COLUMBIA FUNDS TRUST II
COLUMBIA NEWPORT GREATER CHINA FUND
(THE "FUND")
ONE FINANCIAL CENTER,
BOSTON, MASSACHUSETTS 02111-2621
1-866-348-1468
[ ], 2005
Dear Shareholder:
I am writing to you to ask for your vote on the following important matters that
affect your investment in the Fund: (1) the election of Trustees for the Fund;
and (2) the approval of amendments to and the elimination of certain fundamental
investment restrictions of the Fund. If approved, these amendments to and
eliminations of certain fundamental investment restrictions will serve to
facilitate efficient administration of and compliance monitoring for the Fund.
It is expected that if shareholders of the Fund approve the election of all
nominees to its Board of Trustees, the Fund will be reorganized as a series of
Columbia Funds Trust IX, a Massachusetts business trust into which the legal
entities of all of the retail Columbia Funds are expected to be consolidated.
Columbia believes that this consolidation will also enhance the efficiency of
administration and compliance monitoring for the Columbia Funds. In addition, in
connection with this consolidation, the Trustees approved the amendment of the
Agreement and Declaration of Trust of Columbia Funds Trust IX, which became
effective on August 10, 2005. A comparison of the amended Agreement and
Declaration of Trust of Columbia Funds Trust IX to the existing Agreement and
Declaration of Trust for the Fund appears under the heading "Information About
the Acquiring Trust" in this Proxy Statement. Please read it carefully.
Included in this booklet is information about the upcoming meeting of
shareholders of the Fund (the "Special Meeting"):
- A NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF THE FUND, which
summarizes the issues on which you are being asked to vote; and
- A PROXY STATEMENT FOR THE SPECIAL MEETING, which provides more
detailed information on the specific issues being considered at the
Special Meeting.
ALSO ENCLOSED ARE YOUR BALLOT AND POSTAGE-PAID RETURN ENVELOPE.
Although we would like very much to have each shareholder attend this meeting,
we realize that it may not be possible. Whether or not you plan to be present,
we need your vote. We urge you to record your voting instructions by telephone,
via the Internet or by completing, signing and returning the enclosed proxy
card(s) promptly. A postage-paid envelope is enclosed for mailing, and Internet
voting instructions are listed at the top of your proxy card(s).
Your vote is important. A prompt response on your part will help to ensure that
your interests are represented. If you have any questions about the proposals,
please call a Columbia customer service representative at (866)348-1468 or
contact your financial advisor.
Sincerely yours,
Christopher L. Wilson
President
COLUMBIA FUNDS TRUST II
COLUMBIA NEWPORT GREATER CHINA FUND
( THE "FUND")
ONE FINANCIAL CENTER,
BOSTON, MASSACHUSETTS 02111-2621
1-866-348-1468
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 16, 2005
To the Shareholders of the Fund:
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders of the Fund (the
"Meeting") will be held at the offices of the Fund at One Financial Center,
Boston, Massachusetts, on November 16, 2005, at 10:00 a.m. Boston time. The
purpose of the Meeting is to consider and act upon the following matters:
1. To elect the Fund's nominees for Trustees. (To be voted on separately by
all shareholders of Columbia Funds Trust II, voting together with
shareholders of all funds of that trust.)
2. To approve amendments to and the elimination of certain fundamental
investment restrictions of the Fund. (To be voted upon separately on each
proposed amendment or elimination.)
3. To transact such other business as may properly come before the Meeting,
or any adjournment(s) thereof.
The Board of Trustees has fixed the close of business on September 8, 2005, as
the record date for the determination of the shareholders of the Fund entitled
to notice of, and to vote at, the Meeting and any adjournments thereof.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR ALL OF THE PROPOSALS.
By order of the Board of Trustees,
R. Scott Henderson
Secretary of the Funds
[ ] , 2005
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE SEE THE ENCLOSED PROXY STATEMENT AND OTHER MATERIALS FOR INSTRUCTIONS ON
HOW TO VOTE EASILY AND QUICKLY.
COLUMBIA FUNDS TRUST II (THE "TRUST")
COLUMBIA NEWPORT GREATER CHINA FUND (THE "FUND")
ONE FINANCIAL CENTER,
BOSTON, MASSACHUSETTS 02111-2621
1-866-348-1468
PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 16, 2005
This Proxy Statement is being furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board" or the "Trustees") of the Trust
for use at the special meeting of the shareholders of the Fund (the "Meeting")
to be held at the offices of the Fund, One Financial Center, Boston,
Massachusetts, on November 16, 2005, at 10:00 a.m. Boston time, and at any
adjournment(s) thereof, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders (the "Notice"). The Notice, this Proxy Statement
and the enclosed proxy card are first being mailed, or otherwise being made
available, to shareholders on or about [_____], 2005. Please read this Proxy
Statement and keep it for future reference.
The Meeting has been called for the purpose of having the shareholders of the
Fund consider and take action upon the proposals listed in the Notice (the
"Proposals"). This Proxy Statement contains information you should know before
voting on the Proposals. As described in greater detail below, while
shareholders are being asked to amend and eliminate certain "fundamental"
investment restrictions, this is being done solely to facilitate compliance
testing through standardization and to enhance future flexibility. The Fund's
investment advisor, Columbia Management Advisors, Inc. ("Columbia Management")
has no present intention of changing the way that the Fund is managed in
response to these proposals. The following is a list of the Proposals presented
in this Proxy Statement:
Proposal 1: To approve the election of Trustees.
Proposal 2.A.: To approve an amendment to the Fund's fundamental investment
restriction with respect to borrowing money and issuing senior securities.
Proposal 2.B.: To approve an amendment to the Fund's fundamental investment
restriction with respect to making loans.
Proposal 2.C.: To approve an amendment to the Fund's fundamental investment
restriction with respect to investments in real estate.
Proposal 2.D.: To approve an amendment to the Fund's fundamental investment
restriction with respect to underwriting of securities.
Proposal 2.E.: To approve an amendment to the Fund's fundamental investment
restriction with respect to concentrating investments in an industry.
Proposal 2.F.: To approve the elimination of the Fund's fundamental investment
restriction with respect to buying and selling futures contracts and related
options.
Timely, properly executed proxies will be voted as you instruct. If no
specification is made with respect to a Proposal, shares will be voted in
accordance with the recommendation of the Board as to that Proposal. The
solicitation is being made primarily by the mailing of this Proxy Statement and
the accompanying proxy card. Supplemental solicitations of proxies may be made
by personal interview, mail, telephone, facsimile or electronic mail ("e-mail")
by officers and Trustees of the Fund, officers and employees of Columbia
Management and other representatives of the Fund, as described below. Columbia
Management will bear the costs incurred in connection with the solicitation of
proxies, the costs of holding the Meeting, and other expenses associated with
obtaining the approval of the Fund and its shareholders.
Shareholders of record at the close of business on September 8, 2005 (the
"Record Date") are entitled to receive notice of, and to vote at, the Meeting or
any adjournment(s) thereof. Shareholders of the Fund on the Record Date shall be
entitled to one vote for each whole share held, as to any matter on which they
are entitled to vote, and each fractional share shall be entitled to a
proportionate fractional vote.
I. PROPOSAL 1: ELECTION OF TRUSTEES
Mses. Kelly and Verville and Messrs. Hacker, Lowry, Mayer, Nelson, Neuhauser,
Simpson, Stitzel, Theobald and Woolworth (who have each agreed to serve) are
proposed for election as Trustees of the Fund.
REQUIRED VOTE
The affirmative vote of a plurality of the holders of shares of beneficial
interest of the Fund (voting together as a single class) present at the Meeting
in person or by proxy is required for the election of each such Trustee. The
names and ages of the Trustees of the Fund, the year each was first elected,
their principal business occupations during at least the last five years, the
number of portfolios in the other registered investment companies advised by
Columbia Management (the "Fund Complex") overseen by each Trustee and other
directorships that each Trustee holds are shown below. The address of each
Trustee is One Financial Center, Boston, MA 02111-2621.
NUMBER OF
PORTFOLIOS IN
FUND
YEAR FIRST ELECTED COMPLEX
POSITION OR APPOINTED TO PRINCIPAL OCCUPATION(S) OVERSEEN
NAME/AGE AND ADDRESS WITH FUND OFFICE(1) DURING PAST FIVE YEARS BY DIRECTOR OTHER DIRECTORSHIPS HELD
- -------------------- --------- ------------------ --------------------------------- --------------- -------------------------
Douglas A. Hacker Trustee 1996 Executive Vice President - 101 Nash Finch Company (food
(Age 49) Strategy of United Airlines distributor)
(airline) since December, 2002
(formerly President of UAL
Loyalty Services (airline) from
September, 2001 to December,
2002; Executive Vice President
and Chief Financial Officer of
United Airlines from July, 1999
to September, 2001; Senior Vice
President - Finance from March,
1993 to July, 1999).
Janet Langford Kelly Trustee 1996 Partner, Zelle, Hofmann, Voelbel, 101 None
(Age 47) Mason & Gette LLP (Law firm)
since 2005; Adjunct Professor of
Law, Northwestern University,
since September, 2004; (formerly
Chief Administration Officer and
Senior Vice President, Kmart
Holding Corporation (consumer
goods), from September, 2003 to
March, 2004; Executive Vice
President - Corporate Development
and Administration, General
Counsel and Secretary, Kellogg
Company (food manufacturer), from
September, 1999 to August, 2003;
Senior Vice President, Secretary
and General Counsel, Sara Lee
Corporation (branded, packaged,
consumer - products manufacturer)
from January, 1995 to September,
1999).
8
NUMBER OF
PORTFOLIOS IN
FUND
YEAR FIRST ELECTED COMPLEX
POSITION OR APPOINTED TO PRINCIPAL OCCUPATION(S) OVERSEEN
NAME/AGE AND ADDRESS WITH FUND OFFICE(1) DURING PAST FIVE YEARS BY DIRECTOR OTHER DIRECTORSHIPS HELD
- -------------------- --------- ------------------ --------------------------------- --------------- -------------------------
Richard W. Lowry(2) Trustee 1995 Private Investor since August, 103 None
(Age 69) 1987 (formerly Chairman and Chief
Executive Officer, U.S. Plywood
Corporation (building products
manufacturer)).
Charles R. Nelson Trustee 1981 Professor of Economics, 101 None
(Age 62) University of Washington, since
January, 1976; Ford and Louisa
Van Voorhis Professor of
Political Economy, University of
Washington, since September,
1993; (formerly Director,
Institute for Economic Research,
University of Washington, from
September, 2001 to June, 2003;
Adjunct Professor of Statistics,
University of Washington, since
September, 1980; Associate
Editor, Journal of Money Credit
and Banking, since September,
1993; consultant on econometric
and statistical matters).
John J. Neuhauser(2) Trustee 1985 Academic Vice President and Dean 103 Saucony, Inc. (athletic
(Age 62) of Faculties since August, 1999, footwear)
Boston College (formerly Dean,
Boston College School of
Management from September, 1977
to August, 1999).
Patrick J. Simpson Trustee 2000 Partner, Perkins Coie, LLP (law 101 None
(Age 61) firm).
9
NUMBER OF
PORTFOLIOS IN
FUND
YEAR FIRST ELECTED COMPLEX
POSITION OR APPOINTED TO PRINCIPAL OCCUPATION(S) OVERSEEN
NAME/AGE AND ADDRESS WITH FUND OFFICE(1) DURING PAST FIVE YEARS BY DIRECTOR OTHER DIRECTORSHIPS HELD
- -------------------- --------- ------------------ --------------------------------- --------------- -------------------------
Thomas E. Stitzel Trustee 1998 Business Consultant since 1999 101 None
(Age 69) (formerly Professor of Finance
from 1975 to 1999; College of
Business, Boise State
University); Chartered Financial
Analyst.
Thomas C. Theobald(3) Trustee 1996 Partner and Senior Advisor, 101 Anixter International
(Age 68) Chicago Growth Partners (private (network support equipment
equity investing) since distributor); Ventas Inc.
September, 2004; (formerly (real estate investment
Managing Director, William Blair trust); Jones Lang LaSalle
Capital Partners (private equity (real estate management
investing) from September, 1994 services) and Ambac
to September, 2004). Financial Group(financial
guarantee insurance).
Anne-Lee Verville Trustee 1998 Retired since 1997 (formerly 101 Chairman of the Board of
(Age 59) General Manager, Global Education Directors, Enesco Group,
Industry, IBM Corporation Inc.(designer, importer and
(computers and technology) from distributor of giftware and
1994 to 1997). collectibles).
Richard L. Woolworth Trustee 1991 Retired since December, 2003 101 NorthWest Natural (a
(Age 64) (formerly Chairman and Chief natural gas service
Executive Officer, The Regence provider).
Group (regional health insurer);
Chairman and Chief Executive
Officer, Blue Cross Blue Shield
of Oregon; Certified Public
Accountant, Arthur Young &
Company).
10
NUMBER OF
PORTFOLIOS IN
FUND
YEAR FIRST ELECTED COMPLEX
POSITION OR APPOINTED TO PRINCIPAL OCCUPATION(S) OVERSEEN
NAME/AGE AND ADDRESS WITH FUND OFFICE(1) DURING PAST FIVE YEARS BY DIRECTOR OTHER DIRECTORSHIPS HELD
- -------------------- --------- ------------------ --------------------------------- --------------- -------------------------
INTERESTED TRUSTEE
William E. Mayer(2) Trustee 1994 Partner, Park Avenue Equity 103 Lee Enterprises (print
(4) (Age 65) Partners (private equity) since media); WR Hambrecht +
February, 1999; (formerly Co. (financial service
Partner, Development Capital LLC provider); First Health
from November, 1996 to February, (healthcare);Readers
1999). Digest(publisher);OPENFIELD
Solutions (retail industry
technology provider).
