<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 811-4552
---------------------------------------------
Columbia Funds Trust VIII
- -------------------------------------------------------------------------------
(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
[GRAPHIC]
COLUMBIA INCOME FUND
ANNUAL REPORT
MARCH 31, 2004
[COLUMBIAFUNDS(R) LOGO]
A MEMBER OF COLUMBIA MANAGEMENT GROUP
<Page>
TABLE OF CONTENTS
<Table>
Fund Profile 1
Performance Information 2
Economic Update 3
Portfolio Managers' Report 4
Financial Statements 6
Investment Portfolio 7
Statement of Assets and Liabilities 18
Statement of Operations 19
Statement of Changes in Net Assets 20
Notes to Financial Statements 22
Financial Highlights 28
Report of Independent Registered Public Accounting Firm 32
Unaudited Information 33
Trustees 34
Officers 36
Important Information About This Report 37
</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 INCOME 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 INCOME 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 STRUCTURE AS OF 03/31/04 (%)
<Table>
Corporate fixed-income
bonds & notes 93.7
Cash equivalents, net other
assets & liabilities 5.1
Government agencies & obligations 1.2
</Table>
QUALITY BREAKDOWN AS OF 03/31/04 (%)
<Table>
AAA 5.4
AA 7.7
A 25.0
BBB 32.4
BB 17.0
B 10.8
B & lower 1.3
Non-rated 0.4
</Table>
[CHART]
MATURITY BREAKDOWN AS OF 03/31/04 (%)
<Table>
0-1 year 6.7%
1-5 years 35.6%
5-10 years 39.4%
10-20 years 8.8%
Over 20 years 9.5%
</Table>
Portfolio structure is calculated as a percentage of net assets. Quality and
maturity breakdowns are calculated as a percentage of total investments. Ratings
shown in the quality breakdown represent the highest rating assigned to a
particular bond by one of the following respected rating agencies. Standard &
Poor's, Moody's or Fitch Investors Service, Inc. Maturity breakdown is based on
each security's effective maturity, which reflects pre-refundings, mandatory
puts and other conditions that affect a bonds maturity.
(C)2004 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2) may
not be copied or distributed; and (3) is not warranted to be accurate, complete
or timely. Neither Morningstar nor its content providers are responsible for any
damages or losses arising from any use of this information. Past performance is
no guarantee of future results.
The Morningstar Style Box(TM) reveals a fund's investment strategy. For equity
funds the vertical axis shows the market capitalization of the stocks owned and
the horizontal axis shows investment style (value, blend or growth). For
fixed-income funds the vertical axis shows the average credit quality of the
bonds owned, and the horizontal axis shows interest rate sensitivity as measured
by a bond's duration (short, intermediate or long). All of these numbers are
drawn from the data most recently provided by the fund and entered into
Morningstar's database as of month-end. Although the data are gathered from
reliable sources, Morningstar cannot guarantee completeness and accuracy. As of
03/31/2004.
[SIDENOTE]
SUMMARY
- - FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 2004, THE FUND'S CLASS A SHARES
RETURNED 5.50% WITHOUT SALES CHARGE.
- - THE FUND'S RETURN WAS BETTER THAN BOTH ITS BENCHMARK AND THE AVERAGE RETURN
OF ITS PEER GROUP, THE LIPPER CORPORATE BBB RATED DEBT FUND CATEGORY.
- - THE FUND'S COMMITMENT TO BBB AND LOWER-RATED ISSUES WAS THE PRIMARY REASON
FOR ITS STRONG PERFORMANCE.
[CHART]
<Table>
CLASS A SHARES 5.50%
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT BOND INDEX 2.52%
</Table>
OBJECTIVE
Seeks total return by investing for a high level of current income and
opportunities for capital appreciation
TOTAL NET ASSETS
$556.2 million
MORNINGSTAR STYLE BOX
[GRAPHIC]
1
<Page>
PERFORMANCE INFORMATION
COLUMBIA INCOME FUND
[CHART]
VALUE OF A $10,000 INVESTMENT 04/01/94 - 03/31/04
<Table>
<Caption>
CLASS A SHARES CLASS A SHARES LEHMAN BROTHERS INTERMEDIATE LEHMAN BROTHERS INTERMEDIATE
WITHOUT SALES CHARGE WITH SALES CHARGE GOVERNMENT/CREDIT BOND INDEX CREDIT BOND INDEX
4/1/94 $ 10,000 $ 9,525 $ 10,000 $ 10,000
4/30/94 $ 9,893 $ 9,423 $ 9,919 $ 9,917
5/31/94 $ 9,890 $ 9,420 $ 9,924 $ 9,899
6/30/94 $ 9,874 $ 9,405 $ 9,923 $ 9,876
7/31/94 $ 10,023 $ 9,547 $ 10,116 $ 10,074
8/31/94 $ 10,077 $ 9,599 $ 10,158 $ 10,078
9/30/94 $ 9,958 $ 9,485 $ 10,026 $ 9,926
10/31/94 $ 9,946 $ 9,473 $ 10,011 $ 9,915
11/30/94 $ 9,889 $ 9,419 $ 9,962 $ 9,897
12/31/94 $ 9,932 $ 9,461 $ 10,010 $ 9,962
1/31/95 $ 10,097 $ 9,618 $ 10,202 $ 10,154
2/28/95 $ 10,368 $ 9,875 $ 10,474 $ 10,389
3/31/95 $ 10,457 $ 9,960 $ 10,543 $ 10,459
4/30/95 $ 10,622 $ 10,118 $ 10,706 $ 10,605
5/31/95 $ 11,039 $ 10,514 $ 11,115 $ 11,050
6/30/95 $ 11,139 $ 10,610 $ 11,205 $ 11,138
7/31/95 $ 11,142 $ 10,613 $ 11,191 $ 11,095
8/31/95 $ 11,272 $ 10,736 $ 11,330 $ 11,237
9/30/95 $ 11,396 $ 10,854 $ 11,435 $ 11,351
10/31/95 $ 11,535 $ 10,987 $ 11,570 $ 11,518
11/30/95 $ 11,719 $ 11,163 $ 11,764 $ 11,708
12/31/95 $ 11,896 $ 11,331 $ 11,913 $ 11,880
1/31/96 $ 12,015 $ 11,444 $ 12,024 $ 11,954
2/29/96 $ 11,831 $ 11,269 $ 11,831 $ 11,700
3/31/96 $ 11,724 $ 11,167 $ 11,746 $ 11,602
4/30/96 $ 11,662 $ 11,108 $ 11,679 $ 11,522
5/31/96 $ 11,649 $ 11,095 $ 11,661 $ 11,502
6/30/96 $ 11,780 $ 11,221 $ 11,804 $ 11,655
7/31/96 $ 11,805 $ 11,244 $ 11,833 $ 11,682
8/31/96 $ 11,819 $ 11,258 $ 11,828 $ 11,653
9/30/96 $ 12,039 $ 11,467 $ 12,033 $ 11,860
10/31/96 $ 12,300 $ 11,716 $ 12,299 $ 12,137
11/30/96 $ 12,559 $ 11,962 $ 12,508 $ 12,360
12/31/96 $ 12,473 $ 11,881 $ 12,386 $ 12,223
1/31/97 $ 12,537 $ 11,941 $ 12,437 $ 12,238
2/28/97 $ 12,632 $ 12,032 $ 12,471 $ 12,263
3/31/97 $ 12,467 $ 11,875 $ 12,335 $ 12,117
4/30/97 $ 12,608 $ 12,009 $ 12,499 $ 12,294
5/31/97 $ 12,803 $ 12,195 $ 12,626 $ 12,409
6/30/97 $ 12,996 $ 12,379 $ 12,765 $ 12,558
7/31/97 $ 13,402 $ 12,765 $ 13,103 $ 12,942
8/31/97 $ 13,242 $ 12,613 $ 12,988 $ 12,797
9/30/97 $ 13,436 $ 12,797 $ 13,169 $ 12,998
10/31/97 $ 13,473 $ 12,833 $ 13,292 $ 13,206
11/30/97 $ 13,535 $ 12,892 $ 13,322 $ 13,276
12/31/97 $ 13,669 $ 13,020 $ 13,424 $ 13,415
1/31/98 $ 13,821 $ 13,164 $ 13,602 $ 13,604
2/28/98 $ 13,854 $ 13,196 $ 13,604 $ 13,577
3/31/98 $ 13,934 $ 13,273 $ 13,651 $ 13,619
4/30/98 $ 14,011 $ 13,346 $ 13,729 $ 13,687
5/31/98 $ 14,092 $ 13,423 $ 13,847 $ 13,834
6/30/98 $ 14,129 $ 13,458 $ 13,923 $ 13,975
7/31/98 $ 14,184 $ 13,510 $ 13,959 $ 13,986
8/31/98 $ 13,881 $ 13,221 $ 14,059 $ 14,259
9/30/98 $ 14,173 $ 13,500 $ 14,479 $ 14,666
10/31/98 $ 13,880 $ 13,221 $ 14,363 $ 14,562
11/30/98 $ 14,131 $ 13,460 $ 14,475 $ 14,650
12/31/98 $ 14,215 $ 13,539 $ 14,537 $ 14,686
1/31/99 $ 14,334 $ 13,653 $ 14,654 $ 14,791
2/28/99 $ 14,118 $ 13,447 $ 14,405 $ 14,439
3/31/99 $ 14,277 $ 13,599 $ 14,539 $ 14,511
4/30/99 $ 14,404 $ 13,720 $ 14,595 $ 14,547
5/31/99 $ 14,254 $ 13,577 $ 14,433 $ 14,397
6/30/99 $ 14,202 $ 13,527 $ 14,420 $ 14,353
7/31/99 $ 14,156 $ 13,484 $ 14,374 $ 14,312
8/31/99 $ 14,127 $ 13,455 $ 14,364 $ 14,301
9/30/99 $ 14,269 $ 13,591 $ 14,522 $ 14,430
10/31/99 $ 14,309 $ 13,629 $ 14,577 $ 14,467
11/30/99 $ 14,395 $ 13,711 $ 14,612 $ 14,459
12/31/99 $ 14,391 $ 13,707 $ 14,561 $ 14,370
1/31/2000 $ 14,425 $ 13,740 $ 14,498 $ 14,366
2/29/2000 $ 14,584 $ 13,891 $ 14,617 $ 14,546
3/31/2000 $ 14,749 $ 14,048 $ 14,742 $ 14,756
4/30/2000 $ 14,589 $ 13,896 $ 14,656 $ 14,684
5/31/2000 $ 14,519 $ 13,830 $ 14,649 $ 14,671
6/30/2000 $ 14,904 $ 14,196 $ 14,953 $ 14,970
7/31/2000 $ 15,101 $ 14,384 $ 15,091 $ 15,129
8/31/2000 $ 15,332 $ 14,604 $ 15,284 $ 15,342
9/30/2000 $ 15,393 $ 14,662 $ 15,432 $ 15,401
10/31/2000 $ 15,322 $ 14,595 $ 15,446 $ 15,498
11/30/2000 $ 15,465 $ 14,730 $ 15,630 $ 15,763
12/31/2000 $ 15,797 $ 15,047 $ 15,936 $ 16,073
1/31/2001 $ 16,162 $ 15,395 $ 16,273 $ 16,343
2/28/2001 $ 16,384 $ 15,606 $ 16,432 $ 16,511
3/31/2001 $ 16,459 $ 15,677 $ 16,569 $ 16,587
4/30/2001 $ 16,444 $ 15,663 $ 16,537 $ 16,463
5/31/2001 $ 16,624 $ 15,834 $ 16,663 $ 16,559
6/30/2001 $ 16,672 $ 15,880 $ 16,736 $ 16,638
7/31/2001 $ 17,035 $ 16,226 $ 17,128 $ 17,052
8/31/2001 $ 17,243 $ 16,424 $ 17,323 $ 17,271
9/30/2001 $ 16,926 $ 16,122 $ 17,430 $ 17,429
10/31/2001 $ 17,193 $ 16,377 $ 17,741 $ 17,872
11/30/2001 $ 17,212 $ 16,395 $ 17,604 $ 17,579
12/31/2001 $ 17,119 $ 16,306 $ 17,491 $ 17,440
1/31/2002 $ 17,251 $ 16,432 $ 17,602 $ 17,567
2/28/2002 $ 17,311 $ 16,489 $ 17,735 $ 17,717
3/31/2002 $ 17,225 $ 16,407 $ 17,462 $ 17,357
4/30/2002 $ 17,574 $ 16,740 $ 17,705 $ 17,694
5/31/2002 $ 17,682 $ 16,842 $ 17,946 $ 17,857
6/30/2002 $ 17,595 $ 16,759 $ 18,016 $ 18,008
7/31/2002 $ 17,489 $ 16,659 $ 18,075 $ 18,225
8/31/2002 $ 17,741 $ 16,899 $ 18,424 $ 18,633
9/30/2002 $ 17,938 $ 17,086 $ 18,770 $ 19,033
10/31/2002 $ 17,569 $ 16,734 $ 18,620 $ 18,851
11/30/2002 $ 17,948 $ 17,096 $ 18,775 $ 18,862
12/31/2002 $ 18,348 $ 17,477 $ 19,265 $ 19,362
1/31/2003 $ 18,462 $ 17,585 $ 19,319 $ 19,362
2/28/2003 $ 18,783 $ 17,891 $ 19,659 $ 19,706
3/31/2003 $ 18,793 $ 17,900 $ 19,700 $ 19,681
4/30/2003 $ 19,265 $ 18,349 $ 19,970 $ 19,891
5/31/2003 $ 19,777 $ 18,838 $ 20,479 $ 20,456
6/30/2003 $ 19,917 $ 18,971 $ 20,489 $ 20,375
7/31/2003 $ 19,310 $ 18,393 $ 19,860 $ 19,521
8/31/2003 $ 19,374 $ 18,453 $ 19,920 $ 19,650
9/30/2003 $ 19,978 $ 19,029 $ 20,514 $ 20,273
10/31/2003 $ 20,036 $ 19,084 $ 20,331 $ 20,015
11/30/2003 $ 20,190 $ 19,231 $ 20,392 $ 20,069
12/31/2003 $ 20,467 $ 19,495 $ 20,594 $ 20,268
1/31/2004 $ 20,704 $ 19,721 $ 20,759 $ 20,452
2/29/2004 $ 20,841 $ 19,851 $ 20,989 $ 20,702
3/31/2004 $ 20,995 $ 20,000 $ 21,169 $ 19,870
</Table>
The graph and table do not reflect the deductions of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. The Lehman
Brothers Intermediate Government/Credit Bond Index is an unmanaged index that
tracks the performance of intermediate term US government and corporate bonds.
The Lehman Brothers Intermediate Credit Bond Index is an unmanaged index that
tracks the performance of a selection of US government and investment grade
corporate bonds. This index is the fund's secondary benchmark. Unlike the fund,
indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in the index.
AVERAGE ANNUAL TOTAL RETURN AS OF 03/31/04 (%)
<Table>
<Caption>
SHARE CLASS A B C Z
- -------------------------------------------------------------------------------------------------
INCEPTION 07/31/00 07/15/02 07/15/02 03/05/86
- -------------------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
- -------------------------------------------------------------------------------------------------
9-month (cumulative) 5.50 0.52 4.91 -0.09 5.03 4.03 5.80
1-year 11.80 6.51 10.98 5.98 11.14 10.14 12.24
5-year 8.03 6.98 7.75 7.45 7.80 7.80 8.29
10-year 7.70 7.18 7.56 7.56 7.59 7.59 7.83
</Table>
All results shown assume reinvestment of distributions. The "with sales charge"
returns include the maximum 4.75% charge for class A shares, the appropriate
class B contingent deferred sales charge for the holding period after purchase
as follows: through first year--5%, second year--4%, third year--3%, fourth
year--3%, fifth year--2%, sixth year--1%, thereafter--0%, and the class C
contingent deferred sales charge of 1% for the first year only. Performance for
different share classes will vary based on differences in sales charges and fees
associated with each class.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
The performance information for class A, B and C shares (newer class shares)
includes returns of the fund's class Z shares (the oldest existing fund class)
for periods prior to the inception date of the newer share classes. These class
Z share returns were not restated to reflect any expense differential (e.g.,
Rule 12b-1 fees) between class Z shares and the newer class shares. Had the
expense differential been reflected, the returns for the periods prior to the
inception of the newer class shares would have been lower.
[SIDENOTE]
PERFORMANCE OF A $10,000 INVESTMENT 04/01/94 - 03/31/04 ($)
<Table>
<Caption>
SALES CHARGE: WITHOUT WITH
- -------------------------------------------
Class A 20,995 20,000
Class B 20,722 20,722
Class C 20,775 20,775
Class Z 21,250 n/a
</Table>
Performance data quoted represents past performance and current performance may
be lower or higher. Past performance is no guarantee of future results. The
investment return and principal value will fluctuate so that 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.
2
<Page>
ECONOMIC UPDATE
COLUMBIA INCOME 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.
[CHART]
<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%.
[CHART]
<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.
3
<Page>
PORTFOLIO MANAGERS' REPORT
COLUMBIA INCOME FUND
The Board of Trustees for Columbia Income 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 Income Fund's class A shares returned
5.50% without sales charge. The fund performed better than its benchmark, the
Lehman Brothers Intermediate Government/Credit Bond Index, which returned 2.52%
for the same period. The fund's peer group, the Lipper Corporate BBB Rated Debt
Fund Category, averaged 3.93% for the nine-month period.(1)
CORPORATE ISSUES EXTENDED THEIR GAINS
Spurred by tax cuts and low interest rates, the US economy continued to gather
strength during the nine-month period covered by this report. Business
conditions and a favorable environment prevailed for corporate bonds. High-yield
issues enjoyed especially vigorous returns. The fund's solid position in
investment grade bonds--especially BBB-rated holdings--and high yield corporate
issues during a period of strong market performance contributed significantly to
the fund's return.
COMEBACKS FOR UTILITIES, TELECOM AND CABLE
Electric utility companies benefited from easier access to capital, which
enabled them to replace high-cost debt with less expensive borrowings. Cable and
telecom companies enjoyed the same improved conditions, and the savings helped
foster growth in all three industries. Bonds of Edison Mission Energy, a
California utility, and MidAmerican Energy Holdings rebounded along with the
economy. Bonds of Ohio-based FirstEnergy recovered as repairs to its Davis Besse
nuclear plant neared completion. Bonds of Nextel Communications, which provides
wireless communications services, rose in response to improved operating
results. And Canadian cell-phone operator Rogers Cantel bolstered its finances
and enjoyed solid growth. These strong performers provided a boost to
performance during the period.
AUTO AND AIRLINE ISSUES BOOSTED RETURNS
Our timely purchase of Ford Motor Credit bonds was rewarded when restructuring
and cost-cutting initiatives began to pay off and the bonds rose. Dana, a maker
of auto and truck parts, enjoyed a strong turnaround in operating profit by
cutting overhead and streamlining its business. Bonds backed by commercial
aircraft strengthened with increased travel volumes and better cost control on
the part of the airlines, including American Airlines.
