287 $ 75,141 $103,323
Allocated travel, entertainment and other
expenses $605,741 $ 208,514 $286,719
82
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 will 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.
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 which
have been previously acquired 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 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.
83
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 shares of up to four other funds. Complete the Automated
Dollar Cost Averaging section of the Application. The designated amount will be
exchanged on the third Tuesday of each month. There is no charge for exchanges
made pursuant to the Automated Dollar Cost Averaging program. 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.
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 1722, Boston, MA 02105-1722.
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 Individual Retirement Accounts (IRAs), and Pension and 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 $10 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 will also be charged a $15 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
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 are suspended for 30 days after an address change is
effected.
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
1-800-422-3737 or, if you are a Class Z shareholder, at 1-800-338-2550.
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
84
any money market fund, unless such shares were acquired by exchange from
Class A or Class T shares of another non-money market fund).
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 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.
EXCHANGES FOR AFFILIATES OF CFD. Clients of affiliates of CFD who have
previously purchased shares of other investment companies distributed by CFD and
have been charged a front-end load or other sales charge on such purchases may
exchange those shares for Class A shares of any funds distributed by CFD,
without incurring an additional front-end load or sales charge for those
exchanged shares. Certain funds may charge an annual 12b-1 distribution and
service fee.
SPONSORED ARRANGEMENTS. Class A shares of the Funds may be purchased at a
reduced or no sales charge pursuant to sponsored arrangements, which include
programs under which an organization makes recommendations to, or permits group
solicitation of, its employees, members or participants in connection with the
purchase of shares of a Fund on an individual basis. The amount of the sales
charge reduction will reflect the anticipated reduction in sales expense
associated with sponsored arrangements. The reduction in sales expense, and
therefore the reduction in sales charge, will vary depending on factors such as
the size and stability of the organization's
85
group, the term of the organization's existence and certain characteristics of
the members of its group. The Funds reserve the right to revise the terms of or
to suspend or discontinue sales pursuant to sponsored plans at any time.
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 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 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
86
form. Signatures must be guaranteed by a bank, a member firm of a national stock
exchange or another eligible guarantor institution. Stock power forms are
available from FSFs, CFS and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. 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. If a shareholder's account balance is at least
$5,000, 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 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 will 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.
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.
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 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 or furnishing a signature guarantee request. Telephone
redemption privileges for larger amounts may be elected on the Application. 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. No shareholder is obligated to
execute the telephone authorization form or to use the telephone to execute
transactions.
87
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.
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. A shareholder
request must be received within 30 calendar days of the distribution. A
shareholder may exercise this privilege only once. No charge is currently made
for reinvestment.
Shares of the Daily Income Fund will normally earn dividends starting with
the date the Fund receives payment for the shares and will continue through the
day before the shares are redeemed, transferred or exchanged.
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 will 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.
88
If you are seeking to exchange Class A shares of your Fund for Class A
shares of another fund distributed by CFD, the fund into which you wish to
exchange may deny your exchange request if that fund has a higher maximum sales
charge and you have held your Class A shares for less than five months. 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 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
89
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.
INDEPENDENT AUDITORS
The financial statements of each Fund for the period ended August 31,
2003, the selected per share data and ratios under the caption "Financial
Highlights," and the report of PricewaterhouseCoopers LLP, independent auditors,
are included in the 2003 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, or 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 (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 registered
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 the securities (other than government securities or
securities of other regulated investment companies) of any one issuer or of
90
two or more issuers that the Fund "controls" within the meaning of Section 851
of the Code and that meet certain requirements (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) 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 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 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
91
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, qualifying dividend 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 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
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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.
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 qualifying 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
93
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 foreign personal holding company, foreign investment
company, or passive 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 dividend (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 short-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 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 loss if the shares have been
held more than 12 months, and otherwise as a short-term 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 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.
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.
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.
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
94
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. A
Fund may utilize earnings and profits distributed to shareholders on redemptions
made during the year in determining the actual distributions made to the
shareholders for that year.
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.
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 less 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 may also 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 in advance 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.
95
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.
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
96
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.
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 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
97
taxpayer's treatment of the loss is proper. Shareholders should consult their
tax advisers 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 auditors
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.
98
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.
99
PLEASE VOTE PROMPTLY
*********************************
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 the enclosed envelope today.
You may receive additional proxies for other accounts. These are not duplicates;
you should sign and return each proxy card in order for your votes to be
counted.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The signers of this
proxy hereby appoint each of Robert J. Fitzpatrick, Vincent P. Pietropaolo,
Michelle H. Rhee, and David A. Rozenson, or any one of them 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 February 16, 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.
AFTER CAREFUL REVIEW, THE BOARD OF TRUSTEES UNANIMOUSLY HAS RECOMMENDED A VOTE
"FOR" ALL MATTERS.
