<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3009
---------------------------------------------
Columbia Funds Trust II
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
----------------------------
Date of fiscal year end: March 31, 2004
--------------------------
Date of reporting period: March 31, 2004
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
[GRAPHIC]
COLUMBIA MONEY
MARKET FUND
ANNUAL REPORT
MARCH 31, 2004
[COLUMBIAFUNDS(R) LOGO]
A MEMBER OF COLUMBIA MANAGEMENT GROUP
<Page>
TABLE OF CONTENTS
<Table>
Fund Profile 1
Economic Update 2
Portfolio Manager's Report 3
Financial Statements 4
Investment Portfolio 5
Statement of Assets and Liabilities 10
Statement of Operations 11
Statements of Changes in Net Assets 12
Notes to Financial Statements 13
Financial Highlights 18
Report of Independent Registered Public Accounting Firm 22
Unaudited Information 23
Trustees 24
Officers 26
Important Information About This Report 27
</Table>
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
NOT FDIC MAY LOSE VALUE
INSURED -----------------
NO BANK GUARANTEE
TO OUR FELLOW SHAREHOLDERS
COLUMBIA MONEY MARKET FUND
DEAR SHAREHOLDER:
We are pleased to let you know that FleetBoston Financial Corporation and Bank
of America Corporation have merged, effective April 1, 2004. As a result of the
merger, Columbia Management Group became part of the Bank of America family of
companies. Looking ahead, we believe this merger will be a real benefit to our
shareholders. Preserving and leveraging our strengths, the combined organization
intends to deliver additional research and management capabilities, as well as
new products to you.
There are no immediate changes planned for fund names or customer service
contacts. As always, we will provide you with updates at www.columbiafunds.com
or through other communications, such as newsletters and shareholder reports.
As you might know, on March 15, 2004, FleetBoston Financial announced an
agreement in principle with the staff of the Securities and Exchange Commission
("SEC") and the New York Attorney General to settle charges involving market
timing in Columbia Management mutual funds. (Bank of America came to a similar
settlement in principle at the same time.) The agreement requires the final
approval of the SEC. This action reflects our full cooperation with the
investigation and our strong wish to put this regrettable situation behind us.
Columbia Management has taken and will continue to take steps to strengthen
policies, procedures and oversight to curb frequent trading of Columbia fund
shares.
We want you to know that all of the members of your fund's Board of Trustees are
independent of the fund's advisor and its affiliates. In addition, the board has
been energetic over the past year in strengthening its capacity to oversee the
Columbia funds. Recently, the Board of Trustees:
- - APPOINTED A CHIEF COMPLIANCE OFFICER OF THE COLUMBIA FUNDS, WHO REPORTS
DIRECTLY TO EACH FUND'S AUDIT COMMITTEE. TRUSTEES WERE ALSO ASSIGNED TO FOUR
SEPARATE INVESTMENT OVERSIGHT COMMITTEES, EACH DEDICATED TO MONITORING
PERFORMANCE OF INDIVIDUAL FUNDS.
- - VOTED TO DOUBLE THE REQUIRED INVESTMENT BY EACH TRUSTEE IN THE COLUMBIA FUNDS
-- TO FURTHER ALIGN THE INTERESTS OF THE TRUSTEES WITH THOSE OF OUR FUND
SHAREHOLDERS. AT THE SAME TIME, NEW POLICIES WERE INSTITUTED REQUIRING ALL
INVESTMENT PERSONNEL AND TRUSTEES TO HOLD THEIR COLUMBIA FUND SHARES FOR A
MINIMUM OF ONE YEAR (UNLESS EXTRAORDINARY CIRCUMSTANCES WARRANT AN EXCEPTION
TO BE GRANTED BY SENIOR EXECUTIVES OF THE ADVISOR FOR INVESTMENT PERSONNEL
AND BY A DESIGNATED COMMITTEE FOR THE BOARD).
Both your fund's trustees and Columbia Management are committed to serving the
interests of our shareholders, and we will continue to work hard to help you
achieve your financial goals.
In the pages that follow, you'll find valuable information about the economic
environment during the period and the performance of your Columbia fund. These
discussions are followed by financial statements for your fund. We hope that you
will take time to read this report and discuss it with your financial advisor if
you have any questions.
As always, thank you for choosing Columbia funds. It is a privilege to play a
role in your financial future.
Sincerely,
/s/ Thomas C. Theobald /s/ J. Kevin Connaughton
Thomas C. Theobald J. Kevin Connaughton
Chairman, Board of Trustees President, Columbia Funds
J. Kevin Connaughton was named president of Columbia Funds on February 27, 2004.
<Page>
FUND PROFILE
COLUMBIA MONEY MARKET FUND
The information below gives you a snapshot of your fund at the end of the
reporting period. Your fund is actively managed and the composition of its
portfolio will change over time.
PORTFOLIO BREAKDOWN AS OF 03/31/04 (%)
<Table>
US government agency obligations 34.8
Corporate bonds 21.5
Commercial paper 17.5
Municipal bonds 17.0
Certificates of deposit 6.1
Bank notes 4.4
Short term obigation 0.0
</Table>
PORTFOLIO MATURITY AS OF 03/31/04 (%)
<Table>
1-4 days 6.1
5-14 days 35.2
15-29 days 23.4
30-59 days 11.2
More than 59 days 24.1
</Table>
Portfolio breakdown is calculated as a percentage of net assets. Portfolio
maturity is calculated as a percentage of total investments.
[SIDENOTE]
SUMMARY
- - FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 2004, THE FUND'S CLASS A SHARES
RETURNED 0.22% WITHOUT SALES CHARGE.
- - THE FUND'S RETURN WAS IN LINE WITH THE AVERAGE RETURN OF ITS PEER GROUP, THE
LIPPER MONEY MARKET FUNDS CATEGORY, WHICH WAS 0.26%.
<Table>
CLASS A SHARES 0.22%
LIPPER MONEY MARKET FUNDS CATEGORY 0.26%
</Table>
OBJECTIVE
Seeks maximum current income consistent with capital perservation and the
maintenance of liquidity.
TOTAL NET ASSETS
$574.8 million
1
<Page>
ECONOMIC UPDATE
COLUMBIA MONEY MARKET FUND
The US economy moved ahead at a strong but uneven pace during the nine-month
period that began July 1, 2003 and ended March 31, 2004. Annualized GDP for the
third quarter of 2003 was an impressive 8.2%. For the fourth quarter, the pace
of growth slowed to 4.1%, yet comfortably above the economy's long-term average
growth rate of 3.0%. GDP growth for first quarter of 2004 was 4.2%.
Although job growth was slow to catch on, the economy showed signs of
improvement on all fronts. Consumer spending rose as a sizeable package of tax
cuts, implemented in 2003, gave disposable income a boost. Low interest rates
fueled another round of mortgage refinancing late in the period, which further
enhanced household income. Early in 2004, consumer confidence slipped as the
labor market continued to cloud the outlook despite a pick-up in the number of
new jobs added in March. Nevertheless, housing and retail sales showed steady
gains throughout the period.
After two years of holding back, the business sector began to show signs of
improvement late in 2003. Industrial production registered steady gains.
Business spending on technology rose. And late in the period, spending on
capital equipment also picked up.
BONDS DELIVERED SOLID GAINS
Despite concerns that a stronger economy would translate into higher interest
rates--and lower bond prices--the US bond market continued to deliver
respectable gains during the nine-month period. However, July and August were
volatile months as the yield on the 10-year US Treasury bond spiked above 4.6%
on the heels of strong economic data, then dropped to 3.8% by the end of the
period.
High-yield bonds were the top performers in the fixed income markets, but their
performance slipped in the final quarter of the period. Treasury bonds, which
are more sensitive to changing interest rates, were the primary beneficiaries of
falling interest rates. The Merrill Lynch US High Yield, Cash Pay Index returned
10.94% for the nine-month period covered by this report, while the Lehman
Brothers Aggregate Bond Index gained 2.83%. Money market fund yields remained
below 1%, as the Federal Reserve Board kept short-term interest rates at their
historical lows.
US STOCKS HEADED HIGHER
The US stock market snapped a three-year losing streak in 2003. However, its
rate of return slowed in the final months of the period as mixed economic and
profit data and renewed fears about terrorism gave investors pause. The S&P 500
Index returned 17.09% for this nine-month period. Small company stocks
outperformed large company stocks, as evidenced by the 32.74% return of the
Russell 2000 Index, a measure of the performance of 2,000 small company stocks.
[SIDENOTE]
SUMMARY
FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 2004
- - A STRENGTHENING ECONOMY ACCOUNTED FOR CONTINUED STRONG GAINS FROM HIGH-YIELD
BONDS, AS EVIDENCED BY THE DOUBLE-DIGIT RETURN OF THE MERRILL LYNCH US HIGH
YIELD, CASH PAY INDEX. OVERALL, DECLINING INTEREST RATES AND THE FED'S
COMMITMENT TO HOLD THE LINE ON SHORT-TERM INTEREST RATES TRANSLATED INTO
RESPECTABLE RETURNS FOR THE LEHMAN BROTHERS AGGREGATE BOND INDEX.