(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]
NET ASSET VALUE PER SHARE AS OF 03/31/04 ($)
<Table>
Class A 10.21
Class B 10.21
Class C 10.21
Class Z 10.21
</Table>
DISTRIBUTIONS DECLARED PER SHARE 07/01/03 - 03/31/04 ($)
<Table>
Class A 0.43
Class B 0.37
Class C 0.38
Class Z 0.46
</Table>
SEC YIELDS ON 03/31/04 (%)
<Table>
Class A 3.53
Class B 3.02
Class C 3.27
Class Z 4.18
</Table>
The 30-day SEC yields reflect the portfolio's earning power net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period.
HOLDINGS DISCUSSED IN THIS REPORT AS OF 03/31/04 (%)
<Table>
Edison Mission Energy 0.5
MidAmerican Energy Holdings 1.4
FirstEnergy 0.8
Nextel Communications 0.8
Rogers Cantel 0.5
Ford Motor Credit 1.6
Dana 0.5
American Airlines 0.8
Tenet Healthcare 0.5
</Table>
Your fund is actively managed and the composition of its portfolio will change
over time. Information provided is calculated as a percentage of net assets.
4
<Page>
GROCERY, CHEMICAL AND HEALTH CARE BONDS DETRACTED FROM RETURN
We eliminated bonds of Winn Dixie, a grocery chain based in the southeast, when
efforts to reposition stores in competition with Wal-Mart and other superstores
were unsuccessful. (Wal-Mart is not in the portfolio.) We also sold bonds of
Rhodia, a French chemical company. Rhodia was unable to offset the rising cost
of oil, a key feedstock, reducing margins and cutting into sales volume. And
although Tenet Healthcare's bonds remained under pressure due to Medicaid
funding and other concerns, we remain optimistic about this operator of
for-profit healthcare facilities.
ADJUSTING TO A CHANGED ENVIRONMENT
We believe continued economic expansion will bring more good news for corporate
bonds, but this year's returns are unlikely to match those of last year. After
their steep rise, high-yield issues are less attractive than they were a year
ago. As a result, we cut back somewhat on the fund's high-yield exposure near
the end of the period. We added to investment-grade holdings in order to reduce
risk. And, as always, we continue to seek the most attractive values for the
fund regardless of market conditions.
During this reporting period Columbia Income Fund was managed by
Michael T. Kennedy, Kevin L. Cronk and Thomas LaPointe. Effective
May 14, 2004, Kevin L. Cronk, Thomas LaPointe, Mark Newlin and
Steven Luetger became the fund's co-managers.
Investing in high yield bonds involves greater credit and other risks not
associated with investing in higher-quality bonds. Bond investing also involves
interest rate risk, which means that bond prices may change as interest rates
increase or decrease. Foreign investments involve market, political, accounting
and currency risks not associated with other investments.
[SIDENOTE]
WE BELIEVE CONTINUED EXPANSION WILL BRING MORE GOOD NEWS FOR CORPORATE BONDS,
BUT THIS YEAR'S RETURNS ARE UNLIKELY TO MATCH THOSE OF LAST YEAR.
5
<Page>
FINANCIAL STATEMENTS
MARCH 31, 2004 COLUMBIA INCOME 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).
6
<Page>
INVESTMENT PORTFOLIO
MARCH 31, 2004 COLUMBIA INCOME FUND
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 93.7%
AGRICULTURE, FORESTRY & FISHING - 0.6%
AGRICULTURAL SERVICES - 0.3%
BUNGE LTD. FINANCE CORP. 4.375% 12/15/08 (a) 1,400,000 1,449,182
Agricultural Services Total 1,449,182
FORESTRY - 0.3%
TEMBEC INDUSTRIES, INC. 8.500% 02/01/11 1,650,000 1,641,750
Forestry Total 1,641,750
----------
AGRICULTURE, FORESTRY & FISHING TOTAL 3,090,932
CONSTRUCTION - 1.2%
BUILDING CONSTRUCTION - 1.2%
D.R. HORTON, INC. 9.750% 09/15/10 1,500,000 1,837,500
K. HOVNANIAN ENTERPRISES, INC. 7.750% 05/15/13 2,000,000 2,145,000
STANDARD-PACIFIC CORP. 9.250% 04/15/12 2,500,000 2,937,500
Building Construction Total 6,920,000
----------
CONSTRUCTION TOTAL 6,920,000
FINANCE, INSURANCE & REAL ESTATE - 27.8%
DEPOSITORY INSTITUTIONS - 5.2%
BANK ONE CORP. 6.500% 02/01/06 7,060,000 7,656,429
BARCLAYS BANK PLC 7.375% 06/15/49 (a) (b) 2,500,000 2,931,625
NORTH FORK BANCORPORATION, INC. 5.875% 08/15/12 4,000,000 4,388,640
POPULAR, INC. 6.125% 10/15/06 6,000,000 6,475,740
RABOBANK CAPITAL FUNDING II 5.260% 12/31/13 (a) 5,100,000 5,294,106
WESTERN FINANCIAL BANK 9.625% 05/15/12 2,000,000 2,280,000
Depository Institutions Total 29,026,540
FINANCIAL SERVICES - 4.5%
CAPITAL ONE BANK 5.125% 02/15/14 3,350,000 3,405,878
CITIGROUP, INC. 5.750% 05/10/06 7,000,000 7,542,920
INTERNATIONAL LEASE FINANCE CORP. 6.375% 03/15/09 5,000,000 5,638,950
PF EXEMPT RECEIVABLES MASTER TRUST 3.748% 06/01/13 (a) 1,750,000 1,743,420
6.436% 06/01/15 (a) 1,385,455 1,420,645
TEXTRON FINANCIAL CORP. 2.750% 06/01/06 5,000,000 5,052,700
Financial Services Total 24,804,513
</Table>
See notes to investment portfolio.
7
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
FINANCE, INSURANCE & REAL
ESTATE - (CONTINUED)
HOLDING & OTHER INVESTMENT OFFICES - 1.1%
HSBC CAPITAL FUNDING L.P. 9.547% 12/31/49 (a) (b) 4,500,000 5,841,742
Holding & Other Investment
Offices Total 5,841,742
INSURANCE CARRIERS - 3.3%
ALLSTATE CORP. 7.875% 05/01/05 6,000,000 6,411,060
FLORIDA WINDSTORM UNDERWRITING ASSOCIATION 7.125% 02/25/19 (a) 2,000,000 2,447,480
FUND AMERICAN COMPANIES, INC. 5.875% 05/15/13 2,500,000 2,632,450
LIBERTY MUTUAL GROUP, INC. 7.000% 03/15/34 (a) 3,000,000 2,971,200
PRUDENTIAL INSURANCE CO. OF AMERICA 7.650% 07/01/07 (a) 1,500,000 1,711,470
TRAVELERS PROPERTY CASUALTY CORP. 3.750% 03/15/08 2,250,000 2,305,148
Insurance Carriers Total 18,478,808
NON-DEPOSITORY CREDIT INSTITUTIONS - 5.1%
COUNTRYWIDE HOME LOANS, INC. 5.250% 06/15/04 3,000,000 3,023,700
5.500% 08/01/06 4,000,000 4,294,880
FORD MOTOR CREDIT CO. 5.800% 01/12/09 2,350,000 2,423,202
6.875% 02/01/06 4,000,000 4,258,560
7.000% 10/01/13 2,000,000 2,113,660
GENERAL MOTORS ACCEPTANCE CORP. 6.125% 01/22/08 2,500,000 2,690,300
7.250% 03/02/11 2,000,000 2,212,240
HOUSEHOLD FINANCE CORP. 5.750% 01/30/07 3,000,000 3,265,740
IBM CANADA CREDIT SERVICES CO. 3.750% 11/30/07 (a) 4,000,000 4,088,360
Non-Depository Credit
Institutions Total 28,370,642
REAL ESTATE - 4.7%
FOREST CITY ENTERPRISES, INC. 7.625% 06/01/15 1,000,000 1,080,000
HOST MARRIOTT L.P. 9.500% 01/15/07 1,000,000 1,117,500
iSTAR FINANCIAL, INC. 8.750% 08/15/08 3,209,000 3,638,204
PROPERTY TRUST OF AMERICA 6.875% 02/15/08 1,000,000 1,110,700
PRUDENTIAL PROPERTY INVESTMENT
MANAGERS LTD. 6.625% 04/01/09 (a) 3,000,000 3,297,384
7.125% 07/01/07 (a) 4,000,000 4,527,400
SPIEKER PROPERTIES L.P. 6.875% 02/01/05 6,750,000 7,021,080
THORNBURG MORTGAGE, INC. 8.000% 05/15/13 2,000,000 2,110,000
VENTAS REALTY L.P. 9.000% 05/01/12 2,000,000 2,310,000
Real Estate Total 26,212,268
</Table>
See notes to investment portfolio.
8
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
FINANCE, INSURANCE & REAL
ESTATE - (CONTINUED)
SECURITY BROKERS & DEALERS - 3.9%
BEAR STEARNS COMPANIES, INC. 4.000% 01/31/08 6,000,000 6,230,820
CREDIT SUISSE FIRST BOSTON, INC. 7.125% 07/15/32 2,500,000 2,966,300
7.900% 05/29/49 (a) (b) 3,500,000 3,994,788
JEFFERIES GROUP, INC. 7.750% 03/15/12 2,750,000 3,278,798
MORGAN STANLEY 4.750% 04/01/14 1,000,000 980,630
SPEAR LEEDS & KELLOGG L.P. 8.250% 08/15/05 (a) 4,000,000 4,359,920
Security Brokers & Dealers Total 21,811,256
-----------
FINANCE, INSURANCE & REAL
ESTATE TOTAL 154,545,769
MANUFACTURING - 12.5%
AUTO PARTS & ACCESSORIES - 0.5%
DANA CORP. 9.000% 08/15/11 1,100,000 1,325,500
10.125% 03/15/10 1,500,000 1,732,500
Auto Parts & Accessories Total 3,058,000
CHEMICALS & ALLIED PRODUCTS - 3.7%
DOW CHEMICAL CO. 5.750% 11/15/09 4,500,000 4,939,290
EASTMAN CHEMICAL CO. 3.250% 06/15/08 1,150,000 1,136,418
6.300% 11/15/18 4,500,000 4,839,840
EQUISTAR CHEMICAL L.P. 10.125% 09/01/08 2,000,000 2,150,000
FMC CORP. 10.250% 11/01/09 920,000 1,085,600
LYONDELL CHEMICAL CO. 9.625% 05/01/07 2,000,000 2,065,000
MACDERMID, INC. 9.125% 07/15/11 1,000,000 1,125,000
NOVA CHEMICALS LTD. 6.500% 01/15/12 (a) 1,000,000 1,038,280
PROCTER & GAMBLE Co. 5.500% 02/01/34 2,000,000 2,021,120
Chemicals & Allied
Products Total 20,400,548
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.4%
THOMAS & BETTS CORP. 7.250% 06/01/13 2,000,000 2,210,000
Electronic & Electrical
Equipment Total 2,210,000
FOOD & KINDRED PRODUCTS - 2.2%
BOTTLING GROUP LLC 2.450% 10/16/06 7,000,000 7,043,610
CADBURY-SCHWEPPES PLC 5.125% 10/01/13 (a) 1,750,000 1,810,655
CONSTELLATION BRANDS, INC. 8.125% 01/15/12 1,000,000 1,105,000
DOLE FOOD CO., INC. 8.625% 05/01/09 (b) 2,000,000 2,155,000
Food & Kindred Products Total 12,114,265
</Table>
See notes to investment portfolio.
9
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
MANUFACTURING - (CONTINUED)
MACHINERY & COMPUTER EQUIPMENT - 0.7%
BRIGGS & STRATTON CORP. 8.875% 03/15/11 1,400,000 1,715,000
CASE NEW HOLLAND, INC. 9.250% 08/01/11 (a) 2,000,000 2,260,000
Machinery & Computer Equipment Total 3,975,000
MISCELLANEOUS MANUFACTURING - 1.6%
HUTCHISON WHAMPOA INTERNATIONAL LTD. 6.250% 01/24/14 (a) 1,000,000 1,038,420
6.500% 02/13/13 (a) 4,950,000 5,254,227
SPX CORP. 7.500% 01/01/13 2,000,000 2,160,000
TEMPUR-PEDIC, INC. 10.250% 08/15/10 (a) 176,000 201,520
TRINITY INDUSTRIES, INC. 6.500% 03/15/14 (a) 550,000 550,000
Miscellaneous Manufacturing Total 9,204,167
PAPER PRODUCTS - 1.5%
CASCADES, INC. 7.250% 02/15/13 3,500,000 3,666,250
MEADWESTVACO CORP. 8.200% 01/15/30 3,820,000 4,683,396
Paper Products Total 8,349,646
PETROLEUM REFINING - 0.5%
PHILLIPS PETROLEUM CO. 9.375% 02/15/11 2,000,000 2,579,660
Petroleum Refining Total 2,579,660
PRINTING & PUBLISHING - 0.4%
DEX MEDIA WEST LLC 9.875% 08/15/13 (a) 2,000,000 2,220,000
Printing & Publishing Total 2,220,000
STONE, CLAY, GLASS & CONCRETE - 0.6%
OWENS-BROCKWAY GLASS CONTAINER, INC. 8.875% 02/15/09 3,000,000 3,240,000
Stone, Clay, Glass & Concrete Total 3,240,000
TRANSPORTATION EQUIPMENT - 0.4%
SHIP FINANCE INTERNATIONAL LTD. 8.500% 12/15/13 (a) 2,000,000 2,010,240
Transportation Equipment Total 2,010,240
--------------
MANUFACTURING TOTAL 69,361,526
MINING & ENERGY - 7.2%
METALS & MINING - 0.2%
NEWMONT MINING CORP. 8.625% 05/15/11 1,000,000 1,242,480
Metals & Mining Total 1,242,480
</Table>
See notes to investment portfolio.
10
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
MINING & ENERGY - (CONTINUED)
OIL & GAS EXTRACTION - 4.9%
AMERADA HESS CORP. 7.300% 08/15/31 3,000,000 3,232,950
COASTAL CORP. 7.750% 06/15/10 2,000,000 1,730,000
FOREST OIL CORP. 8.000% 06/15/08 2,000,000 2,200,000
MURPHY OIL CORP. 6.375% 05/01/12 2,250,000 2,550,960
NEWFIELD EXPLORATION CO. 7.450% 10/15/07 1,500,000 1,657,500
NEXEN, INC. 7.875% 03/15/32 3,500,000 4,424,980
NOBLE DRILLING CORP. 7.500% 03/15/19 3,500,000 4,090,135
PEMEX PROJECT FUNDING MASTER TRUST 7.875% 02/01/09 2,000,000 2,300,000
9.125% 10/13/10 750,000 917,625
RAS LAFFAN LIQUEFIED NATURAL GAS CO., LTD. 3.437% 09/15/09 (a) 4,500,000 4,443,750
Oil & Gas Extraction Total 27,547,900
OIL & GAS FIELD SERVICES - 2.1%
DEVON FINANCING CORP. 7.875% 09/30/31 2,600,000 3,220,620
PDVSA FINANCE LTD. 7.400% 08/15/16 2,500,000 2,112,500
PETROBRAS INTERNATIONAL FINANCE CO. 9.750% 07/06/11 1,500,000 1,695,000
PREMCOR REFINING GROUP, INC. 7.500% 06/15/15 4,000,000 4,400,000
Oil & Gas Field Services Total 11,428,120
--------------
MINING & ENERGY TOTAL 40,218,500
RETAIL TRADE - 1.2%
DEPARTMENT STORES - 0.3%
SAKS, INC. 7.000% 12/01/13 (a) 1,500,000 1,575,000
Department Stores Total 1,575,000
FOOD STORES - 0.4%
DELHAIZE AMERICA, INC. 8.125% 04/15/11 2,000,000 2,310,300
Food Stores Total 2,310,300
GENERAL MERCHANDISE STORES - 0.3%
OFFICE DEPOT, INC. 6.250% 08/15/13 1,655,000 1,796,618
General Merchandise Stores Total 1,796,618
RESTAURANTS - 0.2%
YUM! BRANDS, INC. 7.700% 07/01/12 1,000,000 1,192,500
Restaurants Total 1,192,500
--------------
RETAIL TRADE TOTAL 6,874,418
</Table>
See notes to investment portfolio.
11
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
SERVICES - 14.9%
AMUSEMENT & RECREATION - 3.4%
HARD ROCK HOTEL, INC. 8.875% 06/01/13 1,200,000 1,284,000
HARRAH'S OPERATING CO., INC. 7.125% 06/01/07 3,750,000 4,199,737
7.875% 12/15/05 500,000 540,000
MOHEGAN TRIBAL GAMING AUTHORITY 8.375% 07/01/11 3,000,000 3,315,000
PARK PLACE ENTERTAINMENT CORP. 9.375% 02/15/07 2,500,000 2,812,500
SIX FLAGS, INC. 9.500% 02/01/09 2,000,000 2,110,000
STATION CASINOS, INC. 6.000% 04/01/12 (a) 1,000,000 1,030,000
6.875% 03/01/16 (a) 1,500,000 1,535,625
STEINWAY MUSICAL INSTRUMENTS, INC. 8.750% 04/15/11 2,000,000 2,165,000
Amusement & Recreation Total 18,991,862
AUTO EQUIPMENT & RENTAL SERVICES - 1.8%
DURA OPERATING CORP. 9.000% 05/01/09 2,000,000 2,020,000
ERAC USA FINANCE CO. 8.000% 01/15/11 (a) 3,000,000 3,658,440
9.125% 12/15/04 (a) 2,000,000 2,099,840
NATIONSRENT, INC. 9.500% 10/15/10 (a) 2,000,000 2,155,000
Auto Equipment & Rental
Services Total 9,933,280
BUSINESS SERVICES - 1.1%
FEDEX CORP. 2.650% 04/01/07 (a) 5,000,000 4,991,950
9.650% 06/15/12 1,000,000 1,339,900
Business Services Total 6,331,850
HEALTH SERVICES - 6.7%
AMERISOURCEBERGEN CORP. 8.125% 09/01/08 3,000,000 3,345,000
BIO-RAD LABORATORIES, INC. 7.500% 08/15/13 2,000,000 2,210,000
BRISTOL-MYERS SQUIBB CO. 4.750% 10/01/06 6,000,000 6,357,120
COVENTRY HEALTH CARE, INC. 8.125% 02/15/12 1,000,000 1,140,000
GLAXOSMITHKLINE CAPITAL PLC 2.375% 04/16/07 5,000,000 5,010,850
HCA, INC. 6.950% 05/01/12 1,500,000 1,631,145
7.125% 06/01/06 3,250,000 3,514,420
7.875% 02/01/11 2,167,000 2,457,725
MEDCO HEALTH SOLUTIONS, INC. 7.250% 08/15/13 1,000,000 1,130,640
MEDQUEST, INC. 11.875% 08/15/12 2,000,000 2,260,000
</Table>
See notes to investment portfolio.
