COLUMBIA FUNDS TRUST II
COLUMBIA NEWPORT GREATER CHINA FUND
(THE "FUND")
ONE FINANCIAL CENTER,
BOSTON, MASSACHUSETTS 02111-2621
1-866-348-1468
OCTOBER 7, 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 Series Trust I, 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 Series
Trust I, which became effective on August 10, 2005. A comparison of the amended
Agreement and Declaration of Trust of Columbia Funds Series Trust I 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
October 7, 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 October 7, 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.
Proposal 2.B.: To approve an amendment to the Fund's fundamental investment
restriction with respect to issuing senior securities.
Proposal 2.C.: To approve an amendment to the Fund's fundamental investment
restriction with respect to making loans.
1
Proposal 2.D.: To approve an amendment to the Fund's fundamental investment
restriction with respect to investments in real estate.
Proposal 2.E.: To approve an amendment to the Fund's fundamental investment
restriction with respect to underwriting of securities.
Proposal 2.F.: To approve an amendment to the Fund's fundamental investment
restriction with respect to concentrating investments in an industry.
Proposal 2.G.: 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) present at the Meeting in person or by
proxy is required for the election of each such Trustee (i.e., the eleven
nominees who receive the most votes will be elected). The names and ages
2
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 Trustees serve terms of indefinite
duration. The address of each Trustee is One Financial Center, Boston, MA
02111-2621.
3
<Table>
<Caption>
NUMBER OF
YEAR FIRST PORTFOLIOS IN
ELECTED OR FUND
APPOINTED COMPLEX
POSITION TO PRINCIPAL OCCUPATION(S) OVERSEEN BY
NAME/AGE AND ADDRESS WITH FUND OFFICE(1) DURING PAST FIVE YEARS DIRECTOR
- ------------------------ ---------- ---------- --------------------------------------- -------------
DISINTERESTED TRUSTEES
Douglas A. Hacker Trustee 1996 Executive Vice President -- Strategy of 101
(Age 49) United Airlines (airline) since
December, 2002 (formerly President of
UAL Loyalty Services (airline) from
September, 2001 to December, 2002;
Executive Vice President and Chief
Financial Officer of United Airlines
from July, 1999 to September, 2001;
Senior Vice President -- Finance from
March, 1993 to July, 1999).
Janet Langford Kelly Trustee 1996 Partner, Zelle, Hofmann, Voelbel, Mason 101
(Age 47) & Gette LLP (law firm) since March,
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).
<Caption>
NAME/AGE AND ADDRESS OTHER DIRECTORSHIPS HELD
- ------------------------ -------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker Nash Finch Company (food
(Age 49) distributor)
Janet Langford Kelly None
(Age 47)
</Table>
4
<Table>
<Caption>
NUMBER OF
YEAR FIRST PORTFOLIOS IN
ELECTED OR FUND
APPOINTED COMPLEX
POSITION TO PRINCIPAL OCCUPATION(S) OVERSEEN BY
NAME/AGE AND ADDRESS WITH FUND OFFICE(1) DURING PAST FIVE YEARS DIRECTOR
- ------------------------ ---------- ---------- --------------------------------------- -------------
Richard W. Lowry(2) Trustee 1995 Private Investor since August, 1987 103
(Age 69) (formerly Chairman and Chief Executive
Officer, U.S. Plywood Corporation
(building products manufacturer)).
Charles R. Nelson (Age Trustee 1981 Professor of Economics, University of 101
63) 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 of 103
(Age 62) Faculties since August, 1999, Boston
College (formerly Dean, Boston College
School of Management from September,
1977 to August, 1999).
Patrick J. Simpson Trustee 2000 Partner, Perkins Coie, LLP (law firm). 101
(Age 61)
Thomas E. Stitzel Trustee 1998 Business Consultant since 1999 101
(Age 69) (formerly Professor of Finance from
1975 to 1999; College of Business,
Boise State University); Chartered
Financial Analyst.