<Table>
MERRILL LYNCH INDEX 10.94%
LEHMAN INDEX 2.83%
</Table>
- - THE US STOCK MARKET GAINED GROUND AS THE ECONOMY STRENGTHENED AND CORPORATE
PROFITS ROSE. SMALL CAP STOCKS LED THE WAY. THE S&P 500 INDEX RETURNED
17.09%. THE RUSSELL 2000 INDEX GAINED 32.74%.
<Table>
S&P 500 INDEX 17.09%
RUSSELL 2000 INDEX 32.74%
</Table>
The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that
tracks the performance of non-investment-grade corporate bonds.
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks fixed-rate, publicly placed, dollar-denominated, and non-convertible
investment grade debt issues.
The S&P 500 Index is an unmanaged index that tracks the performance of 500
widely held, large capitalization US stocks.
The Russell 2000 Index is an unmanaged index that tracks the performance of
2,000 small US companies based on total market capitalizations.
2
<Page>
PORTFOLIO MANAGER'S REPORT
COLUMBIA MONEY MARKET FUND
The Board of Trustees for Columbia Money Market Fund has approved the change of
the fund's fiscal year end from June 30 to March 31. As a result, this report
covers the nine-month period since the last annual report. The next report you
receive will be for the six-month period ending September 30, 2004. For the
nine-month period ended March 31, 2004, Columbia Money Market Fund class A
shares returned 0.22%. The fund's return was slightly lower than the average
return of its peer group, the Lipper Money Market Funds Category, which returned
0.26% for the same period.(1)
OPERATING IN A LOW YIELD ENVIRONMENT
The weighted average maturity of our peer group was longer than that of the
fund, which may have contributed to the slight yield advantage for the peer
group during the period. Yields on short-term fixed-income obligations were held
back over the past year, as short-term interest rates remained at historical
lows. These historically low rates combined with mixed expectations for the
Fed's next move made for a challenging period for managing the fund. The fund's
weighted average maturity at the end of the period was approximately 50 days.
MAINTAINED EMPHASIS ON FLOATING RATE SECURITIES
The fund invested about 35% of its assets in US government agency debt. These
securities, both floating and fixed rate, enabled the fund to pick up some
additional yield without taking on any significant credit risk at the long end
of our maturity spectrum. Additionally, more than half of the fund's assets were
invested in floating rate securities. We continued to add to these positions
during the period. Yields on floating-rate notes are generally higher than those
of comparable fixed-rate securities. The yields on the floating rate securities
owned by the fund are pegged to the London Interbank Offering Rate (LIBOR), a
feature that ensures that the interest rates earned are market rates.
Although we cannot predict when the Federal Reserve Board will revise its policy
and raise short-term interest rates, we believe our emphasis on floating-rate
notes will position the fund well in anticipation of higher rates.
[PHOTO OF KAREN M. ARNEIL]
Karen Arneil, CFA, has managed Columbia Money Market Fund since July 2002 and
has been with the advisor and its predecessors since 1996.
/s/ Karen M. Arneil
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
[SIDENOTE]
DISTRIBUTIONS DECLARED PER SHARE 07/01/03 - 03/31/04 ($)
<Table>
Class A 0.002
Class B 0.001
Class C 0.001
Class Z 0.002
</Table>
7-DAY YIELDS ON 03/31/04 (%)
<Table>
Class A 0.46
Class B 0.10
Class C 0.10
Class Z 0.46
</Table>
30-day yields on 03/31/04 (%)
<Table>
Class A 0.45
Class B 0.10
Class C 0.10
Class Z 0.45
</Table>
The 30-day SEC yields reflect the portfolios earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE INVESTMENT
RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THE SHARES
MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiafunds.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
3
<Page>
FINANCIAL STATEMENTS
MARCH 31, 2004 COLUMBIA MONEY MARKET FUND
A GUIDE TO UNDERSTANDING YOUR FUND'S FINANCIAL STATEMENTS
INVESTMENT PORTFOLIO
The investment portfolio details all of the fund's holdings and their market
value as of the last day of the reporting period. Portfolio holdings are
organized by type of asset, industry, country or geographic region (if
applicable) to demonstrate areas of concentration and diversification.
STATEMENT OF ASSETS AND LIABILITIES
This statement details the fund's assets, liabilities, net assets and share
price for each share class as of the last day of the reporting period. Net
assets are calculated by subtracting all the fund's liabilities (including any
unpaid expenses) from the total of the fund's investment and non-investment
assets. The share price for each class is calculated by dividing net assets for
that class by the number of shares outstanding in that class as of the last day
of the reporting period.
STATEMENT OF OPERATIONS
This statement details income earned by the fund and the expenses accrued by the
fund during the reporting period. The Statement of Operations also shows any net
gain or loss the fund realized on the sales of its holdings during the period,
as well as any unrealized gains or losses recognized over the period. The total
of these results represents the fund's net increase or decrease in net assets
from operations.
STATEMENT OF CHANGES IN NET ASSETS
This statement demonstrates how the fund's net assets were affected by its
operating results, distributions to shareholders and shareholder transactions
(e.g., subscriptions, redemptions and dividend reinvestments) during the
reporting period. The Statement of Changes in Net Assets also details changes in
the number of shares outstanding.
NOTES TO FINANCIAL STATEMENTS
These notes disclose the organizational background of the fund, its significant
accounting policies (including those surrounding security valuation, income
recognition and distributions to shareholders), federal tax information, fees
and compensation paid to affiliates and significant risks and contingencies.
FINANCIAL HIGHLIGHTS
The financial highlights demonstrate how the fund's net asset value per share
was affected by the fund's operating results. The financial highlights table
also discloses the classes' performance and certain key ratios (e.g., class
expenses and net investment income as a percentage of average net assets).
4
<Page>
INVESTMENT PORTFOLIO
MARCH 31, 2004 COLUMBIA MONEY MARKET FUND
<Table>
<Caption>
PAR ($) VALUE ($)
- -----------------------------------------------------------------------------------------------------------------------------
BANK NOTES - 4.4%
Bank One NA,
1.170% 04/13/04 (a) 25,000,000 25,000,701
Total Bank Notes
(cost of $25,000,701) 25,000,701
CERTIFICATES OF DEPOSIT - 6.1%
Canadian Imperial
Bank of Commerce,
1.140% 03/15/08 (a) 20,000,000 20,000,000
Rabobank Nederland NY,
1.330% 04/19/04 15,000,000 15,000,000
Total Certificates of Deposit
(cost of $35,000,000) 35,000,000
COMMERCIAL PAPER - 17.5%
Falcon Asset Securitization Corp.,
1.020% 04/05/04 (b) 10,000,000 9,998,867
Goldman Sachs Group LP,
1.170% 05/28/04 15,000,000 14,972,213
Govco, Inc.,
1.030% 05/24/04 (b) 10,000,000 9,984,836
Greenwich Capital Holdings Funding,
1.040% 05/11/04 15,000,000 14,982,667
Iowa Student Loan,
(SPA: Lloyds TSB Bank PLC)
1.040% 04/27/04 10,010,000 10,002,481
Long Island College Hospital NY,
(LOC: Landesbank Hessen-Thurigen GZ)
1.050% 04/08/04 5,700,000 5,698,836
UBS Financial Delaware LLC,
1.060% 04/01/04 25,000,000 25,000,000
Windmill Funding Corp.,
1.020% 04/20/04 (b) 10,000,000 9,994,617
Total Commercial Paper
(cost of $100,634,517) 100,634,517
CORPORATE BONDS - 21.5%
Abbott Laboratories,
5.125% 07/01/04 2,300,000 2,321,643
American Express Credit Corp.:
1.150% 03/05/08 (a) 13,000,000 13,000,000
1.110% 07/19/04 (a)(c) 12,000,000 12,000,000
American Honda Finance Corp.:
1.270% 07/15/04 (a)(c) 12,000,000 12,006,671
1.300% 10/07/04 (a)(c) 5,000,000 5,004,929
Autumn House at Powder Mill, Inc.,
(LOC: SunTrust Bank)
1.120% 02/01/28 (a) 3,860,000 3,860,000
Best One Tire & Services LLC,
(LOC: Fifth Third Bank)
1.120% 02/01/18 (a) 7,095,000 7,095,000
Chargin Valley Partners LLC,
(LOC: Fifth Third Bank)
1.120% 11/01/13 (a) 1,180,000 1,180,000
</Table>
See notes to investment portfolio.