12
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
SERVICES - (CONTINUED)
HEALTH SERVICES - (CONTINUED)
PACIFICARE HEALTH SYSTEMS, INC. 10.750% 06/01/09 1,300,000 1,527,500
TENET HEALTHCARE CORP. 5.375% 11/15/06 2,000,000 1,890,000
7.375% 02/01/13 1,000,000 905,000
WYETH 6.450% 02/01/24 1,075,000 1,130,685
6.500% 02/01/34 2,500,000 2,647,575
Health Services Total 37,157,660
HOTELS, CAMPS & LODGING - 1.9%
HYATT EQUITIES LLC 6.875% 06/15/07 (a) 2,000,000 2,176,700
MARRIOTT INTERNATIONAL, INC. 6.875% 11/15/05 5,000,000 5,361,450
MEDITRUST COMPANIES 7.620% 09/13/05 2,200,000 2,304,500
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. 7.875% 05/01/12 500,000 563,750
Hotels, Camps & Lodging Total 10,406,400
--------------
SERVICES TOTAL 82,821,052
TRANSPORTATION, COMMUNICATIONS,
ELECTRIC, GAS & SANITARY SERVICES - 27.9%
AEROSPACE - 1.8%
RAYTHEON CO. 4.850% 01/15/11 1,000,000 1,032,520
5.500% 11/15/12 5,000,000 5,299,000
SYSTEMS 2001 ASSET TRUST 6.664% 09/15/13 (a) 1,295,035 1,454,635
7.156% 12/15/11 (a) 2,064,907 2,301,111
Aerospace Total 10,087,266
AIR TRANSPORTATION - 3.0%
AIR 2 US 8.027% 10/01/19 (a) 2,272,631 2,045,368
AMERICAN AIRLINES, INC. 7.024% 10/15/09 3,029,000 3,059,290
9.710% 01/02/07 1,380,933 1,301,530
CONTINENTAL AIRLINES, INC. 7.461% 04/01/15 3,076,001 3,014,481
7.875% 07/02/18 2,125,000 2,103,750
DELTA AIR LINES, INC. 7.779% 11/18/05 2,000,000 1,620,000
SOUTHWEST AIRLINES CO. 5.496% 11/01/06 3,000,000 3,226,680
Air Transportation Total 16,371,099
BROADCASTING - 3.7%
LIBERTY MEDIA CORP. 2.670% 09/17/06 (b) 4,000,000 4,059,080
SINCLAIR BROADCAST GROUP, INC. 8.750% 12/15/11 2,000,000 2,200,000
</Table>
See notes to investment portfolio.
13
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
TRANSPORTATION, COMMUNICATIONS,
ELECTRIC, GAS & SANITARY
SERVICES - (CONTINUED)
BROADCASTING - (CONTINUED)
TV AZTECA SA DE CV 10.500% 02/15/07 2,000,000 2,060,000
VIACOM, INC. 7.750% 06/01/05 5,000,000 5,362,950
VIDEOTRON LTEE 6.875% 01/15/14 220,000 231,000
WALT DISNEY CO. 5.500% 12/29/06 6,000,000 6,464,940
Broadcasting Total 20,377,970
CABLE - 1.7%
CHARTER COMMUNICATIONS HOLDINGS II 10.250% 09/15/10 (a) 1,000,000 1,035,000
COMCAST CORP. 5.850% 01/15/10 2,500,000 2,716,375
6.500% 01/15/15 2,000,000 2,210,760
CSC HOLDINGS, INC. 6.750% 04/15/12 (a) 500,000 505,000
8.125% 07/15/09 1,500,000 1,623,750
ECHOSTAR DBS CORP. 6.375% 10/01/11 (a) 1,500,000 1,593,750
Cable Total 9,684,635
ELECTRIC SERVICES - 11.5%
AES CORP. 8.750% 06/15/08 986,000 1,036,533
ALABAMA POWER CO. 5.490% 11/01/05 1,000,000 1,056,830
CALPINE CORP. 8.500% 07/15/10 (a) 2,500,000 2,268,750
CENTERPOINT ENERGY HOUSTON ELECTRIC LLC 6.950% 03/15/33 1,750,000 2,009,542
CONSTELLATION ENERGY GROUP, INC. 6.125% 09/01/09 2,500,000 2,790,450
CONSUMERS ENERGY CO. 6.000% 02/15/14 2,000,000 2,139,754
DOMINION RESOURCES, INC. 8.125% 06/15/10 2,000,000 2,440,260
EDISON MISSION ENERGY 9.875% 04/15/11 2,500,000 2,625,000
FIRSTENERGY CORP. 5.500% 11/15/06 2,000,000 2,126,920
6.450% 11/15/11 2,250,000 2,461,927
FPL ENERGY AMERICAN WIND LLC 6.639% 06/20/23 (a) 2,550,000 2,725,618
GULFTERRA ENERGY PARTNERS L.P. 8.500% 06/01/10 1,700,000 1,955,000
MIDAMERICAN ENERGY HOLDINGS CO. 5.875% 10/01/12 7,000,000 7,574,910
MSW ENERGY HOLDINGS LLC 8.500% 09/01/10 2,000,000 2,190,000
NEVADA POWER CO. 9.000% 08/15/13 (a) 2,000,000 2,265,000
</Table>
See notes to investment portfolio.
14
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
TRANSPORTATION, COMMUNICATIONS,
ELECTRIC, GAS & SANITARY
SERVICES - (CONTINUED)
ELECTRIC SERVICES - (CONTINUED)
Northern States Power Co. 8.000% 08/28/12 1,750,000 2,196,810
Oncor Electric Delivery Co. 7.250% 01/15/33 3,000,000 3,563,160
Orion Power Holdings, Inc. 12.000% 05/01/10 1,000,000 1,242,500
Pacific Gas & Electric Co. 6.050% 03/01/34 3,125,000 3,156,469
PSEG Power LLC 5.500% 12/01/15 3,560,000 3,640,136
7.750% 04/15/11 2,000,000 2,393,400
South Point Energy Center LLC 8.400% 05/30/12 (a) 719,912 672,218
Southern Power Co. 6.250% 07/15/12 2,000,000 2,219,280
Tenaska Alabama 6.125% 03/30/23 (a) 1,966,813 2,068,458
United Utilities PLC 6.250% 08/15/05 4,988,000 5,286,133
Electric Services Total 64,105,058
PIPELINES - 0.4%
Williams Companies, Inc. 8.125% 03/15/12 2,000,000 2,205,000
Pipelines Total 2,205,000
RAILROADS - 0.8%
Burlington Northern Railroad Co. 9.250% 10/01/06 2,000,000 2,318,220
Kansas City Southern Railway 7.500% 6/15/09 2,000,000 2,055,000
Railroads Total 4,373,220
SANITARY SERVICES - 0.4%
Allied Waste North America, Inc. 6.500% 11/15/10 (a) 500,000 507,500
7.625% 01/01/06 500,000 532,500
8.500% 12/01/08 500,000 558,750
8.875% 04/01/08 500,000 558,750
Sanitary Services Total 2,157,500
TELECOMMUNICATIONS - 4.6%
America Movil SA de CV 5.500% 03/01/14 (a) 1,300,000 1,296,001
Comtel Brasileira Ltd. 10.750% 09/26/04 (a) 2,000,000 2,070,000
Insight Midwest L.P. 9.750% 10/01/09 3,000,000 3,142,500
News America Holdings, Inc. 9.250% 02/01/13 2,000,000 2,632,320
Nextel Communications, Inc. 7.375% 08/01/15 4,000,000 4,325,000
Rogers Cantel, Inc. 9.750% 06/01/16 2,000,000 2,505,000
</Table>
See notes to investment portfolio.
15
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
TRANSPORTATION, COMMUNICATIONS,
ELECTRIC, GAS & SANITARY
SERVICES - (CONTINUED)
TELECOMMUNICATIONS - (CONTINUED)
SPRINT CORP. 6.125% 11/15/08 2,500,000 2,756,825
TELEFONOS DE MEXICO SA DE CV 4.500% 11/19/08 (a) 3,250,000 3,306,453
VERIZON WIRELESS, INC. 7.750% 12/01/30 3,000,000 3,621,450
Telecommunications Total 25,655,549
--------------
TRANSPORTATION, COMMUNICATIONS,
ELECTRIC, GAS & SANITARY
SERVICES TOTAL 155,017,297
WHOLESALE TRADE - 0.4%
NON-DURABLE GOODS - 0.4%
LILLY DEL MAR, INC. 7.717% 08/01/29 (a) (b) 2,250,000 2,285,098
Non-Durable Goods Total 2,285,098
--------------
WHOLESALE TRADE TOTAL 2,285,098
CORPORATE FIXED-INCOME BONDS
& NOTES TOTAL
(cost of $491,663,720) 521,134,592
GOVERNMENT AGENCIES &
OBLIGATIONS - 1.2%
FOREIGN GOVERNMENT BOND - 0.7%
STATE OF QATAR 9.750% 06/15/30 (a) 2,750,000 3,960,000
FOREIGN GOVERNMENT BOND TOTAL 3,960,000
U.S. GOVERNMENT AGENCIES &
OBLIGATIONS - 0.5%
FEDERAL NATIONAL MORTGAGE ASSOCIATION 9.000% 07/01/19-06/01/20 98,772 108,813
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 10.000% 10/15/17-01/15/19 5,974 6,742
10.500% 01/15/16-05/15/20 56,121 63,798
11.500% 05/15/13 11,137 12,795
12.500% 11/15/10-12/15/13 36,402 41,983
13.000% 04/15/11 4,264 4,951
14.000% 08/15/11 2,785 3,279
133,548
U.S. TREASURY NOTE 4.000% 02/15/14 2,245,000 2,274,466
U.S. GOVERNMENT AGENCIES &
OBLIGATIONS TOTAL 2,516,827
GOVERNMENT AGENCIES &
OBLIGATIONS TOTAL
(COST OF $5,203,889) 6,476,827
</Table>
See notes to investment portfolio.
16
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATION - 5.2%
Repurchase agreement with
State Street Bank &
Trust Co., dated
03/31/04, due 04/01/04
at 0.960%,
collateralized by a
U.S. Treasury Bond
maturing 02/15/20,
market value
$29,815,487
(repurchase proceeds
$29,224,779) (cost of
$29,224,000) 29,224,000 29,224,000
TOTAL INVESTMENTS - 100.1%
(COST OF $526,091,609)(c) 556,835,419
OTHER ASSETS & LIABILITIES,
NET - (0.1)% (660,900)
NET ASSETS - 100.0% 556,174,519
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) 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, 2004, the value of
these securities amounted to $118,488,329, which represents 21.3% of net
assets.
(b) Interest rates on variable rate securities change periodically. The rate
listed is as of March 31, 2004.
(c) Cost for federal income tax purposes is $528,407,742.
See notes to financial statements.
17
<Page>
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 COLUMBIA INCOME FUND
<Table>
<Caption>
($)
- ---------------------------------------------------------------------------------------------------------
ASSETS Investments, at cost 526,091,609
----------------
Investments, at value 556,835,419
Cash 1,080,659
Receivable for:
Investments sold 6,839,778
Fund shares sold 1,345,770
Interest 8,419,538
Deferred Trustees' compensation plan 12,331
----------------
Total Assets 574,533,495
LIABILITIES Payable for:
Investments purchased 17,106,528
Fund shares repurchased 319,587
Distributions 291,678
Investment advisory fee 221,470
Administration fee 59,839
Transfer agent fee 216,662
Pricing and bookkeeping fees 17,097
Trustees' fees 853
Custody fee 3,703
Distribution and service fees 51,215
Deferred Trustees' fees 12,331
Other liabilities 58,013
----------------
Total Liabilities 18,358,976
NET ASSETS 556,174,519
COMPOSITION OF NET ASSETS Paid-in capital 551,516,986
Overdistributed net investment income (2,468,472)
Accumulated net realized loss (23,617,805)
Net unrealized appreciation on investments 30,743,810
----------------
NET ASSETS 556,174,519
CLASS A Net assets 92,053,481
Shares outstanding 9,015,815
Net asset value per share 10.21(a)
Maximum offering price per share
($10.21/0.9525) 10.72(b)
CLASS B Net assets 29,534,411
Shares outstanding 2,892,545
Net asset value and offering price per share 10.21(a)
CLASS C Net assets 9,184,618
Shares outstanding 899,554
Net asset value and offering price per share 10.21(a)
CLASS Z Net assets 425,402,009
Shares outstanding 41,666,725
Net asset value, offering and redemption
price per share 10.21
</Table>
(a) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
18
<Page>
STATEMENT OF OPERATIONS
COLUMBIA INCOME FUND
<Table>
<Caption>
PERIOD ENDED YEAR ENDED
MARCH 31, 2004 (a)($) JUNE 30, 2003 ($)
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME Interest 24,503,277 30,799,067
EXPENSES Expenses allocated from Portfolio -- 66,898
Investment advisory fee 1,874,041 2,263,883
Administration fee 507,010 631,184
Distribution fee:
Class B 167,965 234,129
Class C 38,442 32,871
Service fee:
Class A 165,479 213,879
Class B 55,988 78,797
Class C 12,774 10,936
Transfer agent fee:
Class A 146,176 279,968
Class B 50,263 122,841
Class C 10,525 16,165
Class Z 409,552 510,392
Pricing and bookkeeping fees 119,591 185,586
Trustees' fees 14,418 19,492
Custody fee 26,699 19,270
Other expenses 155,996 202,679
Non-recurring costs (See Note 7) 3,727 --
Costs assumed by Investment Advisor (See Note 7) (3,727) --
-----------------------------------
Total Operating Expenses 3,754,919 4,888,970
Fees and expenses waived by Investment Advisor (85,976) --
Transfer agent fees reimbursed by Investment Advisor:
Class A (8,361) (39,479)
Class B (2,950) (34,918)
Class C (532) (3,568)
Fees waived by Distributor - Class C (7,785) (6,411)
Custody earnings credit (260) (1,040)
-----------------------------------
Net Operating Expenses 3,649,055 4,803,554
Interest expense 43 --
-----------------------------------
Net Expenses 3,649,098 4,803,554
-----------------------------------
Net Investment Income 20,854,179 25,995,513
NET REALIZED AND UNREALIZED Net realized gain on:
GAIN (LOSS) ON INVESTMENTS Investments 9,142,243 3,417,955
AND FOREIGN CURRENCY Foreign currency transactions -- 9,655
-----------------------------------
Net realized gain 9,142,243 3,427,610
Net change in unrealized appreciation/
depreciation on investments (2,136,105) 33,226,182
-----------------------------------
Net Gain 7,006,138 36,653,792
-----------------------------------
Net Increase in Net Assets
from Operations 27,860,317 62,649,305
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
See notes to financial statements.
19
<Page>
STATEMENT OF CHANGES IN NET ASSETS
COLUMBIA INCOME FUND
<Table>
<Caption>
PERIOD ENDED YEAR ENDED YEAR ENDED
MARCH 31, JUNE 30, JUNE 30,
INCREASE (DECREASE) IN NET ASSETS: 2004 (a)(b)($) 2003 (c)(d)($) 2002 ($)
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS Net investment income 20,854,179 25,995,513 18,767,145
Net realized gain (loss) on investments
and foreign currency transactions 9,142,243 3,427,610 (2,281,856)
Net change in unrealized appreciation/
depreciation on investments (2,136,105) 33,226,182 (1,393,561)
---------------------------------------------------
Net Increase from Operations 27,860,317 62,649,305 15,091,728
DISTRIBUTIONS DECLARED TO From net investment income:
SHAREHOLDERS Class A (3,767,366) (4,851,795) (336)
Class B (1,104,196) (1,525,173) --
Class C (260,133) (220,682) --
Class Z (18,030,708) (21,848,537) (19,104,757)
Return of capital:
Class A -- -- (1)
Class Z -- -- (35,938)
---------------------------------------------------
Total Distributions Declared to
Shareholders (23,162,403) (28,446,187) (19,141,032)
SHARE TRANSACTIONS Class A:
Subscriptions 11,896,879 13,307,884 408,267
Proceeds received in connection
with merger -- 92,697,100 --
Distributions reinvested 2,226,081 2,836,832 168
Redemptions (12,719,120) (24,933,740) (204,204)
---------------------------------------------------
Net Increase 1,403,840 83,908,076 204,231
Class B:
Subscriptions 5,143,365 7,355,762 --
Proceeds received in connection
with merger -- 32,521,573 --
Distributions reinvested 676,743 951,704 --
Redemptions (8,955,692) (10,486,433) --
---------------------------------------------------
Net Increase (Decrease) (3,135,584) 30,342,606 --
Class C:
Subscriptions 4,978,358 2,990,400 --
Proceeds received in connection
with merger -- 3,795,846 --
Distributions reinvested 145,525 132,549 --
Redemptions (1,569,954) (1,717,380) --
---------------------------------------------------
Net Increase 3,553,929 5,201,415 --
Class Z:
Subscriptions 87,808,248 140,602,354 129,053,213
Distributions reinvested 17,198,335 20,689,189 17,598,485
Redemptions (111,003,329) (86,620,640) (81,573,998)
---------------------------------------------------
Net Increase (Decrease) (5,996,746) 74,670,903 65,077,700
Net Increase (Decrease) from
Share Transactions (4,174,561) 194,123,000 65,281,931
---------------------------------------------------
Total Increase in Net Assets 523,353 228,326,118 61,232,627
NET ASSETS Beginning of period 555,651,166 327,325,048 266,092,421
End of period 556,174,519 555,651,166 327,325,048
Overdistributed net investment
income at end of period (2,468,472) (1,216,871) (420,053)
</Table>
See notes to financial statements.
20
<Page>
STATEMENT OF CHANGES IN NET ASSETS
COLUMBIA INCOME FUND
<Table>
<Caption>
PERIOD ENDED YEAR ENDED YEAR ENDED
MARCH 31, JUNE 30, JUNE 30,
2004 (a)(b) 2003 (c)(d) 2002
- --------------------------------------------------------------------------------------------------------------------------
CHANGES IN SHARES Class A:
Subscriptions 1,180,862 1,404,563 42,979
Issued in connection with merger -- 9,788,501 --
Issued for distributions reinvested 222,302 295,360 18
Redemptions (1,274,508) (2,622,883) (21,498)
----------------------------------------------------
Net Increase 128,656 8,865,541 21,499
Class B:
Subscriptions 511,389 772,472 --
Issued in connection with merger -- 3,434,168 --
Issued for distributions reinvested 67,614 99,099 --
Redemptions (896,625) (1,095,572) --
----------------------------------------------------
Net Increase (Decrease) (317,622) 3,210,167 --
Class C:
Subscriptions 495,828 311,006 --
Issued in connection with merger -- 400,829 --
Issued for distributions reinvested 14,500 13,770 --
Redemptions (157,399) (178,980) --
----------------------------------------------------
Net Increase 352,929 546,625 --
Class Z:
Subscriptions 8,734,872 14,613,670 13,516,324
Issued for distributions reinvested 1,717,623 2,140,928 1,844,361
Redemptions (11,147,023) (9,059,989) (8,576,296)
----------------------------------------------------
Net Increase (Decrease) (694,528) 7,694,609 6,784,389
</Table>
(a) On October 13, 2003, the Liberty Income Fund was renamed Columbia
Income Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Class B and Class C shares commenced operations on July 15, 2002.
(d) Effective July 15, 2002, Stein Roe Income Fund Class S shares
were redesignated Liberty Income Fund Class Z shares.