<Caption>
NAME/AGE AND ADDRESS OTHER DIRECTORSHIPS HELD
- ------------------------ -------------------------------
Richard W. Lowry(2) None
(Age 69)
Charles R. Nelson (Age None
63)
John J. Neuhauser(2) Saucony, Inc. (athletic
(Age 62) footwear)
Patrick J. Simpson None
(Age 61)
Thomas E. Stitzel None
(Age 69)
</Table>
5
<Table>
<Caption>
NUMBER OF
YEAR FIRST PORTFOLIOS IN
ELECTED OR FUND
APPOINTED COMPLEX
POSITION TO PRINCIPAL OCCUPATION(S) OVERSEEN BY
NAME/AGE AND ADDRESS WITH FUND OFFICE(1) DURING PAST FIVE YEARS DIRECTOR
- ------------------------ ---------- ---------- --------------------------------------- -------------
Thomas C. Theobald(3) Trustee 1996 Partner and Senior Advisor, Chicago 101
(Age 68) Growth Partners (private equity
investing) since September, 2004;
(formerly Managing Director, William
Blair Capital Partners (private equity
investing) from September, 1994 to
September, 2004).
Anne-Lee Verville Trustee 1998 Retired since 1997 (formerly General 101
(Age 59) Manager, Global Education Industry, IBM
Corporation (computers and technology)
from 1994 to 1997).
Richard L. Woolworth Trustee 1991 Retired since December, 2003 (formerly 101
(Age 64) Chairman and Chief Executive Officer,
The Regence Group (regional health
insurer); Chairman and Chief Executive
Officer, Blue Cross Blue Shield of
Oregon; Certified Public Accountant,
Arthur Young & Company).
INTERESTED TRUSTEE
William E. Mayer(2)(4) Trustee 1994 Partner, Park Avenue Equity Partners 103
(Age 65) (private equity) since February, 1999;
(formerly Partner, Development Capital
LLC from November, 1996 to February,
1999).
<Caption>
NAME/AGE AND ADDRESS OTHER DIRECTORSHIPS HELD
- ------------------------ -------------------------------
Thomas C. Theobald(3) Anixter International (network
(Age 68) support equipment distributor);
Ventas Inc. (real estate
investment trust); Jones Lang
LaSalle (real estate management
services) and Ambac Financial
Group(financial guarantee
insurance).
Anne-Lee Verville Chairman of the Board of
(Age 59) Directors, Enesco Group,
Inc.(designer, importer and
distributor of giftware and
collectibles).
Richard L. Woolworth NorthWest Natural (a natural
(Age 64) gas service provider).
INTERESTED TRUSTEE
William E. Mayer(2)(4) Lee Enterprises (print media);
(Age 65) WR Hambrecht & Co. (financial
service provider); First Health
(healthcare); Readers
Digest(publisher); OPENFIELD
Solutions (retail industry
technology provider).
</Table>
6
(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.
7
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
Series Trust I (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.G.). 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
8
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.
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.
9
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 advisor 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.
10
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
Acquiring Trust was named Columbia Funds Trust IX until September 19, 2005, on
which date it was renamed Columbia Funds Series Trust I.
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, free of charge, by
contacting the Acquiring Trust at its address listed on the cover page of this
Proxy Statement.
11
<Table>
<Caption>
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 and not having been a shareholder is entitled
because of his or her acts or to be held harmless from and
omissions is entitled out of the indemnified against all loss and
assets of the series (or attributable expense arising from such liability.
to the class) of which he or she is a Every note, bond, contract,
shareholder or former shareholder to instrument, certificate or
be held harmless from and indemnified undertaking made or issued by any
against all loss and expense arising Trustees or Trustee or by any
from such liability. officers or officer must recite that
Every note, bond, contract, the same was executed or made by or
instrument, certificate or on behalf of the Trust and that
undertaking made or issued by any obligations of such instrument are
Trustees or Trustee or by any not binding on any of them or
officers or officer must recite that shareholders individually.
the same was executed or made by or
on behalf of the Trust and that
obligations of such instrument are
not binding on any of them or
shareholders individually.
</Table>
12
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
SHAREHOLDER VOTING RIGHTS: Shareholders have the power to vote Shareholders have the power to vote
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 any
Trustees; (ii) with respect to 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
No shareholder may bring a derivative required by law, the organizational
claim without first requesting the documents, or deemed desirable by the
Trustees to bring or maintain such Board of Trustees.
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.
</Table>
13
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
Each whole share (or fractional On a record date, each outstanding
share) outstanding on the record date share or fractional share is entitled
is entitled to a number of votes on to one vote or a proportional
any matter on which it is entitled to fractional vote.
vote equal to the net asset value of
the share (or fractional share) in Shareholders may vote together with
U.S. dollars determined at the close shareholders of the other series of
of business on the record date (for the Trust on matters affecting the
example, a share having a net asset Trust as a whole, such as the
value of $10.50 would be entitled to election of Trustees.