5
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -----------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - (CONTINUED)
Congregation Mkor Shalom,
(LOC: Fifth Third Bank)
1.160% 06/01/23 (a) 2,320,000 2,320,000
Connecticut Water Co.,
(LOC: Royal Bank of Scotland)
1.100% 01/04/29 (a) 4,500,000 4,500,000
Crescent Paper Tube Co.,
(LOC: Fifth Third Bank)
1.120% 08/01/22 (a) 2,240,000 2,240,000
Crestmont Nursing Home,
(LOC: Fifth Third Bank)
1.070% 03/01/24 (a) 1,000,000 1,000,000
Crestmont Realty Corp.,
(LOC: Fifth Third Bank)
1.120% 11/01/22 (a) 4,185,000 4,185,000
Dominican Sisters,
(LOC: Fifth Third Bank)
1.120% 10/01/23 (a) 3,450,000 3,450,000
General Electric Capital Corp.:
1.170% 09/16/04 (a) 13,000,000 13,007,459
7.250% 05/03/04 9,390,000 9,438,407
Michigan Equity Group,
(LOC: Fifth Third Bank)
1.120% 09/01/51 (a) 2,080,000 2,080,000
Morgan Stanley Dean Witter & Co.,
1.100% 12/29/04 (a) 12,000,000 12,000,000
PCP Investors LLC,
(LOC: Wells Fargo Bank)
1.150% 01/01/24 (a) 2,000,000 2,000,000
Precision Radiotherapy LLC,
(LOC: Fifth Third Bank)
1.120% 08/01/18 (a) 2,430,000 2,430,000
PS Greetings, Inc.,
(LOC: LaSalle Bank)
1.210% 12/01/33 (a) 1,080,000 1,080,000
Shephard Capital LLC,
(LOC: Wachovia Bank)
1.210% 03/15/49 (a) 2,070,000 2,070,000
Skeletal Properties LLC,
(LOC: Fifth Third Bank)
1.120% 11/01/14 (a) 2,000,000 2,000,000
Titan Holdings Group LLC,
(LOC: Fifth Third Bank)
1.120% 05/01/12 (a) 1,000,000 1,000,000
Young Men's Christian Association,
(LOC: Wachovia Bank)
1.090% 02/01/24 (a) 2,490,000 2,490,000
Total Corporate Bonds
(cost of $123,759,109) 123,759,109
MUNICIPAL BONDS - 17.0%
Abag Finance Authority for Nonprofit Corps.,
California Multifamily Revenue:
Bachenheimer Building Apartments,
(Credit Support: FNMA)
1.080% 07/15/32 (a) 2,100,000 2,100,000
</Table>
See notes to investment portfolio.
6
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - (CONTINUED)
Darling Florist Building Apartments,
(Credit Support: FNMA)
1.080% 07/15/35 (a) 1,500,000 1,500,000
Fine Arts Building Apartments,
(Credit Support: FNMA)
1.080% 07/15/35 (a) 3,800,000 3,800,000
Breckinridge County KY Lease Program
Revenue, Kentucky Association of
Counties Leasing Trust,
(LOC: Bank One N.A.)
1.120% 02/01/32 (a) 3,600,000 3,600,000
California Statewide Communities
Development Authority, Vineyard
Creek Apartments, (LOC: FHLB)
1.100% 12/01/36 (a) 3,700,000 3,700,000
City of Baltimore MD,
(FSA INS)/(SPA: Bank of America)
1.100% 10/15/22 (a) 4,000,000 4,000,000
First Pentecostal Church, Inc.,
Noblesville, IN,
(LOC: Bank One N.A.)
1.110% 11/01/26 (a) 1,660,000 1,660,000
Iowa Finance Authority, Health Care
Facilities Revenue, St. Luke's Health
System, (LOC: GE Capital Corp.)
1.080% 03/01/18 (a) 2,850,000 2,850,000
Jackson County MI Economic
Development Corp, Vista Grande Villa,
(LOC: LaSalle Bank)
1.100% 11/01/31 (a) 10,100,000 10,100,000
Michigan State University Revenue,
(SPA: Landesbank Hessen-Thurigen GZ)
1.090% 02/15/33 (a) 9,850,000 9,850,000
Missouri Development Finance
Board, Cultural Facilities Revenue,
Nelson Gallery Foundation,
(Credit Support: MBIA INS)
(SPA: JP Morgan Chase Bank)
1.120% 12/01/31 (a) 11,500,000 11,500,000
New Jersey Economic Development
Authority State Pension Funding,
(FSA INS)/(SPA: Dexia Credit Local de France)
1.090% 02/15/29 (a) 19,000,000 19,000,000
San Antonio Educational Facilities
Revenue Corp., St. Anthony Catholic High
School, (LOC: Bank One N.A.)
1.140% 12/01/23 (a) 1,070,000 1,070,000
Texas State Public Finance Authority,
1.080% 06/01/04 23,000,000 23,000,000
Total Municipal Bonds
(cost of $97,730,000) 97,730,000
</Table>
See notes to investment portfolio.
7
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -----------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 34.8%
Federal Home Loan Bank:
1.010% 04/25/05 (a) 7,000,000 6,996,998
1.040% 04/19/05 (a) 15,000,000 14,995,300
1.350% 04/15/05 6,000,000 6,000,000
1.350% 04/29/05 7,000,000 7,000,000
3.375% 06/15/04 20,000,000 20,091,728
4.875% 04/16/04 10,000,000 10,014,404
Federal Home Loan Mortgage Corp.:
1.040% 05/20/04 (d) 4,800,000 4,793,205
1.040% 05/28/04 (d) 3,000,000 2,995,060
1.085% 11/07/05 (a) 8,000,000 8,000,000
1.110% 10/07/05 (a) 30,000,000 30,000,000
1.145% 04/02/04 (d) 7,655,000 7,654,757
1.180% 06/21/04 (d) 8,700,000 8,676,901
1.270% 07/23/04 (d) 7,712,000 7,681,257
1.290% 08/12/04 (d) 15,000,000 14,928,512
3.000% 07/15/04 10,000,000 10,054,245
Federal National Mortgage Association:
1.040% 03/23/05 (d) 25,000,000 24,995,098
1.610% 12/30/04 15,000,000 15,000,000
Total U.S. Government
Agency Obligations
(cost of $199,877,465) 199,877,465
SHORT-TERM OBLIGATION - 0.0%
Repurchase agreement with State Street Bank
Trust & Co., dated 03/31/04, due 04/01/04 at
1.010%, collateralized by a U.S. Government
Agency Obligation maturing 06/17/05, market
value $145,620 (repurchase proceeds $138,004)
(cost of $138,000) 138,000 138,000
TOTAL INVESTMENTS - 101.3%
(COST OF $582,139,792) (e) 582,139,792
OTHER ASSETS & LIABILITIES, NET - (1.3)% (7,335,239)
NET ASSETS - 100.0% 574,804,553
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Floating rate note whose interest rate is reset periodically based on an
index. The rate shown reflects the rate in effect at March 31, 2004.
(b) Represents private placement securities exempt from registration by Section
4(2) of the Securities Act of 1933. These securities generally are issued
to investors who agree that they are purchasing the securities for
investments and not for public distribution. Any resale by the Fund must be
in an exempt transaction, normally to other institutional investors. At
March 31, 2004, the aggregate amortized cost of the Fund's private
placement securities were $29,978,320 which represents 5.2% of net assets.
None of these securities were deemed illiquid.
See notes to financial statements.
8
<Page>
(c) This security is exempt from registration under Rule 144A of the Securities
Act of 1933 and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At March 31, 2003, the value of
these securities amounted to $29,011,600 which represents 5.0% of net
assets.
(d) These issuers show the rate of discount at time of purchase.
(e) Cost for both financial statement and federal income tax purposes is the
same.
<Table>
<Caption>
ACRONYM NAME
Abag Association of Bay Area Government
FHLB Federal Home Loan Bank
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
INS Insured
LOC Letter of Credit/Line of Credit
MBIA Municipal Bond Insurance Association
SPA Stand-by Purchase Agreement
</Table>
See notes to financial statements.
9
<Page>
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 COLUMBIA MONEY MARKET FUND
<Table>
<Caption>
($)
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS Investments, at cost 582,139,792
------------
Investments, at value 582,139,792
Cash 11,532
Receivable for:
Fund shares sold 549,588
Interest 1,503,301
Expense reimbursement due from Investment Advisor 56,345
Deferred Trustees' compensation plan 20,919
------------
Total Assets 584,281,477
LIABILITIES Payable for:
Investments purchased 7,000,000
Fund shares repurchased 1,830,775
Distributions 5,947
Investment advisory fee 116,174
Administration fee 121,327
Transfer agent fee 211,013
Pricing and bookkeeping fees 21,466
Trustees' fees 853
Custody fee 1,508
Distribution and service fees 75,676
Deferred Trustees' fees 20,919
Other liabilities 71,266
------------
Total Liabilities 9,476,924
NET ASSETS 574,804,553
COMPOSITION OF NET ASSETS Paid-in capital 574,841,746
Overdistributed net investment income (30,652)
Accumulated net realized loss (6,541)
NET ASSETS 574,804,553
CLASS A Net assets 228,749,537
Shares outstanding 228,802,720
Net asset value and offering price per share 1.00(a)
CLASS B Net assets 82,338,097
Shares outstanding 82,370,247
Net asset value and offering price per share 1.00(a)
CLASS C Net assets 15,392,864
Shares outstanding 15,397,862
Net asset value and offering price per share 1.00(a)
CLASS Z Net assets 248,324,055
Shares outstanding 248,576,032
Net asset value and offering price per share 1.00
</Table>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
10
<Page>
STATEMENT OF OPERATIONS
MARCH 31, 2004 COLUMBIA MONEY MARKET FUND
<Table>
<Caption>
FOR THE PERIOD FOR THE YEAR
ENDED MARCH 31, ENDED JUNE 30,
2004(a)($) 2003($)
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME Interest 5,071,862 10,356,589
EXPENSES Expenses allocated from Portfolio -- 62,591
Investment advisory fee 1,089,504 1,604,484
Administration fee 1,072,804 1,618,442
Distribution fee:
Class B 552,648 935,260
Class C 86,813 149,072
Service fee:
Class B 184,216 311,753
Class C 28,955 49,713
Transfer agent fee 1,516,303 2,361,034
Pricing and bookkeeping fees 112,053 248,577
Trustees' fees 20,155 24,509
Custody fee 15,120 16,583
Merger expense -- 39,150
Other expenses 228,050 232,322
---------------------------------
Total Expenses 4,906,621 7,653,490
Fees and expenses waived by Investment Advisor (173,055) --
Distribution and service fees reimbursed
by Investment
Advisor:
Class B (601,801) (700,271)
Class C (25,058) (12,527)
Fees waived by Distributor - Class C (69,440) (119,245)
Custody earnings credit (1,009) (3,126)
---------------------------------
Net Expenses 4,036,258 6,818,321
---------------------------------
Net Investment Income 1,035,604 3,538,268
NET REALIZED GAIN (LOSS) ON Net realized loss on investments (149) --
INVESTMENTS ---------------------------------
Net Increase in Net Assets from Operations 1,035,455 3,538,268
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
See notes to financial statements.