(1) 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) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee
of the All-Star Funds, currently consisting of 2 investment companies,
which are advised by an affiliate of Columbia Management.
(3) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
(4) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940, as amended) of the Fund by reason of his affiliation with WR
Hambrecht + Co.
11
FOR INFORMATION REGARDING THE EXECUTIVE OFFICERS OF THE FUND, SEE APPENDIX A TO
THIS PROXY STATEMENT.
CONSOLIDATION OF LEGAL ENTITIES
The Trustees have also approved, subject to shareholder approval of the election
of all current Trustees, the reorganization of the Fund (the "Reorganization")
as a series (the "New Fund") of a Massachusetts business trust, Columbia Funds
Trust IX (the "Acquiring Trust"). The Trustees believe that the consolidation of
the Fund, along with other Columbia Funds, into a single legal entity will
enhance the efficiency of compliance monitoring and administration. This
consolidation is currently expected to be effected in the first quarter of 2006.
The New Fund will have the same fundamental investment restrictions as the Fund
immediately prior to the Reorganization (which will reflect any approvals of
Proposals 2.A. through 2.F.). All of the Trustees of the Acquiring Trust are
expected to serve as Trustees of the New Fund, even if one or more of such
Trustees are not elected pursuant to Proposal 1.
The Reorganization would be effected pursuant to a plan of reorganization (a
"Plan") that provides for the transfer of all of the assets of the Fund to the
New Fund in exchange for shares of the New Fund and the assumption by the New
Fund of all of the liabilities of the Fund, followed by the liquidation of the
Fund.
As described in more detail below in "Information About the Acquiring Trust",
the Acquiring Trust, like each Trust, is a business trust governed by
Massachusetts law and an agreement and declaration of trust (the "Agreement and
Declaration of Trust"). The Acquiring Trust has separate series representing
different portfolios. Each series of the Acquiring Trust will have shares
representing beneficial interests in the assets and liabilities belonging to
that series, and shares of each series will be further divided into separate
classes. The New Fund will continue the business of the Fund.
The New Fund will have the same investment objectives, policies and restrictions
as the Fund (as amended by Proposal 2 to the extent the amendments are approved
by shareholders). In addition, the New Fund will be managed by the same
investment team as the Fund using the same investment process, and will have the
same management fees and expense structure as the Fund immediately prior to the
Reorganization.
Because the Reorganization would satisfy the provisions of Rule 17a-8 of the
Investment Company Act of 1940, as amended (the "1940 Act") that permit
reorganizations without a shareholder vote and the Agreement and Declaration of
Trust of the Fund does not require a shareholder vote for the Reorganization, no
shareholder vote is required to complete the Reorganization.
BACKGROUND AND REASONS FOR THE REORGANIZATION
At a meeting held on May 11, 2005, the Board, including all Trustees who are not
"interested persons" of the Fund (as defined in Section 2(a)(19) of the 1940
Act) (each, an "Independent Trustee") unanimously approved the Reorganization of
the Fund. The Board was assisted in its determination by independent legal
counsel for the Independent Trustees. The Board determined that the
Reorganization would be in the best interests of the Fund, and that the
interests of the Fund's shareholders would not be diluted as a result of
effecting the Reorganization.
The Board also took into account the fact that the expected costs of the
proposed Reorganization, including the costs incurred in connection with the
solicitation of proxies, the costs of holding the Meeting, the fees associated
with creating the New Fund, accounting fees, and legal fees, would be borne by
Columbia Management and not the Trust or the Fund.
The primary purpose of the Reorganization is to facilitate compliance monitoring
and efficient administration.
12
AGREEMENT AND PLAN OF REORGANIZATION
The Plan provides that the New Fund will acquire all of the assets of the Fund
in exchange for the assumption by the New Fund of all of the liabilities of the
Fund and for the issuance of the shares of the New Fund ("Reorganization
Shares"), all as of the Valuation Date, currently expected to be a date in the
first quarter of 2006. The following discussion of the Plan is qualified in its
entirety by the full text of the Plan for the Fund, the form of which is
attached as Exhibit 1 to this Proxy Statement.
The Fund will sell all of its assets attributable to each class of its shares to
the corresponding New Fund, and, in exchange, the New Fund will assume all of
the liabilities of the Fund and deliver to the Fund a number of full and
fractional shares of beneficial interest of the same class of the New Fund
having an aggregate net asset value equal to the value of the assets of the
Fund, less the value of the liabilities of the Fund assumed by the New Fund
attributable to such class.
For federal income tax purposes, the Reorganization is expected to be a tax-free
reorganization. For more information about the tax consequences of the proposed
Reorganization, see "Federal Income Tax Consequences of the Reorganization"
below.
Upon consummation of the transactions proposed to occur on the Exchange Date
(defined in the Plan to be the date next following shareholder approval or which
the Fund's prospectus is scheduled to be reprinted or such other date as may be
agreed upon by the New Fund and the Fund), the Fund will distribute pro rata to
its shareholders of record of each class as of the Exchange Date the full and
fractional Reorganization Shares of such class received by the Fund. Each holder
of shares of the Fund will receive a number of full and/or fractional
Reorganization Shares having an aggregate net asset value on the Exchange Date
equal to the value of and of the same class as the full and/or fractional shares
of the Fund held by the shareholder as of the Exchange Date. This distribution
will be accomplished by the establishment of accounts on the share records of
the New Fund in the names of the Fund shareholders, each account representing
the respective number of full and fractional Reorganization Shares due such
shareholder.
The consummation of the Reorganization is subject to the conditions set forth in
the Plan, including receipt of opinions of counsel, any of which may be waived.
The Plan may be terminated and the Reorganization abandoned at any time, before
or after approval by the shareholders of the Fund, prior to the Exchange Date,
by mutual consent of the Trustees of the Fund and trustees of the New Fund or,
if any condition set forth in the Plan has not been fulfilled and has not been
waived by the party entitled to its benefits, by such party.
All fees and expenses, including legal and accounting expenses, portfolio
transfer taxes (if any) or other similar expenses incurred in connection with
the consummation by the New Fund and the Fund of the transactions contemplated
by the Plan will be borne by Columbia Management.
OTHER MATTERS
The investment objectives, policies and restrictions of the Fund (as amended by
Proposal 2 to the extent the amendments are approved by shareholders) will be
adopted by the New Fund and will not change as a result of the Reorganization.
In addition, Columbia Management will serve as the investment adviser of the New
Fund. Furthermore, the management fees and expense structures of the New Fund
will be the same as for the Fund.
Immediately prior to the Reorganization, the New Fund will have nominal assets
and no liabilities, and Columbia Management will be the sole shareholder of the
New Fund.
13
INFORMATION ABOUT THE ACQUIRING TRUST.
On May 11, 2005, the Trustees of the Acquiring Trust approved the amendment and
restatement of the Acquiring Trust's Agreement and Declaration of Trust (as
amended and restated, the "Declaration of Trust")and By-Laws (as amended and
restated, the "By-Laws"), which became effective on August 10, 2005.
The table below summarizes the significant differences between the Declaration
of Trust and By-Laws of the Acquiring Trust and the organizational documents for
the Fund. For additional information, shareholders of the Fund should refer
directly to such documents, copies of which may be obtained by contacting the
Acquiring Trust at its address listed on the cover page of this Proxy Statement.
14
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
SHAREHOLDER LIABILITY: A shareholder or former shareholder A shareholder or former shareholder
held to be personally liable solely held to be personally liable solely
by reason of his or her being or by reason of his or her being or
having been a shareholder is having been a shareholder is
entitled to be held harmless from entitled to be held harmless from
and indemnified against all loss and and indemnified against all loss and
expense arising from such liability. expense arising from such liability.
Every note, bond, contract, Every note, bond, contract,
instrument, certificate or instrument, certificate or
undertaking made or issued by any undertaking made or issued by any
Trustees or Trustee or by any Trustees or Trustee or by any
officers or officer must recite that officers or officer must recite that
the same was executed or made by or the same was executed or made by or
on behalf of the Trust and that on behalf of the Trust and that
obligations of such instrument are obligations of such instrument are
not binding on any of them or not binding on any of them or
shareholders individually. shareholders individually.
SHAREHOLDER VOTING Shareholders have the power to vote Shareholders have the power to vote
RIGHTS: only (i) for the election or, to the only (i) for the election or removal
extent required by law, removal of of Trustees; (ii) with respect to
Trustees; (ii) with respect to any any investment adviser; (iii) with
termination, by the shareholders, of respect to any termination, by the
the Trust or series or class of the shareholders, of the Trust or series
Trust; (iii) with respect to or class of the Trust; (iv) with
derivative actions, to the extent respect to any amendment, by the
certain demand requirements are met; Trustees that requires shareholder
and (iv) with respect to any other authorization; (v) with respect to
matters required by law, the derivative actions similar to a
organizational documents or deemed Massachusetts corporation; and (vi)
desirable by the Board of Trustees. with respect to any other matters
required by law, the organizational
documents, or deemed desirable by
the Board of Trustees.
15
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
No shareholder may bring a
derivative claim without first
requesting the Trustees to bring or
maintain such action, proceeding or
claim. Such demand shall be excused
only when the plaintiff makes a
specific showing that irreparable
injury to the Trust or series would
otherwise result.
Each whole share (or fractional On a record date, each
share) outstanding on the record outstanding share or fractional
date is entitled to a number of share is entitled to one vote or
votes on any matter which it is a proportional fractional vote.
entitled to vote equal to the net
asset value of the share (or Shareholders may vote together
fractional share) in U.S. dollars with shareholders of the other
determined at the close of series of the Trust on matters
business on the record date (for affecting the Trust as a whole,
example, a share having a net such as the election of Trustees.
asset value of $10.50 would be
entitled to 10.5 votes).
Shareholders will vote together
with shareholders of the other
series of the Trust on matters
affecting the Trust as a whole,
such as the election of Trustees.
SHAREHOLDER MEETINGS: Shareholders have no specific Shareholders have no specific
right to call meetings, except as right to call meetings, except as
may be required by applicable may be required by applicable
law, including the Investment law, including the Investment
Company Act of 1940. Company Act of 1940.
16
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
SHAREHOLDER QUORUM: 30% of the shares entitled to 30% of the shares entitled to
vote at the meeting. vote at the meeting.
SHAREHOLDER CONSENT: Majority consent required for Majority consent required for
shareholder action taken without shareholder action taken without
a meeting. a meeting.
NOTICE TO SHAREHOLDERS: Notice of shareholder meetings is Written notice of shareholder
to be mailed, postage prepaid, or meetings must be given not less
sent by facsimile or other than seven days in advance.
electronic submission not less
than seven days before the date Notice is not expressly required
of such meeting. to include the purpose for which
the meeting is called.
Notice is not expressly required
to state the purpose for which
the meeting is called.
SHAREHOLDER PROXIES: Shareholders may put a proxy in Shareholders may put a proxy in
place for a duration of up to six place for a duration of up to six
months. months.
TRUSTEE'S POWER TO AMEND The Declaration of Trust may be The Declaration of Trust may be
DECLARATION OF TRUST: amended at any time by an instrument amended at any time by an instrument
in writing signed by a majority of in writing signed by a majority of
the then Trustees, provided that, the then Trustees when authorized so
for non- ministerial amendments, to do by vote of a majority of the
notice is promptly mailed to shares entitled to vote with respect
shareholders as of the day such to such amendment, except that
amendment is effective. shareholder authorization is not
required for amendments to change
the name of the Trust, supply any
omission, cure any ambiguity or
cure, correct or supplement any
defective or inconsistent provision.
17
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
TERMINATION OF TRUST: Shareholders have the right to Shareholders have the right to
terminate the Trust, or series or terminate the Trust or series
class, upon approval of at least upon approval of at least
66 2/3% of the outstanding shares two-thirds of the outstanding
of the Trust or the affected shares of the Trust or the
series or class. affected series.
Trustees may terminate the Trust, Trustees may terminate the Trust
or any series or class, without or series without shareholder
shareholder approval by written approval by written notice to the
notice to shareholders. shareholders.
MERGER OR CONSOLIDATION The Declaration of Trust provides Shareholders have no express
TRUST: that a consolidation, merger or right under the Declaration of Trust
transfer may be authorized by vote to vote on mergers or
of a majority of the Trustees then consolidations.
in office without shareholder
approval, unless otherwise required
by law.
REMOVAL OF TRUSTEES: Trustee may be removed, with or Trustee may be removed, with or
without cause, by a majority of without cause, by (i) a majority of
Trustees then in office. Trustees then in office or (ii) by a
vote of two-thirds of the holders of
outstanding shares, with, at a
meeting called for the purpose.
DIRECTOR/TRUSTEE Not limited. Not limited.
COMMITTEES
TRUSTEE LIABILITY: Trustees are not personally liable Trustees are not personally liable
for claims against the Trust or for for claims against the Trust or for
any neglect or wrongdoing of any any neglect or wrongdoing of any
officer, agent, employee, investment officer, agent, employee, investment
adviser, or principal underwriter of adviser, or principal underwriter of
the Trust. the Trust.