10.5 votes).
Shareholders shall vote together as a
single class without regard to series
or class of shares, except that (1)
when required by the 1940 Act or when
the Trustees shall have determined
that the matter affects one or more
series or classes of shares
materially differently, shares shall
be voted by individual series or
class and (2) when the matter affects
only the interests of one or more
series or classes, only shareholders
of such series or classes shall be
entitled to vote thereon.
SHAREHOLDER MEETINGS: Shareholders have no specific right Shareholders have no specific right
to call meetings, except as may be to call meetings, except as may be
required by applicable law, including required by applicable law, including
the Investment Company Act of 1940. the Investment Company Act of 1940.
SHAREHOLDER QUORUM: 30% of the shares entitled to vote at 30% of the shares entitled to vote at
the meeting. the meeting.
SHAREHOLDER CONSENT: Majority consent required for Majority consent required for
shareholder action taken without a shareholder action taken without a
meeting. meeting.
</Table>
14
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
NOTICE TO SHAREHOLDERS: Notice of shareholder meetings is to Written notice of shareholder
be mailed, postage prepaid, or sent meetings must be given not less than
by facsimile or other electronic seven days in advance.
submission not less than seven days
before the date of such meeting. Notice is not expressly required to
Notice is not expressly required to include the purpose for which the
state the purpose for which the meeting is called.
meeting is called.
TRUSTEE'S POWER TO AMEND DECLARATION The Declaration of Trust may be The Declaration of Trust may be
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, for the then Trustees when authorized so
non-ministerial amendments, notice is to do by vote of a majority of the
promptly mailed to shareholders as of shares entitled to vote with respect
the day such amendment is effective. to such amendment, except that
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.
TERMINATION OF TRUST: Shareholders have the right to Shareholders have the right to
terminate the Trust, or series or terminate the Trust or series upon
class, upon approval of at least approval of at least two-thirds of
66 2/3% of the outstanding shares of the outstanding shares of the Trust
the Trust or the affected series or or the affected series.
class.
Trustees may terminate the Trust, or Trustees may terminate the Trust or
any series or class, without series without shareholder approval
shareholder approval by written by written notice to the
notice to shareholders. shareholders.
</Table>
15
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
MERGER OR CONSOLIDATION TRUST: The Declaration of Trust provides Shareholders have no express right
that a consolidation, merger or under the Declaration of Trust to
transfer may be authorized by vote of vote on mergers or consolidations.
a majority of the Trustees then 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.
TRUSTEE LIABILITY: No Trustee, officer, employee or Trustees are not personally liable
agent of the Trust shall be subject for claims against the Trust or for
to any liability whatsoever to any any neglect or wrongdoing of any
person in connection with Trust officer, agent, employee, investment
property or the affairs of the Trust, adviser, or principal underwriter of
and no Trustee shall be responsible the Trust.
or liable in any event for any Each Trustee is not responsible for
neglect or wrong-doing of any the act or omission of any other
officer, agent, employee, manager or Trustee and may be liable only by
principal underwriter of the Trust or reason of willful misfeasance, bad
for the act or omission of any other faith, gross negligence or reckless
Trustee. disregard of the duties involved in
the conduct of his office.
</Table>
16
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
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.
</Table>
17
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
TRUSTEE INDEMNIFICATION: The By-Laws state that the Trust will The Declaration of Trust states that
indemnify each of its Trustees and the Trust will indemnify each of its
officers who are not employees or Trustees and officers against all
officers of any investment adviser to liabilities and expenses, including
the Trust or any affiliated person amounts paid in satisfaction of
thereof and may indemnify each of its judgments, in compromise, as fines
officers who are employees or and penalties, and as counsel fees,
officers of any investment adviser to reasonably incurred by such person
the Trust or any affiliated person while in office or thereafter, by
thereof against all liabilities and reason of the indemnified person's
expenses, including amounts paid in service as a Trustee or officer. The
satisfaction of judgments, in Trust will not indemnify its Trustees
compromise, as fines and penalties, and officers against any liability to
and as counsel fees, reasonably the Trust or to its shareholders to
incurred by such person while in which he or she would otherwise be
office or thereafter, by reason of subject by reason of willful
the indemnified person's service as a misfeasance, bad faith, gross
Trustee or officer. The Trust will negligence or reckless disregard of
not indemnify its Trustees and the duties involved in the conduct of
officers against any liability to the such person's office.