See notes to financial statements.
21
<Page>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004 COLUMBIA INCOME FUND
NOTE 1. ORGANIZATION
Columbia Income Fund (the "Fund"), a series of Columbia Funds Trust VIII (the
"Trust"), is a diversified portfolio. The Trust is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
INVESTMENT GOAL
The Fund seeks total return by investing for a high level of current income and
opportunities for capital appreciation.
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 subject to a maximum front-end sales charge of 4.75% based on
the amount of initial investment. Class A shares purchased without an initial
sales charge 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. 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 Income Fund was renamed Columbia Income Fund.
Also on this date, the Liberty-Stein Roe Funds Income Trust was renamed Columbia
Funds Trust VIII.
The fiscal year end of the Fund was changed from June 30 to March 31.
Accordingly, the Fund's 2004 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
Debt securities generally are valued by a pricing service approved by the Fund's
Board of Trustees, based upon market transactions for normal, institutional-size
trading units of similar securities. The services may use various pricing
techniques which take into account appropriate factors such as yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other data, as
well as broker quotes. Debt securities for which quotations are readily
available are valued at an over-the-counter or exchange bid quotation. Certain
debt securities, which tend to be more thinly traded and of lesser quality, are
priced based on fundamental analysis of the financial condition of the issuer
and the estimated value of any collateral. Valuations developed through pricing
techniques may vary from the actual amounts realized upon sale of the
securities, and the potential variation may be greater for those securities
valued using fundamental analysis.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Foreign securities are generally valued at the closing price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events
affecting the values of such foreign securities and such exchange rates may
occur between
22
<Page>
the times at which they are determined and the close of the customary trading
session of the NYSE, which would not be reflected in the computation of the
Fund's net asset value. If events materially affecting the values of such
foreign securities occur and it is determined that market quotations are not
reliable, then these foreign securities will be valued at their fair value using
procedures approved by the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
REPURCHASE AGREEMENTS
The 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.
DELAYED DELIVERY SECURITIES
The Fund may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
to subsequently invest at less advantageous prices. The Fund identifies cash or
liquid portfolio securities as segregated with the custodian in an amount equal
to the delayed delivery commitment.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities.
FOREIGN CURRENCY TRANSACTIONS
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates. Net realized and
unrealized gains (losses) on foreign currency transactions include gains
(losses) arising from the fluctuation in exchange rates between trade and
settlement dates on securities transactions, gains (losses) arising from the
disposition of foreign currency and currency gains (losses) between the accrual
and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes, the Fund does not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains (losses) on
investments.
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.
23
<Page>
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 amortization/accretion adjustments, market
discount reclassification adjustments and paydown reclassifications 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
- ----------------------------------------------------
$ 1,056,623 $ (1,056,610) $ (13)
</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 March 31, 2004,
and the years ended June 30, 2003 and June 30, 2002 was as follows:
<Table>
<Caption>
MARCH 31, JUNE 30, JUNE 30,
2004 2003 2002
- -----------------------------------------------------------------------------------
Distributions paid from:
Ordinary income* $ 23,162,403 $ 28,446,187 $ 19,105,093
Tax return of capital -- -- 35,939
</Table>
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
As of March 31, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
- ---------------------------------------------------------
$ 39,515 $ -- $ 28,427,677
</Table>
* The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to discount accretion/premium amortization on debt
securities and deferral of losses from wash sales.
Unrealized appreciation and depreciation at March 31, 2004, based on cost of
investments for federal income tax purposes was:
<Table>
Unrealized appreciation $ 31,482,800
Unrealized depreciation (3,055,123)
-------------
Net unrealized appreciation $ 28,427,677
</Table>
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
- ---------------------------------------------------------
2008 $ 10,505,238
2009 8,620,038
2010 1,393,345
2011 2,985,140
-------------
$ 23,503,761
</Table>
Capital loss carryforwards of $7,979,870 were utilized and/or expired during the
period ended March 31, 2004 for the Fund. Expired capital loss carryforwards are
recorded as a reduction of paid-in capital.
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 $100 million 0.500%
Next $900 million 0.475%
Over $1 billion 0.450%
</Table>
Prior to November 1, 2003, Columbia was entitled to receive 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 $100 million 0.500%
Over $100 million 0.475%
</Table>
Prior to July 12, 2002, the management fee was paid by the SR&F Income Portfolio
(the "Portfolio") at the same rate.
For the period July 1, 2003 through October 31, 2003, Columbia voluntarily
waived its investment advisory fee by 0.05% annually of the Fund's average daily
net assets.
24
<Page>
For the period ended March 31, 2004 and the year ended June 30, 2003, the Fund's
annualized effective investment advisory fee rates were 0.46% and 0.48%,
respectively.
ADMINISTRATION FEE
Columbia provides accounting and other services to the Fund 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 $100 million 0.150%
Next $900 million 0.125%
Over $1 billion 0.100%
</Table>
Prior to November 1, 2003, Columbia was entitled to receive 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 $100 million 0.150%
Over $100 million 0.125%
</Table>
For the period ended March 31, 2004 and the year ended June 30, 2003, the Fund's
annualized effective administration fee rates were 0.13% and 0.13%,
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 0.031% and 0.038%, respectively.
Prior to July 12, 2002, Columbia received from the Fund an annual flat fee of
$5,000.
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 $34.00 per open account. The Transfer
Agent also receives reimbursement for certain out-of-pocket expenses.
Columbia has voluntarily agreed to reimburse the Fund for a portion of the
transfer agent expenses so that transfer agent expenses (excluding out-of-pocket
expenses) would not exceed 0.23% annually of the Fund's average daily net
assets. Columbia, at its discretion, may revise or discontinue this arrangement
any time.
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. Additionally, prior to November 1, 2003,
Columbia voluntarily reimbursed the Fund for transfer agency fees so that Class
A, Class B and Class C transfer agent expenses (excluding out-of-pocket
expenses) did not exceed 0.23%.
For the period ended March 31, 2004, the Fund's annualized effective transfer
agent fee rates, inclusive of out-of-pocket fees, were 0.23%, 0.23%, 0.23% and
0.16% for Class A, Class B, Class C and Class Z shares, respectively. For the
year ended June 30, 2003, the Fund's effective transfer agent fee rates,
inclusive of out-of-pocket fees, were 0.29%, 0.29%, 0.29% and 0.14% for Class A,
Class B, Class C and Class Z shares, 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 and the year ended
June 30, 2003, the Distributor has retained net underwriting discounts on sales
of the Fund's Class A shares of $15,842 and $1,040, respectively. For the period
ended March 31, 2004, the Distributor has received CDSC fees of $909, $63,301
and $1,566 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 $29,457,
$91,600 and $902 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
25
<Page>
Distributor at the annual rate of 0.25% of the average daily net assets
attributable to Class A, 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 0.60% annually
of Class C average daily net assets.
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.
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. PORTFOLIO INFORMATION
PURCHASES AND SALES OF SECURITIES
For the period ended March 31, 2004, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $468,461,658 and
$480,747,430, respectively, of which $92,394,860 and $113,741,743, respectively,
were U.S. Government securities.
NOTE 6. 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, the average daily loan balance
outstanding on days where borrowings existed was $1,000,000 at a weighted
average interest rate of 1.56%. For the year ended June 30, 2003, there were no
borrowings under these agreements.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. Government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns may disrupt the high-yield market and impair the ability of issuers to
repay principal and interest. Also, an increase in interest rates would likely
have an adverse impact on the value of such obligations. Moreover, high-yield
securities may be less liquid due to the extent that there is no established
retail secondary market and because of a decline in the value of such
securities.
INDUSTRY FOCUS
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
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
26
<Page>
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.
For the period ended March 31, 2004, Columbia has assumed $3,727 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
NOTE 8. 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 9. BUSINESS COMBINATIONS AND MERGERS
FUND MERGERS
As of the end of business on July 12, 2002, the Stein Roe Income Fund acquired
all the net assets of Liberty Income Fund pursuant to a plan of reorganization
approved by Liberty Income Fund shareholders on June 28, 2002. All assets of
Liberty Income Fund were transferred to the Stein Roe Income Fund in a tax-free
exchange and shareholders of Liberty Income Fund received shares of the Stein
Roe Income Fund in exchange for their shares as follows:
<Table>
<Caption>
STEIN ROE
INCOME FUND LIBERTY INCOME FUND UNREALIZED
SHARES ISSUED NET ASSETS RECEIVED DEPRECIATION(1)
--------------------------------------------------------
13,623,498 $ 129,014,519 $ (883,393)
</Table>
(1) Unrealized depreciation is included in the Net Assets Received amount shown
above.
<Table>
<Caption>
NET ASSETS NET ASSETS
OF THE STEIN ROE NET ASSETS OF OF THE STEIN ROE
INCOME FUND LIBERTY INCOME FUND INCOME FUND
PRIOR TO IMMEDIATELY PRIOR TO IMMEDIATELY AFTER
COMBINATION COMBINATION COMBINATION
- -------------------------------------------------------------------
$ 327,547,213 $ 129,014,519 $ 456,561,732
</Table>
Effective July 15, 2002, Stein Roe Income Fund was renamed Liberty Income Fund
(currently known as Columbia Income Fund) and began offering Class B and Class C
shares. The Class S shares were subsequently redesignated as Class Z shares.
CHANGE IN FUND STRUCTURE
Prior to July 13, 2002, the Fund invested substantially all of its assets in the
SR&F Income Portfolio (the "Portfolio"), as part of a master/feeder structure.
The Portfolio allocated income, expenses, realized and unrealized gains (losses)
to its investors 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 Portfolio were distributed to the Fund based on
allocation methods in compliance with the Internal Revenue Service.
27
<Page>
FINANCIAL HIGHLIGHTS
COLUMBIA INCOME FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD PERIOD
ENDED ENDED
MARCH 31, YEAR ENDED JUNE 30, JUNE 30,
CLASS A SHARES 2004(a)(b) 2003(c) 2002(c) 2001(c)(d)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 9.44 $ 9.54 $ 9.21
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.39 0.45 0.60(f) 0.61
Net realized and unrealized gain (loss)
on investments and foreign currency 0.15 0.75 (0.08)(f) 0.32
------------ ------------ ------------ ------------
Total from Investment Operations 0.54 1.20 0.52 0.93
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.43) (0.54) (0.62) (0.60)
Return of capital -- -- --(g) --
------------ ------------ ------------ ------------
Total Distributions Declared
to Shareholders (0.43) (0.54) (0.62) (0.60)
NET ASSET VALUE, END OF PERIOD $ 10.21 $ 10.10 $ 9.44 $ 9.54
Total return (h) 5.50%(i)(j) 13.18%(i) 5.53% 10.41%(j)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (k) 1.14%(l) 1.23% 1.10% 1.12%(l)
Interest expense --%(l)(m) -- -- --
Expenses (k) 1.14%(l) 1.23% 1.10% 1.12%(l)
Net investment income (k) 5.20%(l) 5.12% 6.32%(f) 7.08%(l)
Waiver/reimbursement 0.03%(l) 0.05% -- --
Portfolio turnover rate 93%(j) 96% 136%(n) 128%(n)
Net assets, end of period (000's) $ 92,053 $ 89,740 $ 204 $ 1
</Table>
(a) On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(d) Class A shares were initially offered on July 31, 2000. Per share data and
total return reflect activity from that date.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Income Portfolio adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting discount on all debt securities. The
effect of this change for the year ended June 30, 2002, was to decrease net
investment income per share by $0.01, decrease net realized and unrealized
loss per share by $0.01 and decrease the ratio of net investment income to
average net assets from 6.40% to 6.32%. Per share data and ratios for the
period prior to June 30, 2002 have not been restated to reflect this change
in presentation.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(i) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(j) Not annualized.
(k) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l) Annualized.
(m) Rounds to less than 0.01%.
(n) Portfolio turnover disclosed is for the SR&F Income Portfolio.
28
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD PERIOD
ENDED ENDED
MARCH 31, JUNE 30,
CLASS B SHARES 2004(a)(b) 2003(c)(d)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 9.47
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.33 0.40
Net realized and unrealized gain on investments and foreign currency 0.15 0.68
------------ ------------
Total from Investment Operations 0.48 1.08
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.37) (0.45)
NET ASSET VALUE, END OF PERIOD $ 10.21 $ 10.10
Total return (f) (g) (h) 4.91% 11.78%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (i) (j) 1.89% 1.99%
Interest expense --%(j)(k) --
Expenses (i) (j) 1.89% 1.99%
Net investment income (i) (j) 4.46% 4.39%
Waiver/reimbursement (j) 0.03% 0.11%
Portfolio turnover rate 93%(h) 96%
Net assets, end of period (000's) $ 29,534 $ 32,430
</Table>
(a) On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Class B shares were initially offered on July 15, 2002. Per share data and
total return reflect activity from that date.
(d) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(g) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
(k) Rounds to less than 0.01%.
29
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD PERIOD
ENDED ENDED
MARCH 31, JUNE 30,
CLASS C SHARES 2004 (a)(b) 2003 (c)(d)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 9.47
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.34 0.42
Net realized and unrealized gain on investments and foreign currency 0.15 0.68
------------ ------------
Total from Investment Operations 0.49 1.10
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.38) (0.47)
NET ASSET VALUE, END OF PERIOD $ 10.21 $ 10.10
Total return (f) (g) (h) 5.03% 11.94%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (i) (j) 1.74% 1.84%
Interest expense --%(j)(k) --
Expenses (i) (j) 1.74% 1.84%
Net investment income (i) (j) 4.52% 4.51%
Waiver/reimbursement (j) 0.18% 0.23%
Portfolio turnover rate 93%(h) 96%
Net assets, end of period (000's) $ 9,185 $ 5,522
</Table>
(a) On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Class C shares were initially offered on July 15, 2002. Per share data and
total return reflect activity from that date.
(d) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(g) Had the Investment Advisor/Distributor not reimbursed a portion of
expenses, total return would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
(k) Rounds to less than 0.01%.
30
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
MARCH 31, YEAR ENDED JUNE 30,
CLASS Z SHARES 2004(a)(b) 2003(c)(d) 2002(d) 2001(d) 2000(d) 1999(d)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 9.44 $ 9.54 $ 9.15 $ 9.41 $ 10.03
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (e) 0.41 0.53 0.63(f) 0.69 0.70 0.67
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.16 0.71 (0.09)(f) 0.39 (0.26) (0.62)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment
Operations 0.57 1.24 0.54 1.08 0.44 0.05
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.46) (0.58) (0.64) (0.69) (0.70) (0.67)
Return of capital -- -- --(g) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions Declared
to Shareholders (0.46) (0.58) (0.64) (0.69) (0.70) (0.67)
NET ASSET VALUE, END OF PERIOD $ 10.21 $ 10.10 $ 9.44 $ 9.54 $ 9.15 $ 9.41
Total return (h) 5.80%(i)(j) 13.61% 5.80% 12.20% 4.92% 0.52%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (k) 0.82%(l) 0.84% 0.85% 0.86% 0.86% 0.84%
Interest expense --%(l)(m) -- -- -- -- --
Expenses (k) 0.82%(l) 0.84% 0.85% 0.86% 0.86% 0.84%
Net investment income (k) 5.46%(l) 5.51% 6.57%(f) 7.32% 7.58% 6.91%
Waiver/reimbursement 0.02%(l) -- -- -- -- --
Portfolio turnover rate 93%(j) 96% 136%(n) 128%(n) 205%(n) 203%(n)
Net assets, end of period (000's) $ 425,402 $ 427,959 $ 327,121 $ 266,091 $ 227,090 $ 294,640
</Table>
(a) On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Effective July 15, 2002, the Stein Roe Income Fund's Class S shares were
redesignated Liberty Income Fund Class Z shares.
(d) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Income Portfolio adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting discount on all debt securities. The
effect of this change for the year ended June 30, 2002, was to decrease net
investment income per share by $0.01, decrease net realized and unrealized
loss per share by $0.01 and decrease the ratio of net investment income to
average net assets from 6.65% to 6.57%. Per share data and ratios for
periods prior to June 30, 2002 have not been restated to reflect this
change in presentation.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested.
(i) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(j) Not annualized.
(k) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l) Annualized.
(m) Rounds to less than 0.01%.
(n) Portfolio turnover disclosed is for the SR&F Income Portfolio.
31
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
COLUMBIA INCOME FUND
TO THE TRUSTEES OF COLUMBIA FUNDS TRUST VIII AND THE SHAREHOLDERS OF COLUMBIA
INCOME 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 Income Fund (the "Fund")
(a series of Columbia Funds Trust VIII) 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
32
<Page>
UNAUDITED INFORMATION
COLUMBIA INCOME 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.
33
<Page>
TRUSTEES
COLUMBIA INCOME 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
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS 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.
34
<Page>
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS 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
Suite 3204 February1999).Oversees 120(3), Lee Enterprises (print media), WR Hambrecht + Co.
New York, NY 10022 (financial service provider), First Health (healthcare), Reader's Digest (publishing)
Trustee (since 1994) and 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.
35
<Page>
OFFICERS
COLUMBIA INCOME 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 since
One Financial Center June 2001 (formerly Controller of the Columbia Funds and of the Liberty All-Star
Boston, MA 02111 Funds from May 2002 to May 2004); Controller and Chief Accounting Officer of the
Chief Accounting Officer (since 2001) 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, Product
Boston, MA 02111 Strategy & Development of Liberty Funds Group from February 2001 to June 2002;
Controller (since 2004) 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 Columbia
One Financial Center Funds and of the Liberty All-Star Funds since December 2000; Vice President of the
Boston, MA 02111 Advisor since April 2003 (formerly Chief Accounting Officer and Controller of the
Treasurer (since 2000) and Liberty Funds and Liberty All-Star Funds from February 1998 to October 2000);
President (since 2004) 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 December
One Financial Center 2003; Senior Counsel, Fleet Boston Financial Corporation since January 1996;
Boston, MA 02111 Associate General Counsel, Columbia Management Group since November 2002.
Secretary (since 2003)
</Table>
36
<Page>
IMPORTANT INFORMATION ABOUT THIS REPORT
COLUMBIA INCOME 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 Income 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.