11
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
MARCH 31, 2004 COLUMBIA MONEY MARKET FUND
<Table>
<Caption>
PERIOD ENDED YEAR ENDED YEAR ENDED
MARCH 31, JUNE 30, JUNE 30,
INCREASE (DECREASE) IN NET ASSETS: 2004(a)($) 2003(b)($) 2002 ($)
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS Net investment income 1,035,604 3,538,268 3,766,522
Net realized loss on investments (149) -- --
---------------------------------------------------
Net Increase from Operations 1,035,455 3,538,268 3,766,522
DISTRIBUTIONS DECLARED TO From net investment income:
SHAREHOLDERS Class A (441,305) (1,493,624) (2,973,519)
Class B (73,946) (208,504) (644,928)
Class C (12,956) (55,169) (156,549)
Class Z (588,244) (1,763,556) --
---------------------------------------------------
Total Distributions Declared
to Shareholders (1,116,451) (3,520,853) (3,774,996)
SHARE TRANSACTIONS Class A:
Subscriptions 271,755,492 910,150,826 863,868,895
Distributions reinvested 412,583 1,302,088 2,488,176
Redemptions (309,985,945) (855,426,770) (845,560,093)
---------------------------------------------------
Net Increase (Decrease) (37,817,870) 56,026,144 20,796,978
Class B:
Subscriptions 54,247,449 155,689,122 133,987,302
Distributions reinvested 64,742 158,062 555,248
Redemptions (82,734,676) (141,953,170) (118,589,391)
---------------------------------------------------
Net Increase (Decrease) (28,422,485) 13,894,014 15,953,159
Class C:
Subscriptions 33,670,794 120,063,340 106,686,947
Distributions reinvested 10,662 45,279 128,677
Redemptions (35,609,703) (123,559,631) (96,052,718)
---------------------------------------------------
Net Increase (Decrease) (1,928,247) (3,451,012) 10,762,906
Class Z:
Subscriptions 167,190,771 262,511,827 --
Proceeds received in
connection with merger -- 338,355,029 --
Distributions reinvested 565,585 1,710,449 --
Redemptions (208,829,522) (313,151,895) --
---------------------------------------------------
Net Increase (Decrease) (41,073,166) 289,425,410 --
Net Increase (Decrease) from
Share Transactions (109,241,768) 355,894,556 47,513,043
---------------------------------------------------
Total Increase (Decrease)
in Net Assets (109,322,764) 355,911,971 47,504,569
NET ASSETS Beginning of period 684,127,317 328,215,346 280,710,777
End of period 574,804,553 684,127,317 328,215,346
Undistributed (overdistributed)
net investment income at end of
period (30,652) 42,533 (14,032)
CHANGES IN SHARES Class A:
Subscriptions 271,755,491 910,150,825 863,870,771
Issued for distributions
reinvested 412,582 1,302,088 2,488,176
Redemptions (309,985,944) (855,426,769) (845,563,936)
---------------------------------------------------
Net Increase (Decrease) (37,817,871) 56,026,144 20,795,011
Class B:
Subscriptions 54,247,449 155,689,123 133,987,311
Issued for distributions
reinvested 64,742 158,062 555,248
Redemptions (82,734,670) (141,953,166) (118,589,191)
---------------------------------------------------
Net Increase (Decrease) (28,422,479) 13,894,019 15,953,368
Class C:
Subscriptions 33,670,794 120,063,342 106,687,018
Issued for distributions
reinvested 10,662 45,279 128,677
Redemptions (35,609,703) (123,559,630) (96,052,717)
---------------------------------------------------
Net Increase (Decrease) (1,928,247) (3,451,009) 10,762,978
Class Z:
Subscriptions 167,190,771 262,735,612 --
Issued in connection with
merger -- 338,355,029 --
Issued for distributions
reinvested 565,585 1,710,449 --
Redemptions (208,829,520) (313,151,894) --
---------------------------------------------------
Net Increase (Decrease) (41,073,164) 289,649,196 --
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
(b) Class Z shares commenced operations on July 29, 2002.
See notes to financial statements.
12
<Page>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004 COLUMBIA MONEY MARKET FUND
NOTE 1. ORGANIZATION
Columbia Money Market Fund (the "Fund"), a series of Columbia Funds Trust II
(the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business
trust registered under the Investment Company Act of 1940 (the "1940 Act"), as
amended, as an open-end management investment company.
INVESTMENT GOAL
The Fund seeks maximum current income consistent with capital preservation and
the maintenance of liquidity.
FUND SHARES
The Fund may issue an unlimited number of shares, and offers four classes of
shares: Class A, Class B, Class C and Class Z. Each share class has its own
sales charge and expense structure.
Class A shares are sold at net asset value. Class A shares are subject to a
1.00% contingent deferred sales charge ("CDSC") on shares sold within eighteen
months on an original purchase of $1 million to $25 million. When exchanged for
Class A shares in another Columbia Fund, a sales charge may be imposed. Class B
shares are subject to a maximum CDSC of 5.00% based upon the holding period
after purchase. Class B shares will convert to Class A shares in a certain
number of years after purchase, depending on the program under which shares were
purchased. Class C shares are subject to a 1.00% CDSC on shares sold within one
year after purchase. Class Z shares are offered continuously at net asset value.
There are certain restrictions on the purchase of Class Z shares, as described
in the Fund's prospectus.
On October 13, 2003, the Liberty Money Market Fund was renamed Columbia Money
Market Fund. Also on this date, the Liberty Funds Trust II was renamed Columbia
Funds Trust II.
The fiscal year end of the Fund was changed from June 30 to March 31.
Accordingly, the Fund's fiscal year ended on March 31, 2004.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION
Securities in the Fund are valued utilizing the amortized cost valuation method
permitted in accordance with Rule 2a-7 under the 1940 Act provided certain
conditions are met. This method involves valuing a portfolio security initially
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions with institutions that
the Fund's investment advisor has determined are creditworthy. The Fund, through
its custodian, receives delivery of underlying securities collateralizing a
repurchase agreement. Collateral is at least equal, at all times, to the value
of the repurchase obligation including interest. A repurchase agreement
transaction involves certain risks in the event of default or insolvency of the
counterparty. These risks include possible delays or restrictions upon the
Fund's ability to dispose of the underlying securities and a possible decline in
the value of the underlying securities during the period while the Fund seeks to
assert its rights.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities.
13
<Page>
DETERMINATION OF CLASS NET ASSET VALUES
All income, expenses (other than class-specific expenses, as shown on the
Statement of Operations) and realized and unrealized gains (losses) are
allocated to each class of the Fund on a daily basis for purposes of determining
the net asset value of each class. Income and expenses are allocated to each
class based on the settled shares method, while realized and unrealized gains
(losses) are allocated based on the relative net assets of each class.
FEDERAL INCOME TAX STATUS
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable income, if any, for its tax year, and as such
will not be subject to federal income taxes. In addition, by distributing in
each calendar year substantially all of its net investment income, capital gains
and certain other amounts, if any, the Fund will not be subject to federal
excise tax. Therefore, no federal income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly. Net
realized capital gains, if any, are distributed at least annually.
NOTE 3. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the period ended March 31, 2004, permanent differences resulting primarily
from differing treatments for return of capital distributions were identified
and reclassified among the components of the Fund's net assets as follows:
<Table>
<Caption>
OVERDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME LOSS CAPITAL
---------------------------------------------
$ 7,662 $ (2) $ (7,660)
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the period ended and the year
ended March 31, 2004 and June 30, 2003, respectively, was as follows:
<Table>
<Caption>
MARCH 31, 2004 JUNE 30, 2003
- --------------------------------------------------------------------
Distributions paid from:
Ordinary Income* $ 1,116,451 $ 3,520,853
</Table>
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
The following capital loss carryforwards may be available to reduce taxable
income arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD
--------------------------------------------------------
2005 $ 266
2006 2,756
2007 1,437
2008 1,578
2009 355
2012 149
--------
Total $ 6,541
</Table>
Of the capital loss carryforwards attributable to the Fund, $4,030 ($266 will
expire March 31, 2005, $2,756 will expire March 31, 2006, $13 will expire March
31, 2007 and $995 will expire March 31, 2008) was obtained in the merger with
Stein Roe Cash Reserves Fund.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston was acquired by Bank of America Corporation ("BOA"). Columbia
receives a monthly investment advisory fee based on the Fund's average daily net
assets as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
-------------------------------------------------
First $500 million 0.250%
Next $500 million 0.225%
Over $1 billion 0.200%
</Table>
14
<Page>
For the period July 1, 2003 through October 31, 2003, Columbia voluntarily
waived its investment advisory fee by 0.08% annually of the Fund's average daily
net assets.