Trust or to its shareholders to which
he or she would otherwise be subject Under the Declaration of Trust, in
by reason of willful misfeasance, bad the absence of a final decision on
faith, gross negligence or reckless the merits by an adjudicating body
disregard of the duties involved in that such person is liable by reason
the conduct of his office. of willful misfeasance, bad faith,
gross negligence or reckless
Under the By-Laws, in the absence of disregard of the duties involved in
a final decision on the merits by an the conduct of their office,
adjudicating body that such person indemnification will be provided if
has not acted in good faith in the (a) approved as in the best interests
reasonable belief that such person's of the Trust, after notice that it
action was in the best interests of involves such indemnification, by at
the Trust or is liable to the Trust least a majority of the disinterested
or its Shareholders by reason of Trustees acting on the matter
willful misfeasance, bad faith, gross (provided that a majority of the
disinterested Trustees then in office
act on
</Table>
18
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
negligence or reckless disregard of the matter) upon a determination,
the duties involved in the conduct of based upon a review of readily
his or her office, indemnification available facts, that such per son is
will be provided if (a) approved, not liable to the Trust or its
after notice that it involves such shareholders by reason of willful
indemnification, by at least a misfeasance, bad faith, gross
majority of the disinterested negligence or reckless disregard of
Trustees acting on the matter the duties involved in the conduct of
(provided that a majority of the his or her office or (b) there has
disinterested Trustees then in office been obtained an opinion in writing
act on the matter) upon a of independent legal counsel to the
determination, based upon a review of effect that such indemnification
readily available facts, that such would not protect such person against
person has acted in good faith in the any liability to the Trust to which
reasonable belief that such person's such person would otherwise be
action was in the best interests of subject by reason of willful
the Trust and is not liable to the misfeasance, bad faith, gross
Trust or its shareholders by reason negligence or reckless disregard of
of willful misfeasance, bad faith, the duties involved in the conduct of
gross negligence or reckless his or her office.
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 misfeasance, bad
faith, gross negligence or reckless
disregard of the duties involved in
the conduct of his or her office.
</Table>
19
<Table>
<Caption>
THE ACQUIRING TRUST THE FUND
------------------------------------- -------------------------------------
LEGAL EXPENSES: The By-Laws state that legal expenses The Declaration of Trust states that
shall be paid from time to time by legal expenses shall be paid from
the Trust in advance of the final time to time by the Trust in advance
disposition of any such proceeding if of the final disposition of any such
the Trust receives a written proceeding if the Trust receives a
undertaking by the indemnified person written undertaking by the
to reimburse the Trust in the event indemnified person to reimburse the
it is subsequently determined that Trust in the event it is subsequently
the indemnified person is not determined that the indemnified
entitled to such indemnification and person is not entitled to such
(a) the indemnified person provides indemnification and (a) the
security for his undertaking, or (b) indemnified person provides security
the Trust is insured against losses for his undertaking, or (b) the Trust
arising by reason of any lawful is insured against losses arising by
advances, or (c) a majority of the reason of any lawful advances, or (c)
disinterested, non-party Trustees or a majority of the disinterested, non-
an independent legal counsel, as party Trustees or an independent
expressed in a written opinion, legal counsel, as expressed in a
determines that there is reason to written opinion, determines that
believe that the indemnified person there is reason to believe that the
ultimately will be found entitled to indemnified person ultimately will be
indemnification. found entitled to indemnification.
</Table>
20
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;
21
(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 not to forward to the Board or a Trustee
any letter that does not relate to the business of the Fund.
22
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, 2005, the Fund held 7 meetings (5 regular joint
Board meetings and 2 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 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,
23
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 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
24
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 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
25
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.
<Table>
<Caption>
NUMBER OF
MEETINGS
FOR FISCAL
YEAR ENDED
AUGUST 31, 2005
---------------
Audit Committee 7
Governance Committee 6
Advisory Fees & Expenses Committee 9
Compliance Committee 4
</Table>
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 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
26
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 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.
27
FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
The table in Appendix E1 sets forth the aggregate fees billed by the independent
registered public accountant 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.