37
<Page>
[GRAPHIC]
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 INCOME 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
751-02/630R-0304 (05/04) 04/1094
<Page>
[GRAPHIC]
COLUMBIA INTERMEDIATE BOND FUND
ANNUAL REPORT
MARCH 31, 2004
[COLUMBIAFUNDS(R) LOGO]
A MEMBER OF COLUMBIA MANAGEMENT GROUP
<Page>
TABLE OF CONTENTS
<Table>
Fund Profile 1
Performance Information 2
Economic Update 3
Portfolio Managers' Report 4
Financial Statements 6
Investment Portfolio 6
Statement of Assets and Liabilities 16
Statement of Operations 17
Statement of Changes in Net Assets 18
Notes to Financial Statements 20
Financial Highlights 26
Report of Independent Registered Public Accounting Firm 30
Unaudited Information 31
Trustees 32
Officers 34
Important Information About This Report 35
Columbia Funds 36
</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 INTERMEDIATE BOND 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 INTERMEDIATE BOND 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 STRUCTURE AS OF 03/31/04 (%)
<Table>
Corporate fixed-income bonds & notes 63.8
Government agencies & obligations 20.3
Asset-backed & non-agency mortgage-backed securities 11.9
Cash equivalents, net other assets & liabilities 4.0
</Table>
QUALITY BREAKDOWN AS OF 03/31/04 (%)
<Table>
AAA 35.8
AA 7.5
A 23.8
BBB 21.6
BB 8.2
B and lower 3.1
</Table>
[CHART]
MATURITY BREAKDOWN AS OF 03/31/04 (%)
<Table>
0-1 YEAR 5.0%
1-5 YEARS 55.2%
5-10 YEARS 28.8%
10-20 YEARS 5.7%
20+ YEARS 5.3%
</Table>
Portfolio structure is calculated as a percentage of net assets. Quality and
maturity breakdowns are calculated as a percentage of total investments. Ratings
shown in the quality breakdown represent the highest rating assigned to a
particular bond by one of the following respected rating agencies: Standard &
Poor's, Moody's or Fitch Investors Service, Inc. Maturity breakdown is based on
each security's effective maturity and other conditions that affect a bond's
maturity.
(C)2004 Morningstar, Inc. All Rights Reserved. The information contained herein:
(1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is not warranted to be accurate, complete or
timely. Neither Morningstar nor its content providers are responsible for any
damages or losses arising from any use of this information. Past performance is
no guarantee of future results.
The Morningstar Style Box(TM) reveals a fund's investment strategy. For equity
funds the vertical axis shows the market capitalization of the stocks owned and
the horizontal axis shows investment style (value, blend or growth). For
fixed-income funds the vertical axis shows the average credit quality of the
bonds owned, and the horizontal axis shows interest rate sensitivity as measured
by a bond's duration (short, intermediate or long). All of these numbers are
drawn from the data most recently provided by the fund and entered into
Morningstar's database as of month-end. Although the data are gathered from
reliable sources, Morningstar cannot guarantee completeness and accuracy. As of
03/31/2004.
[SIDENOTE]
SUMMARY
- - FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 2004, THE FUND'S CLASS A SHARES
RETURNED 4.59% WITHOUT SALES CHARGE.
- - THE FUND'S RETURN WAS BETTER THAN THE RETURN OF ITS BENCHMARK AND THE AVERAGE
RETURN OF ITS PEER GROUP, THE LIPPER INTERMEDIATE INVESTMENT GRADE BOND
CATEGORY.
- - SIGNIFICANT POSITIONS IN INVESTMENT GRADE AND HIGH-YIELD CORPORATE BONDS WERE
KEY TO THE FUND'S STRONG PERFORMANCE.
[CHART]
<Table>
CLASS A SHARES 4.59%
LEHMAN BROTHERS AGGREGATE BOND INDEX 2.83%
</Table>
OBJECTIVE
Seeks total return by investing for
a high level of current income
and opportunities for capital
appreciation
TOTAL NET ASSETS
$1,103.9 million
MORNINGSTAR STYLE BOX
[GRAPHIC]
1
<Page>
PERFORMANCE INFORMATION
COLUMBIA INTERMEDIATE BOND FUND
[CHART]
VALUE OF A $10,000 INVESTMENT 04/01/94 - 03/31/04
<Table>
<Caption>
CLASS A SHARES WITHOUT CLASS A SHARES LEHMAN BROTHERS AGGREGATE
SALES CHARGE WITH SALES CHARGE BOND INDEX
4/1/1994 $ 10,000 $ 9,525 $ 10,000
4/30/1994 $ 9,938 $ 9,466 $ 9,920
5/31/1994 $ 9,912 $ 9,441 $ 9,919
6/30/1994 $ 9,921 $ 9,450 $ 9,897
7/31/1994 $ 10,070 $ 9,592 $ 10,094
8/31/1994 $ 10,103 $ 9,623 $ 10,106
9/30/1994 $ 9,992 $ 9,517 $ 9,958
10/31/1994 $ 9,977 $ 9,503 $ 9,949
11/30/1994 $ 9,914 $ 9,443 $ 9,927
12/31/1994 $ 9,964 $ 9,490 $ 9,995
1/31/1995 $ 10,111 $ 9,631 $ 10,193
2/28/1995 $ 10,316 $ 9,826 $ 10,436
3/31/1995 $ 10,380 $ 9,887 $ 10,500
4/30/1995 $ 10,529 $ 10,029 $ 10,646
5/31/1995 $ 10,842 $ 10,327 $ 11,059
6/30/1995 $ 10,925 $ 10,406 $ 11,139
7/31/1995 $ 10,923 $ 10,404 $ 11,115
8/31/1995 $ 11,074 $ 10,548 $ 11,249
9/30/1995 $ 11,172 $ 10,641 $ 11,358
10/31/1995 $ 11,298 $ 10,762 $ 11,506
11/30/1995 $ 11,477 $ 10,932 $ 11,679
12/31/1995 $ 11,644 $ 11,091 $ 11,842
1/31/1996 $ 11,761 $ 11,202 $ 11,920
2/29/1996 $ 11,575 $ 11,025 $ 11,713
3/31/1996 $ 11,495 $ 10,949 $ 11,631
4/30/1996 $ 11,426 $ 10,883 $ 11,566
5/31/1996 $ 11,426 $ 10,883 $ 11,543
6/30/1996 $ 11,559 $ 11,010 $ 11,697
7/31/1996 $ 11,612 $ 11,060 $ 11,729
8/31/1996 $ 11,608 $ 11,057 $ 11,709
9/30/1996 $ 11,798 $ 11,237 $ 11,913
10/31/1996 $ 12,032 $ 11,461 $ 12,177
11/30/1996 $ 12,265 $ 11,682 $ 12,385
12/31/1996 $ 12,171 $ 11,593 $ 12,270
1/31/1997 $ 12,245 $ 11,663 $ 12,308
2/28/1997 $ 12,284 $ 11,700 $ 12,339
3/31/1997 $ 12,144 $ 11,567 $ 12,202
4/30/1997 $ 12,329 $ 11,744 $ 12,385
5/31/1997 $ 12,461 $ 11,869 $ 12,503
6/30/1997 $ 12,636 $ 12,036 $ 12,651
7/31/1997 $ 12,995 $ 12,377 $ 12,993
8/31/1997 $ 12,860 $ 12,249 $ 12,883
9/30/1997 $ 13,041 $ 12,421 $ 13,072
10/31/1997 $ 13,169 $ 12,543 $ 13,262
11/30/1997 $ 13,220 $ 12,592 $ 13,323
12/31/1997 $ 13,306 $ 12,674 $ 13,457
1/31/1998 $ 13,480 $ 12,840 $ 13,629
2/28/1998 $ 13,506 $ 12,864 $ 13,618
3/31/1998 $ 13,579 $ 12,934 $ 13,665
4/30/1998 $ 13,649 $ 13,001 $ 13,736
5/31/1998 $ 13,768 $ 13,114 $ 13,866
6/30/1998 $ 13,840 $ 13,182 $ 13,984
7/31/1998 $ 13,872 $ 13,213 $ 14,014
8/31/1998 $ 13,805 $ 13,149 $ 14,242
9/30/1998 $ 14,095 $ 13,425 $ 14,575
10/31/1998 $ 13,871 $ 13,212 $ 14,498
11/30/1998 $ 14,084 $ 13,415 $ 14,581
12/31/1998 $ 14,160 $ 13,488 $ 14,624
1/31/1999 $ 14,308 $ 13,628 $ 14,728
2/28/1999 $ 14,123 $ 13,452 $ 14,470
3/31/1999 $ 14,283 $ 13,604 $ 14,550
4/30/1999 $ 14,344 $ 13,663 $ 14,597
5/31/1999 $ 14,247 $ 13,570 $ 14,468
6/30/1999 $ 14,200 $ 13,525 $ 14,422
7/31/1999 $ 14,201 $ 13,526 $ 14,360
8/31/1999 $ 14,197 $ 13,522 $ 14,353
9/30/1999 $ 14,340 $ 13,659 $ 14,519
10/31/1999 $ 14,357 $ 13,675 $ 14,573
11/30/1999 $ 14,389 $ 13,705 $ 14,571
12/31/1999 $ 14,340 $ 13,659 $ 14,501
1/31/2000 $ 14,370 $ 13,688 $ 14,454
2/29/2000 $ 14,518 $ 13,829 $ 14,628
3/31/2000 $ 14,665 $ 13,968 $ 14,822
4/30/2000 $ 14,575 $ 13,883 $ 14,779
5/31/2000 $ 14,494 $ 13,805 $ 14,771
6/30/2000 $ 14,856 $ 14,150 $ 15,078
7/31/2000 $ 15,018 $ 14,305 $ 15,216
8/31/2000 $ 15,254 $ 14,529 $ 15,436
9/30/2000 $ 15,399 $ 14,667 $ 15,534
10/31/2000 $ 15,420 $ 14,688 $ 15,636
11/30/2000 $ 15,582 $ 14,842 $ 15,892
12/31/2000 $ 15,861 $ 15,108 $ 16,188
1/31/2001 $ 16,243 $ 15,472 $ 16,454
2/28/2001 $ 16,438 $ 15,657 $ 16,597
3/31/2001 $ 16,548 $ 15,762 $ 16,680
4/30/2001 $ 16,505 $ 15,721 $ 16,610
5/31/2001 $ 16,708 $ 15,915 $ 16,709
6/30/2001 $ 16,718 $ 15,924 $ 16,773
7/31/2001 $ 17,108 $ 16,295 $ 17,148
8/31/2001 $ 17,329 $ 16,506 $ 17,346
9/30/2001 $ 17,148 $ 16,334 $ 17,549
10/31/2001 $ 17,390 $ 16,564 $ 17,915
11/30/2001 $ 17,382 $ 16,556 $ 17,668
12/31/2001 $ 17,295 $ 16,473 $ 17,555
1/31/2002 $ 17,428 $ 16,600 $ 17,697
2/28/2002 $ 17,522 $ 16,690 $ 17,869
3/31/2002 $ 17,399 $ 16,573 $ 17,572
4/30/2002 $ 17,554 $ 16,720 $ 17,913
5/31/2002 $ 17,724 $ 16,882 $ 18,065
6/30/2002 $ 17,570 $ 16,736 $ 18,221
7/31/2002 $ 17,435 $ 16,607 $ 18,441
8/31/2002 $ 17,705 $ 16,864 $ 18,753
9/30/2002 $ 17,788 $ 16,943 $ 19,057
10/31/2002 $ 17,566 $ 16,732 $ 18,969
11/30/2002 $ 17,835 $ 16,988 $ 18,963
12/31/2002 $ 18,227 $ 17,361 $ 19,356
1/31/2003 $ 18,311 $ 17,441 $ 19,373
2/28/2003 $ 18,578 $ 17,696 $ 19,641
3/31/2003 $ 18,638 $ 17,752 $ 19,625
4/30/2003 $ 18,969 $ 18,068 $ 19,788
5/31/2003 $ 19,429 $ 18,506 $ 20,156
6/30/2003 $ 19,510 $ 18,583 $ 20,116
7/31/2003 $ 19,034 $ 18,130 $ 19,440
8/31/2003 $ 19,089 $ 18,183 $ 19,568
9/30/2003 $ 19,637 $ 18,704 $ 20,087
10/31/2003 $ 19,606 $ 18,674 $ 19,900
11/30/2003 $ 19,704 $ 18,768 $ 19,948
12/31/2003 $ 19,911 $ 18,965 $ 20,151
1/31/2004 $ 20,118 $ 19,162 $ 20,312
2/29/2004 $ 20,261 $ 19,298 $ 20,532
3/31/2004 $ 20,389 $ 19,423 $ 20,689
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or redemption of fund shares. The Lehman
Brothers Aggregate Bond Index is a market value-weighted index that tracks
fixed-rate, publicly placed, dollar-dominated, and non-convertible investment
grade debt issues. Unlike the fund, indices are not investments, do not incur
fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. Securities in the fund may not match those in an
index.
AVERAGE ANNUAL TOTAL RETURN AS OF 03/31/04 (%)
<Table>
<Caption>
SHARE CLASS A B C Z
- -----------------------------------------------------------------------------------------------
INCEPTION 07/31/00 02/01/02 02/01/02 12/05/78
- -----------------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
- -----------------------------------------------------------------------------------------------
9-month (cumulative) 4.59 -0.40 4.00 -1.00 4.12 3.12 4.78
1-year 9.48 4.31 8.67 3.67 8.83 7.83 9.76
5-year 7.39 6.35 7.04 6.74 7.11 7.11 7.60
10-year 7.38 6.86 7.21 7.21 7.25 7.25 7.49
</Table>
All results shown assume reinvestment of distributions. The "with sales charge"
returns include the maximum 4.75% charge for class A shares, the appropriate
class B contingent deferred sales charge for the holding period after purchase
as follows: through first year--5%, second year--4%, third year--3%, fourth
year--3%, fifth year--2%, sixth year--1%, thereafter--0%, and the class C
contingent deferred sales charge of 1% for the first year only. Performance for
different share classes will vary based on differences in sales charges and fees
associated with each class.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
The performance information for class A, B and C shares (newer class shares)
includes returns of the fund's class Z shares (the oldest existing fund class)
for periods prior to the inception date of the newer share classes. These class
Z share returns were not restated to reflect any expense differential (e.g.,
Rule 12b-1 fees) between class Z shares and the newer class shares. Had the
expense differential been reflected, the returns for the periods prior to the
inception of the newer class shares would have been lower.
[SIDENOTE]
PERFORMANCE OF A $10,000 INVESTMENT 04/01/94 - 03/31/04 ($)
<Table>
<Caption>
SALES CHARGE: WITHOUT WITH
- -------------------------------------------------------------
Class A 20,389 19,423
Class B 20,062 20,062
Class C 20,127 20,127
Class Z 20,590 n/a
</Table>
Performance data quoted represents past performance and current performance may
be lower or higher. Past performance is no guarantee of future results. The
investment return and principal value will fluctuate so that 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.
2
<Page>
ECONOMIC UPDATE
COLUMBIA INTERMEDIATE BOND 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 the 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.
[CHART]
<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%.
[CHART]
<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.
3
<Page>
PORTFOLIO MANAGERS' REPORT
COLUMBIA INTERMEDIATE BOND FUND
The Board of Trustees for Columbia Intermediate Bond 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, class A shares of Columbia
Intermediate Bond Fund returned 4.59% without sales charge. The fund
outperformed its benchmark, the Lehman Brothers Aggregate Bond Index, which
posted a total return of 2.83% for the same period. The fund also beat its peer
group, the Lipper Intermediate Investment Grade Bond Category average, which
returned 2.62% for the period.(1)
FURTHER GAINS FOR CORPORATE BONDS
Low interest rates and lower taxes helped to extend the US economic expansion
into 2004. The expansion has been beneficial for corporate profits, which have
risen strongly over the past year, and attracted investors who were ready to
assume more risk. The fund's substantial commitment to lower quality investment
grade bonds--especially BBB-rated issues--and high-yield corporate bonds during
a period of high investor demand accounted for the majority of the fund's strong
return relative to its benchmark.
UTILITIES AND TELECOM BOUNCED BACK
Utility and telecommunications companies took advantage of improving business
conditions, lower interest rates and easier access to the capital markets to
refinance high-coupon debt. These savings led to higher profits, making bonds
in both industries more attractive. California-based Edison Mission Energy and
Iowa's MidAmerican Energy Holdings got a boost from the growing economy. Bonds
of Ohio-based FirstEnergy recovered as the company's Davis Besse nuclear plant's
restart date approached. The bonds had fallen when the plant went off-line.
Bonds of Canadian cell-phone operator Rogers Cantel rose in value. The company
increased its customer base and revenues after shoring up its finances. These
strong performers boosted the fund's return during the period.
STRONG RETURNS FROM AUTOS AND AIRLINES
We bought bonds of Ford Motor Credit when the possibility of a ratings downgrade
drove off investors. Our view was more positive, and this timely purchase was
rewarded when the bonds rose in response to Ford's restructuring initiatives.
Similarly, Dana, a supplier of truck and automobile parts, improved its bottom
line by streamlining operations and cutting costs. Increased travel volumes and
cost reductions boosted profits Fundat Continental Airlines, Delta Air Lines and
American Airlines and bonds collateralized by their aircraft recovered in
response.
(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]
NET ASSET VALUE PER SHARE AS OF 03/31/04 ($)
<Table>
Class A 9.27
Class B 9.27
Class C 9.27
Class Z 9.27
</Table>
DISTRIBUTIONS DECLARED PER SHARE
07/01/03 - 03/31/04 ($)
<Table>
Class A 0.32
Class B 0.27
Class C 0.28
Class Z 0.34
</Table>
SEC YIELDS AS OF 03/31/04 (%)
<Table>
Class A 3.56
Class B 2.99
Class C 3.14
Class Z 3.99
</Table>
The 30-day SEC yields reflect the portfolio's earning power net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period.
HOLDINGS DISCUSSED IN THIS REPORT AS OF 03/31/04 (%)
<Table>
Edison Mission Energy 0.1
MidAmerican Energy Holdings 1.6
FirstEnergy 0.9
Rogers Cantel 0.2
Ford Motor Credit 1.7
Dana 0.5
Continental Airlines 0.9
Delta Air Lines 0.6
American Airlines 0.6
Tenet Healthcare 0.6
</Table>
Your fund is actively managed and the composition of its portfolio will change
over time. Information provided is calculated as a percentage of net assets.
4
<Page>
SUPERMARKET, CHEMICAL AND HEALTHCARE HURT RESULTS
We eliminated Winn Dixie Stores whose bonds declined as the company struggled
against the entry of Wal-Mart (not in the portfolio) and other superstores into
its market area. We also sold France's Rhodia when this chemical company's
margins were pinched by the rising cost of oil. But we remain optimistic about
Tenet Healthcare, an operator of for-profit hospitals and related heath care
facilities whose bonds fell amid questions about Medicaid funding and related
pressure on operating margins.
ADJUSTMENTS FOR THE MONTHS AHEAD
We believe continued economic growth could boost corporate bonds further, but
returns are unlikely to match recent gains and interest rates are likely to
rise. Therefore, we have taken steps to increase portfolio quality and reduce
interest rate risk. We have reduced our exposure to high-yield and investment
grade corporate bonds, and made modest additions to Treasuries, mortgage-backed
and other asset-backed securities.
During this reporting period Columbia Intermediate Bond Fund was
managed by Michael T. Kennedy and Thomas LaPointe. Effective May 14,
2004, Thomas LaPointe, Mark Newlin and Steven Luetger became the
fund's co-managers.
Investing in high-yield bonds involves greater credit and other risks not
associated with investing in higher-quality bonds. Bond investing also involves
interest rate risk, which means that bond prices may change as interest rates
increase or decrease. Foreign investments involve market, political, accounting
and currency risks not associated with other investments.
[SIDENOTE]
RETURNS ARE UNLIKELY TO MATCH RECENT GAINS AND INTEREST RATES ARE LIKELY TO
RISE. THEREFORE, WE HAVE TAKEN STEPS TO INCREASE PORTFOLIO QUALITY AND REDUCE
INTEREST RATE RISK.