18
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
Each Trustee is not responsible for Each Trustee is not responsible for
the act or omission of any other the act or omission of any other
Trustee and may be liable only by Trustee and may be liable only by
reason of willful misfeasance, bad reason of willful misfeasance, bad
faith, gross negligence or reckless faith, gross negligence or reckless
disregard of the duties involved in disregard of the duties involved in
the conduct of his office. the conduct of his office.
The appointment, designation or
identification of a Trustee as the
chairman of the Board, the lead or
assistant lead independent Trustee,
a member or chairman of a committee
of the Board, an expert on any topic
or in any area (including an audit
committee financial expert) or as
having any other special
appointment, designation or
identification shall not (a) impose
on that person any duty, obligation
or liability that is greater than
the duties, obligations and
liabilities imposed on that person
as a Trustee in the absence of the
appointment, designation or
identification or (b) affect in any
way such Trustee's rights or
entitlement to indemnification, and
no Trustee who has special skills or
expertise, or is appointed,
designated or identified as
foresaid, shall (x) be held to a
higher standard of care by virtue
thereof or (y) be limited with
respect to any indemnification to
which such Trustee would otherwise
be entitled.
19
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
TRUSTEE INDEMNIFICATION: The By-Laws state that the Trust The Declaration of Trust states that
will indemnify each of its Trustees the Trust will indemnify each of its
and officers who are not employees Trustees and officers against all
or officers of any investment liabilities and expenses, including
adviser to the Trust or any amounts paid in satisfaction of
affiliated person thereof and may judgments, in compromise, as fines
indemnify each of its officers who and penalties, and as counsel fees,
are employees or officers of any reasonably incurred by such person
investment adviser to the Trust or while in office or thereafter, by
any affiliated person thereof reason of the indemnified person's
against all liabilities and service as a Trustee or officer. The
expenses, including amounts paid in Trust will not indemnify its Trustees
satisfaction of judgments, in and officers against any liability to
compromise, as fines and penalties, the Trust or to its shareholders to
and as counsel fees, reasonably which he or she would otherwise be
incurred by such person while in subject by reason of willful
office or thereafter, by reason of misfeasance, bad faith, gross
the indemnified person's service as negligence or reckless disregard of
a Trustee or officer. The Trust will the duties involved in the conduct of
not indemnify its Trustees and such person's office.
officers against any liability to
the Trust or to its shareholders to Under the Declaration of Trust, in
which he or she would otherwise be the absence of a final decision on
subject by reason of willful the merits by an adjudicating body
misfeasance, bad faith, gross that such person is liable by reason
negligence or reckless disregard of of willful misfeasance, bad faith,
the duties involved in the conduct gross negligence or reckless
of his office. disregard of the duties involved in
the conduct of their office,
Under the By-Laws, in the absence of indemnification will be provided if
a final decision on the merits by an (a) approved as in the best interests
adjudicating body that such person of the Trust, after notice that it
has not acted in good faith in the involves such indemnification, by at
reasonable belief that such person's least a majority of the disinterested
action was in the best interests of Trustees acting on the matter
the Trust or is liable to the Trust (provided that a majority of the
or its Shareholders by reason of
willful
20
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
misfeasance, bad faith, gross disinterested Trustees then in
negligence or reckless disregard of office act on the matter) upon a
the duties involved in the conduct determination, based upon a review
of his or her office, of readily available facts, that
indemnification will be provided if such person is not liable to the
(a) approved, after notice that it Trust or its shareholders by reason
involves such indemnification, by at of willful misfeasance, bad faith,
least a majority of the gross negligence or reckless
disinterested Trustees acting on the disregard of the duties involved in
matter (provided that a majority of the conduct of his or her office or
the disinterested Trustees then in (b) there has been obtained an
office act on the matter) upon a opinion in writing of independent
determination, based upon a review legal counsel to the effect that
of readily available facts, that such indemnification would not
such person has acted in good faith protect such person against any
in the reasonable belief that such liability to the Trust to which such
person's action was in the best person would otherwise be subject by
interests of the Trust and is not reason of willful misfeasance, bad
liable to the Trust or its faith, gross negligence or reckless
shareholders by reason of willful disregard of the duties involved in
misfeasance, bad faith, gross the conduct of his or her office.
negligence or reckless disregard of
the duties involved in the conduct
of his or her office or (b) there
has been obtained an opinion in
writing of independent legal
counsel, based upon a review of
readily available facts to the
effect that such person appears to
have acted in good faith in the
reasonable belief that such person's
action was in the best interests of
the Trust and that such
indemnification would not protect
such person against any liability to
the Trust to which such person would
otherwise be subject by reason of
willful
21
THE ACQUIRING TRUST THE FUND
------------------------------------ -------------------------------------
misfeasance, bad faith, gross
negligence or reckless disregard of
the duties involved in the conduct
of his or her office.
LEGAL EXPENSES: The By-Laws state that legal The Declaration of Trust states
expenses may be paid from time to that legal expenses may be paid
time by the Trust in advance of from time to time by the Trust in
the final disposition of any such advance of the final disposition
proceeding if the Trust receives of any such proceeding if the
a written undertaking by the Trust receives a written
indemnified person to reimburse undertaking by the indemnified
the Trust in the event it is person to reimburse the Trust in
subsequently determined that the the event it is subsequently
indemnified person is not determined that the indemnified
entitled to such indemnification person is not entitled to such
and (a) the indemnified person indemnification and (a) the
provides security for his indemnified person provides
undertaking, or (b) the Trust is security for his undertaking, or
insured against losses arising by (b) the Trust is insured against
reason of any lawful advances, or losses arising by reason of any
(c) a majority of the lawful advances, or (c) a
disinterested, non-party Trustees majority of the disinterested,
or an independent legal counsel, non-party Trustees or an
as expressed in a written independent legal counsel, as
opinion, determines that there is expressed in a written opinion,
reason to believe that the determines that there is reason
indemnified person ultimately to believe that the indemnified
will be found entitled to person ultimately will be found
indemnification. entitled to indemnification.
DIVIDENDS: Not limited. Not limited.
22
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Reorganization is intended to be tax-free. As a condition to the Fund's
obligation to consummate the Reorganization, the Fund will receive an opinion
from Ropes & Gray LLP ("Ropes & Gray"), counsel to the Trust, to the effect
that, on the basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the treasury regulations promulgated thereunder,
current administrative rules and court decisions, generally for federal income
tax purposes, except as noted below:
(i) the Reorganization will constitute a reorganization within the meaning of
Section 368(a) of the Code, and the Fund and the New Fund will each be a
"party to a reorganization" within the meaning of Section 368(b) of the
Code;
(ii) under Section 361 of the Code, no gain or loss will be recognized by the
Fund upon the transfer of its assets to the New Fund in exchange for
Reorganization Shares and the assumption by the New Fund of the Fund's
liabilities, or upon the distribution of such Reorganization Shares by the
Fund to the shareholders of the Fund in liquidation;
(iii) under Section 354 of the Code, the Fund shareholders will recognize no
gain or loss upon exchange of their shares of the Fund for the
Reorganization Shares;
(iv) under Section 358 of the Code, the aggregate tax basis of the
Reorganization Shares to be received by each shareholder of the Fund will
be the same as the aggregate tax basis of the shares of the Fund exchanged
therefor;
(v) under Section 1223(1) of the Code, the holding period of the
Reorganization Shares received by each shareholder of the Fund will
include the holding period for the Fund shares exchanged for the
Reorganization Shares; provided such shares of the Fund were held as a
capital asset on the date of the exchange;
(vi) under Section 1032 of the Code, no gain or loss will be recognized by the
New Fund upon receipt of the assets transferred to the New Fund pursuant
to the Plan in exchange for the Reorganization Shares and assumption by
the New Fund of the liabilities of the Fund;
(vii) under Section 362(b) of the Code, the New Fund's tax basis in the assets
that the New Fund receives from the Fund will be the same as the Fund's
tax basis in such assets immediately prior to such exchange;
23
(viii) under Section 1223(2) of the Code, the New Fund's holding period in such
assets will include the Fund's holding period in such assets;
(ix) under Section 381 of the Code, the New Fund will succeed to the capital
loss carryovers of the Fund, if any, but the use by the New Fund of any
such capital loss carryovers (and of capital loss carryovers of the New
Fund) may be subject to limitation under Sections 383 and 284 of the
Code.
The opinion will be qualified to reflect that the Code requires that certain
contracts or securities (including, in particular, futures contracts, certain
foreign currency contracts, "non-equity" options and investments in "passive
foreign investment companies") be marked-to-market (treated as sold for their
fair market value) at the end of a taxable year (or upon their termination or
transfer).
The opinion will be based on certain factual certifications made by officers of
the Trust and the Fund and will also be based on customary assumptions. The Fund
has agreed to make and provide additional representations to Ropes & Gray with
respect to the Fund that are reasonably requested by Ropes & Gray. The opinion
is not a guarantee that the tax consequences of the Reorganization will be as
described above. The opinion will note and distinguish certain published
precedent. There is no assurance that the Internal Revenue Service or a court
would agree with the opinion.
TRUSTEES' COMPENSATION
The members of the Board of Trustees also serve as trustees for certain other
portfolios in the Fund Complex. As of December 31, 2004, the Fund Complex
consisted of 127 open-end funds and 11 closed-end management investment company
portfolios. Two-thirds of the Trustees' fees are allocated among the funds
within the Fund Complex based on the relative net assets of each fund and
one-third of the fees is divided equally among the funds within the Fund
Complex.
FOR MORE INFORMATION REGARDING THE COMPENSATION OF THE TRUSTEES, SEE APPENDIX
B.1 AND APPENDIX B.2 TO THIS PROXY STATEMENT.
SHAREHOLDER COMMUNICATIONS
Shareholders may communicate with the Trustees as a group or individually. Any
such communications should be sent to the Fund's Board or an individual Trustee
in writing, c/o the Secretary of the Fund, One Financial Center, Boston, MA
02111-2621. The Secretary may determine
24
not to forward to the Board or a Trustee any letter that does not relate to the
business of the Fund.
TRUSTEE SHARE OWNERSHIP
The table in Appendix C shows, as of December 31, 2004, the dollar range of
equity securities beneficially owned by each Trustee (i) in the Fund, and (ii)
in all funds overseen by the Trustee in the Fund Complex. Except as shown in
Appendix C, the Trustees did not, as of December 31, 2004 beneficially own
shares of the Fund.
TRUSTEES' MEETINGS AND COMMITTEES
The Board is responsible for the overall management and supervision of the
Fund's affairs and for protecting the interests of the Fund's shareholders. For
the fiscal year ended August 31, 2004, the Fund held [18] meetings ([5] regular
joint Board meetings and [13] special joint Board meetings). The Fund is not
required under its Agreement and Declaration of Trust to hold annual meetings,
but has voluntarily undertaken to hold meetings to elect Trustees at least every
five years.
The Board has created several committees to perform specific functions on behalf
of the Fund. The members of each committee, along with a description of each
committee's functions, appear below, followed by a table that sets forth the
number of meetings held by each committee during the last fiscal year.
1. AUDIT COMMITTEE
The Fund has an Audit Committee (the "Audit Committee") comprised of Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Fund. Each
member of the Audit Committee must be financially literate and at least one
member must have prior accounting experience or related financial management
expertise.
The Audit Committee serves as an independent and objective party to monitor the
Fund's accounting policies, financial reporting and internal control systems and
the work of the Fund's independent registered public accountant. The Audit
Committee also serves to provide an open avenue of communication between the
independent registered public accountants, Columbia Management Group, Inc.'s
("Columbia") internal accounting staff and the Board. The principal functions of
the Audit Committee are to assist Board oversight of (1) the integrity of the
Fund's financial statements, (2) the Fund's compliance with legal and regulatory
requirements, (3) the independent registered public accountant's
25
qualifications and independence, (4) the performance of Columbia Management's
internal audit function, and (5) the independent registered public accountant.
The Audit Committee is directly responsible for the appointment, compensation,
retention and oversight of the work of the independent registered public
accountants (including the resolution of disagreements between management and
the independent registered public accountants regarding financial reporting) for
the purpose of preparing or issuing an audit report or performing other review
or attest services for the Fund.
The Fund's Audit Committee members are Ms. Verville and Messrs. Hacker, Stitzel
and Woolworth.
Based on the recommendation from the Audit Committee and on its own review, the
Board selected PricewaterhouseCoopers LLP ("PwC") as independent registered
public accountant for the Fund for its fiscal year. Representatives of PwC are
not expected to be at the Meeting, but have been given the opportunity to make a
statement if they so desire and will be available should any matter arise
requiring their presence.
2. GOVERNANCE COMMITTEE
Messrs. Lowry, Mayer, Simpson and Theobald are members of the Governance
Committee of the Fund. The Fund has no nominating or compensation committee. The
Governance Committee performs certain of the functions typically performed by
those committees. Among other things, the Governance Committee recommends to the
Board nominees for Trustee and nominees for appointment to various committees;
performs periodic evaluations of the effectiveness of the Board; reviews and
recommends to the Board policies and practices to be followed in carrying out
the Trustees' duties and responsibilities; and reviews and makes recommendations
to the Board regarding the compensation of the Trustees who are not affiliated
with Columbia. On February 9, 2005, the Governance Committee adopted a written
charter which sets forth the Governance Committee's structure, duties and
powers, and methods of operation. A copy of the Governance Committee Charter is
attached as Appendix D.