Effective March 1, 2004, the Fund engaged new independent registered public
accountants. Unless otherwise noted, fees disclosed represent fees paid or
accrued to the current and predecessor principal accountants while each was
engaged by the Fund.
All of the audit fees, audit-related fees, tax fees and other fees billed by the
independent registered public accountant for services provided to the Fund
during its most recent fiscal year were pre-approved by the Audit Committee.
The amounts billed by the independent registered public accountant for the
fiscal years ended August 31, 2005 and August 31, 2004 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
$93,500 and $95,000, respectively.
The table in Appendix E2 sets forth the aggregate fees billed by the independent
registered public accountant 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 the independent
registered public accountant.
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.
28
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 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.G. 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
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."
29
The 1940 Act requires the Fund to state the extent to which it may borrow money.
Under Section 18(f)(1) of the 1940 Act, an open-end investment company may
borrow from banks, for any purpose, up to 33 1/3% of its total assets (including
the amount borrowed).
The Trustees recommend that the Fund amend its policy so that it will allow the
Fund to 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.
The proposed amended fundamental investment restriction is as follows:
"The fund may not. . . [b]orrow money . . . 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 RESTRICTION WITH RESPECT TO ISSUING
SENIOR SECURITIES
The Fund 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 policy with regard to the issuance
of 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).
The Trustees recommend that the Fund amend its policy so as to permit the Fund
to issue senior securities 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 expenses of obtaining shareholder approval
to change the restriction. In addition, the proposed
30
changes will reduce administrative and compliance burdens by simplifying and
making uniform applicable Columbia Funds' fundamental investment restrictions
with respect to issuing senior securities.
The proposed amended fundamental investment restriction is as follows:
"The fund may not ... [i]ssue senior securities except to the extent
permitted by the 1940 Act, the rules and regulations thereunder and any
applicable exemptive relief."
2.C. 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
an open-end investment company 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 Fund, in the
future, in achieving its investment objective and responding to changes in
applicable law or regulation. The proposed
31
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.
2.D. 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.
32
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.E. 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 open-end investment companies, 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
33
shall not limit the fund's ability to invest in securities issued by other
registered investment companies."
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.F. 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
34
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.
2.G. 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.
A 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
35
underlying security by the premium paid for the put option and by transaction
costs.
A 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.
A fund's successful use of options strategies depends on the ability of its
advisor 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 a 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.G. Approval of each of Proposals 2.A. through 2.G. 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 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.G. 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.G.
36
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 Management Distributors,
Inc. ("CMD," formerly named Columbia Funds Distributor, Inc.), located at One
Financial Center, Boston, MA 02111, is the Fund's distributor. Columbia
Management is a wholly owned subsidiary of Columbia Management Group, LLC
("CMG"), which is a wholly owned subsidiary of Bank of America Corporation. CMD
is an indirectly owned subsidiary of CMG. Prior to June 15, 2005, CMG was a
corporation. Effective June 15, 2005, CMG converted to a limited liability
company. 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 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,
37
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 transferred to the Federal
District Court in Maryland and consolidated in a multi-district proceeding (the
"MDL").(1) The MDL is ongoing.
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
- ------------------------------
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.
38
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 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.
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 transferred to the MDL.
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 September 8, 2005.
39
The Trustees and officers of the Fund, in the aggregate, owned less than 1% of
the Fund's outstanding shares as of September 8, 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.G. 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 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.
40
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.
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.
41
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
<Table>
<Caption>
YEAR FIRST ELECTED
OR APPOINTED TO
NAME/AGE AND ADDRESS POSITION WITH FUND OFFICE
- ------------------------ ------------------------- ------------------
Christopher L. Wilson Head of Mutual Funds 2004
(Age 48) since August 2004;
President of the Columbia
Funds since October 2004
<Caption>
NAME/AGE AND ADDRESS PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------ ------------------------------------------------------------
Christopher L. Wilson Head of Mutual Funds since August, 2004 and Senior Vice
(Age 48) President of the Advisor since January, 2005; President of
the Columbia Funds, Liberty Funds and Stein Roe Funds since
October, 2004; President and Chief Executive Officer of the
Nations Funds since January, 2005; President of the Galaxy
Funds since April, 2005; Director of Bank of America Global
Liquidity Funds, plc since May, 2005; Director of Bank of
America Capital Management (Ireland), Limited since May,
2005; Senior Vice President of BACAP Distributors LLC since
January, 2005; Director of FIM Funding, Inc. since January,
2005; Senior Vice President of Columbia Management
Distributors, 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).