For the period ended March 31, 2004 and the year ended June 30, 2003, the Fund's
annualized effective investment advisory fee rates were 0.21% and 0.24%,
respectively.
ADMINISTRATION FEE
Columbia provides accounting and other services for a monthly administration fee
based on the Fund's average daily net assets as follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
--------------------------------------------------
First $500 million 0.250%
Next $500 million 0.200%
Over $1 billion 0.150%
</Table>
For the period ended March 31, 2004 and the year ended June 30, 2003, the Fund's
annualized effective administration fee rates were 0.24% and 0.24%,
respectively.
PRICING AND BOOKKEEPING FEES
Columbia is responsible for providing pricing and bookkeeping services to the
Fund under a pricing and bookkeeping agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Corporation ("State Street"). Columbia pays the total fees collected to State
Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000 paid monthly, and in any month that
the Fund's average daily net assets exceed $50 million, an additional monthly
fee. The additional fee rate is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. This rate is applied to
the average daily net assets of the Fund for that month. The Fund also pays
additional fees for pricing services. For the period ended March 31, 2004 and
the year ended June 30, 2003, the Fund's annualized effective pricing and
bookkeeping fee rates were 0.025% and 0.036%, respectively.
TRANSFER AGENT FEE
Columbia Funds Services, Inc. (the "Transfer Agent"), formerly Liberty Funds
Services, Inc., an indirect, wholly owned subsidiary of BOA, provides
shareholder services to the Fund. For such services, the Transfer Agent receives
a fee, paid monthly, at the annual rate of $33.50 per open account. The Transfer
Agent also receives reimbursement for certain out-of-pocket expenses.
Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly
transfer agent fee at the annual rate of 0.06% of the Fund's average daily net
assets plus flat-rate charges based on the number of shareholder accounts and
transactions. The Transfer Agent was also entitled to receive reimbursement for
certain out-of-pocket expenses.
For the period ended March 31, 2004 and the year ended June 30, 2003, the Fund's
annualized effective transfer agent fee rates, inclusive of out-of-pocket fees,
were 0.34% and 0.34%, respectively.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Columbia Funds Distributor, Inc. (the "Distributor"), formerly Liberty Funds
Distributor, Inc., an indirect, wholly owned subsidiary of BOA, is the principal
underwriter of the Fund. For the period ended March 31, 2004, the Distributor
has received CDSC fees of $91,751, $544,399 and $14,171 on Class A, Class B and
Class C share redemptions, respectively. For the year ended June 30, 2003, the
Distributor has received CDSC fees of $270,386, $1,224,387 and $104,612 on Class
A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a
monthly service fee to the Distributor at the annual rate of 0.25% of the
average daily net assets attributable to Class B and Class C shares of the Fund.
The Plan also requires the payment of a monthly distribution fee to the
Distributor at the annual rate of 0.75% of the average daily net assets
attributable to Class B and Class C shares only. The Distributor has voluntarily
agreed to waive a portion of the Class C share distribution fee so that it will
not exceed 0.15% annually of Class C average daily net assets. In addition,
Columbia has voluntarily agreed to reimburse a portion of the Class B and Class
C share distribution and service fees.
The CDSC and the fees received from the Plan are used principally as repayment
to the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
15
<Page>
CUSTODY CREDITS
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. The Fund could have invested a portion of the
assets utilized in connection with the expense offset arrangement in an
income-producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES
The Fund pays no compensation to its officers, all of whom are employees of
Columbia or its affiliates.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 5. LINE OF CREDIT
The Fund and other affiliated funds participate in a $350,000,000 credit
facility, which is used for temporary or emergency purposes to facilitate
portfolio liquidity. Interest is charged to the Fund based on its borrowings. In
addition, the Fund has agreed to pay commitment fees on its pro-rata portion of
the unutilized line of credit. The commitment fee is included in "Other
expenses" on the Statement of Operations. Prior to April 26, 2003, the Fund
participated in a separate credit agreement with similar terms to its existing
agreement. For the period ended March 31, 2004 and the year ended June 30, 2003,
the Fund did not borrow under these arrangements.
NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
LEGAL PROCEEDINGS
Columbia, the Distributor, and certain of their affiliates (collectively, "The
Columbia Group") have received information requests and subpoenas from various
regulatory and law enforcement authorities in connection with their
investigations of late trading and market timing in mutual funds. The Columbia
Group has not uncovered any instances where Columbia or the Distributor were
knowingly involved in late trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and the Distributor, alleging that they had
violated certain provisions of the federal securities laws in connection with
trading activity in mutual fund shares. Also on February 24, 2004, the New York
Attorney General ("NYAG") filed a civil complaint in New York Supreme Court,
County of New York against Columbia and the Distributor alleging that Columbia
and the Distributor had violated certain New York anti-fraud statutes. If either
Columbia or the Distributor is unsuccessful in its defense of these proceedings,
it could be barred from serving as an investment advisor or distributor for any
investment company registered under the Investment Company Act of 1940, as
amended (a "registered investment company"). Such results could prevent
Columbia, the Distributor or any company that is an affiliated person of
Columbia and the Distributor from serving as an investment advisor or
distributor for any registered investment company, including your fund. Your
fund has been informed by Columbia and the Distributor that, if these results
occur, they will seek exemptive relief from the SEC to permit them to continue
to serve as your fund's investment advisor and distributor. There is no
assurance that such exemptive relief will be granted. On March 15, 2004,
Columbia and the Distributor entered into agreements in principle with the SEC
Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and the Distributor agreed, inter alia, to the following
conditions: payment of $70 million in disgorgement; payment of $70 million in
civil penalties; an order requiring Columbia and the Distributor to cease and
desist from violations of the antifraud provisions and other provisions of the
federal securities laws; governance changes designed to maintain the
independence of the mutual fund boards of trustees and ensure compliance with
securities laws and their fiduciary duties; and retention of an independent
consultant to review Columbia's and the Distributor's compliance policies and
procedures. The agreement requires the final approval of the SEC. In a separate
agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund
fees by $80 million over a five-year period.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
16
<Page>
NOTE 7. SUBSEQUENT EVENT
On April 1, 2004, FleetBoston, including the Fund's investment advisor and
distributor, was acquired by BOA. The merger did not change the way the Fund is
managed, the investment personnel assigned to manage the Fund or the fees paid
by the Fund.
NOTE 8. BUSINESS COMBINATIONS AND MERGERS
As of the end of business on July 26, 2002, the net assets of Stein Roe Cash
Reserves Fund were transferred to the Fund in a tax-free exchange and
shareholders of Stein Roe Cash Reserves Fund received shares of the Fund in
exchange for their shares as follows:
<Table>
<Caption>
NET ASSETS OF THE STEIN ROE CASH
SHARES ISSUED RESERVES FUND RECEIVED
---------------------------------------------------------
338,355,029 $ 338,355,029
</Table>
<Table>
<Caption>
NET ASSETS OF
NET ASSETS STEIN ROE CASH NET ASSETS OF
OF THE RESERVES FUND THE FUND
FUND PRIOR IMMEDIATELY PRIOR IMMEDIATELY
TO COMBINATION TO COMBINATION AFTER COMBINATION
-------------------------------------------------------------
$ 354,468,496 $ 338,355,029 $ 692,823,525
</Table>
PORTFOLIO STRUCTURE
Prior to July 29, 2002, the Fund invested substantially all of its assets in the
SR&F Cash Reserves Portfolio (the "Portfolio") as part of a master/feeder
structure. The Portfolio allocated income, expenses, realized and unrealized
gains (losses) to each investor on a daily basis, based on methods in compliance
with the Internal Revenue Service. Prior to the reorganization described above,
the Fund's pro-rata share of the net assets of the Portfolio were distributed to
the Fund based on allocation methods in compliance with the Internal Revenue
Service.
17
<Page>
FINANCIAL HIGHLIGHTS
COLUMBIA MONEY MARKET FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED JUNE 30,
CLASS A SHARES 2004(a) 2003(b) 2002(b) 2001(b) 2000(b) 1999(b)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.002(c) 0.006(c) 0.015 0.052 0.052 0.046
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.002) (0.006) (0.015) (0.052) (0.052) (0.046)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total return (d) 0.22%(e)(f) 0.60% 1.56% 5.34%(f) 5.26%(f) 4.70%(f)
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA:
Expenses 0.88%(g)(h) 0.89%(g) 1.01% 0.70% 0.65%(g) 0.68%(g)
Net investment income 0.27%(g)(h) 0.61%(g) 1.54% 5.31% 5.13%(g) 4.61%(g)
Waiver/reimbursement 0.04%(h) -- -- 0.19% 0.19% 0.19%
Net assets, end of
period (000's) $ 228,750 $ 266,602 $ 210,616 $ 189,822 $ 178,678 $ 157,790
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the SR&F Cash Reserves Portfolio, prior to the merger.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Not annualized.