Three of the four Governance Committee members, Messrs. Lowry, Simpson and
Theobald, who are not "interested persons" (as defined in the 1940 Act) of the
Fund ("Governance Committee Independent Trustees"), participate in the
consideration, selection and nomination of Trustees. The Governance Committee
Independent Trustees will consider candidates for Trustee identified by any
reasonable source, including current Independent Trustees, Fund management, Fund
shareholders and other persons or entities. Shareholders of the Fund who wish to
nominate a candidate to
26
the Fund's Board may send information regarding prospective candidates to the
Governance Committee, in care of the Fund, at One Financial Center, Boston, MA
02111-2621. The information should include evidence of the shareholders' Fund
ownership, a full listing of the proposed candidate's education, experience,
current employment, date of birth, names and addresses of at least three
professional references, information as to whether the candidate is not an
"interested person" under the 1940 Act and such other information as may be
helpful to the Governance Committee Independent Trustees in evaluating the
candidate. All satisfactorily completed information packages regarding a
candidate will be forwarded to a member of the Governance Committee for
consideration. Recommendations for candidates will be evaluated in light of
whether the number of Trustees of the Fund is expected to be increased and
anticipated vacancies. All nominations from Fund shareholders will be
considered. There may be times when the Governance Committee is not recruiting
new Board members. In that case, shareholder recommendations will be maintained
on file pending the active recruitment of Trustees.
When considering candidates for Trustee, the Governance Committee Independent
Trustees consider, among other things, whether prospective nominees have
distinguished records in their primary careers, personal and professional
integrity, and substantive knowledge in areas important to the Board's
operations, such as background or education in finance, auditing, securities
law, the workings of the securities markets, or investment advice. For
candidates to serve as Independent Trustees, independence from the Fund's
investment adviser, its affiliates and other principal service providers is
critical, as is an independent and questioning mind-set. In each case, the
Governance Committee Independent Trustees will evaluate whether a candidate is
an "interested person" under the 1940 Act. The Governance Committee Independent
Trustees also consider whether a prospective candidate's workload would be
consistent with regular attendance at Board meetings and would allow him or her
to be available for service on Board committees, and devote the additional time
and effort necessary to stay apprised of Board matters and the rapidly changing
regulatory environment in which the Fund operates. Different substantive areas
may assume greater or lesser significance at particular times, in light of the
Board's present composition and its perceptions about future issues and needs.
The Governance Committee Independent Trustees initially evaluate prospective
candidates on the basis of their resumes, considered in light of the criteria
discussed above. Those prospective candidates that appear likely to be able to
fill a significant need of the Board would be contacted by a Governance
Committee Independent Trustee by telephone to discuss the position; if there
appeared to be sufficient interest, an in-person meeting
27
with one or more of the Governance Committee Independent Trustees would be
arranged. If a Governance Committee Independent Trustee, based on the results of
these contacts, believes he or she has identified a viable candidate, he or she
would air the matter with the other Governance Committee Independent Trustees
for input. Any request by Fund management to meet with the prospective candidate
would be given appropriate consideration. The Fund has not paid a fee to third
parties to assist in finding nominees.
3. ADVISORY FEES & EXPENSES COMMITTEE
Ms. Kelly and Messrs. Mayer, Nelson and Neuhauser are members of the Advisory
Fees & Expenses Committee of the Fund. The Advisory Fees & Expenses Committee's
functions include reviewing and making recommendations to the Board as to
contracts requiring approval of a majority of the disinterested Trustees and as
to any other contracts that may be referred to the committee by the Board.
4. COMPLIANCE COMMITTEE
Mses. Kelly and Verville, and Messrs. Nelson, Simpson and Stitzel are members of
the Compliance Committee of the Board of Trustees of the Fund. The Compliance
Committee's functions include providing oversight of the monitoring processes
and controls regarding the Fund. The Committee supervises legal, regulatory and
internal rules, policies, procedures and standards other than those relating to
accounting matters and oversight of compliance by the Fund's investment adviser,
principal underwriter and transfer agent.
NUMBER OF
MEETINGS
FOR FISCAL
YEAR ENDED
AUGUST 31, 2004
---------------
Audit Committee 10
Governance Committee 4
Advisory Fees & Expenses Committee 4
Compliance Committee 5
5. INVESTMENT OVERSIGHT COMMITTEES
Each Investment Oversight Committee ("IOC") is responsible for monitoring, on an
ongoing basis, a select group of Columbia Funds (the "Funds") and gives
particular consideration to such matters as the Funds' adherence to their
investment mandates, historical performance, changes in investment
28
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 meets four times a
year. Investment Oversight Committee 1 currently consists of Messrs. Lowry,
Mayer and Neuhauser. Investment Oversight Committee 2 currently consists of Mr.
Hacker and Ms. Verville. Investment Oversight Committee 3 currently consists of
Ms. Kelley and Messrs. Stitzel and Theobald. Investment Oversight Committee 4
currently consists of Messrs. Nelson, Simpson and Woolworth.
AUDIT COMMITTEE PRE-APPROVAL OF INDEPENDENT ACCOUNTANT SERVICES
The Audit Committee is required to pre-approve the engagement of the Fund's
independent registered public accountant to provide audit and non-audit services
to the Fund and non-audit services to Columbia Management or any entity
controlling, controlled by or under common control with Columbia Management that
provides ongoing services to the Fund ("Columbia Affiliate"), if the engagement
relates directly to the operations or financial reporting of the Fund. The
engagement may be entered into pursuant to pre-approval policies and procedures
established by the Audit Committee.
The Audit Committee has adopted an Audit and Non-Audit Services Pre-Approval
Policy (the "Policy"). The Policy sets forth the procedures and conditions
pursuant to which services to be performed by the Fund's independent registered
public accountant are to be pre-approved. Unless a type of service receives
general pre-approval under the Policy, it requires specific pre-approval by the
Audit Committee if it is to be provided by the independent registered public
accountant.
The Policy provides for the general pre-approval by the Audit Committee of
certain: (i) audit services to the Fund; (ii) audit-related services to the
Fund; (iii) tax services to the Fund; (iv) other services to the Fund; and (v)
Fund-related services to Columbia Affiliates. The Policy requires the Fund
Treasurer and/or Director of Trustee Administration to submit to the Audit
Committee, at least annually, a schedule of the types of services that are
subject to general pre-approval. The schedule(s) must provide a description of
each type of service that is subject to general pre-approval and, where
possible, will provide projected fee caps for each instance of providing each
service. At least annually, the Audit Committee will review and approve the
types of services and review the projected fees for the next year, and may add
to, or subtract from, the list of pre-approved services from time to time, based
on subsequent determinations. In addition to the fees for each individual
service, the Audit Committee has the authority to
29
implement a fee cap on the aggregate amount of non-audit services provided to
the New Fund. The fee amounts listed on the schedules will be updated to the
extent necessary at each of the other regularly scheduled meetings of the Audit
Committee.
FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
The table in Appendix E1 sets forth the aggregate fees billed by PwC for the
Fund's last two fiscal years for professional services rendered for (i) audit
services, including the audit of the Fund's financial statements and services
normally provided in connection with statutory and regulatory filings or
engagements for those fiscal years; (ii) audit-related services associated with
the review of the Funds' semi-annual financial statements; (iii) tax services
and, primarily, reviews of Fund tax returns; and (iv) other services. Please
note that the table includes amounts related to non-audit services that would
have been subject to pre-approval if Securities and Exchange Commission (the
"SEC") rules relating to the pre-approval of non-audit services had been in
effect at that time.
All of the audit fees, audit-related fees, tax fees and other fees billed by PwC
for services provided to the Fund during its most recent fiscal year were
pre-approved by the Audit Committee.
The amount billed by PwC in each of the last two fiscal years for audit-related
services provided to Columbia or Columbia Affiliates for engagements that
related directly to the operations or financial reporting of the Fund was
$95,000.
The table in Appendix E2 sets forth the aggregate fees billed by PwC for
non-audit services for the Fund, Columbia and Columbia Affiliates for the last
two fiscal years.
The Audit Committee has determined that the provision of the services described
above is compatible with maintaining the independence of PwC.
REQUIRED VOTE. The affirmative vote of a plurality of the holders of shares of
beneficial interest of the Fund present at the Meeting in person or by proxy is
required for the election of each such Trustee.
II. PROPOSAL 2: ADOPTION OF STANDARDIZED FUNDAMENTAL INVESTMENT RESTRICTIONS
As described in the following proposals, the Trustees recommend that
shareholders of the Fund approve the elimination of and revisions to certain
fundamental investment restrictions of the Fund. Generally, the purpose of these
proposed changes is to increase the Fund's investment
30
flexibility and reduce administrative and compliance burdens by simplifying and
making uniform these fundamental investment restrictions across all applicable
Columbia Funds.
BACKGROUND. The 1940 Act requires registered investment companies like the Fund
to have "fundamental" investment restrictions governing certain of their
investment practices. Investment companies may also voluntarily designate
restrictions relating to other investment practices as fundamental.
"Fundamental" investment restrictions can be changed only by a shareholder vote.
The proposed elimination of and revisions to certain of the fundamental
investment restrictions of the Fund are discussed below. Columbia Management has
indicated that it has no present intention of changing the manner in which it
manages the Fund in response to these proposals. By eliminating those
fundamental investment restrictions that are not required and revising those
fundamental investment restrictions that are required, however, the Trustees
believe that Columbia Management will be better able to manage the Fund in a
changing regulatory or investment environment. In addition, the process of
monitoring the Fund's compliance with investment restrictions will be
simplified.
The discussion below in Proposals 2.A. through 2.F. highlights the differences
between the Fund's current fundamental investment restrictions and, where
applicable, a proposed uniform fundamental investment restriction.
2.A. AMENDING THE FUNDAMENTAL INVESTMENT RESTRICTION WITH RESPECT TO BORROWING
MONEY, PLEDGING ASSETS AND ISSUING SENIOR SECURITIES
The Fund has a fundamental restriction stating that:
The Fund may "[b]orrow from banks, other affiliated funds and other
entities to the extent permitted by applicable law, provided that the
Fund's borrowings shall not exceed 33 1/3% of the value of its total
assets (including the amount borrowed) less liabilities (other than
borrowings) or such other percentage permitted by law."
The Fund also has a fundamental restriction stating that:
The Fund may "[n]ot issue senior securities except as provided in
paragraph 1 above and to the extent permitted by the 1940 Act."
The 1940 Act requires the Fund to state the extent to which it may borrow money
and issue senior securities. Under Section 18(f)(1) of the 1940 Act, an open-end
investment company may not issue senior securities, except that it may borrow
from banks, for any purpose, up to 33 1/3% of its total assets (including the
amount borrowed).
31
The Trustees recommend that the Fund amend its policy so that it will allow the
Fund to issue senior securities, pledging assets or borrow money to the full
extent permitted under applicable law. The proposed changes would automatically
conform the Fund's policy more closely to the exact statutory and regulatory
requirements, as they exist from time to time, without incurring the time and
expense of obtaining shareholder approval to change the restriction. In
addition, the proposed changes will reduce administrative and compliance burdens
by simplifying and making uniform applicable Columbia Funds' fundamental
investment restrictions with respect to borrowing money and issuing senior
securities.
The proposed amended fundamental investment restriction is as follows:
"The fund may not. . . [b]orrow money or issue senior securities except to
the extent permitted by the 1940 Act, the rules and regulations thereunder
and any applicable exemptive relief."
2.B. AMENDING THE FUNDAMENTAL INVESTMENT RESTRICTIONS WITH RESPECT TO MAKING
LOANS
The Fund has a fundamental restriction stating that:
The Fund may "[m]ake loans (a) through lending of securities, (b) through
the purchase of debt instruments or similar evidences of indebtedness
typically sold privately to financial institutions, (c) through an
interfund lending program with other affiliated funds provided that no
such loan may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of its total assets (taken at market value at
the time of such loans), and (d) through repurchase agreements."
The 1940 Act requires the Fund to state the extent to which it intends to make
loans to other persons. The Trustees recommend that the Fund's fundamental
investment restriction with respect to making loans be revised to reflect a
standard restriction for all applicable Columbia Funds. The amendment would
permit the Fund to enter into repurchase agreements and securities loans to the
extent permitted by the 1940 Act and applicable rules and exemptive relief.
The proposed amended fundamental investment restriction is as follows:
"The fund may not . . . [m]ake loans, except to the extent permitted by
the 1940 Act, the rules and regulations thereunder and any applicable
exemptive relief."
Following the amendment, the Fund may, consistent with the 1940 Act and its
investment objective and policies, enter into repurchase agreements and
securities loans without limit. The staff of the SEC has taken the position that
a fund may not loan more than 1/3 of the total value of its assets (including
any collateral for such loans). As noted above, although Columbia Management has
no present intention of changing the way in which the Fund is managed, this
increased flexibility could assist the
32
Fund, in the future, in achieving its investment objective and responding to
changes in applicable law or regulation. The proposed change would also
automatically conform the Fund's lending policy more closely to the exact
statutory and regulatory requirements, as they exist from time to time, without
incurring the time and expense of obtaining shareholder approval to change the
policy. In addition, these proposed changes will reduce administrative and
compliance burdens by simplifying and making uniform applicable Columbia Funds'
fundamental investment restrictions with respect to making loans.
When a Fund enters into a repurchase agreement, it typically purchases a
security for a relatively short period of time (usually not more than seven
days), which the seller agrees to repurchase at a fixed time and price,
representing the Fund's cost plus interest. When a Fund enters into a securities
loan, it lends certain of its portfolio securities to broker-dealers or other
parties, typically in exchange for a portion of the interest earned on the
collateral posted by the borrower or a fee from the borrower. The borrower may
also pay the Fund an amount equal to any interest, dividends or other
distributions payable on the securities lent. These transactions must be fully
collateralized at all times, but involve risk to the Fund if the seller, in the
case of repurchase agreements, or the borrower, in the case of securities loans,
should default on its obligations. If the Fund's counterparty to these
transactions should become involved in bankruptcy or insolvency proceedings, it
is possible that the Fund may be treated as an unsecured creditor and may be
required to return the underlying securities or collateral, as applicable, to
the counterparty's estate.