5
<Page>
INVESTMENT PORTFOLIO
MARCH 31, 2004
COLUMBIA INTERMEDIATE BOND FUND
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 63.8%
AGRICULTURE, FORESTRY & FISHING - 0.3%
AGRICULTURAL SERVICES - 0.2%
BUNGE LTD. FINANCE CORP. 4.375% 12/15/08 (a) 2,600,000 2,691,338
Agricultural Services Total 2,691,338
FORESTRY - 0.1%
TEMBEC INDUSTRIES, INC. 8.500% 02/01/11 550,000 547,250
Forestry Total 547,250
AGRICULTURE, FORESTRY & FISHING
TOTAL 3,238,588
CONSTRUCTION - 0.3%
BUILDING CONSTRUCTION - 0.3%
D.R. HORTON, INC. 9.750% 09/15/10 1,000,000 1,225,000
STANDARD-PACIFIC CORP. 9.250% 04/15/12 2,000,000 2,350,000
Building Construction Total 3,575,000
CONSTRUCTION TOTAL 3,575,000
FINANCE, INSURANCE & REAL ESTATE - 26.2%
DEPOSITORY INSTITUTIONS - 5.6%
BANK ONE CORP. 6.000% 08/01/08 (b) 11,888,000 13,403,958
BARCLAYS BANK PLC 7.375% 06/15/49 (a)(c) 5,000,000 5,863,250
FIRST MASSACHUSETTS BANK 7.625% 06/15/11 5,500,000 6,561,280
POPULAR, INC. 6.125% 10/15/06 8,250,000 8,904,142
RABOBANK CAPITAL FUNDING II 5.260% 12/31/13 (a) 9,500,000 9,861,570
WELLS FARGO FINANCIAL, INC. 4.875% 06/12/07 14,300,000 15,381,223
WESTERN FINANCIAL BANK 9.625% 05/15/12 2,000,000 2,280,000
Depository Institutions Total 62,255,423
FINANCIAL SERVICES - 5.5%
CAPITAL ONE BANK 5.125% 02/15/14 6,650,000 6,760,922
CITICORP, INC. 8.040% 12/15/19 (a) 12,075,000 14,614,372
GENERAL ELECTRIC CAPITAL CORP. 5.375% 03/15/07 10,000,000 10,838,900
HARTFORD FINANCIAL SERVICES GROUP 4.700% 09/01/07 4,000,000 4,255,320
INTERNATIONAL LEASE FINANCE CORP. 6.375% 03/15/09 9,000,000 10,150,110
JOHN DEERE CAPITAL CORP. 7.000% 03/15/12 9,000,000 10,634,670
PF EXPORT RECEIVABLES MASTER TRUST 3.748% 06/01/13 (a) 3,250,000 3,237,780
Financial Services Total 60,492,074
</Table>
See notes to investment portfolio.
6
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
FINANCE, INSURANCE & REAL
ESTATE - (CONTINUED)
HOLDING & OTHER INVESTMENT OFFICES - 1.2%
HSBC CAPITAL FUNDING L.P. 9.547% 12/31/49 (a)(c) 10,500,000 13,630,732
Holding & Other Investment Offices
Total 13,630,732
INSURANCE CARRIERS - 3.0%
FLORIDA WINDSTORM UNDERWRITING ASSOCIATION 7.125% 02/25/19 (a) 4,425,000 5,415,050
FUND AMERICAN COMPANIES, INC. 5.875% 05/15/13 4,250,000 4,475,165
LIBERTY MUTUAL GROUP, INC. 5.750% 03/15/14 (a) 6,200,000 6,168,194
PRUDENTIAL INSURANCE CO. OF AMERICA 7.650% 07/01/07 (a) 10,105,000 11,529,603
TRAVELERS PROPERTY CASUALTY CORP. 3.750% 03/15/08 4,750,000 4,866,422
Insurance Carriers Total 32,454,434
NON-DEPOSITORY CREDIT INSTITUTIONS - 4.6%
COUNTRYWIDE HOME LOANS, INC. 5.500% 08/01/06 7,500,000 8,052,900
FORD MOTOR CREDIT CO. 5.800% 01/12/09 4,650,000 4,794,848
7.000% 10/01/13 5,500,000 5,812,565
7.375% 10/28/09 7,000,000 7,638,330
GENERAL MOTORS ACCEPTANCE CORP. 6.125% 01/22/08 3,500,000 3,766,420
6.150% 04/05/07 5,000,000 5,385,150
HOUSEHOLD FINANCE CORP. 5.875% 02/01/09 8,200,000 9,089,536
IBM CANADA CREDIT SERVICES CO. 3.750% 11/30/07 (a) 6,000,000 6,132,540
Non-Depository Credit Institutions
Total 50,672,289
REAL ESTATE - 2.5%
EOP OPERATING L.P. 8.375% 03/15/06 11,000,000 12,300,860
FOREST CITY ENTERPRISES, INC. 7.625% 06/01/15 1,000,000 1,080,000
iSTAR FINANCIAL, INC. 8.750% 08/15/08 4,800,000 5,442,000
PRUDENTIAL PROPERTY INVESTMENT MANAGERS LTD. 7.125% 07/01/07 (a) 5,300,000 5,998,805
THORNBURG MORTGAGE, INC. 8.000% 05/15/13 2,500,000 2,637,500
Real Estate Total 27,459,165
SECURITY BROKERS & DEALERS - 3.8%
BEAR STEARNS COMPANIES, INC. 4.000% 01/31/08 10,000,000 10,384,700
CREDIT SUISSE FIRST BOSTON, INC. 4.625% 01/15/08 5,000,000 5,299,900
5.875% 08/01/06 7,750,000 8,388,057
JEFFERIES GROUP, INC. 7.750% 03/15/12 7,250,000 8,644,102
</Table>
See notes to investment portfolio.
7
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
FINANCE, INSURANCE & REAL
ESTATE - (CONTINUED)
SECURITY BROKERS &
DEALERS - (CONTINUED)
J.P. MORGAN & CO. 6.000% 01/15/09 1,748,000 1,957,008
MORGAN STANLEY 4.750% 04/01/14 2,000,000 1,961,260
6.100% 04/15/06 5,000,000 5,407,300
Security Brokers & Dealers
Total 42,042,327
FINANCE, INSURANCE & REAL ESTATE
TOTAL 289,006,444
MANUFACTURING - 7.1%
APPAREL - 0.8%
CINTAS CORP. 5.125% 06/01/07 5,315,000 5,726,594
6.000% 06/01/12 3,250,000 3,631,550
Apparel Total 9,358,144
AUTO PARTS & ACCESSORIES - 0.5%
DANA CORP. 9.000% 08/15/11 3,200,000 3,856,000
10.125% 03/15/10 1,000,000 1,155,000
Auto Parts & Accessories Total 5,011,000
CHEMICALS & ALLIED PRODUCTS - 2.0%
DOW CHEMICAL CO. 5.750% 11/15/09 6,000,000 6,585,720
EASTMAN CHEMICAL CO. 3.250% 06/15/08 2,750,000 2,717,523
6.300% 11/15/18 7,500,000 8,066,400
FMC CORP. 10.250% 11/01/09 920,000 1,085,600
LYONDELL CHEMICAL CO. 9.625% 05/01/07 2,000,000 2,065,000
NOVA CHEMICALS LTD. 6.500% 01/15/12 (a) 1,000,000 1,038,280
Chemicals & Allied Products Total 21,558,523
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.2%
THOMAS & BETTS CORP. 7.250% 06/01/13 2,000,000 2,210,000
Electronic & Electrical Equipment
Total 2,210,000
FOOD & KINDRED PRODUCTS - 0.6%
CADBURY-SCHWEPPES PLC 3.875% 10/01/08 (a) 7,000,000 7,144,690
Food & Kindred Products Total 7,144,690
LUMBER & WOOD PRODUCTS - 0.3%
GEORGIA-PACIFIC CORP. 7.500% 05/15/06 3,000,000 3,232,500
Lumber & Wood Products Total 3,232,500
MACHINERY & COMPUTER EQUIPMENT - 0.2%
BRIGGS & STRATTON CORP. 8.875% 03/15/11 1,375,000 1,684,375
Machinery & Computer Equipment
Total 1,684,375
</Table>
See notes to investment portfolio.
8
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
MANUFACTURING - (CONTINUED)
MISCELLANEOUS MANUFACTURING - 1.4%
HUTCHISON WHAMPOA INTERNATIONAL LTD. 6.250% 01/24/14 (a) 1,500,000 1,557,630
6.500% 02/13/13 (a) 10,500,000 11,145,330
SPX CORP. 7.500% 01/01/13 2,000,000 2,160,000
TEMPUR-PEDIC, INC. 10.250% 08/15/10 (a) 117,000 133,965
TRINITY INDUSTRIES, INC. 6.500% 03/15/14 (a) 550,000 550,000
Miscellaneous Manufacturing Total 15,546,925
PAPER PRODUCTS - 1.0%
CASCADES, INC. 7.250% 02/15/13 6,000,000 6,285,000
MEADWESTVACO CORP. 8.200% 01/15/30 4,000,000 4,904,080
Paper Products Total 11,189,080
STONE, CLAY, GLASS & CONCRETE - 0.1%
OWENS-BROCKWAY GLASS CONTAINER, INC. 8.875% 02/15/09 1,000,000 1,080,000
Stone, Clay, Glass & Concrete Total 1,080,000
MANUFACTURING TOTAL 78,015,237
MINING & ENERGY - 4.8%
METALS & MINING - 0.5%
ALCOA, INC. 6.000% 01/15/12 5,000,000 5,585,000
Metals & Mining Total 5,585,000
OIL & GAS EXTRACTION - 3.5%
AMERADA HESS CORP. 7.300% 08/15/31 5,250,000 5,657,663
COASTAL CORP. 7.750% 06/15/10 1,500,000 1,297,500
FOREST OIL CORP. 8.000% 06/15/08 2,000,000 2,200,000
NEWFIELD EXPLORATION CO. 7.450% 10/15/07 1,500,000 1,657,500
NEXEN, INC. 7.875% 03/15/32 5,250,000 6,637,470
NOBLE DRILLING CORP. 7.500% 03/15/19 4,245,000 4,960,749
PEMEX PROJECT FUNDING MASTER TRUST 7.875% 02/01/09 6,000,000 6,900,000
RAS LAFFAN LIQUEFIED NATURAL GAS CO., LTD. 3.437% 09/15/09 (a) 9,000,000 8,887,500
Oil & Gas Extraction Total 38,198,382
OIL & GAS FIELD SERVICES - 0.8%
PDVSA FINANCE LTD. 7.400% 08/15/16 2,500,000 2,112,500
</Table>
See notes to investment portfolio.
9
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
MINING & ENERGY - (CONTINUED)
OIL & GAS FIELD
SERVICES - (CONTINUED)
PETROBRAS INTERNATIONAL FINANCE CO. 9.125% 02/01/07 3,000,000 3,345,000
9.750% 07/06/11 3,500,000 3,955,000
Oil & Gas Field Services Total 9,412,500
MINING & ENERGY TOTAL 53,195,882
RETAIL TRADE - 1.5%
AUTO DEALERS & GAS STATIONS - 0.8%
DAIMLERCHRYSLER AG 6.900% 09/01/04 8,706,000 8,891,177
Auto Dealers & Gas Stations Total 8,891,177
DEPARTMENT STORES - 0.2%
SAKS, INC. 7.000% 12/01/13 (a) 1,594,000 1,673,700
Department Stores Total 1,673,700
FOOD STORES - 0.2%
DELHAIZE AMERICA, INC. 8.125% 04/15/11 2,000,000 2,310,300
Food Stores Total 2,310,300
RESTAURANTS - 0.3%
YUM! BRANDS, INC. 7.700% 07/01/12 2,850,000 3,398,625
Restaurants Total 3,398,625
RETAIL TRADE TOTAL 16,273,802
SERVICES - 4.4%
AMUSEMENT & RECREATION - 1.0%
MGM MIRAGE, INC. 8.375% 02/01/11 1,500,000 1,732,500
MOHEGAN TRIBAL GAMING AUTHORITY 8.375% 07/01/11 2,000,000 2,210,000
PARK PLACE ENTERTAINMENT CORP. 8.125% 05/15/11 2,000,000 2,285,000
STATION CASINOS, INC. 6.000% 04/01/12 (a) 1,000,000 1,030,000
6.875% 03/01/16 (a) 1,500,000 1,535,625
STEINWAY MUSICAL INSTRUMENTS, INC. 8.750% 04/15/11 2,000,000 2,165,000
Amusement & Recreation Total 10,958,125
BUSINESS SERVICES - 0.1%
FEDEX CORP. 7.530% 09/23/06 1,064,005 1,155,967
Business Services Total 1,155,967
HEALTH SERVICES - 2.8%
HCA, INC. 6.950% 05/01/12 3,000,000 3,262,290
7.125% 06/01/06 5,000,000 5,406,800
7.875% 02/01/11 5,015,000 5,687,812
</Table>
See notes to investment portfolio.
10
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
SERVICES - (CONTINUED)
HEALTH SERVICES - (CONTINUED)
PACIFICARE HEALTH SYSTEMS, INC. 10.750% 06/01/09 2,275,000 2,673,125
TENET HEALTHCARE CORP. 5.375% 11/15/06 7,250,000 6,851,250
WYETH 6.450% 02/01/24 2,400,000 2,524,320
6.500% 02/01/34 5,000,000 5,295,150
Health Services Total 31,700,747
HOTELS, CAMPS & LODGING - 0.5%
HYATT EQUITIES LLC 6.875% 06/15/07 (a) 5,000,000 5,441,750
Hotels, Camps & Lodging Total 5,441,750
SERVICES TOTAL 49,256,589
TRANSPORTATION,
COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 18.8%
AEROSPACE - 1.5%
RAYTHEON CO. 8.300% 03/01/10 7,000,000 8,540,700
SYSTEMS 2001 ASSET TRUST 6.664% 09/15/13 (a) 2,405,065 2,701,465
7.156% 12/15/11 (a) 4,359,247 4,857,900
Aerospace Total 16,100,065
AIR TRANSPORTATION - 3.6%
AIR 2 US 8.027% 10/01/19 (a) 5,950,161 5,355,145
AMERICAN AIRLINES, INC. 7.024% 10/15/09 7,000,000 7,070,000
CONTINENTAL AIRLINES, INC. 6.940% 10/15/13 1,423,333 1,380,633
7.461% 04/01/15 4,077,780 3,996,224
7.875% 07/02/18 4,250,000 4,207,500
DELTA AIR LINES, INC. 7.570% 11/18/10 4,250,000 4,207,500
7.779% 11/18/05 3,000,000 2,430,000
SOUTHWEST AIRLINES CO. 5.496% 11/01/06 7,000,000 7,528,920
UNITED AIRLINES, INC. 7.783% 01/01/14 (d) 2,843,628 2,559,265
9.200% 03/22/08 (e) 2,399,897 1,055,955
Air Transportation Total 39,791,142
BROADCASTING - 2.2%
LIBERTY MEDIA CORP. 2.670% 09/17/06 (c) 11,000,000 11,162,470
VIACOM, INC. 7.700% 07/30/10 6,500,000 7,843,940
7.750% 06/01/05 5,000,000 5,362,950
Broadcasting Total 24,369,360
</Table>
See notes to investment portfolio.
11
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - (CONTINUED)
CABLE - 1.3%
AT&T BROADBAND CORP. 8.375% 03/15/13 7,214,000 8,941,392
CSC HOLDINGS, INC. 6.750% 04/15/12 (a) 500,000 505,000
7.875% 02/15/18 1,250,000 1,350,000
8.125% 07/15/09 1,500,000 1,623,750
ECHOSTAR DBS CORP. 6.375% 10/01/11 (a) 1,500,000 1,593,750
Cable Total 14,013,892
ELECTRIC SERVICES - 7.1%
CALPINE CORP. 8.500% 07/15/10 (a) 2,500,000 2,268,750
EDISON MISSION ENERGY 9.875% 04/15/11 1,100,000 1,155,000
FIRSTENERGY CORP. 5.500% 11/15/06 5,000,000 5,317,300
6.450% 11/15/11 4,500,000 4,923,855
FPL ENERGY AMERICAN WIND LLC 6.639% 06/20/23 (a) 4,670,000 4,991,623
KANSAS CITY POWER & LIGHT 6.000% 03/15/07 10,000,000 10,875,700
MIDAMERICAN ENERGY HOLDINGS CO. 3.500% 05/15/08 5,310,000 5,329,116
4.625% 10/01/07 5,000,000 5,245,650
5.875% 10/01/12 7,000,000 7,574,910
MSW ENERGY HOLDINGS LLC 8.500% 09/01/10 2,000,000 2,190,000
NEVADA POWER CO. 9.000% 08/15/13 (a) 2,000,000 2,265,000
NIAGARA MOHAWK POWER CORP. 8.875% 05/15/07 5,500,000 6,486,370
NORTHERN STATES POWER CO. 8.000% 08/28/12 3,750,000 4,707,450
OGLETHORPE POWER CORP. 6.974% 06/30/11 2,724,000 3,001,004
PACIFIC GAS & ELECTRIC CO. 6.050% 03/01/34 6,250,000 6,312,938
SOUTH POINT ENERGY CENTER LLC 8.400% 05/30/12 (a) 1,799,780 1,680,545
TENASKA ALABAMA 6.125% 03/30/23 (a) 3,441,923 3,619,802
Electric Services Total 77,945,013
PIPELINES - 0.4%
SOUTHERN NATIONAL GAS 8.875% 03/15/10 2,000,000 2,225,000
WILLIAMS COMPANIES, INC. 8.125% 03/15/12 2,000,000 2,205,000
Pipelines Total 4,430,000
</Table>
See notes to investment portfolio.
12
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS &
NOTES - (CONTINUED)
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - (CONTINUED)
RAILROADS - 0.2%
KANSAS CITY SOUTHERN RAILWAY 7.500% 06/15/09 2,000,000 2,055,000
Railroads Total 2,055,000
SANITARY SERVICES - 0.5%
ALLIED WASTE NORTH AMERICA, INC. 8.875% 04/01/08 5,500,000 6,146,250
Sanitary Services Total 6,146,250
TELECOMMUNICATIONS - 2.0%
AMERICA MOVIL SA DE CV 5.500% 03/01/14 (a) 3,000,000 2,990,772
ROGERS CANTEL, INC. 9.750% 06/01/16 2,000,000 2,505,000
SPRINT CORP. 6.125% 11/15/08 3,800,000 4,190,374
8.750% 03/15/32 1,500,000 1,891,185
TELEFONOS DE MEXICO SA DE CV 4.500% 11/19/08 (a) 6,000,000 6,104,220
TPSA FINANCE BV 7.750% 12/10/08 (a) 3,000,000 3,363,270
WORLDCOM, INC. 8.250% 05/15/31 (e) 4,000,000 1,360,000
Telecommunications Total 22,404,821
--------------
TRANSPORTATION, COMMUNICATIONS,
ELECTRIC, GAS & SANITARY SERVICES
TOTAL 207,255,543
WHOLESALE TRADE - 0.4%
NON-DURABLE GOODS - 0.4%
LILLY DEL MAR, INC. 7.717% 08/01/29 (a)(c) 4,155,000 4,219,814
Non-Durable Goods Total 4,219,814
--------------
WHOLESALE TRADE TOTAL 4,219,814
CORPORATE FIXED-INCOME
BONDS & NOTES TOTAL
(COST OF $677,192,301) 704,036,899
GOVERNMENT AGENCIES &
OBLIGATIONS - 20.3%
FOREIGN GOVERNMENT BOND - 0.7%
STATE OF QATAR 9.750% 06/15/30 (a) 5,000,000 7,200,000
FOREIGN GOVERNMENT BOND TOTAL 7,200,000
U.S. GOVERNMENT AGENCIES &
OBLIGATIONS - 19.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION 4.500% 09/01/18 9,614,245 9,750,960
12.000% 07/01/20 417,966 475,220
To Be Announced:
4.500% 04/20/19 (f) 20,000,000 20,250,000
5.000% 04/15/34 (f) 10,000,000 10,046,880
--------------
40,523,060
</Table>
See notes to investment portfolio.
