<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: 811-2214
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Columbia Funds Trust I
---------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(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
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Date of fiscal year end: 05/31/2005
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Date of reporting period: 11/30/2004
------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
[GRAPHIC]
COLUMBIA HIGH YIELD
OPPORTUNITY FUND
SEMIANNUAL REPORT
NOVEMBER 30, 2004
[COLUMBIAFUNDS(R) LOGO]
A MEMBER OF COLUMBIA MANAGEMENT
<Page>
TABLE OF CONTENTS
<Table>
Fund Profile 1
Performance Information 2
Understanding Your Expenses 3
Economic Update 4
Portfolio Managers' Report 5
Financial Statements 7
Investment Portfolio 8
Statement of Assets and Liabilities 34
Statement of Operations 35
Statement of Changes in Net Assets 36
Notes to Financial Statements 37
Financial Highlights 43
Columbia Funds 47
Important Information
About This Report 49
</Table>
Economic and market conditions change frequently. There is no assurance that
trends described in this report will continue or commence.
NOT FDIC MAY LOSE VALUE
INSURED -------------------
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
COLUMBIA HIGH YIELD OPPORTUNITY FUND
DEAR SHAREHOLDER:
In 2004, Columbia Funds became part of the Bank of America family, one of the
largest, most respected financial institutions in the United States. As a direct
result of this merger, a number of changes are in the works that we believe
offer significant potential benefits for our shareholders. Plans are underway to
bring Nations Funds and Columbia Funds together in a single fund family that
covers a wide range of markets, sectors, and asset classes under the management
of talented, seasoned investment professionals. As a result, some funds will be
merged in order to eliminate redundancies and fund management teams will be
aligned to maximize performance potential. You will receive more detailed
information about these proposed mergers, and you will be asked to vote on
certain fund changes that affect you and your account. In this matter, your
timely response will enable us to implement the changes in 2005.
The increased efficiencies we expect from a more stream-lined offering of funds
may help us reduce fees charged to the funds, because larger funds often benefit
from size and scale of operations. For example, significant savings for the
combined complex may result from the consolidation of certain vendor agreements.
In fact, negotiations are currently underway to consolidate the transfer agency
of all of our funds and to consolidate custodial services, each under a single
vendor. We will also be reducing management fees for many funds as part of our
agreement in principle with the New York Attorney General.
As a result of these changes, we believe we will offer shareholders an even
stronger lineup of investment options, with management expenses that continue to
be competitive and fair. What will not change as we enter this next phase of
consolidation is our commitment to the highest standards of performance and our
dedication to superior service. Change for the good has another name: it's
called improvement. It helps move us forward, and we believe that it represents
progress for all our shareholders in their quest for long-term financial
success.
In the pages that follow, you'll find a discussion of the economic environment
during the period followed by a detailed report from the fund's manager or
managers on key factors that influenced performance. We hope that you will read
the manager reports carefully and discuss any questions you might have with your
financial advisor.
As always, we thank you for choosing Columbia Funds. We appreciate your
continued confidence. And, we look forward to helping you keep your long-term
financial goals on target in the years to come.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
HEAD OF MUTUAL FUNDS, COLUMBIA MANAGEMENT
Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible
for the day-to-day delivery of mutual fund services to the firm's investors.
With the exception of distribution, Chris oversees all aspects of the mutual
fund services operation, including treasury, investment accounting and
shareholder and broker services. Chris serves as Columbia Management's liaison
to the mutual fund boards of trustees.
Chris joined Bank of America in August 2004.
<Page>
FUND PROFILE
COLUMBIA HIGH YIELD OPPORTUNITY 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.