(f) Had the Investment Advisor, Administrator and/or Distributor not waived a
portion of expenses, total return would have been reduced.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
18
<Page>
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED JUNE 30,
CLASS B SHARES 2004(a) 2003(b) 2002(b) 2001(b) 2000(b) 1999(b)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.001(c) 0.002(c) 0.007 0.042 0.041 0.036
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.001) (0.002) (0.007) (0.042) (0.041) (0.036)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total return (d)(e) 0.08%(f) 0.17% 0.73% 4.31% 3.99% 3.68%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA:
Expenses 1.06%(g)(h) 1.41%(g) 1.84% 1.70% 1.65%(g) 1.68%(g)
Net investment income 0.09%(g)(h) 0.10%(g) 0.71% 4.31% 4.13%(g) 3.61%(g)
Waiver/reimbursement 0.86%(h) 0.56% 0.17% 0.19% 0.19% 0.19%
Net assets, end of
period (000's) $ 82,338 $ 110,776 $ 96,827 $ 80,879 $ 69,214 $ 93,821
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the SR&F Cash Reserves Portfolio, prior to the merger.
(c) Per share data was calculated using average shares outstanding for the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Had the Investment Advisor, Administrator and/or Distributor not waived a
portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
19
<Page>
<Table>
<Caption>
PERIOD ENDED
MARCH 31, YEAR ENDED JUNE 30,
CLASS C SHARES 2004(a) 2003(b) 2002(b) 2001(b) 2000(b) 1999(b)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.001(c) 0.003(c) 0.011 0.048 0.048 0.042
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.001) (0.003) (0.011) (0.048) (0.048) (0.042)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total return (d)(e) 0.08%(f) 0.27% 1.16% 4.93% 4.71% 4.30%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA:
Expenses 1.06%(g)(h) 1.23%(g) 1.41% 1.10% 1.05%(g) 1.08%(g)
Net investment income 0.10%(g)(h) 0.30%(g) 1.14% 4.91% 4.73%(g) 4.21%(g)
Waiver/reimbursement 0.86%(h) 0.66% 0.60% 0.79% 0.79% 0.79%
Net assets, end of
period (000's) $ 15,393 $ 17,324 $ 20,772 $ 10,010 $ 3,950 $ 2,194
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the SR&F Cash Reserves Portfolio, prior to the merger.
(c) Per share data was calculated using average shares outstanding for the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Had the Investment Advisor, Administrator and/or Distributor not waived a
portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
20
<Page>
<Table>
<Caption>
PERIOD ENDED PERIOD ENDED
MARCH 31, JUNE 30,
CLASS Z SHARES 2004(a) 2003(b)
- ----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (c) 0.002 0.006
- ----------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.002) (0.006)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
Total return (d)(e) 0.22%(f) 0.55%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (g)(h) 0.88% 0.89%
Net investment income (g)(h) 0.27% 0.61%
Waiver/reimbursement (h) 0.04% --
Net assets, end of period (000's) $ 248,324 $ 289,425
- ----------------------------------------------------------------------------
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
(b) Class Z shares were initially offered on July 29, 2002. Per share data and
total return reflect activity from that date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Not annualized.
(f) Had the Investment Advisor and/or Administrator not waived a portion of
expenses, total return would have been reduced.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
21
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
COLUMBIA MONEY MARKET FUND
TO THE TRUSTEES OF COLUMBIA FUNDS TRUST II AND THE SHAREHOLDERS OF COLUMBIA
MONEY MARKET FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Columbia Money Market Fund (the
"Fund") (a series of Columbia Funds Trust II) at March 31, 2004, and the results
of its operations, the changes in its net assets and the financial highlights
for the nine month period then ended, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States), which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at March
31, 2004 by correspondence with the custodian and brokers, provides a reasonable
basis for our opinion. The financial statements of the Fund as of June 30, 2003
and for the five years in the period then ended were audited by other
independent accountants whose report dated August 19, 2003 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 19, 2004
22
<Page>
UNAUDITED INFORMATION
COLUMBIA MONEY MARKET FUND
CHANGE IN INDEPENDENT AUDITORS
On March 1, 2004, Ernst & Young LLP ("E&Y") resigned as the Fund's independent
auditors. During the two most recent fiscal years, E&Y's audit reports contained
no adverse opinion or disclaimer of opinion; nor were its reports qualified or
modified as to uncertainty, audit scope, or accounting principle. Further, in
connection with its audits for the two most recent fiscal years and through
March 1, 2004, there were no disagreements between the Fund and E&Y on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which if not resolved to the satisfaction of E&Y
would have caused it to make reference to the disagreement in its report on the
financial statements for such years. Effective March 1, 2004,
PricewaterhouseCoopers LLP was appointed as the independent auditors of the Fund
for the fiscal year ended March 31, 2004.
23
<Page>
TRUSTEES
COLUMBIA MONEY MARKET FUND
Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were
appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth
had been directors of 15 Columbia Funds and 20 funds in the CMG Fund Trust. Also
effective October 8, 2003, the incumbent trustees of the Fund were elected as
directors of the 15 Columbia Funds and as trustees of the 20 funds in the CMG
Fund Trust. The new combined Board of Trustees/Directors of the Fund now
oversees 118 funds in the Columbia Funds Complex (including the former Liberty
Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of these
trustees/directors also serve on the Boards of other funds in the Columbia Funds
Complex.
The Trustees/Directors serve terms of indefinite duration. The names, addresses
and ages of the Trustees/Directors and officers of the Funds in the Columbia
Funds complex, the year each was first elected or appointed to office, their
principal business occupations during at least the last five years, the number
of portfolios overseen by each Trustee/Director and other directorships they
hold are shown below. Each officer listed below serves as an officer of each
Fund in the Columbia Funds Complex.
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
DOUGLAS A. HACKER (age 48) Executive Vice President-Strategy of United Airlines (airline) since December 2002
P.O. Box 66100 (formerly President of UAL Loyalty Services (airline) from September 2001 to December
Chicago, IL 60666 2002; Executive Vice President and Chief Financial Officer of United Airlines from
Trustee (since 1996) July 1999 to September 2001; Senior Vice President-Finance from March 1993 to July
1999). Oversees 118, Orbitz (online travel company)
JANET LANGFORD KELLY (age 46) Private Investor since March 2004 (formerly Chief Administrative Officer and Senior
9534 W. Gull Lake Drive Vice President, Kmart Holding Corporation (consumer goods) from September 2003 to
Richland, MI 49083-8530 March 2004; Executive Vice President-Corporate Development and Administration,
Trusttee (since 1996) General Counsel and Secretary, Kellogg Company (food manufacturer), from September
1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee
Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to
September 1999). Oversees 118, None
RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive Officer,
10701 Charleston Drive U.S. Plywood Corporation (building products manufacturer). Oversees 120(3), None
Vero Beach, FL 32963
Trustee (since 1995)
CHARLES R. NELSON (age 61) Professor of Economics, University of Washington, since January 1976; Ford and Louisa
Department of Economics Van Voorhis Professor of Political Economy, University of Washington, since September
University of Washington 1993; (formerly Director, Institute for Economic Research, University of Washington
Seattle, WA 98195 from September 2001 to June 2003) Adjunct Professor of Statistics, University of
Trustee (since 1981) Washington, since September 1980; Associate Editor, Journal of Money Credit and
Banking, since September 1993; consultant on econometric and statistical matters.
Oversees 118, None
</Table>
(1) In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds complex.
24
<Page>
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA FUNDS
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College
84 College Road (formerly Dean, Boston College School of Management from September 1977 to September
Chestnut Hill, MA 02467-3838 1999). Oversees 121(3),(4), Saucony, Inc. (athletic footwear)
Trustee (since 1985)
PATRICK J. SIMPSON (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999,
2208 Tawny Woods Place College of Business, Boise State University); Chartered Financial Analyst. Oversees
Boise, ID 83706 118, None
Trustee (since 1998)
THOMAS C. THEOBALD (age 67) Managing Director, William Blair Capital Partners (private equity investing) since
227 West Monroe Street, September 1994. Oversees 118, Anixter International (network support equipment
Suite 3500 distributor), Jones Lang LaSalle (real estate management services), MONY Group (life
Chicago, IL 60606 insurance) and Ventas, Inc (real estate investment trust)
Trustee and Chairman of the Board(5)
(since 1996)
ANNE-LEE VERVILLE (age 58) Retired since 1997 (formerly General Manager, Global Education Industry, IBM
359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 119(4), Chairman
Hopkinton, NH 03229 of the Board of Directors, Enesco Group, Inc. (designer, importer and distributor of
Trustee (since 1998) giftware and collectibles)
RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The
100 S.W. Market Street #1500 Regence Group (regional health insurer); Chairman and Chief Executive Officer,
Portland, OR 97207 BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company).
Trustee (since 1991) Oversees 118, Northwest Natural Gas Co. (natural gas service provider)
INTERESTED TRUSTEES
WILLIAM E. MAYER(2) (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since February 1999
399 Park Avenue (formerly Founding Partner, Development Capital LLC from November 1996 to February
Suite 3204 1999). Oversees 120(3), Lee Enterprises (print media), WR Hambrecht + Co. (financial
New York, NY 10022 service provider), First Health (healthcare), Reader's Digest (publishing) and
Trustee (since 1994) OPENFIELD Solutions (retail industry technology provider)
</Table>
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of
the All-Star Funds, currently consisting of 2 funds, which are advised by
an affiliate of the Advisor.