33
2.C. AMENDING THE FUNDAMENTAL INVESTMENT RESTRICTION WITH RESPECT TO INVESTMENTS
IN REAL ESTATE
The Fund has a fundamental restriction stating that:
The Fund may "[o]nly own real estate acquired as the result of owning
securities and not more than 5% of total assets."
The 1940 Act requires the Fund to state a fundamental policy regarding the
purchase and sale of real estate. Currently, the Fund's investment policy
restricts its ability to own real estate to not more than 5% of total assets
even when the Fund acquires ownership of the real estate as a result of its
permissible investments. The Trustees recommend that this policy be modified to
allow the holding and sale of real estate when ownership of real estate results
from the exercise of its rights as a holder of real estate securities to the
full extent permitted by under applicable law, and to clarify that a Fund may
invest in real estate-related securities and real estate-backed securities or
instruments.
34
The proposed amended fundamental investment restriction is as follows:
"The fund may not . . . [p]urchase or sell real estate, except the fund
may purchase securities of issuers which deal or invest in real estate and
may purchase securities which are secured by real estate or interests in
real estate and it may hold and dispose of real estate or interests in
real estate acquired through the exercise of its rights as a holder of
securities which are secured by real estate or interests therein."
These proposed changes will also reduce administrative and compliance burdens by
simplifying and making uniform applicable Columbia Funds' fundamental investment
restrictions with respect to real estate.
2.D. AMENDING THE FUNDAMENTAL INVESTMENT RESTRICTION WITH RESPECT TO
UNDERWRITING OF SECURITIES
The Fund has a fundamental restriction stating that:
The Fund may "[u]nderwrite securities issued by others only when disposing
of portfolio securities."
The 1940 Act requires the Fund to state the extent to which it intends to engage
in the business of underwriting securities issued by other persons. Under
applicable law, a person or company generally is considered to be an underwriter
if the person or company participates in the public distribution of securities
of other issuers, which involves purchasing the securities from another issuer
with the intention of re-selling the securities to the public. From time to
time, the Fund may purchase securities in a private transaction for investment
purposes and later sell the securities to institutional investors. Under these
or other circumstances, the Fund could possibly be considered to be within the
technical definition of an underwriter under applicable law. The SEC staff has
issued interpretations that clarify that re-sales of privately placed securities
by institutional investors, such as funds, do not make the institutional
investor an underwriter in these circumstances.
The proposed amended fundamental investment restriction is as follows:
"The fund may not . . . [u]nderwrite any issue of securities issued by
other persons within the meaning of the Securities Act of 1933 except when
it might be deemed to be an underwriter either: (a) in connection with the
disposition of a portfolio security; or (b) in connection with the
purchase of securities directly from the issuer thereof in accordance with
its investment objective. This restriction shall not limit the fund's
ability to invest in securities issued by other registered investment
companies."
35
The Trustees recommend that this policy be amended as proposed in order to
conform the Fund's policy to the statutory and related requirements discussed
above and to the policies of applicable Columbia Funds. In addition, these
proposed changes will reduce administrative and compliance burdens by
simplifying and making uniform applicable Columbia Funds' fundamental investment
restrictions with respect to underwriting of securities.
2.E. AMENDMENT TO FUNDAMENTAL INVESTMENT RESTRICTIONS WITH RESPECT TO
CONCENTRATING INVESTMENTS IN AN INDUSTRY
The Fund has a fundamental restriction stating that:
The Fund may "[n]ot concentrate more than 25% of its total assets in any
one industry or, with respect to 50% of total assets, purchase any
security (other than obligations of the U.S. government and cash items
including receivables) if, as a result more than 5% of its total assets
would then be invested in securities of a single issuer, or purchase the
voting securities of an issuer if, as a result of such purchases, the Fund
would own more than 10% of the outstanding voting shares of such issuer."
Under applicable law, an investment company may not concentrate its investments
in any industry or group of industries without shareholder approval, and must
concentrate its investments consistent with any policy to do so. Although
"concentration" is not defined in the 1940 Act, the SEC has generally regarded a
fund as concentrating its investments in an industry if the fund invests more
than 25% of its net assets in securities of issuers in that industry.
The proposed amended fundamental investment restriction is as follows:
"The fund may not . . . [p]urchase any securities which would cause 25% or
more of the value of its total assets at the time of purchase to be
invested in the securities of one or more issuers conducting their
principal business activities in the same industry, provided that: (a)
there is no limitation with respect to obligations issued or guaranteed by
the U.S. Government, any state or territory of the United States, or any
of their agencies, instrumentalities or political subdivisions; and (b)
notwithstanding this limitation or any other fundamental investment
limitation, assets may be invested in the securities of one or more
management investment companies to the extent permitted by the 1940 Act,
the rules and regulations thereunder and any applicable exemptive relief."
The Trustees recommend that this policy be amended as shown above to conform the
Fund's policy to the statutory and related requirements discussed above and to
the policies of other applicable Columbia Funds. In addition, these proposed
changes will reduce administrative and compliance burdens by simplifying and
making uniform applicable Columbia Funds' fundamental investment restrictions
with respect to concentrating investments in an industry.
36
2.F. ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTIONS WITH RESPECT TO BUYING
AND SELLING FUTURES CONTACTS AND RELATED OPTIONS
The Fund has a fundamental investment restriction stating that:
The Fund "[m]ay purchase and sell futures contracts and related options so
long as the total initial margin and premiums do not exceed 5% of its
total assets."
The Trustees recommend that the Fund's fundamental investment restriction with
respect to buying and selling futures contacts and related options be
eliminated.
If this Proposal is approved, the Fund would be able to engage in a variety of
transactions involving the use of options to the extent consistent with the
Fund's investment objectives and policies. As noted above, although Columbia
Management has no present intention of changing the way in which the Fund is
managed as a result of the elimination of this restriction, this increased
investment flexibility could, in the future, assist the Fund in achieving its
investment objective. Columbia Management also believes that elimination of this
investment restriction would reduce administrative and compliance burdens by
conforming the Fund's fundamental investment restrictions with other Columbia
Funds which currently do not have a fundamental investment restriction with
respect to investments in futures contracts and related options.
37
The Fund may purchase put options to protect its portfolio holdings in an
underlying security against a decline in market value. Such protection is
provided during the life of the put option since the Fund, as holder of the
option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. In order
for a put option to be profitable, the market price of the underlying security
must decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the Fund will reduce any
profit it might otherwise have realized from appreciation of the underlying
security by the premium paid for the put option and by transaction costs.
The Fund may purchase call options to hedge against an increase in the price of
securities that the Fund wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs.
The successful use of the Fund's options strategies depends on the ability of
Columbia Management to forecast correctly interest rate and market movements.
When the Fund purchases an option, it runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing sale transaction before the
option's expiration. If the price of the underlying security does not rise (in
the case of a call) or fall (in the case of a put) to an extent sufficient to
cover the option premium and transaction costs, the Fund will lose part or all
of its investment in the option. This contrasts with an investment by the Fund
in the underlying security, since the Fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on the Fund's ability to terminate
option positions at times when Columbia Management deems it desirable to do so.
There is no assurance that the Fund will be able to effect closing transactions
at any particular time or at an acceptable price.
REQUIRED VOTE. Shareholders of the Fund are entitled to vote on each Proposal
2.A. through 2.F. Approval of each of Proposals 2.A. through 2.F. requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund entitled to vote on such Proposal. As defined by the 1940 Act, a "majority
of the outstanding voting securities" means the vote of (i) 67% or more of the
Fund's shares present at the Meeting, if the
38
holders of more than 50% of the outstanding shares of the Fund are represented
at the Meeting in person or by proxy, or (ii) more than 50% of the Fund's
outstanding shares, whichever is less. The adoption of any of these Proposals is
not contingent on the adoption of any other Proposal by shareholders of the
Fund. In addition, with respect to the Fund, the adoption of any of these
Proposals 2.A. through 2.F. is not contingent on election of any Trustees
pursuant to Proposal 1.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE FOR PROPOSALS 2.A.
THROUGH 2.F.
III. OTHER INFORMATION
Certain additional information regarding Columbia Management and the Meeting is
presented below.
MANAGEMENT
Columbia Management, located at One Financial Center, Boston, MA 02111, is the
Fund's investment adviser. Columbia Management, a registered investment adviser,
has been an investment adviser since 1969. Columbia Funds Distributor, Inc.
("CFD"), located at One Financial Center, Boston, MA 02111, is the Fund's
distributor. Columbia Management and CFD are wholly owned subsidiaries of
Columbia Management Group, Inc. ("CMG"), which is a wholly owned subsidiary of
Bank of America Corporation. Prior to April 1, 2004, CMG was an indirect wholly
owned subsidiary of Fleet Boston Financial Corporation. Effective April 1, 2004,
Fleet Boston Financial Corporation was acquired by Bank of America Corporation.
Bank of America is one of the world's largest financial institutions, serving
individual consumers, small businesses and large corporations and institutions
with a full range of banking, investing, asset management and other financial
and risk management products and services. CMG is located at One Financial
Center, Boston, MA 02111.
LEGAL PROCEEDINGS
On February 9, 2005, Columbia Management and CFD (collectively, the "Columbia
Group") entered into an Assurance of Discontinuance with the New York Attorney
General ("NYAG") (the "NYAG Settlement") and consented to the entry of a
cease-and-desist order by the SEC (the "SEC Order"). The SEC Order and the NYAG
Settlement are referred to collectively as the "Settlements". The Settlements
contain substantially the same terms and conditions as
39
outlined in the agreements in principle which Columbia Group entered into with
the SEC and NYAG in March 2004.
Under the terms of the SEC Order, the Columbia Group has agreed among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution consultant
(see below). The Columbia Funds have also voluntarily undertaken to implement
certain governance measures designed to maintain the independence of their
boards of trustees. The NYAG Settlement also, among other things, requires
Columbia Management and its affiliates, Banc of America Capital Management, LLC
and BACAP Distributors, LLC, to reduce certain Columbia Funds, Nations Funds and
other mutual funds management fees collectively by $32 million per year for five
years, for a projected total of $160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan to be developed by an independent distribution consultant, who
is acceptable to the SEC staff and the Columbia Funds' independent trustees. The
distribution plan must be based on a methodology developed in consultation with
the Columbia Group and the Funds' independent trustees and not unacceptable to
the staff of the SEC. At this time, the distribution plan is still under
development. As such, any gain to the fund or its shareholders can not currently
be determined.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of Fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the Columbia Funds.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A
copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005.
In connection with events described in detail above, various parties have filed
suit against certain funds, the Trustees of the Columbia Funds, FleetBoston
Financial Corporation and its affiliated entities and/or Bank of America
Corporation and its affiliated entities. More than 300 cases including those
filed against entities unaffiliated with the funds, their Boards, FleetBoston
Financial Corporation and its affiliated entities and/or Bank of America
Corporation and its affiliated entities have been
40
transferred to the Federal District Court in Maryland and consolidated in a
multi-district proceeding (the "MDL").(1) The MDL is ongoing.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the Funds
and Columbia. The lawsuit alleges that defendants violated common law duties to
fund shareholders as well as sections of the Investment Company Act of 1940, by
failing to ensure that the Funds and other affiliated funds participated in
securities class action settlements for which the funds were eligible.
Specifically, plaintiffs allege that defendants failed to submit proof of claims
in connection with settlements of securities class action lawsuits filed against
companies in which the funds held positions.
In 2004, certain Columbia Funds, the Trustees of the Columbia Funds, advisers
and affiliated entities were named as defendants in certain purported
shareholder class and derivative actions(2) making claims, including claims
under the Investment Company and the Investment Advisers Acts of 1940 and state
law. The suits seek damages and allege, inter alia, that the fees and expenses
paid by the funds are excessive and that the advisers and their affiliates
inappropriately used fund assets to distribute the funds and for other improper
purpose. On March 2, 2005, the actions were consolidated in the Massachusetts
federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a
consolidated amended complaint on June 9, 2005.
On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts
state court alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has conditionally ordered its transfer to the MDL.
- ----------
(1) The derivative cases purportedly brought on behalf of the Columbia Funds
in the MDL have been consolidated under the lead case, Slaybe, et al. v.
Columbia Management Advisers, Inc. et al, No. 04-CV-1768 (D. Md. Sept. 29,
2004). The fund derivative plaintiffs allege that the funds were harmed by
market timing and late trading activity and seek, among other things,
removal of the trustees of the funds, removal of Columbia Management and
CFD, disgorgement of all management fees and monetary damages.
(2) Cohen, et al. v. FleetBoston Financial Corporation, et al., (D. Mass. Aug.
2, 2004); Osburn, et al. v. FleetBoston Financial Corporation, et al., (D.
Mass. Aug. 10, 2004); Slick er, et al. v. FleetBoston Financial
Corporation, et al., (D. Mass. Aug. 11, 2004); Simmonds, et al. v.
FleetBoston Financial Corporation, et al., (D. Mass. Sept. 8, 2004).