</Table>
A-1
<Table>
<Caption>
YEAR FIRST ELECTED
OR APPOINTED TO
NAME/AGE AND ADDRESS POSITION WITH FUND OFFICE
- ------------------------ ------------------------- ------------------
J. Kevin Connaughton Treasurer 2000
(Age 41)
Mary Joan Hoene Senior Vice President and 2004
(Age 56) Chief Compliance Officer
40 West 57th Street since 2004
New York, NY 10019
Michael G. Clarke Chief Accounting Officer 2004
(Age 35) since October 2004
<Caption>
NAME/AGE AND ADDRESS PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------ ------------------------------------------------------------
J. Kevin Connaughton Treasurer of the Columbia Funds since October, 2003 and of
(Age 41) 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).
Mary Joan Hoene Senior Vice President and Chief Compliance Officer of the
(Age 56) Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star
40 West 57th Street Funds since August, 2004; Chief Compliance Officer of the
New York, NY 10019 Columbia Management Multi-Strategy Hedge Fund, LLC since
August, 2004; Chief Compliance Officer of the BACAP
Alternative Multi-Strategy Hedge Fund LLC since October,
2004 (formerly Partner, Carter, Ledyard & Milburn LLP from
January, 2001 to August, 2004; Counsel, 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 Officer of the Columbia Funds, Liberty
(Age 35) Funds, Stein Roe Funds and All-Star Funds since October,
2004 (formerly Controller of the Columbia Funds, Liberty
Funds, Stein Roe Funds and the All-Star Funds from May, 2004
to October, 2004); Assistant treasurer from June, 2002 to
May, 2004; Vice President, Product Strategy & Development of
the Liberty Funds Group from February, 2001 to June, 2002;
Assistant Treasurer of the Liberty Funds Group from
February, 2001 to June, 2002; Assistant Treasurer of the
Liberty Funds, Stein Roe Funds and the All-Star Funds from
August, 1999 to February, 2001; Audit Manager, Deloitte &
Touche LLP from May, 1997 to August, 1999.
</Table>
A-2
<Table>
<Caption>
YEAR FIRST ELECTED
OR APPOINTED TO
NAME/AGE AND ADDRESS POSITION WITH FUND OFFICE
- ------------------------ ------------------------- ------------------
Jeffrey R. Coleman Controller since October 2004
(Age 35) 2004
R. Scott Henderson Secretary since December 2004
(Age 45) 2004
<Caption>
NAME/AGE AND ADDRESS PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------ ------------------------------------------------------------
Jeffrey R. Coleman Controller of the Columbia Funds, Liberty Funds, Stein Roe
(Age 35) 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 of the Columbia Funds, Liberty Funds and the Stein
(Age 45) 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).
</Table>
A-3
APPENDIX B.1 -- TRUSTEES' COMPENSATION
For the calendar year ended December 31, 2004, the Trustees received the
following compensation for serving as Trustees:
<Table>
<Caption>
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
</Table>
(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-1
APPENDIX B.2 -- TRUSTEES' COMPENSATION
For the last fiscal year, the Trustees received from the Fund the following
compensation for serving as Trustees:
<Table>
<Caption>
AGGREGATE COMPENSATION FROM THE
FUND FOR THE FISCAL YEAR ENDED
TRUSTEE 8/31/05
- ------- -------------------------------
Douglas A. Hacker $522.00
Janet Langford Kelly 598.00
Richard W. Lowry 494.00
William E. Mayer 575.00
Charles R. Nelson 553.00
John J. Neuhauser 515.00
Patrick J. Simpson(a) 522.00
Thomas E. Stitzel 554.00
Thomas C. Theobald(b) 925.00
Anne-Lee Verville(c) 584.00
Richard L. Woolworth 477.00
</Table>
(a) During the fiscal year ended August 31, 2005, Mr. Simpson deferred $522.00
of his compensation from the Fund.
(b) During the fiscal year ended August 31, 2005, Mr. Theobald deferred $634.00
of his compensation from the Fund.
(c) During the fiscal year ended August 31, 2005, Ms. Verville deferred $59.00
of her compensation from the Fund.