(4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the
Advisor.
(5) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
25
<Page>
OFFICERS
COLUMBIA MONEY MARKET FUND
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA
FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
VICKI L. BENJAMIN (age 42) Chief Accounting Officer of the Columbia Funds and Liberty All-Star Funds
One Financial Center since June 2001 (formerly Controller of the Columbia Funds and of the Liberty
Boston, MA 02111 All-Star Funds from May 2002 to May 2004); Controller and Chief Accounting
Chief Accounting Officer (since 2001) Officer of the Galaxy Funds since September 2002 (formerly Vice President,
Corporate Audit, State Street Bank and Trust Company from May 1998 to April
2001).
MICHAEL CLARKE (age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds since 2004
One Financial Center (formerly Assistant Treasurer from June 2002 to May 2004; Vice President,
Boston, MA 02111 Product Strategy & Development of Liberty Funds Group from February 2001 to
Controller (since 2004) June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty
All-Star Funds from August 1999 to February 2001; Audit Manager at Deloitte &
Touche LLP from May 1997 to August 1999).
J. KEVIN CONNAUGHTON (age 39) President of the Columbia Funds since February 27, 2004; Treasurer of the
One Financial Center Columbia Funds and of the Liberty All-Star Funds since December 2000; Vice
Boston, MA 02111 President of the Advisor since April 2003 (formerly Chief Accounting Officer
Treasurer (since 2000) and and Controller of the Liberty Funds and Liberty All-Star Funds from February
President (since 2004) 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002;
Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December
2002 (formerly Vice President of Colonial from February 1998 to October 2000).
DAVID A. ROZENSON (age 49) Secretary of the Columbia Funds and of the Liberty All-Star Funds since
One Financial Center December 2003; Senior Counsel, Fleet Boston Financial Corporation since
Boston, MA 02111 January 1996; Associate General Counsel, Columbia Management Group since
Secretary (since 2003) November 2002.
</Table>
26
<Page>
IMPORTANT INFORMATION ABOUT THIS REPORT
COLUMBIA MONEY MARKET FUND
TRANSFER AGENT
Columbia Funds Services, Inc.
P.O. Box 8081
Boston MA 02266-8081
800.345.6611
DISTRIBUTOR
Columbia Funds Distributor, Inc.
One Financial Center
Boston MA 02111
INVESTMENT ADVISOR
Columbia Management Advisors, Inc.
100 Federal Street
Boston MA 02110
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
125 High Street
Boston MA 02110
The fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call shareholder services at 800-345-6611 and
additional reports will be sent to you.
This report has been prepared for shareholders of Columbia Money Market Fund.
This report may also be used as sales literature when preceded or accompanied by
the current prospectus which provides details of sales charges, investment
objectives and operating policies of the fund and with the most recent copy of
the Columbia Funds Performance Update.
A description of the policies and procedures that the fund uses to determine how
to vote proxies relating to its portfolio securities is available (i) without
charge, upon request, by calling 800-345-6611 and (ii) on the Securities and
Exchange Commission's website at http://www.sec.gov.
27
<Page>
COLUMBIA FUNDS
COLUMBIA MONEY MARKET FUND
LARGE GROWTH Columbia Common Stock
Columbia Growth
Columbia Growth Stock
Columbia Large Cap Growth
Columbia Tax-Managed Growth
Columbia Tax-Managed Growth II
Columbia Young Investor
LARGE VALUE Columbia Disciplined Value
Columbia Growth & Income
Columbia Large Cap Core
Columbia Tax-Managed Value
MIDCAP GROWTH Columbia Acorn Select
Columbia Mid Cap Growth
Columbia Tax-Managed Aggressive Growth
MIDCAP VALUE Columbia Dividend Income
Columbia Mid Cap
Columbia Strategic Investor
SMALL GROWTH Columbia Acorn
Columbia Acorn USA
Columbia Small Company Equity
SMALL VALUE Columbia Small Cap
Columbia Small-Cap Value
BALANCED Columbia Asset Allocation
Columbia Balanced
Columbia Liberty Fund
SPECIALTY Columbia Real Estate Equity
Columbia Technology
Columbia Utilities
TAXABLE FIXED-INCOME Columbia Contrarian Income
Columbia Corporate Bond
Columbia Federal Securities
Columbia Fixed Income Securities
Columbia High Yield
Columbia High Yield Opportunities
Columbia Income
Columbia Intermediate Bond
Columbia Intermediate Government Income
Columbia Quality Plus Bond
Columbia Short Term Bond
Columbia Strategic Income
FLOATING RATE Columbia Floating Rate
Columbia Floating Rate Advantage
TAX EXEMPT Columbia High Yield Municipal
Columbia Intermediate Tax-Exempt Bond
Columbia Managed Municipals
Columbia National Municipal Bond
Columbia Tax-Exempt
Columbia Tax-Exempt Insured
28
<Page>
SINGLE STATE TAX EXEMPT Columbia California Tax-Exempt
Columbia Connecticut Intermediate Municipal Bond
Columbia Connecticut Tax-Exempt
Columbia Florida Intermediate Municipal Bond
Columbia Massachusetts Intermediate Municipal Bond
Columbia Massachusetts Tax-Exempt
Columbia New Jersey Intermediate Municipal Bond
Columbia New York Intermediate Municipal Bond
Columbia New York Tax-Exempt
Columbia Oregon Municipal Bond
Columbia Pennsylvania Intermediate Municipal Bond
Columbia Rhode Island Intermediate Municipal Bond
MONEY MARKET Columbia Money Market
Columbia Municipal Money Market
INTERNATIONAL/GLOBAL Columbia Acorn International
Columbia Acorn International Select
Columbia Europe
Columbia Global Equity
Columbia International Stock
Columbia Newport Asia Pacific
Columbia Newport Greater China
Columbia Newport Tiger
INDEX Columbia Large Company Index
Columbia Small Company Index
Columbia U.S. Treasury Index
PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A
MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT US AT 800-345-6611 FOR A
PROSPECTUS WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND.
READ IT CAREFULLY BEFORE YOU INVEST.
For complete product information on any Columbia fund, visit our website at
www.columbiafunds.com.
Columbia Management Group and Columbia Management refer collectively to the
various investment advisory subsidiaries of Columbia Management Group, including
Columbia Management Advisors, Inc., the registered investment advisor, and
Columbia Funds Distributor, Inc.
29
<Page>
[GRAPHIC]
eDelivery
Help your fund reduce printing and postage costs! Elect to get your shareholder
reports by electronic delivery. With Columbia's eDelivery program, you receive
an e-mail message when your shareholder report becomes available online. If your
fund account is registered with Columbia Funds, you can sign up quickly and
easily on our website at www.columbiafunds.com.
Please note -- if you own your fund shares through a financial institution,
contact the institution to see if it offers electronic delivery. If you own your
fund shares through a retirement plan, electronic delivery may not be available
to you.
COLUMBIA MONEY MARKET FUND ANNUAL REPORT, MARCH 31, 2004
PRSRT STD
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
[COLUMBIAFUNDS(R) LOGO]
A MEMBER OF COLUMBIA MANAGEMENT GROUP
(C) 2004 COLUMBIA FUNDS DISTRIBUTOR, INC.
ONE FINANCIAL CENTER, BOSTON, MA 02111-2621
800.345.6611 www.columbiafunds.com
757-02/628R-0304 (05/04) 04/1079
<Page>
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this report,
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.
(b) During the period covered by this report, there were not any amendments
to a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers or
implicit waivers to a provision of the code of ethics adopted in 2(a)
above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas
E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members
of the registrant's Board of Trustees and Audit Committee, each qualify as an
audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr.
Woolworth are each independent trustees, as defined in paragraph (a)(2) of this
item's instructions and collectively constitute the entire Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
<Page>
Fee information below is disclosed in aggregate for the series of the
registrant whose reports to stockholders are included in this annual filing.
Effective in 2004, the series included in this filing changed its fiscal
year-end to March 31 from June 30. Also, effective March 1, 2004, the
registrant engaged new independent accountants. Unless otherwise noted, fees
disclosed below represent fees paid or accrued to the current and predecessor
principal accountants while each was engaged by the registrant.
(a) Aggregate Audit Fees billed by the principal accountant for professional
services rendered during the fiscal years ended March 31, 2004 and June 30,
2003 are as follows:
2004 2003
$20,460 $22,500
Audit Fees include amounts related to the audit of the fund's annual
financial statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for those
fiscal years.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years ended March 31, 2004
and June 30, 2003 are as follows:
2004 2003
$4,000 $9,500
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the
audit of the registrant's financial statements and are not reported in Audit
Fees above. In both fiscal years 2004 and 2003, Audit-Related Fees include
certain agreed-upon procedures performed for semi-annual shareholder reports.
In fiscal year 2003, Audit-Related Fees also include certain agreed-upon
procedures performed: (1) during the conversion of the fund's accounting
system, and (2) relating to fund mergers.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. For the fund, the percentage
of Audit-Related services that were approved under the "de minimis" exception
during the fiscal years ended March 31, 2004 and June 30, 2003 were zero.