41
OTHER BUSINESS
The Meeting has been called to transact any business that properly comes before
it. The only business that management of the Fund intends to present or knows
that others will present is the Proposals. If any other matters properly come
before the Meeting, and on all matters incidental to the conduct of the Meeting,
the persons named as proxies intend to vote the proxies in accordance with their
judgment, unless the Secretary of the Fund has previously received written
contrary instructions from the shareholder entitled to vote the shares.
OUTSTANDING SHARES AND SIGNIFICANT SHAREHOLDERS
The table in Appendix F lists for the Fund the total number of shares
outstanding as of the close of business on September 8, 2005, for each class of
the Fund's shares entitled to vote at the Meeting.
The table in Appendix G lists each holder of more than five percent of any class
of shares of the Fund as of the close of business on [________], 2005. The
Trustees and officers of the Fund, in the aggregate, owned less than 1% of the
Fund's outstanding shares as of [___________], 2005.
INFORMATION ABOUT THE MEETING AND THE VOTING AND TABULATION OF PROXIES
All proxies solicited by or on behalf of the Board that are properly executed
and returned in time to be voted at the Meeting will be voted at the Meeting as
instructed on the proxy. If no instructions are given, the proxy will be voted
in favor of the Proposals.
Any proxy may be revoked at any time prior to its being exercised by written
notification received by the Fund's Secretary, by the execution of a later dated
proxy, or by attending the Meeting and voting in person.
Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Fund as tellers for the Meeting (the "Tellers"). thirty percent
of the shares of the Fund outstanding on the Record Date and entitled to vote,
present at the Meeting in person or represented by proxy, constitutes a quorum
for the transaction of business by the shareholders of the Fund.
Approval of Proposal 1 is by a plurality of votes cast at the Meeting. Approval
of each of Proposals 2.A. through 2.F. requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund entitled to vote on
such Proposal. As defined by the 1940 Act, a "majority of the outstanding voting
securities" means the vote of (i) 67% or more of the
42
Fund's shares present at the Meeting, if the holders of more than 50% of the
outstanding shares of the Fund are represented at the Meeting in person or by
proxy, or (ii) more than 50% of the Fund's outstanding shares, whichever is
less. Only shareholders of record on September 8, 2005, may vote.
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. With respect to Proposal 1,
withheld authority, abstentions and broker non-votes have no effect on the
outcome of voting. With respect to any other Proposals, withheld authority,
abstentions and broker non-votes have the effect of a vote "against" 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.
ADJOURNMENTS
If a quorum is not present at the Meeting, the Meeting will be adjourned to
permit further solicitation of proxies. In the event that a quorum is present at
the Meeting but sufficient votes to approve any of the proposals have not been
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. A shareholder vote may be
taken on one or more of the proposals referred to above prior to such
adjournment if sufficient votes have been received and it is otherwise
appropriate. Any such adjournment will require the affirmative vote of a
majority of those shares voted at the Meeting (without regard to abstentions and
broker non-votes). If a quorum is present, the persons named as proxies will
vote those proxies that entitle them to vote for any such proposal in favor of
such adjournment and will vote those proxies that require them to vote for
rejection of any such proposal against any such adjournment.
SUBMISSION OF PROPOSALS FROM SHAREHOLDERS AT FUTURE MEETINGS
The Fund does not regularly hold annual shareholder meetings, but may from time
to time schedule special meetings. In accordance with the regulations of the
SEC, in order to be eligible for inclusion in the Fund's proxy statement for
such a meeting, a shareholder proposal must be received a reasonable time before
the Fund prints and mails its proxy statement.
You may submit shareholder proposals c/o the Secretary of the Fund, One
Financial Center, Boston, Massachusetts 02111-2621.
43
OTHER INFORMATION
THE FUND HAS PREVIOUSLY SENT ITS MOST RECENT ANNUAL REPORT AND SEMI-ANNUAL
REPORT FOR ANY SUBSEQUENT SEMI-ANNUAL PERIOD TO ITS SHAREHOLDERS. YOU MAY OBTAIN
A COPY OF THE REPORT, FREE OF CHARGE, BY WRITING TO COLUMBIA AT ONE FINANCIAL
CENTER, BOSTON, MASSACHUSETTS 02111-2621, OR BY CALLING 1-866-348-1468.
44
APPENDIX A -- OFFICER INFORMATION
The names and ages of the executive officers of the Fund, the year each was
first elected or appointed to office and their principal business occupations
during at least the last five years are shown below. The address of each officer
is One Financial Center, Boston, MA 02111-2621.
OFFICERS
YEAR FIRST ELECTED
OR APPOINTED TO
NAME/AGE AND ADDRESS POSITION WITH FUND OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- -------------------- ------------------ -----------------------------------------------------------
Christopher L. Wilson Head of Mutual Funds 2004 Head of Mutual Funds since August, 2004 and Senior Vice
(Age 47) since August 2004; President of the Advisor since January, 2005; President of
President of the the Columbia Funds, Liberty Funds and Stein Roe Funds since
Columbia Funds since October, 2004; President and Chief Executive Officer of the
October 2004 Nations Funds since January, 2005; Senior Vice President of
BACAP Distributors LLC since January, 2005; Director of FIM
Funding, Inc. since January, 2005; Senior Vice President of
Columbia Funds Distributor, Inc. since January, 2005;
Director of Columbia Funds Services, Inc. since January,
2005 (formerly President and Chief Executive Officer, CDC
IXIS Asset Management Services, Inc. from September, 1998 to
August, 2004).
J. Kevin Connaughton Treasurer 2000 Treasurer of the Columbia Funds since October, 2003 and of
(Age 40) the Liberty Funds, Stein Roe Funds and All-Star Funds since
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 All-Star Funds from February, 1998 to October,
2000); Treasurer of the Galaxy Funds since September, 2002
(formerly Treasurer from December, 2002 to December, 2004
and President from February, 2004 to December, 2004 of the
Columbia Management Multi-Strategy Hedge Fund, LLC; Vice
President of Colonial Management Associates, Inc. from
February, 1998 to October, 2000).
A-1
YEAR FIRST ELECTED
OR APPOINTED TO
NAME/AGE AND ADDRESS POSITION WITH FUND OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- --------------------- ------------------ ------------------------------------------------------------
Mary Joan Hoene Senior Vice President 2004 Senior Vice President and Chief Compliance Officer of the
(Age 54) and Chief Compliance Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star
40 West 57th Officer since 2004 Funds since August, 2004 (formerly Partner, Carter, Ledyard
Street New York, NY & Milburn LLP from January, 2001 to August, 2004; Counsel,
10019 Carter, Ledyard & Milburn LLP from November, 1999 to
December, 2000; Vice President and Counsel, Equitable Life
Assurance Society of the United States from April, 1998 to
November, 1999).
Michael G. Clarke Chief Accounting 2004 Chief Accounting Officer of the Columbia Funds, Liberty
(Age 35) Officer since October Funds, Stein Roe Funds and All-Star Funds since October,
2004 2004 (formerly Controller of the Columbia Funds, Liberty
Funds, Stein Roe Funds and the All-Star Funds from May, 2004
to October, 2004); Assistant treasurer from June, 2002 to
May, 2004; Vice President, Product Strategy & Development of
the Liberty Funds Group from February, 2001 to June, 2002;
Assistant Treasurer of the Liberty Funds Group from
February, 2001 to June, 2002; Assistant Treasurer of the
Liberty Funds, Stein Roe Funds and the All-Star Funds from
August, 1999 to February, 2001; Audit Manager, Deloitte &
Touche LLP from May, 1997 to August, 1999.
Jeffrey R. Coleman Controller since 2004 Controller of the Columbia Funds, Liberty Funds, Stein Roe
(Age 35) October 2004 Funds and the All-Star Funds since October, 2004 (formerly
Vice President of CDC IXIS Asset Management Services, Inc.
and Deputy Treasurer of the CDC Nvest Funds and Loomis
Sayles Funds from February, 2003 to September, 2004;
Assistant Vice President of CDC IXIS Asset Management
Services, Inc. and Assistant Treasurer of the CDC Nvest
Funds from August, 2000 to February, 2003; Tax Manager of
PFPC, Inc. from November, 1996 to August, 2000).
R. Scott Henderson Secretary since 2004 Secretary of the Columbia Funds, Liberty Funds and the Stein
(Age 45) December 2004 Roe Funds since December, 2004 (formerly Of Counsel Bingham
McCutchen from April 2001 to September 2004; Executive
Director and General Counsel, Massachusetts Pension Reserves
Investment Management Board from September, 1997 to March,
2001).
A-2
APPENDIX B.1 -- TRUSTEES' COMPENSATION
For the calendar year ended December 31, 2004, the Trustees received the
following compensation for serving as Trustees:
TOTAL COMPENSATION FROM THE
FUND COMPLEX PAID TO THE
PENSION OR RETIREMENT TRUSTEES FOR THE
BENEFITS ACCRUED AS PART CALENDAR YEAR ENDED
DISINTERESTED TRUSTEES OF FUND EXPENSES(1) DECEMBER 31, 2004
- ----------------------- ------------------------ ---------------------------
Douglas A. Hacker N/A $ 135,000
Janet Langford Kelly N/A $ 148,500
Richard W. Lowry N/A $ 150,700
Charles R. Nelson N/A $ 141,500
John J. Neuhauser N/A $ 158,284
Patrick J. Simpson(2) N/A $ 129,000
Thomas E. Stitzel N/A $ 149,000
Thomas C. Theobald(2) N/A $ 172,500
Anne-Lee Verville(2) N/A $ 157,000
Richard L. Woolworth N/A $ 131,000
INTERESTED TRUSTEE
William E. Mayer N/A $ 166,700
(1) The Fund does not currently provide pension or retirement plan benefits to
the Trustees.
(2) During the calendar year ended December 31, 2004, Mr. Simpson deferred
$129,000 of his total compensation pursuant to the deferred compensation
plan, Mr. Theobald deferred $90,000 of his total compensation pursuant to
the deferred compensation plan and Ms. Verville deferred $55,000 of her
total compensation pursuant to the deferred compensation plan.
B-3
APPENDIX B.2 -- TRUSTEES' COMPENSATION
For the last fiscal year, the Trustees received from the Fund the following
compensation for serving as Trustees:
AGGREGATE COMPENSATION
FROM THE FUND FOR THE
FISCAL YEAR ENDED
TRUSTEE 8/31/04
- --------------------- -------
Douglas A. Hacker $
Janet Langford Kelly
Richard W. Lowry
William E. Mayer
Charles R. Nelson
John J. Neuhauser
Patrick J. Simpson(a)
Thomas E. Stitzel
Thomas C. Theobald(b)
Anne-Lee Verville(c)
Richard L. Woolworth
(a) During the fiscal year ended August 31, 2004, Mr. Simpson deferred
$[_______] of his compensation from the Fund.
(b) During the fiscal year ended August 31, 2004, Mr. Theobald deferred
$[___________] of his compensation from the Fund.
(c) During the fiscal year ended August 31, 2004, Ms. Verville deferred
$[_____________] of her compensation from the Fund.
B-4
APPENDIX C -- TRUSTEE SHARE OWNERSHIP
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES OWNED IN
DOLLAR RANGE OF ALL FUNDS OVERSEEN BY
EQUITY SECURITIES OWNED TRUSTEE/DIRECTOR IN
NAME IN THE FUND THE FUND COMPLEX
- --------------------------- ---------------------- ---------------------
Douglas A. Hacker $ Over $100,000
Janet Langford Kelly $ Over $100,000
Richard W. Lowry $ Over $100,000
William E. Mayer $ $50,001-$100,000
Charles R. Nelson $ Over $100,000
John J. Neuhauser $ Over $100,000
Patrick J. Simpson $ Over $100,000
Thomas E. Stitzel $ Over $100,000
Thomas C. Theobald $ Over $100,000
Anne-Lee Verville $ Over $100,000
Richard W. Woolworth $ Over $100,000
C-1
APPENDIX D
GOVERNANCE COMMITTEE CHARTER
The Governance Committee (the "Committee") of the Funds shall be composed
entirely of members of the Board of the Funds who are not affiliated with the
Funds' investment adviser, sub-advisers or principal underwriter.
The functions of the Committee are:
To make nominations for independent trustee membership on the Board of Trustees
when necessary and to consider candidates proposed for the Board of Trustees by
shareholders of the Funds;
To review periodically Board governance practices and procedures and any
recommendations of the Chief Compliance Officer of the Funds relating thereto,
and to recommend to the Board any changes it may deem appropriate;
To review periodically trustee compensation and to recommend to the independent
trustees any changes it may deem appropriate;
To review committee assignments on an annual basis;
To review on an annual basis the responsibilities and charter of each committee
of the Board, whether there is continuing need for each committee, whether there
is a need for additional committees of the Board, and whether committees should
be combined or reorganized, and to make recommendations for any such action to
the Board;
To plan and administer the Board's annual self-evaluation process;
To evaluate on at least an annual basis the independence of counsel to the
independent trustees, to make recommendations to the independent trustees
regarding their determination of such counsel's status as an "independent legal
counsel" under applicable SEC rules, and to supervise such counsel.
The Committee shall meet as frequently and at such times as circumstances
dictate. Minutes shall be kept of the Committee's meetings.
The Committee shall have the resources and authority appropriate to discharge
its responsibilities, including authority to retain special counsel and other
experts or consultants at the expense of the appropriate Fund.
The Committee shall review this charter at least annually and recommend to the
Board any changes it deems appropriate.