13
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCIES &
OBLIGATIONS - (CONTINUED)
U.S. GOVERNMENT AGENCIES &
OBLIGATIONS - (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION 4.500% 07/01/18 - 02/01/19 60,445,920 61,274,790
5.000% 07/25/15 - 06/01/18 57,351,457 59,162,378
5.500% 12/01/17 8,910,153 9,292,332
6.000% 04/01/09 - 03/01/24 4,302,681 4,535,656
6.500% 10/01/28 - 12/01/31 5,030,097 5,287,726
9.250% 03/25/18 315,839 348,292
--------------
139,901,174
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 4.750% 07/20/25 (c) 212,790 218,162
8.000% 01/15/08 - 07/15/08 508,302 544,618
9.000% 06/15/16 - 10/15/16 36,623 40,985
--------------
803,765
U.S. TREASURY BONDS AND NOTES 3.375% 11/15/08 4,500,000 4,636,760
4.000% 02/15/14 - 11/15/14 7,310,000 7,433,409
4.250% 08/15/13 1,650,000 1,709,812
5.375% 02/15/31 17,430,000 18,998,700
5.750% 08/15/10 2,385,000 2,738,278
--------------
35,516,959
U.S. GOVERNMENT AGENCIES &
OBLIGATIONS TOTAL 216,744,958
GOVERNMENT AGENCIES &
OBLIGATIONS TOTAL
(COST OF $203,519,279) 223,944,958
ASSET-BACKED &
NON-AGENCY MORTGAGE-BACKED
SECURITIES - 11.9%
AMERICAN MORTGAGE TRUST 8.445% 09/27/22 36,106 32,496
BANK ONE ISSUANCE TRUST 3.590% 05/17/10 5,000,000 5,165,550
4.160% 01/15/08 13,000,000 13,391,690
CALIFORNIA INFRASTRUCTURE 6.420% 12/26/09 10,000,000 11,150,800
CAPITAL AUTO RECEIVABLES ASSET TRUST 2.000% 11/15/07 5,600,000 5,623,695
CAPITAL ONE MULTI-ASSET EXECUTION TRUST 3.650% 07/15/11 16,000,000 16,457,600
CIGNA CBO LTD. 6.460% 11/15/08 (a) 4,007,994 4,168,314
CITIBANK CREDIT CARD ISSUANCE TRUST 2.500% 04/07/08 11,290,000 11,417,464
4.950% 02/09/09 5,000,000 5,349,800
DIVERSIFIED REIT TRUST 6.780% 03/18/11 (a)(c) 5,000,000 5,624,562
FIRST UNION NATIONAL BANK 5.585% 02/12/34 5,785,781 6,285,824
6.141% 02/12/34 8,000,000 9,045,892
GS MORTGAGE SECURITIES CORP. 7.750% 09/19/27 (a) 2,217,113 2,414,788
LB-UBS COMMERCIAL MORTGAGE TRUST 6.510% 12/15/26 5,000,000 5,749,478
</Table>
See notes to investment portfolio.
14
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED & NON-AGENCY
MORTGAGE-BACKED SECURITIES - (CONTINUED)
MBNA MASTER CREDIT CARD TRUST 7.350% 07/16/07 10,000,000 10,496,800
MERRILL LYNCH MORTGAGE INVESTORS, INC. 7.123% 12/26/25 (c) 480,317 487,857
NOMURA ASSET SECURITIES CORP. 7.120% 04/13/39 6,255,000 6,810,747
STRUCTURED ASSET SECURITIES CORP. 1.934% 02/25/28 (c)(g) 9,362,491 738,971
WACHOVIA BANK COMMERCIAL MORTGAGE TRUST 3.989% 06/15/35 11,930,000 11,691,877
ASSET-BACKED &
NON-AGENCY MORTGAGE-BACKED
SECURITIES TOTAL
(COST OF $128,572,292) 132,104,205
SHORT-TERM OBLIGATION - 5.7%
Repurchase agreement with
State Street Bank &
Trust Co., dated
03/31/04, due 04/01/04
at 0.960%,
collateralized by a
U.S. Treasury Bill
maturing 08/19/04,
market value $63,919,400
(repurchase proceeds
$62,663,671) (cost of
$62,662,000) 62,662,000 62,662,000
TOTAL INVESTMENTS - 101.7%
(COST OF
$1,071,945,872) (h) 1,122,748,062
OTHER ASSETS &
LIABILITIES, NET - (1.7)% (18,848,785)
NET ASSETS - 100.0% 1,103,899,277
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) 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, 2004, the value of
these securities amounted to $191,206,424, which represents 17.3% of net
assets.
(b) This security, or a portion thereof with a market value of $2,026,153, is
being used to collateralize open futures contracts.
(c) Interest rates on variable rate securities change periodically. The rate
listed is as of March 31, 2004.
(d) As of March 31, 2004, the Fund held a security of this issuer that has filed
for bankruptcy protection under Chapter 11, representing 0.2% of net assets.
This issuer is in default of certain debt covenants, however, income is
being fully accrued.
(e) As of March 31, 2004, the Fund held securities of these issuers that have
filed for bankruptcy protection under Chapter 11, representing 0.2% of net
assets. These issuers are in default of certain debt covenants. Income is
not being accrued.
(f) This security has been purchased on a delayed delivery basis whereby the
terms that are fixed are the purchase price, interest rate and settlement
date. The exact quantity purchased may be slightly more or less than the
amount shown.
(g) Accrued interest accumulates in the value of this security and is payable at
redemption.
(h) Cost for federal income tax purposes is $1,076,618,223.
Short futures contracts open at March 31, 2004:
<Table>
<Caption>
PAR VALUE UNREALIZED
COVERED BY EXPIRATION DEPRECIATION
TYPE CONTRACTS DATE AT 03/31/04
- ---------------------------------------------------------------------------------------------
5 Year U.S. Treasury Note $ 21,000,000 Jun-2004 $ (271,858)
10 Year U.S. Treasury Note 13,200,000 Jun-2004 (277,101)
30 Year U.S. Treasury Bond 26,500,000 Jun-2004 (454,848)
-------------
$ (1,003,807)
-------------
</Table>
See notes to financial statements.
15
<Page>
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 COLUMBIA INTERMEDIATE BOND FUND
<Table>
<Caption>
($)
- ---------------------------------------------------------------------------------------------------------------
ASSETS Investments, at cost 1,071,945,872
----------------
Investments, at value 1,122,748,062
Cash 420
Receivable for:
Investments sold 7,124,240
Fund shares sold 5,251,372
Interest 11,474,274
Deferred Trustees' compensation plan 9,973
----------------
Total Assets 1,146,608,341
LIABILITIES Payable for:
Investments purchased 9,339,314
Investments purchased on a delayed delivery basis 30,342,578
Fund shares repurchased 1,089,496
Futures variation margin 338,469
Distributions 572,111
Investment advisory fee 321,238
Administration fee 138,449
Transfer agent fee 268,613
Pricing and bookkeeping fees 23,133
Trustees' fees 1,353
Custody fee 5,641
Distribution and service fees 186,862
Deferred Trustees' fees 9,973
Other liabilities 71,834
----------------
Total Liabilities 42,709,064
NET ASSETS 1,103,899,277
COMPOSITION OF NET ASSETS Paid-in capital 1,066,007,304
Overdistributed net investment income (2,995,178)
Accumulated net realized loss (8,911,232)
Net unrealized appreciation (depreciation) on:
Investments 50,802,190
Futures contracts (1,003,807)
----------------
NET ASSETS 1,103,899,277
CLASS A Net assets 146,709,008
Shares outstanding 15,822,855
Net asset value per share 9.27(a)
Maximum offering price per share ($9.27/0.9525) 9.73(b)
CLASS B Net assets 104,704,231
Shares outstanding 11,292,549
Net asset value and offering price per share 9.27(a)
CLASS C Net assets 59,009,011
Shares outstanding 6,364,253
Net asset value and offering price per share 9.27(a)
CLASS Z Net assets 793,477,027
Shares outstanding 85,578,000
Net asset value, offering and redemption price per share 9.27
</Table>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
16
<Page>
STATEMENTS OF OPERATIONS
MARCH 31, 2004 COLUMBIA INTERMEDIATE BOND FUND
<Table>
<Caption>
PERIOD ENDED YEAR ENDED
MARCH 31, 2004(a) ($) JUNE 30, 2003 ($)
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME Interest 39,971,333 55,777,640
EXPENSES Expenses allocated from Portfolio -- 619,612
Investment advisory fee 2,625,831 2,515,761
Administration fee 1,127,243 1,331,433
Distribution fee:
Class A 87,140 64,939
Class B 583,250 561,827
Class C 308,118 246,000
Service fee:
Class A 217,359 161,861
Class B 194,417 187,275
Class C 102,614 81,617
Transfer agent fee 1,307,940 1,997,159
Pricing and bookkeeping fees 200,918 331,790
Trustees' fees 21,481 25,889
Custody fee 42,810 28,890
Other expenses 230,828 268,316
Non-recurring costs (See Note 7) 7,471 --
Costs assumed by Investment Advisor (See Note 7) (7,471) --
------------------------------
Total Operating Expenses 7,049,949 8,422,369
Fees waived by Distributor:
Class A (87,140) (64,939)
Class C (61,845) (50,123)
Custody earnings credit (205) (2,583)
------------------------------
Net Operating Expenses 6,900,759 8,304,724
Interest expense -- 1,830
------------------------------
Net Expenses 6,900,759 8,306,554
------------------------------
Net Investment Income 33,070,574 47,471,086
NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain (loss) on:
INVESTMENTS AND FUTURES CONTRACTS Investments 8,774,489 16,149,207
Futures contracts 3,658,435 (17,991,728)
------------------------------
Net realized gain (loss) 12,432,924 (1,842,521)
Net change in unrealized
appreciation/depreciation on:
Investments 3,777,125 47,404,056
Futures contracts (2,825,587) 2,989,426
------------------------------
Net change in unrealized
appreciation/depreciation 951,538 50,393,482
------------------------------
Net Gain 13,384,462 48,550,961
------------------------------
Net Increase in Net Assets from Operations 46,455,036 96,022,047
</Table>
(a) The Fund changed its fiscal year end from June 30 to March 31.
See notes to financial statements.
17
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
MARCH 31, 2004 COLUMBIA INTERMEDIATE BOND FUND
<Table>
<Caption>
PERIOD ENDED YEAR ENDED YEAR ENDED
MARCH 31, JUNE 30, JUNE 30,
INCREASE (DECREASE) IN NET ASSETS: 2004 (a)(b) ($) 2003 (c) ($) 2002 (d) ($)
- --------------------------------------------------------------------------------------------------------------------------------
OPERATIONS Net investment income 33,070,574 47,471,086 40,582,815
Net realized gain (loss) on
investments and futures contracts 12,432,924 (1,842,521) (3,112,703)
Net change in unrealized
appreciation/depreciation on
investments and futures contracts 951,538 50,393,482 (6,652,968)
---------------------------------------------
Net Increase from Operations 46,455,036 96,022,047 30,817,144
DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income:
Class A (4,074,020) (3,487,025) (980,531)
Class B (3,054,628) (3,467,410) (221,915)
Class C (1,672,747) (1,549,430) (79,287)
Class Z (26,871,410) (40,839,542) (40,976,904)
Return of capital:
Class A -- -- (4,063)
Class B -- -- (919)
Class C -- -- (329)
Class Z -- -- (169,791)
---------------------------------------------
Total Distributions
Declared to Shareholders (35,672,805) (49,343,407) (42,433,739)
SHARE TRANSACTIONS Class A:
Subscriptions 82,402,961 93,406,890 26,788,516
Distributions reinvested 3,517,373 2,883,981 925,567
Redemptions (33,954,472) (40,046,836) (7,089,601)
---------------------------------------------
Net Increase 51,965,862 56,244,035 20,624,482
Class B:
Subscriptions 18,062,576 83,003,613 29,577,438
Distributions reinvested 2,126,834 2,442,195 157,274
Redemptions (20,373,050) (15,335,796) (668,496)
---------------------------------------------
Net Increase (Decrease) (183,640) 70,110,012 29,066,216
Class C:
Subscriptions 20,227,688 48,689,817 12,356,180
Distributions reinvested 1,011,442 974,767 59,464
Redemptions (14,503,875) (11,862,809) (636,168)
---------------------------------------------
Net Increase 6,735,255 37,801,775 11,779,476
Class Z:
Subscriptions 234,474,636 269,095,613 486,288,652
Distributions reinvested 23,876,353 35,988,674 36,918,397
Redemptions (190,223,570) (351,929,592) (296,924,898)
---------------------------------------------
Net Increase (Decrease) 68,127,419 (46,845,305) 226,282,151
Net Increase from Share Transactions 126,644,896 117,310,517 287,752,325
---------------------------------------------
Total Increase in Net Assets 137,427,127 163,989,157 276,135,730
NET ASSETS Beginning of period 966,472,150 802,482,993 526,347,263
End of period 1,103,899,277 966,472,150 802,482,993
Overdistributed net investment income
at end of period (2,995,178) (2,007,917) (1,514,400)
</Table>
See notes to financial statements.
18
<Page>
<Table>
<Caption>
PERIOD ENDED YEAR ENDED YEAR ENDED
MARCH 31, JUNE 30, JUNE 30,
2004 (a)(b) 2003 (c) 2002 (d)
- --------------------------------------------------------------------------------------------------------------------------------
CHANGES IN SHARES Class A:
Subscriptions 9,023,912 10,637,329 3,030,795
Issued for distributions reinvested 385,364 325,300 104,218
Redemptions (3,713,540) (4,558,154) (800,927)
---------------------------------------------
Net Increase 5,695,736 6,404,475 2,334,086
Class B:
Subscriptions 1,985,472 9,478,046 3,352,832
Issued for distributions reinvested 233,459 275,656 17,903
Redemptions (2,239,392) (1,735,505) (75,922)
---------------------------------------------
Net Increase (Decrease) (20,461) 8,018,197 3,294,813
Class C:
Subscriptions 2,219,854 5,533,514 1,400,267
Issued for distributions reinvested 110,951 109,962 6,772
Redemptions (1,594,157) (1,350,773) (72,137)
---------------------------------------------
Net Increase 736,648 4,292,703 1,334,902
Class Z:
Subscriptions 25,666,393 30,633,958 54,642,619
Issued for distributions reinvested 2,620,156 4,081,323 4,156,784
Redemptions (20,891,749) (40,109,913) (33,398,899)
---------------------------------------------
Net Increase (Decrease) 7,394,800 (5,394,632) 25,400,504
</Table>
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed Columbia
Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Effective July 29, 2002, Stein Roe Intermediate Bond Fund Class S shares
were redesignated Liberty Intermediate Bond Fund Class Z shares.
(d) Class B and Class C shares were initially offered on February 1, 2002, at
which time Stein Roe Intermediate Bond Fund was renamed Liberty Intermediate
Bond Fund with Class S shares renamed as Stein Roe Intermediate Bond Fund,
Class S.
See notes to financial statements.
19
<Page>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2004 COLUMBIA INTERMEDIATE BOND FUND
NOTE 1. ORGANIZATION
Columbia Intermediate Bond Fund (the "Fund"), a series of Columbia Funds Trust
VIII (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts
business trust registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company.
INVESTMENT GOAL
The Fund seeks total return by investing for a high level of current income and
opportunities for capital appreciation.
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 subject to a maximum front-end sales charge of 4.75% based on
the amount of initial investment. Class A shares purchased without an initial
sales charge 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. 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 Intermediate Bond Fund was renamed Columbia
Intermediate Bond Fund. Also on this date, the Liberty-Stein Roe Funds Income
Trust was renamed Columbia Funds Trust VIII.
The fiscal year end of the Fund was changed from June 30 to March 31.
Accordingly, the Fund's 2004 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
Debt securities generally are valued by a pricing service approved by the Fund's
Board of Trustees, based upon market transactions for normal, institutional-size
trading units of similar securities. The services may use various pricing
techniques which take into account appropriate factors such as yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other data, as
well as broker quotes. Debt securities for which quotations are readily
available are valued at an over-the-counter or exchange bid quotation. Certain
debt securities, which tend to be more thinly traded and of lesser quality, are
priced based on fundamental analysis of the financial condition of the issuer
and the estimated value of any collateral. Valuations developed through pricing
techniques may vary from the actual amounts realized upon sale of the
securities, and the potential variation may be greater for those securities
valued using fundamental analysis.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
20
<Page>
FUTURES CONTRACTS
The Fund may invest in municipal and U.S. Treasury futures contracts. The Fund
will invest in these instruments to hedge against the effects of changes in the
value of portfolio securities due to anticipated changes in interest rates
and/or market conditions, for duration management, or when the transactions are
economically appropriate to the reduction of risk inherent in the management of
the Fund and not for trading purposes. The use of futures contracts involves
certain risks, which include: (1) imperfect correlation between the price
movement of the instruments and the underlying securities, (2) inability to
close out positions due to differing trading hours, or the temporary absence of
a liquid market, for either the instrument or the underlying securities, or (3)
an inaccurate prediction by Columbia Management Advisors, Inc. of the future
direction of interest rates. Any of these risks may involve amounts exceeding
the variation margin recorded in the Fund's Statement of Assets and Liabilities
at any given time.
Upon entering into a futures contract, the Fund deposits cash or securities with
the broker in an amount sufficient to meet the initial margin requirement.
Subsequent payments are made or received by the Fund equal to the daily change
in the contract value and are recorded as variation margin payable or receivable
and offset in unrealized gains or losses. The Fund also identifies portfolio
securities as segregated with the custodian in a separate account in an amount
equal to the futures contract. The Fund recognizes a realized gain or loss when
the contract is closed or expires.
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.
DELAYED DELIVERY SECURITIES
The Fund may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
to subsequently invest at less advantageous prices. The Fund identifies cash or
liquid portfolio securities as segregated with the custodian in an amount equal
to the delayed delivery commitment.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities.
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.