[COLUMBIA LOGO]
----------------------------------------------------------------------------
COLUMBIA INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------------------
Please be sure to sign and date this proxy. Date
--------
- --------------------------------- -----------------------------------
Shareholder sign here Co-owner sign here
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BELOW
AND, ABSENT DIRECTION, WILL BE VOTED FOR PROPOSAL 1 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 PROPOSAL:
1. Proposal to approve the Agreement and Plan [ ] FOR [ ] AGAINST
of Reorganization with respect to the
acquisition of Columbia International Equity [ ] ABSTAIN
Fund by Columbia International Stock Fund,
Inc. (Item 1 of the Notice)
MARK BOX AT RIGHT FOR ADDRESS CHANGE AND NOTE NEW ADDRESS AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
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.
DETACH CARD DETACH CARD
THREE CONVENIENT WAYS TO VOTE YOUR PROXY
The enclosed proxy statement provides details on important issues affecting your
fund. The Board of Trustees recommends that you vote for the proposal.
You can vote your proxies over the Internet, by telephone, or by fax - it's easy
and confidential!
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 www.[_________].com or www.[________].com.
- Click on the proxy link and follow the instructions provided.
Vote by telephone:
- Read the proxy statement and have your proxy card available.
- When you are ready to vote, call toll free [___]-[___]-[____].
- Enter the voter control number located on the upper left corner of
your proxy card.
- Follow the instructions provided to cast your vote. A representative
will be available to answer questions regarding the meeting agenda
and execution of proxies.
Vote by fax:
- Read the proxy statement and have your proxy card available.
- When you are ready to vote, fax your completed proxy card to
[___]-[___]-[____].
INTERNET, TELEPHONE AND FAX VOTING ARE AVAILABLE 24 HOURS A DAY, SEVEN DAYS A
WEEK. If you have any questions or concerns, please call 888-___-____ from 9:00
a.m. to 11:00 p.m. EDT Monday through Friday, and Saturdays from 12:00 to 6:00
p.m.
COLUMBIA INTERNATIONAL STOCK FUND, INC.
FORM N-14
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) Opinion of Stoel Rives LLP, including consent. (7)
(12) Opinion of Ropes & Gray LLP as to tax matters - Exhibit 1.*
(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. (6)
(14)(b) Consent of Ernst & Young LLP, Independent Registered Public Accounting
Firm to Columbia International Equity Fund. (6)
(14)(c) Consent of PricewaterhouseCoopers LLP, Independent Registered Public
Accounting Firm to Columbia International Equity Fund. (7)
(15) Not applicable.
(16) Powers of Attorney. (6)
(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.
(6) Incorporated herein by reference to the Registrant's Registration
Statement on Form N-14, File No. 333-120783, filed November 24,
2004.
(7) Incorporated herein by reference to Pre-Effective Amendment No.1
to Registrant's Registration Statement on Form N-14, File No.
333-120783, filed December 23, 2004.
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 reofferings 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, as amended, this Registration
Statement has been signed on behalf of the Registrant, in the City of Boston and
The Commonwealth of Massachusetts on the 15th day of June, 2005.
COLUMBIA INTERNATIONAL STOCK FUND, INC.
By: Christopher L. Wilson, President
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Christopher L. Wilson
- -------------------------------------------
Christopher L. Wilson President (Principal Executive
Officer) June 15, 2005
/s/ J. Kevin Connaughton
- -------------------------------------------
J. Kevin Connaughton Chief Financial Officer (Principal
Accounting and Financial Officer) June 15, 2005
/s/ Michael G. Clarke
- -------------------------------------------
Michael G. Clarke Chief Accounting Officer
(Principal Accounting Officer) June 15, 2005
/s/ Douglas A. Hacker*
- -------------------------------------------
Douglas A. Hacker Director June 15, 2005
/s/ Janet Langford Kelly*
- -------------------------------------------
Janet Langford Kelly Director June 15, 2005
/s/ Richard W. Lowry*
- -------------------------------------------
Richard W. Lowry Director June 15, 2005
/s/ William E. Mayer*
- -------------------------------------------
William E. Mayer Director June 15, 2005
/s/ Charles R. Nelson *
- -------------------------------------------
Charles R. Nelson Director June 15, 2005
/s/ John J. Neuhauser *
- -------------------------------------------
John J. Neuhauser Director June 15, 2005
/s/ Joseph R. Palombo *
- -------------------------------------------
Joseph R. Palombo Director June 15, 2005
/s/ Patrick J. Simpson *
- -------------------------------------------
Patrick J. Simpson Director June 15, 2005
/s/ Thomas E. Stitzel *
- -------------------------------------------
Thomas E. Stitzel Director June 15, 2005
/s/ Thomas C. Theobald *
- -------------------------------------------
Thomas C. Theobald Director June 15, 2005
/s/ Anne-Lee Verville *
- -------------------------------------------
Anne-Lee Verville Director June 15, 2005
/s/ Richard L. Woolworth *
- -------------------------------------------
Richard L. Woolworth Director June 15, 2005
* By: Vincent P. Pietropaolo
as Attorney-in-Fact
June 15, 2005
EXHIBIT INDEX
(12) Opinion of Ropes & Gray LLP as to tax matters - Exhibit 1.