D-1
APPENDIX E1
AUDIT- ALL
AUDIT RELATED TAX OTHER
FYE FEES FEES FEES FEES TOTAL
- ------- ------ -------- ----- ------ ------
8/31/04 $[___] $[___] $[__] $[__] $[___]
8/31/03 $[___] $[___] $[__] $[__] $[___]
E-1
APPENDIX E2
NON-AUDIT
FYE SERVICES
- ------- ---------
8/31/04 $[_____]
8/31/03 $[_____]
E-2
APPENDIX F -- SHARES OUTSTANDING AND ENTITLED TO VOTE
For each class of the Fund's shares entitled to vote at the Meeting, the number
of shares outstanding as of September 8, 2005 was as follows:
NUMBER OF SHARES OUTSTANDING
CLASS AND ENTITLED TO VOTE
- ----- ----------------------------
A 2,181,292.1210
B 526,033.9660
Z 348,393.0610
F-1
APPENDIX G -- OWNERSHIP OF SHARES
CLASS REGISTRATION SHARE BALANCE PERCENT CLASS TOTAL
- ----- ------------ ------------- ------- -----------
1
EXHIBIT 1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of , 2005, is by and
among (the "Acquired Trust"), a Massachusetts business trust, on behalf of
(the "Acquired Fund"); (the "Acquiring Trust"), a Massachusetts business
trust on behalf of (the "Acquiring Fund"); and Columbia Management
Advisors, Inc. ("Columbia").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Sections 361(a) and Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and any
successor provision. The reorganization will consist of the transfer of all of
the assets of the Acquired Fund attributable to each class of its shares in
exchange for shares of the same class of shares of the Acquiring Fund (the
"Acquisition Shares"), and the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund and the distribution of the Acquisition Shares
to the relevant shareholders of the Acquired Fund in liquidation of the Acquired
Fund, all upon the terms and conditions set forth in this Agreement.
In consideration of the premises and of the covenants and agreements hereinafter
set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF LIABILITIES
AND ACQUISITION SHARES AND LIQUIDATION OF ACQUIRED FUND.
1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein,
(a) The Acquired Fund will transfer and deliver to the Acquiring
Fund, and the Acquiring Fund will acquire, all the assets of
the Acquired Fund as set forth in paragraph 1.2;
(b) The Acquiring Fund will assume all of the Acquired Fund's
liabilities and obligations of any kind whatsoever, whether
absolute, accrued, contingent or otherwise, in existence on
the Closing Date (as defined in paragraph 1.2 hereof) (the
"Obligations"); and
(c) The Acquiring Fund will issue and deliver to the Acquired Fund
in exchange for the net assets attributable to each class of
its shares the number of Acquisition Shares of the
1
corresponding class (including fractional shares, if any)
determined by dividing the value of such net assets, computed
in the manner and as of the time and date set forth in
paragraph 2.1, by the net asset value of one Acquisition Share
of the applicable class 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, other
than unamortized organizational expenses, shown as an asset on the
books of the Acquired Fund on the Closing Date. The Acquiring Fund
agrees that all rights to indemnification and all limitations of
liability existing in favor of the Acquired Fund's current and
former Trustees and officers, acting in their capacities as such,
under the Acquired Fund's organizational documents 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 Acquiring Fund, its
successors or assigns.
1.3 As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Acquired Fund
will liquidate and distribute pro rata to shareholders of record of
each class of shares, determined as of the close of business on the
Valuation Date (as defined in paragraph 2.1), the Acquisition Shares
of the relevant class received by the Acquired Fund pursuant to
paragraph 1.1. Such liquidation and distribution will be
accomplished by the transfer of the Acquisition Shares then credited
to the account of the Acquired Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in
the names of the Acquired Fund shareholders and representing the
respective pro rata number of Acquisition Shares due such
shareholders. The Acquiring Fund shall not be obligated to issue
certificates representing Acquisition Shares in connection with such
exchange.
1.4 With respect to Acquisition Shares distributable pursuant to
paragraph 1.3 to an Acquired Fund shareholder holding a
2
certificate or certificates for shares of the Acquired Fund, if any,
on the Valuation Date, the Acquired Fund will not permit such
shareholder to receive Acquisition Share certificates therefor,
exchange such Acquisition Shares for shares of other investment
companies, effect an account transfer of such \ Acquisition Shares,
or pledge or redeem such Acquisition Shares until 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 If applicable, as soon as practicable after the Closing Date, the
Acquired Trust shall file an application pursuant to Section 8(f) of
the Investment Company Act of 1940, as amended (the "1940 Act"), for
an order declaring that it has ceased to be an investment company
and, upon receipt of such order, shall make all filings and take all
other steps as shall be necessary and proper to effect its complete
termination under Massachusetts law. After the Closing Date, the
Acquired Fund shall not conduct any business except in connection
with its liquidation, deregistration (if applicable), and
termination.
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
value of such assets 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
organizational documents of the Acquiring Fund 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") for
determining net asset value, [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 an
Acquisition Share of each class shall be the net asset value per
share computed as of the close of regular trading on the New York
Stock Exchange on the Valuation Date, using the valuation procedures
set forth in the organizational documents of the Acquiring Fund and
the Acquiring Fund Prospectus.
3
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be on , 2005, or on such other date as
the parties may agree. The Closing shall be held at p.m. at
Columbia's offices, One Financial Center, Boston, Massachusetts
02111, or at such other time and/or place as the parties may agree.
3.2 The portfolio securities of the Acquired Fund shall be made
available by the Acquired Fund to the 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 1940 Act and accompanied by all necessary federal
and state stock transfer stamps or a check for the appropriate
purchase price thereof. The cash delivered shall be in the form of
currency or certified or official bank checks, payable to the order
of "[Name of Custodian], custodian for [Name of Acquiring 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 Acquired Fund or 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
4
names and addresses of the Acquired Fund shareholders and the number
of outstanding shares of each class of the Acquired Fund owned by
each Acquired Fund shareholder, all as of the close of business on
the Valuation Date, certified by any Vice President, Secretary or
Assistant Secretary of the Acquired Fund. The Trust 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 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 Acquired Fund is a series of the Acquired Trust that is
duly organized, validly existing and in good standing under
the laws of The Commonwealth of Massachusetts;
(b) The Acquired 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 Acquired Trust and the 1940
Act;
(c) The Acquired Fund is not in violation in any material respect
of any provision of its organizational documents or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquired Fund is a party or by which
the Acquired Fund is bound, and the execution,
5
delivery and performance of this Agreement will not result in
any such violation;
(d) The Acquired Fund has no material contracts or other
commitments (other than this Agreement and such other
contracts as may be entered into in the ordinary course of its
business) which if terminated may result in material liability
to the Acquired Fund or under which (whether or not
terminated) any material payments for periods subsequent to
the Closing Date will be due from the Acquired Fund;
(e) To the knowledge of the Acquired Fund, except as has been
disclosed in writing to the Acquiring Fund, no litigation or
administrative proceeding or investigation of or before any
court or governmental body is presently pending or threatened
as to the Acquired Fund, any of its properties or assets, or
any person whom the Acquired Fund may be obligated to
indemnify in connection with such litigation, proceeding or
investigation, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its
business or its ability to consummate the transactions
contemplated hereby;
(f) The statement of assets and liabilities, the statement of
operations, the statement of changes in net assets, and the
schedule of investments of the Acquired Fund, as of and for
its most recently completed fiscal year, audited by
PricewaterhouseCoopers LLP (and, if applicable, an unaudited
statement of assets and liabilities, statement of operations,
statement of changes in net assets and schedule of investments
for any subsequent semiannual period following the most
recently completed fiscal year), 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 the date of the
Acquired Fund's most recently completed fiscal year;
6
(g) Since the date of the Acquired Fund's most recently completed
fiscal year, there has not been any material adverse change in
the Acquired Fund's financial condition, assets, liabilities
or business (other than changes occurring in the ordinary
course of business), or any incurrence by the Acquired Fund of
indebtedness, except as disclosed in writing to the Acquiring
Fund. For the purposes of this subparagraph (g), distributions
of net investment income and net realized capital gains,
changes in portfolio securities, changes in the market value
of portfolio securities or net redemptions shall be deemed to
be in the ordinary course of business;
(h) As of the Closing Date, all federal and other tax returns and
reports of the Acquired Fund required by law to have been
filed by such date (giving effect to extensions) shall have
been filed, and all federal and other taxes shown to be due on
such returns and reports or on any assessment received shall
have been paid, or provisions shall have been made for the
payment thereof. All of the Acquired Fund's tax liabilities
will have been adequately provided for on its books. To the
best of the Acquired Fund's knowledge, it will not have had
any tax deficiency or liability asserted against it or
question with respect thereto raised, and it will not be under
audit by the Internal Revenue Service or by any state or local
tax authority for taxes in excess of those already paid;
(i) The Acquired Fund meets the requirements of subchapter M of
the Code for treatment as a "regulated investment company"
within the meaning of Section 851 of the Code, and will
continue meeting such requirements at all times through the
Closing Date. The Acquired Fund has not at any time since its
inception been liable for nor is now liable for any material
income or excise tax pursuant to Section 852 or 4982 of the
Code. The Acquired Fund has duly filed all federal, state,
local and foreign tax returns which are required to have been
filed, and all taxes of the Acquired Fund which are due and
payable have been paid except for amounts that alone or in the
aggregate would not reasonably be expected to have a material
adverse effect. The Acquired Fund is in compliance in all
material respects with applicable regulations of the Internal
Revenue Service pertaining to the reporting of dividends and
other distributions on and redemptions of its capital stock
and to withholding in respect
7
of dividends and other distributions to shareholders, and is
not liable for any material penalties which could be imposed
thereunder;
(j) Exhibit A attached hereto sets forth the authorized capital of
the Acquired Fund. 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 Acquired Fund and will have been issued
in compliance with all applicable registration or
qualification requirements of federal and state securities
laws. Except as set forth on Exhibit A attached hereto, no
options, warrants or other rights to subscribe for or
purchase, or securities convertible into, any shares of common
stock 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 the Acquired Fund Prospectus, 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 Acquired Fund,
and, upon approval thereof by the required majority of the
shareholders of the Acquired Fund, this Agreement will
constitute the valid and binding obligation of the Acquired
Fund enforceable in accordance with its terms except as the
same may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors'
rights generally and other equitable principles;
(m) The Acquisition Shares to be issued to the Acquired Fund
pursuant to paragraph 1 will not be acquired for the purpose
of making any distribution thereof other than to the Acquired
Fund shareholders as provided in paragraph 1.3;
(n) The information provided by the Acquired Fund for use in the
Proxy Statement referred to in paragraph 5.3 shall be
8
accurate and complete in all material respects and shall
comply with federal securities and other laws and regulations
as applicable thereto;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this
Agreement, except such as may be required under the Securities
Act of 1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the 1940
Act and state securities or "Blue Sky" laws (which terms used
herein shall include the laws of the District of Columbia and
of Puerto Rico);
(p) At the Closing Date, the Acquired Fund will have good and
marketable title to its assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.1 and will have full
right, power and authority to sell, assign, transfer and
deliver the Investments (as defined below) and any other
assets and liabilities of the Acquired Fund to be transferred
to the Acquiring Fund pursuant to this Agreement. At the
Closing Date, subject only to the delivery of the Investments
and any such other assets and liabilities and payment therefor
as contemplated by this Agreement, the Acquiring Fund will
acquire good and marketable title thereto and will acquire the
Investments and any such other assets and liabilities subject
to no encumbrances, liens or security interests whatsoever and
without any restrictions upon the transfer thereof, except as
previously disclosed to the Acquiring Fund. As used in this
Agreement, the term "Investments" shall mean the Acquired
Fund's investments shown on the schedule of its investments as
of the date of its most recently completed fiscal year,
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) Reserved;
(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.
9
4.2 The Acquiring Fund represents and warrants the following 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 series of the Acquiring Trust that is
duly organized, validly existing and in good standing under
the laws of The Commonwealth of Massachusetts;
(b) The Acquiring 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 Acquiring Fund is a separate series
thereof duly designated in accordance with the applicable
provisions of the Declaration of Trust of the Acquiring Trust
and the 1940 Act;
(c) At the Closing Date, the Acquiring Fund Prospectus will
conform 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 will 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 will be 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 organizational documents or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which
the Acquiring Fund is bound, and the execution, delivery and
performance of this Agreement will not result in any such
violation;
(f) To the knowledge of 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
10
threatened as to the Acquiring Fund, 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, 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) Reserved;
(h) Reserved;
(i) As of the Closing Date, the Acquiring Fund shall have not been
required by law to have filed any federal or other tax returns
or reports. All of the Acquiring Fund's tax liabilities, if
any, 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 was established by the Trustees of the
Acquiring Trust in order to effect the transactions described
in this Agreement. It has not yet filed its first federal
income tax return and, thus, has not yet elected to be treated
as a "regulated investment company" for federal income tax
purposes. However, upon filing its first income tax return at
the completion of its first taxable year, the Acquiring Fund
will elect to be a "regulated investment company" and until
such time will take all steps necessary to ensure that it
qualifies for taxation as a "regulated investment company"
under Sections 851 and 852 of the Code.
(k) The Acquiring Fund has no shares of beneficial interest issued
and outstanding;
(l) Reserved;
(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
11
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 shares 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 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 the
Acquiring Fund of the transactions contemplated by this
Agreement, except such as may be required under the 1933 Act,
the 1934 Act, the 1940 Act and state securities or "Blue Sky"
laws (which term as used herein shall include the laws of the
District of Columbia and of Puerto Rico).
5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND.