21
<Page>
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 amortization/accretion adjustments and paydown
reclassifications 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
- -------------------------------------------------
$ 1,614,970 $ (1,606,484) $ (8,486)
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statements of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the period ended March 31, 2004,
and the years ended June 30, 2003 and June 30, 2002 was as follows:
<Table>
<Caption>
MARCH 31, JUNE 30, JUNE 30,
2004 2003 2002
- ------------------------------------------------------------------------------
Distributions paid from:
Ordinary income* $ 35,672,805 $ 49,343,407 $ 42,258,637
Tax return of capital -- -- 175,102
</Table>
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
As of March 31, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
- ----------------------------------------------------
$ 2,520,415 $ 1,148,237 $ 46,129,839
</Table>
* The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to discount accretion/premium amortization on debt
securities and deferral of losses from wash sales.
Unrealized appreciation and depreciation at March 31, 2004, based on cost of
investments for federal income tax purposes was:
<Table>
Unrealized appreciation $ 55,604,328
Unrealized depreciation (9,474,489)
-------------
Net unrealized appreciation $ 46,129,839
</Table>
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. As of March 31, 2004, the Fund had no capital loss
carryforwards.
Capital loss carryforwards of $7,778,990 were utilized and/or expired during the
period ended March 31, 2004 for the Fund. Expired capital loss carryforwards are
recorded as a reduction of paid-in capital.
Under current tax rules, certain capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
As of March 31, 2004, post-October capital losses of $1,727,579 attributed to
security transactions were deferred to April 1, 2004.
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 $1 billion 0.35%
Over $1 billion 0.30%
</Table>
Prior to November 1, 2003, Columbia was entitled to receive a monthly investment
advisory fee at the annual rate of 0.35% of the Fund's average daily net assets.
Prior to September 13, 2002, the management fee was paid by the SR&F
Intermediate Bond Portfolio (the "Portfolio") at the same rate.
For the period ended March 31, 2004 and the year ended June 30, 2003, the Fund's
annualized effective investment advisory fee rates were 0.35% and 0.35%,
respectively.
ADMINISTRATION FEE
Columbia provides accounting and other services to the Fund for a monthly
administration fee at the annual rate of 0.15% of the Fund's average daily net
assets.
22
<Page>
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 0.027% and 0.037%, respectively.
Prior to September 13, 2002, Columbia received from the Fund an annual flat fee
of $5,000.
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 $34.00 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 0.17% and 0.22%, 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 and the year ended
June 30, 2003, the Distributor has retained net underwriting discounts on sales
of the Fund's Class A shares of $60,584 and $16,209, respectively. For the
period ended March 31, 2004, the Distributor has received CDSC fees of $272,194
and $18,373 on Class B and Class C share redemptions, respectively. For the year
ended June 30, 2003, the Distributor has received CDSC fees of $1,635, $226,760
and $19,450 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 A, 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 rates of 0.10%, 0.75% and 0.75% of the average
daily net assets attributable to Class A, Class B and Class C shares of the
Fund, respectively. The Distributor has voluntarily agreed to waive the Class A
share distribution fee and a portion of the Class C share distribution fee so
that it will not exceed 0.60% annually of Class C average daily net assets.
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.
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.
23
<Page>
NOTE 5. PORTFOLIO INFORMATION
PURCHASES AND SALES OF SECURITIES
For the period ended March 31, 2004, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $1,044,443,729 and
$924,449,382, respectively, of which $484,096,815 and $419,001,140,
respectively, were U.S. Government securities.
NOTE 6. 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, the Fund did not borrow under
this arrangement. For the year ended June 30, 2003, the average daily loan
balance outstanding on days where borrowings existed was $2,224,399 at a dollar
weighted average interest rate of 2.28%.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. Government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns may disrupt the high-yield market and impair the ability of issuers to
repay principal and interest. Also, an increase in interest rates would likely
have an adverse impact on the value of such obligations. Moreover, high-yield
securities may be less liquid due to the extent that there is no established
retail secondary market and because of a decline in the value of such
securities.
INDUSTRY FOCUS
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
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
24
<Page>
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.
For the period ended March 31, 2004, Columbia has assumed $7,471 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
NOTE 8. 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 9. BUSINESS COMBINATIONS AND MERGERS
CHANGE IN FUND STRUCTURE
Effective July 29, 2002, Stein Roe Intermediate Bond Fund's Class S shares were
redesignated Liberty Intermediate Bond Fund (currently known as Columbia
Intermediate Bond Fund) Class Z shares.
Prior to September 13, 2002, the Fund invested substantially all of its assets
in the Portfolio as part of a master/feeder structure. As of the close of
business on September 12, 2002, the Portfolio distributed all of its net assets
to the Fund in exchange for the Fund's interest in the Portfolio in complete
liquidation of the Portfolio. The Portfolio allocated income, expenses, realized
and unrealized gains (losses) to its investors on a daily basis, based on
methods approved by the Internal Revenue Service.
25
<Page>
FINANCIAL HIGHLIGHTS
COLUMBIA INTERMEDIATE BOND FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD PERIOD
ENDED ENDED
MARCH 31, YEAR ENDED JUNE 30, JUNE 30,
CLASS A SHARES 2004(a)(b) 2003(c) 2002(c) 2001(c)(d)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.18 $ 8.73 $ 8.84 $ 8.46
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.30 0.45 0.53(f) 0.56
Net realized and unrealized gain (loss)
on investments and futures contracts 0.11 0.48 (0.08)(f) 0.36
---------- ---------- ---------- ----------
Total from Investment Operations 0.41 0.93 0.45 0.92
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.32) (0.48) (0.56) (0.54)
Return of capital -- -- --(g) --
---------- ---------- ---------- ----------
Total Distributions Declared
to Shareholders (0.32) (0.48) (0.56) (0.54)
NET ASSET VALUE, END OF PERIOD $ 9.27 $ 9.18 $ 8.73 $ 8.84
Total return (h) 4.59%(i)(j) 11.03%(i) 5.10%(i) 11.19%(j)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (k) 0.99%(l) 1.05% 1.04% 0.96%(l)
Interest expense -- --%(m) -- --
Expenses (k) 0.99%(l) 1.05% 1.04% 0.96%(l)
Net investment income (k) 4.31%(l) 5.13% 5.94%(f) 6.90%(l)
Waiver/reimbursement 0.10%(l) 0.10% 0.10% --
Portfolio turnover 96%(j) 114% 179%(n) 254%(n)
Net assets, end of period (000's) $ 146,709 $ 92,993 $ 32,493 $ 12,279
</Table>
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(d) Class A shares were initially offered on July 31, 2000. Per share data and
total return reflect activity from that date.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.01, decrease net realized and
unrealized loss per share by $0.01 and decrease the ratio of net investment
income to average net assets from 6.10% to 5.94%. Per share data and ratios
for the period prior to June 30, 2002 have not been restated to reflect
this change in presentation.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(i) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(j) Not annualized.
(k) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l) Annualized.
(m) Rounds to less than 0.01%.
(n) Portfolio turnover disclosed is for the SR&F Intermediate Bond
Portfolio.
26
<Page>
<Table>
<Caption>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
CLASS B SHARES 2004(a)(b) 2003(c) 2002(c)(d)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.18 $ 8.73 $ 8.89
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.25 0.39 0.18(f)
Net realized and unrealized gain (loss) on
investments and futures contracts 0.11 0.47 (0.13)(f)
---------- ---------- ----------
Total from Investment Operations 0.36 0.86 0.05
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.27) (0.41) (0.21)
Return of capital -- -- --(g)
---------- ---------- ----------
Total Distributions Declared
to Shareholders (0.27) (0.41) (0.21)
NET ASSET VALUE, END OF PERIOD $ 9.27 $ 9.18 $ 8.73
Total return (h) 4.00%(i) 10.21% 0.51%(i)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (j) 1.74%(k) 1.80% 1.83%(k)
Interest expense -- --%(l) --
Expenses (j) 1.74%(k) 1.80% 1.83%(k)
Net investment income (j) 3.58%(k) 4.38% 5.04%(f)(k)
Portfolio turnover 96%(i) 114% 179%(m)
Net assets, end of period (000's) $ 104,704 $ 103,880 $ 28,758
</Table>
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(d) Class B shares were initially offered on February 1, 2002. Per share data
and total return reflect activity from that date.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.01, decrease net realized and
unrealized loss per share by $0.01 and decrease the ratio of net investment
income to average net assets from 5.19% to 5.04%.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(i) Not annualized.
(j) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(k) Annualized.
(l) Rounds to less than 0.01%.
(m) Portfolio turnover disclosed is for the SR&F Intermediate Bond
Portfolio.
27
<Page>
<Table>
<Caption>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
CLASS C SHARES 2004(a)(b) 2003(c) 2002(c)(d)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.18 $ 8.73 $ 8.89
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.26 0.40 0.19(f)
Net realized and unrealized gain (loss)
on investments and futures contracts 0.11 0.48 (0.14)(f)
---------- ---------- ----------
Total from Investment Operations 0.37 0.88 0.05
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.28) (0.43) (0.21)
Return of capital -- -- --(g)
---------- ---------- ----------
Total Distributions Declared
to Shareholders (0.28) (0.43) (0.21)
NET ASSET VALUE, END OF PERIOD $ 9.27 $ 9.18 $ 8.73
Total return (h) (i) 4.12%(j) 10.37% 0.58%(j)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (k) 1.59%(l) 1.65% 1.68%(l)
Interest expense -- --%(m) --
Expenses (k) 1.59%(l) 1.65% 1.68%(l)
Net investment income (k) 3.72%(l) 4.50% 5.19%(f)(l)
Waiver/reimbursement 0.15%(l) 0.15% 0.15%(l)
Portfolio turnover 96%(j) 114% 179%(n)
Net assets, end of period (000's) $ 59,009 $ 51,676 $ 11,651
</Table>
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(d) Class C shares were initially offered on February 1, 2002. Per share data
and total return reflect activity from that date.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.01, decrease net realized and
unrealized loss per share by $0.01 and decrease the ratio of net investment
income to average net assets from 5.34% to 5.19%.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(i) Had the Distributor not reimbursed a portion of expenses, total return
would have been reduced.
(j) Not annualized.
(k) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l) Annualized.
(m) Rounds to less than 0.01%.
(n) Portfolio turnover disclosed is for the SR&F Intermediate Bond
Portfolio.
28
<Page>
<Table>
<Caption>
PERIOD
ENDED
MARCH 31, YEAR ENDED JUNE 30,
CLASS Z SHARES 2004(a)(b) 2003(c)(d) 2002(c)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.18 $ 8.73 $ 8.84
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.31 0.49 0.55(f)
Net realized and unrealized
gain (loss) on investments and
futures contracts 0.12 0.46 (0.08)(f)
---------- ---------- ----------
Total from Investment
Operations 0.43 0.95 0.47
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.34) (0.50) (0.58)
Return of capital -- -- --(g)
---------- ---------- ----------
Total Distributions Declared
to Shareholders (0.34) (0.50) (0.58)
NET ASSET VALUE, END OF PERIOD $ 9.27 $ 9.18 $ 8.73
Total return (h) 4.78%(i) 11.30% 5.36%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (j) 0.74%(k) 0.80% 0.79%
Interest expense -- --%(l) --
Expenses (j) 0.74%(k) 0.80% 0.79%
Net investment income (j) 4.58%(k) 5.51% 6.22%(f)
Portfolio turnover 96%(i) 114% 179%(m)
Net assets, end of period (000's) $ 793,477 $ 717,923 $ 729,580
<Caption>
YEAR ENDED JUNE 30,
CLASS Z SHARES 2001(c) 2000(c) 1999(c)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.41 $ 8.63 $ 8.97
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.62 0.60 0.56
Net realized and unrealized
gain (loss) on investments and
futures contracts 0.43 (0.22) (0.33)
---------- ---------- ----------
Total from Investment
Operations 1.05 0.38 0.23
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.62) (0.60) (0.57)
Return of capital -- -- --
---------- ---------- ----------
Total Distributions Declared
to Shareholders (0.62) (0.60) (0.57)
NET ASSET VALUE, END OF PERIOD $ 8.84 $ 8.41 $ 8.63
Total return (h) 12.86% 4.62% 2.60%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (j) 0.72% 0.72% 0.72%
Interest expense -- -- --
Expenses (j) 0.72% 0.72% 0.72%
Net investment income (j) 7.14% 7.16% 6.31%
Portfolio turnover 254%(m) 356%(m) 253%(m)
Net assets, end of period (000's) $ 514,068 $ 406,216 $ 431,123
</Table>
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(d) Effective July 29, 2002, the Stein Roe Intermediate Bond Fund's Class S
shares were redesignated Liberty Intermediate Bond Fund Class Z shares.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.02, decrease net realized and
unrealized loss per share by $0.02 and decrease the ratio of net investment
income to average net assets from 6.38% to 6.22%. Per share data and ratios
for periods prior to June 30, 2002 have not been restated to reflect this
change in presentation.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested.
(i) Not annualized.
(j) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(k) Annualized.
(l) Rounds to less than 0.01%.
(m) Portfolio turnover disclosed is for the SR&F Intermediate Bond Portfolio.
29
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
COLUMBIA INTERMEDIATE BOND FUND
TO THE TRUSTEES OF COLUMBIA FUNDS TRUST VIII AND THE SHAREHOLDERS OF
COLUMBIA INTERMEDIATE BOND 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 Intermediate Bond Fund
(the "Fund") (a series of Columbia Funds Trust VIII) 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
30
<Page>
UNAUDITED INFORMATION
COLUMBIA INTERMEDIATE BOND FUND
FEDERAL INCOME TAX INFORMATION
For the fiscal year ended March 31, 2004, the Fund designates long-term capital
gains of $1,148,237.
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.
31
<Page>
TRUSTEES
COLUMBIA INTERMEDIATE BOND 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
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
DOUGLAS A. HACKER (age 48) Executive Vice President-Strategy of United Airlines (airline) since
P.O.Box 66100 December 2002 (formerly President of UAL Loyalty Services (airline) from
Chicago, IL 60666 September 2001 to December 2002; Executive Vice President and Chief Financial
Trustee (since 1996) Officer of United Airlines from July 1999 to September 2001; Senior Vice
President-Finance from March1993 to July 1999). Oversees 118, Orbitz (online
travel company)
JANET LANGFORD KELLY (age 46) Private Investor since March 2004 (formerly Chief Administrative Officer and
9534 W.Gull Lake Drive Senior Vice President, Kmart Holding Corporation (consumer goods) from
Richland,MI 49083-8530 September 2003 to March 2004; Executive Vice President-Corporate Development
Trusttee (since 1996) and Administration, General Counsel and Secretary, Kellogg Company (food
manufacturer), from September 1999 to August 2003; Senior Vice
President, Secretary and General Counsel, Sara Lee Corporation
(branded, packaged, consumer-products manufacturer) from January 1995 to
September 1999). Oversees 118, None
RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive
10701 Charleston Drive Officer, U.S. plywood Corporation (building products manufacturer). Oversees
Vero Beach, FL 32963 120(3), None
Trustee (since 1995)
CHARLES R. NELSON (age 61) Professor of Economics, University of Washington, since January 1976; Ford and
Department of Economics Louisa Van Voorhis Professor of Political Economy, University of
University of Washington Washington, since September 1993; (formerly Director, Institute for Economic
Seattle, WA 98195 Research, University of Washington from September 2001 to June 2003) Adjunct
Trustee (since 1981) Professor of Statistics, University of Washington, since
September 1980; Associate Editor, Journal of Money Credit and Banking, since
September 1993; consultant on econometric and statistical matters. 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.
32
<Page>
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) COLUMBIA FUNDS 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
84 College Road College (formerly Dean, Boston College School of Management from
Chestnut Hill, MA 02467-3838 September 1977 to September 1999). Oversees 121(3),(4), Saucony, Inc. (athletic
Trustee (since 1985) footwear)
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
2208 Tawny Woods Place 1999, College of Business, Boise State University); Chartered Financial
Boise, ID 83706 Analyst. Oversees 118, None
Trustee (since 1998)
THOMAS C. THEOBALD (age 67) Managing Director, William Blair Capital Partners (private equity investing)
227 West Monroe Street, since September 1994. Oversees 118, Anixter International (network support
Suite 3500 equipment distributor), Jones Lang LaSalle (real estate management
Chicago, IL 60606 services), MONY Group (life insurance) and Ventas, Inc (real estate
Trustee and Chairman of the Board(5) investment trust)
(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
Hopkinton, NH 03229 119(4), Chairman of the Board of Directors, Enesco
Trustee (since 1998) Group, Inc.(designer, importer and distributor of giftware and collectibles)
RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive
100 S.W.Market Street #1500 Officer, The Regence Group (regional health insurer); Chairman and Chief
Portland, OR 97207 Executive Officer, BlueCross BlueShield of Oregon; Certified Public
Trustee (since 1991) Accountant, Arthur Young & Company). 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
399 Park Avenue February 1999 (formerly Founding Partner, Development Capital LLC from
Suite3204 November 1996 to February 1999). Oversees 120(3), Lee Enterprises (print
New York, NY 10022 media), WR Hambrecht + Co. (financial service provider), First Health
Trustee (since 1994) (healthcare), Reader's Digest (publishing) and 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.
33
<Page>
OFFICERS
COLUMBIA INTERMEDIATE BOND 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
Boston, MA 02111 Liberty All-Star Funds from May 2002 to May 2004);Controller and Chief
Chief Accounting Officer (since 2001) Accounting 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
One Financial Center 2004 (formerly Assistant Treasurer from June 2002 to May 2004; Vice
Boston, MA 02111 President, Product Strategy& Development of Liberty Funds Group from
Controller (since 2004) February 2001 to 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
President (since 2004) February 1998 to October 2000);Treasurer of the Galaxy Funds since
September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC
since December 2002 (formerly Vice President of Colonial 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, FleetBoston Financial Corporation since
Boston, MA 02111 January 1996; Associate General Counsel, Columbia Management Group since
Secretary (since 2003) November 2002.
</Table>
34
<Page>
IMPORTANT INFORMATION ABOUT THIS REPORT
COLUMBIA INTERMEDIATE BOND 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 Intermediate Bond
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.
35
<Page>
COLUMBIA FUNDS
COLUMBIA INTERMEDIATE BOND 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
36
<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.
37
<Page>
[GRAPHIC]
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 INTERMEDIATE BOND 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
713-02/629R-0304 (05/04) 04/1023
<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.
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 their fiscal
year-end to March 31 from June 30. Also, effective March 1, 2004, the series
of 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:
<Table>
<Caption>
2004 2003
$ 51,700 $ 49,500
</Table>
Audit Fees include amounts related to the audit of the registrant'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:
<Table>
<Caption>
2004 2003
$ 8,000 $ 15,500
</Table>
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 registrant'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 registrant, 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.
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:
<Table>
<Caption>
2004 2003
$ 5,000 $ 6,700
</Table>
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 include the review of annual tax returns, while
fiscal year 2003 also includes the review of calculations of required
shareholder distributions.
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 registrant, 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:
<Table>
<Caption>
2004 2003
$ 0 $ 0
</Table>
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in (a)-(c) above.
<Page>
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 registrant, 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.
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 registrant'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.
<Page>
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
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
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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.
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
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Director of Trustee Administration. The Policy shall be reviewed and
approved at least annually by the Audit Committee.
*****
(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.
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.
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(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 VIII
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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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