B-2
APPENDIX C -- TRUSTEE SHARE OWNERSHIP
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES OWNED IN
DOLLAR RANGE OF ALL FUNDS OVERSEEN BY
EQUITY SECURITIES OWNED TRUSTEE/DIRECTOR
NAME IN THE FUND IN THE FUND COMPLEX
- ----------------------- ----------------------- ---------------------------
Douglas A. Hacker $0 Over $100,000
Janet Langford Kelly $0 Over $100,000
Richard W. Lowry $50,001-$100,000 Over $100,000
William E. Mayer $0 $50,001-$100,000
Charles R. Nelson $0 Over $100,000
John J. Neuhauser $0 Over $100,000
Patrick J. Simpson $0 Over $100,000
Thomas E. Stitzel $0 Over $100,000
Thomas C. Theobald $0 Over $100,000
Anne-Lee Verville $0 Over $100,000
Richard W. Woolworth $0 Over $100,000
</Table>
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
<Table>
<Caption>
AUDIT AUDIT-RELATED TAX ALL OTHER
FYE FEES FEES FEES FEES TOTAL
- --------------------------------------------------------------------------------------
8/31/05 $21,758 $3,774 $2,500 $0 $28,032
8/31/04 $19,780 $3,500 $2,512 $0 $25,792
</Table>
E-1
APPENDIX E2
<Table>
<Caption>
NON-AUDIT
FYE SERVICES
- ------------------------------------------------------------------------
8/31/05 $ 99,774
8/31/04 $101,012
</Table>
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:
<Table>
<Caption>
NUMBER OF SHARES
OUTSTANDING AND ENTITLED TO
CLASS VOTE
- -------------------------------------------------------------------------------------
A 2,181,292.1210
B 526,033.9660
Z 348,393.0610
</Table>
F-1
APPENDIX G -- OWNERSHIP OF SHARES
<Table>
<Caption>
SHARE
CLASS REGISTRATION BALANCE PERCENT CLASS TOTAL
- ---------------------------------------------------------------------------------------
A Merrill Lynch Pierce Fenner & Smith 234,721.5240 10.76% 2,181,292.1210
4800 Deer Lake Dr E Fl 2
Jacksonville, FL 32246-6484
B Merrill Lynch Pierce Fenner & Smith 28,896.2540 5.49% 526,033.9660
4800 Deer Lake Dr E Fl 2
Jacksonville, FL 32246-6484
Z Bank of America NA 51,736.7810 14.85% 348,393.0610
411 N Akard St
Dallas, TX 75201-3307
Z NFS LLC FEBO 20,992.4550 6.03% 348,393.0610
Albert Safer
1874 McCarter Hwy
Newark, NJ 07104-4211
</Table>
G-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 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
1
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 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.
2
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. 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,
3
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 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
4
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, 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
5
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;
(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;
6
(i) The Acquired Fund meets the requirements of subchapter M of the
Code for treatment as a "regulated investment company" within the meaning
of Section 851 of the Code, and will continue meeting such requirements at
all times through the Closing Date. The Acquired Fund has not at any time
since its inception been liable for nor is now liable for any material
income or excise tax pursuant to Section 852 or 4982 of the Code. The
Acquired Fund has duly filed all federal, state, local and foreign tax
returns which are required to have been filed, and all taxes of the
Acquired Fund which are due and payable have been paid except for amounts
that alone or in the aggregate would not reasonably be expected to have a
material adverse effect. The Acquired Fund is in compliance in all material
respects with applicable regulations of the Internal Revenue Service
pertaining to the reporting of dividends and other distributions on and
redemptions of its capital stock and to withholding in respect of dividends
and other distributions to shareholders, and is 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
7
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 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;
8
(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.
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;
9
(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 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 may be limited by bankruptcy, insolvency,
10
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 Proxy Statement for such
meeting, to be distributed to the Acquired Fund
11
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 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.
12
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 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;
13
(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 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
14
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 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
15
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.
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.
16
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 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 therefore;
17
(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 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.
18
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;
(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
19
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.
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.]
20
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:
21
EXHIBIT A
<Table>
<Caption>
ACQUIRED FUND AUTHORIZED CAPITAL
- -------------------------------------------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
</Table>
* 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
and Vincent P. Pietropaolo, 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: HTTPS://VOTE.PROXY-DIRECT.COM
VOTE VIA THE TELEPHONE: 1-866-837-1888
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.G. 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