The Acquired Fund and the Acquiring Fund each hereby covenants and agrees with
the other as follows:
5.1 Each of 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 elect the Board of Trustees of the
Acquired Fund 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
12
Proxy Statement for such meeting, to be distributed to the Acquired
Fund shareholders pursuant hereto, all in compliance with the
applicable requirements of the 1934 Act and the 1940 Act.
5.4 The information to be furnished by the Acquired Fund and the
Acquiring Fund for use in the Proxy Statement, as referred to in
paragraph 5.3, shall be accurate and complete in all material
respects and shall comply with federal securities and other laws and
regulations thereunder applicable thereto.
5.5 The Acquiring Fund will advise the Acquired Fund promptly if at any
time prior to the Closing Date the assets of the Acquired Fund
include any securities which the Acquiring Fund is not permitted to
acquire.
5.6 Subject to the provisions of this Agreement, the Acquired Fund and
the Acquiring Fund will each take, or cause to be taken, all action,
and do or cause to be done, all things reasonably necessary, proper
or advisable to cause the conditions to the other party's
obligations to consummate the transactions contemplated hereby to be
met or fulfilled and otherwise to consummate and make effective such
transactions.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state securities or "Blue Sky" laws as it may deem
appropriate in order to continue its operations after the Closing
Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Acquiring
Fund of all the obligations to be performed by them hereunder on or before the
Closing Date and, in addition thereto, to the following further conditions:
6.1 The Acquiring Fund shall have delivered to the Acquired Fund, a
certificate executed in its name by its President or a Vice
President and its Treasurer or an Assistant Treasurer, in form and
substance satisfactory to the Acquired Fund and dated as of the
Closing Date, to the effect that the representations and warranties
of the Acquiring Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be
13
affected by the transactions contemplated by this Agreement, and
that the Acquiring Fund has complied with all the covenants and
agreements and satisfied all of the conditions on their parts to be
performed or satisfied under this Agreement at or prior to the
Closing Date.
6.2 The Acquired Fund shall have received a favorable opinion of Ropes &
Gray LLP dated the Closing Date and, in a form satisfactory to the
Acquiring Fund, to the following effect:
(a) The Acquiring Trust is 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;
(b) This Agreement has been duly authorized, executed and
delivered on behalf of the Acquiring Fund and, assuming the
Proxy Statement referred to in paragraph 5.3 complies with
applicable federal securities laws and assuming the due
authorization, execution and delivery of this Agreement by 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 shares in the Acquiring Fund, and no shareholder
of the Acquiring Fund has any preemptive right of subscription
or purchase in respect thereof;
(d) 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 organizational
documents, 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
14
counsel, result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or
decree to which the Acquiring Fund is a party or by which it
is bound;
(f) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority
is required for the consummation by the Acquiring Fund of the
transactions contemplated by this Agreement except such as may
be required under state securities or "Blue Sky" laws or such
as have been obtained;
(g) Such counsel does not know of any legal or governmental
proceedings relating to the Acquiring Fund existing on or
before the date of mailing of the Proxy Statement referred to
in paragraph 5.3 or the Closing Date required to be described
in the Proxy Statement which are not described as required;
(h) The Acquiring Trust 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 Acquired Fund may be obligated to
indemnify in connection with such litigation, proceeding or
investigation, and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of
any court or governmental body, which materially and adversely
affects its business or its ability to consummate the
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 Acquired Fund shall have delivered to the Acquiring Fund a
certificate executed in its name by its President or a Vice
15
President and its Treasurer or an Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of the
Closing Date, to the effect that the representations and warranties
of the Acquired Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and that the Acquired
Fund have complied with all the covenants and agreements and
satisfied all of the conditions on their parts to be performed or
satisfied under this Agreement at or prior to the Closing Date;
7.2 The Acquiring Fund shall have received a favorable opinion of Ropes
& Gray LLP, dated the Closing Date and in a form satisfactory to the
Acquiring Fund, to the following effect:
(a) The Acquired Trust is 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;
(b) This Agreement has been duly authorized, executed and
delivered on behalf of the Acquired Fund and, assuming the
Proxy Statement referred to in paragraph 5.3 comply with
applicable federal securities laws and, assuming the due
authorization, execution and delivery of this Agreement by the
Acquiring Fund, is the valid and binding obligation of the
Acquired Fund enforceable against the Acquired Fund in
accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally
and other equitable principles;
(c) The Acquired Fund has the power to sell, assign, transfer and
deliver the assets to be transferred by it hereunder, and,
upon consummation of the transactions contemplated hereby, the
Acquired Fund will have duly transferred such assets to the
Acquiring Fund;
(d) The execution and delivery of this Agreement did not, and the
performance by the Acquired Fund of its respective obligations
hereunder will not, violate the Acquired Fund's organizational
documents or any provision of any agreement known to such
counsel to which the Acquired Fund is a party or by which it
is bound or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition
16
of any penalty under any agreement, judgment, or decree to
which the Acquired Fund is a party or by which it is bound;
(e) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority
is required for the consummation by the Acquired Fund of the
transactions contemplated by this Agreement, except such as
have been obtained;
(f) Such counsel does not know of any legal or governmental
proceedings relating to the Acquired Fund existing on or
before the date of mailing of the Proxy Statement referred to
in paragraph 5.3 or the Closing Date required to be described
in the Proxy Statement which are not described as required;
(g) The Acquired Trust is registered with the Securities and
Exchange Commission as an investment company under the 1940
Act; and
(h) To the knowledge of such counsel, except as has been disclosed
in writing to the Acquiring Fund, no litigation or
administrative proceeding or investigation of or before any
court or governmental body is presently pending or threatened
as to the Acquired Fund or any of its properties or assets or
any person whom the Acquiring Fund may be obligated to
indemnify in connection with such litigation, proceeding or
investigation, and the Acquired Fund is not a party to or
subject to the provisions of any order, decree or judgment of
any court or governmental body, which materially and adversely
affects its business or its ability to consummate the
transaction contemplated thereby.
7.3 Reserved.
7.4 The Acquired Fund shall have furnished to the Acquiring Fund a
certificate, signed by the President (or any Vice President) and the
Treasurer of the Acquired Fund, as to the adjusted tax basis in the
hands of the Acquired Fund of the securities delivered to the
Acquiring Fund pursuant to this Agreement.
7.5 The custodian of the Acquired Fund shall have delivered to the
Acquiring Fund a certificate identifying all of the assets of the
Acquired Fund held by such custodian as of the Valuation Date.
17
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
The respective obligations of the Acquired Fund and the Acquiring Fund hereunder
are each subject to the further conditions that on or before the Closing Date:
8.1 Shareholders of the Acquired Fund shall have elected the nominees
for Trustees of the Acquired Fund, set forth in the Proxy Statement.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated
hereby.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities
(including those of the Securities and Exchange Commission and of
state "Blue Sky" and securities authorities) deemed necessary by the
Acquired Fund 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 Acquired Fund or the
Acquiring Fund.
8.4 Reserved.
8.5 The Acquired Fund shall have received a favorable opinion of Ropes &
Gray LLP satisfactory to the Acquired Fund, and the Acquiring Fund
shall have received a favorable opinion of Ropes & Gray LLP
satisfactory to the Acquiring Fund, each substantially to the effect
that, for federal income tax purposes:
(a) The transactions contemplated by this Agreement 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
18
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;
(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 Acquired Fund and the Acquiring Fund and will also
be based on customary assumptions. The opinion is not a
19
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 each of the
Acquired Fund and the Acquiring Fund, if, in their judgment, such
waiver will not have a material adverse effect on the interests of
the shareholders of the Acquired Fund or the Acquiring Fund.
9. BROKERAGE FEES AND EXPENSES.
9.1 The Acquired Fund and the Acquiring Fund each represents and
warrants to the other that there are no brokers or finders entitled
to receive any payments in connection with the transactions provided
for herein.
9.2 All fees and expenses incurred in connection with the transactions
contemplated herein shall be borne by Columbia.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.
10.1 The Acquired Fund and the Acquiring Fund agree that neither party
has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement
between the parties.
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
Acquired Fund and the Acquiring Fund. In addition, either the
Acquired Fund or the Acquiring Fund may at its option terminate this
Agreement at or prior to the Closing Date because:
(a) Of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be
performed by the other party at or prior to the Closing Date;
20
(b) A condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met; or
(c) Any governmental authority of competent jurisdiction shall
have issued any judgment, injunction, order, ruling or decree
or taken any other action restraining, enjoining or otherwise
prohibiting this Agreement or the consummation of any of the
transactions contemplated herein and such judgment,
injunction, order, ruling, decree or other action becomes
final and non-appealable; provided that the party seeking to
terminate this Agreement pursuant to this Section 11.1(c)
shall have used its reasonable best efforts to have such
judgment, injunction, order, ruling, decree or other action
lifted, vacated or denied.
If the transactions contemplated by this Agreement have not been
substantially completed by December 31, 2007, this Agreement shall
automatically terminate on that date unless a later date is agreed
to by both the Acquired Fund and the Acquiring Fund.
11.2 If for any reason the transactions contemplated by this Agreement
are not consummated, no party shall be liable to any other party for
any damages resulting therefrom, including without limitation
consequential damages.
12. AMENDMENTS.
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon in writing by the authorized officers of the Acquired Fund
and the Acquiring Fund; provided, however, that following the shareholders'
meeting called by the Acquired Fund pursuant to paragraph 5.2 no such amendment
may have the effect of changing the provisions for determining the number of the
Acquisition Shares to be issued to shareholders of the Acquired Fund under this
Agreement to the detriment of such shareholders without their further approval.
13. NOTICES.
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquired Fund or the Acquiring Fund,
One Financial Center, Boston, Massachusetts 02111, Attention: Secretary.
21
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; NON- RECOURSE.
14.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the domestic substantive laws of The Commonwealth of Massachusetts,
without giving effect to any choice or conflicts of law rule or
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 Acquiring Trust and the
Acquired Trust is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that no trustee, officer,
agent or employee of such fund shall have any personal liability
under this Agreement, and that this Agreement is binding only upon
the assets and properties of the Acquired Fund and the Acquiring
Fund.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK.]
22
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as a sealed instrument by its President, a Vice President or Treasurer
and its corporate seal to be affixed thereto and attested by its Secretary or
Assistant Secretary.
[NAME OF ACQUIRED FUND]
By:_________________________________
Name:
Title:
[NAME OF ACQUIRING FUND]
By:_________________________________
Name:
Title:
Solely for purposes of Paragraph 9.2 of
the Agreement
COLUMBIA MANAGEMENT
ADVISORS, INC.
By:_________________________________
Name:
Title:
23
EXHIBIT A
ACQUIRED FUND AUTHORIZED CAPITAL
- ------------------------------- -------------------------
_______________________________ _________________________
_______________________________ _________________________
* Converts to Class A shares after the expiration of a period of time.
A-1
COLUMBIA MANAGEMENT FORM OF PROXY
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 16, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Christopher L. Wilson, J. Kevin Connaughton, Michael G. Clarke,
Vincent P. Pietropaolo and Michelle H. Rhee, and each of them, with full power
of substitution to each, to vote all shares at the Special Meeting of
Shareholders to be held at One Financial Center, Boston, Massachusetts, on
November 16, 2005 at 2:00 p.m. Boston Time and at any and all adjournments, as
specified herein and in accordance with their best judgment, on any other
business that may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BELOW
AND, ABSENT DIRECTION, WILL BE VOTED FOR THE PROPOSAL LISTED BELOW. THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER
MATTER.
VOTE VIA THE INTERNET: HHTPS://VOTE.PROXY-DIRECT.COM
VOTE VIA THE TELEPHONE: 1-866-241-6192
NOTE: Please sign exactly as name or names appear
hereon. Joint owners should each sign personally. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a
corporation, please sign in corporate name by President
or other authorized officer. If a partnership, please
sign in partnership name by authorized person.
______________________________________________________
Shareholder sign here
______________________________________________________
Co-owner sign here
______________________________________________________
Date ORE_15350
Columbia Newport Greater China Fund
PLEASE MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. EXAMPLE: [ ]
[ ] To vote FOR on ALL Proposals mark this box. No other vote is necessary.
1. TO ELECT TRUSTEES:
01. Janet Langford Kelly 02. Anne-Lee Verville 03. Douglas A. Hacker
04. Richard W. Lowry 05. William E. Mayer 06. Charles R. Nelson
07. John J. Neuhauser 08. Patrick J. Simpson 09. Thomas E. Stitzel
10. Thomas C. Theobald 11. Richard L. Woolworth
FOR ALL WITHHOLD FOR ALL
AUTHORITY EXCEPT
FOR ALL
[ ] [ ] [ ]
To withhold authority to vote for one or more of the nominees, write the
corresponding number(s) of the nominee(s) on the line below.
2.A. TO APPROVE AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
WITH RESPECT TO BORROWING MONEY.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2.B. TO APPROVE AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
WITH RESPECT TO ISSUING SENIOR SECURITIES.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2.C. TO APPROVE AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
WITH RESPECT TO MAKING LOANS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2.D. TO APPROVE AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
WITH RESPECT TO INVESTMENTS IN REAL ESTATE
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2.E. TO APPROVE AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
WITH RESPECT TO UNDERWRITING OF SECURITIES
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2.F. TO APPROVE AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
WITH RESPECT TO CONCENTRATING INVESTMENTS IN AN INDUSTRY
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2.M. TO APPROVE THE ELIMINATION OF THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS WITH RESPECT TO BUYING AND SELLING FUTURES CONTRACTS AND RELATED
OPTIONS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ORE_15350