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the
fiscal years ended March 31, 2004 and June 30, 2003, there were no
Audit-Related Fees that were approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X.
<Page>
The percentage of Audit-Related fees required to be approved under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de
minimis" exception during the fiscal years ended March 31, 2004 and June 30,
2003 were zero.
(c) Aggregate Tax Fees billed by the principal accountant for professional
services rendered during the fiscal years ended March 31, 2004 and June 30,
2003 are as follows:
2004 2003
$1,400 $1,200
Tax Fees include amounts for professional services by the principal
accountant for tax compliance, tax advice and tax planning. Tax Fees in both
fiscal years 2004 and 2003 are primarily for the review of annual tax returns.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. For the fund, the percentage
of Tax services that were approved under the "de minimis" exception during
the fiscal years ended March 31, 2004 and June 30, 2003 were zero.
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the
fiscal years ended March 31, 2004 and June 30, 2003, there were no Tax Fees
that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X.
The percentage of Tax fees required to be approved under paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X that were approved under the "de minimis"
exception during the fiscal years ended March 31, 2004 and June 30, 2003 were
zero.
(d) Aggregate All Other Fees billed by the principal accountant for
professional services rendered during the fiscal years ended March 31, 2004
and June 30, 2003 are as follows:
2004 2003
$0 $0
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in (a)-(c) above.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. For the fund, the percentage
of All Other Fees that were approved under the "de minimis" exception during
the fiscal years ended March 31, 2004 and June 30, 2003 were zero.
<Page>
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the
fiscal year ended March 31, 2004, All Other Fees that were approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately
$95,000 (note that fees were paid to the current principal accountant).
During the fiscal year ended June 30, 2003, All Other Fees that would have
been subject to pre-approval had paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X been applicable at the time the services were provided, were
approximately $95,000 (note that fees were paid to the current principal
accountant). For both fiscal years, All Other Fees relate to internal
controls reviews of the fund's transfer agent.
The percentage of All Other Fees required to be approved under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de
minimis" exception during the fiscal years ended March 31, 2004 and June 30,
2003 were zero.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the
"Policy") which sets forth the procedures and the conditions pursuant to
which the Audit Committee will pre-approve (i) all audit and non-audit
(including audit related, tax and all other) services provided by the
registrant's independent auditor to the registrant and individual funds
(collectively "Fund Services"), and (ii) all non-audit services provided by
the registrant's independent auditor to the funds' adviser or a control
affiliate of the adviser, that relate directly to the funds' operations and
financial reporting (collectively "Fund-related Adviser Services"). A
"control affiliate" is an entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the funds, and the
term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role
is primarily portfolio management and is sub-contracted or overseen by
another investment adviser. The adviser and control affiliates are
collectively referred to as "Adviser Entities."
The Audit Committee uses a combination of specific (on a case-by-case basis
as potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received
general pre-approval, it will require specific pre-approval by the Audit
Committee if it is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
<Page>
On an annual basis, the Fund Treasurer and/or Director of Trustee
Administration shall submit to the Audit Committee a schedule of the types of
Fund Services and Fund-related Adviser Services that are subject to general
pre-approval.
These schedules will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide estimated
fees for each instance of providing each service. This general pre-approval
and related fees (where provided) will generally cover a one-year period (for
example, from July 1 through June 30 of the following year). The Audit
Committee will review and approve the types of services and review the
projected fees for the next one-year period and may add to, or subtract from,
the list of general pre-approved services from time to time, based on
subsequent determinations. This approval acknowledges that the Audit
Committee is in agreement with the specific types of services that the
independent auditor will be permitted to perform. The fee amounts will be
updated to the extent necessary at other regularly scheduled meetings of the
Audit Committee.
In addition to the fees for each individual service, the Audit Committee has
the authority to implement a fee cap on the aggregate amount of non-audit
services provided to an individual fund.
If, subsequent to general pre-approval, a fund, its investment adviser or a
control affiliate determines that it would like to engage the independent
auditor to perform a service that requires pre-approval and that is not
included in the general pre-approval list, the specific pre-approval
procedure shall be as follows:
- A brief written request shall be prepared by management detailing the
proposed engagement with explanation as to why the work is proposed to
be performed by the independent auditor;
- The request should be addressed to the Audit Committee with copies to
the Fund Treasurer and/or Director of Trustee Administration;
- The Fund Treasurer and/or Director of Trustee Administration will
arrange for a discussion of the service to be included on the agenda
for the next regularly scheduled Audit Committee meeting, when the
Committee will discuss the proposed engagement and approve or deny the
request.
- If the timing of the project is critical and the project needs to
commence before the next regularly scheduled meeting, the Chairperson
of the Audit Committee may approve or deny the request on behalf of the
Audit Committee, or, in the Chairperson's discretion, determine to call
a special meeting of the Audit Committee for the purpose of considering
the proposal. Should the Chairperson of the Audit Committee be
unavailable, any other member of the Audit Committee may serve as an
alternate for the purpose of approving or denying the request.
Discussion with the Chairperson (or alternate, if necessary) will be
arranged by the Fund Treasurer and/or Director of Trustee
Administration. The independent auditor will not commence any such
project unless and until specific approval has been given.
<Page>
III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES
The Audit Committee recognizes that there are cases where services proposed
to be provided by the independent auditor to the adviser or control
affiliates are not Fund-related Adviser Services within the meaning of the
Policy, but nonetheless may be relevant to the Audit Committee's ongoing
evaluation of the auditor's independence and objectivity with respect to its
audit services to the funds. As a result, in all cases where an Adviser
Entity engages the independent auditor to provide audit or non-audit services
that are not Fund Services or Fund-related Adviser Services, were not subject
to pre-approval by the Audit Committee, and the projected fees for any such
engagement (or the aggregate of all such engagements during the period
covered by the Policy) exceeds a pre-determined threshold established by the
Audit Committee; the independent auditor, Fund Treasurer and/or Director of
Trustee Administration will notify the Audit Committee not later than its
next meeting. Such notification shall include a general description of the
services provided, the entity that is to be the recipient of such services,
the timing of the engagement, the entity's reasons for selecting the
independent auditor, and the projected fees. Such information will allow the
Audit Committee to consider whether non-audit services provided to the
adviser and Adviser Entities, which were not subject to Audit Committee
pre-approval, are compatible with maintaining the auditor's independence with
respect to the Funds.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services
or Fund-related Adviser Services initiated since the last such report was
rendered, including:
- A general description of the services, and
- Actual billed and projected fees, and
- The means by which such Fund Services or Fund-related Adviser Services
were pre-approved by the Audit Committee.
In addition, the independent auditor shall report to the Audit Committee
annually, and no more than 90 days prior to the filing of audit reports with
the SEC, all non-audit services provided to entities in the funds'
"investment company complex," as defined by SEC rules, that did not require
pre-approval under the Policy.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be
reviewed and approved at least annually by the Audit Committee.
*****
<Page>
(e)(2) This information has been included in items (b)-(d) above.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years ended March 31, 2004 and
June 30, 2003 are disclosed in (b)-(d) above.
All non-audit fees billed by the registrant's accountant for services
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser) and any entity controlling,
controlled by, or under common control with the adviser that provides ongoing
services to the registrant for the fiscal years ended March 31, 2004 and June
30, 2003 are also disclosed in (b)-(d) above. Such fees were approximately
$95,000 and $95,000, respectively.
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the investment adviser that provides ongoing services to
the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X, is compatible with maintaining the principal
accountant's independence. The Audit Committee determined that the provision
of such services is compatible with maintaining the principal accountant's
independence.
<Page>
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable at this time.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not filed Schedule 14A subsequent to the effective date of
that Schedule's Item 7(d)(2)(ii)(G). However, it is the registrant's policy to
consider candidates for the Board of Trustees/Directors who are recommend by
shareholders. A Fund shareholder who wishes to nominate a candidate to the Board
may send information regarding prospective candidates to the Fund's Governance
Committee, care of the Fund's Secretary. The information should include evidence
of the shareholder's Fund ownership, a full listing of the proposed candidate's
education, experience, current employment, date of birth, names and addresses of
at least three professional references, information as to whether the candidate
is not an "interested person" under the 1940 Act and "independent" under NYSE
Listing Standards in relation to the Fund, and such other information as may be
helpful to the independent trustees/directors in evaluating the candidate. All
satisfactorily completed information packages regarding a candidate will be
forwarded to an independent trustee/director for consideration.
ITEM 10. CONTROLS AND PROCEDURES.
<Page>
(a) The registrant's principal executive officer and principal financial
officer, based on his evaluation of the registrant's disclosure controls
and procedures as of a date within 90 days of the filing of this report,
has concluded that such controls and procedures are adequately designed
to ensure that information required to be disclosed by the registrant in
Form N-CSR is accumulated and communicated to the registrant's
management, including the principal executive officer and principal
financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Columbia Funds Trust II
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By (Signature and Title) /s/ J. Kevin Connaughton
----------------------------------------------------
J. Kevin Connaughton, President and Treasurer
Date June 7, 2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By (Signature and Title) /s/ J. Kevin Connaughton
----------------------------------------------------
J. Kevin Connaughton, President and Treasurer
Date June 7, 2004
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