TOP 10 ISSUERS AS OF 11/30/04 (%)
<Table>
El Paso Corp. 2.2
Charter Communications Holdings LLC 1.6
Qwest Capital Funding, Inc. 1.4
Qwest Services Corp. 1.3
Calpine 1.2
Spanish Broadcasting System, Inc. 1.1
Tenet Healthcare Corp. 1.0
Hollywood Casino Shreveport 1.0
Dex Media 1.0
Pinnacle Entertainment 0.9
</Table>
MATURITY BREAKDOWN AS OF 11/30/04 (%)
<Table>
0 - 3 years 4.7
3 - 5 years 12.8
5 - 7 years 30.0
7 - 10 years 44.2
10 - 15 years 1.4
15 - 20 years 0.4
20 - 30 years 0.6
Common and preferred stock 5.1
Cash equivalents 0.8
</Table>
QUALITY BREAKDOWN AS OF 11/30/04 (%)
<Table>
AAA 0.1
BB 11.1
B 48.9
CCC 30.4
CC 5.0
D 0.8
Non-rated 3.7
</Table>
PORTFOLIO STRUCTURE AS OF 11/30/04 (%)
<Table>
Corporate fixed-income bonds & notes 91.9
Preferred stocks 3.1
Common stocks 2.6
Convertible bonds 0.7
Municipal bond (taxable) 0.5
Cash equivalents, net other assets & liabilities 1.2
</Table>
Maturity and quality breakdowns are calculated as a percentage of investments.
Ratings shown in the quality breakdown represent the highest rating assigned to
a particular bond by one of the following nationally-recognized rating agencies:
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc. or Fitch Ratings Ltd.
Portfolio structure and top 10 issuers are calculated as a percentage of net
assets.
Management Style is determined by Columbia Management and is based on the
investment strategy and process as outlined in the fund's prospectus.
[SIDENOTE]
SUMMARY
- - FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004, THE FUND'S CLASS A SHARES
RETURNED 10.25% WITHOUT SALES CHARGE.
- - SOLID ECONOMIC GROWTH HELPED THE FUND, ITS BENCHMARKS AND PEER GROUP TO
STRONG RETURNS FOR THE PERIOD. THE FUND OUTPERFORMED ITS BENCHMARKS, THE CSFB
HIGH YIELD INDEX AND THE JP MORGAN GLOBAL HIGH YIELD INDEX, AS WELL AS ITS
PEER GROUP, THE LIPPER HIGH CURRENT YIELD FUNDS CATEGORY.
- - THE FUND BENEFITED FROM ITS EMPHASIS ON ISSUES IN THE SINGLE B AND CCC
RATINGS CATEGORIES AT A TIME WHEN INVESTORS FAVORED LOWER QUALITY, HIGHER
YIELDING BONDS.
[CHART]
<Table>
CLASS A SHARES 10.25%
CSFB HIGH YIELD INDEX 9.31%
</Table>
OBJECTIVE
Seeks high current income
and total return
TOTAL NET ASSETS
$619.4 million
MANAGEMENT STYLE
[GRAPHIC]
1
<Page>
PERFORMANCE INFORMATION
COLUMBIA HIGH YIELD OPPORTUNITY FUND
[CHART]
VALUE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04
<Table>
<Caption>
CLASS A SHARES WITHOUT CLASS A SHARES WITH CSFB JP MORGAN GLOBAL
SALES CHARGE SALES CHARGE HIGH YIELD INDEX HIGH YIELD INDEX
12/1/94 $ 10,000 $ 9,525 $ 10,000 $ 10,000
12/31/94 $ 10,083 $ 9,604 $ 10,106 $ 10,300
1/31/95 $ 10,182 $ 9,698 $ 10,212 $ 10,432
2/28/95 $ 10,443 $ 9,947 $ 10,463 $ 10,803
3/31/95 $ 10,511 $ 10,012 $ 10,582 $ 10,912
4/30/95 $ 10,760 $ 10,249 $ 10,816 $ 11,194
5/31/95 $ 10,995 $ 10,473 $ 11,122 $ 11,513
6/30/95 $ 11,048 $ 10,523 $ 11,195 $ 11,559
7/31/95 $ 11,235 $ 10,701 $ 11,368 $ 11,739
8/31/95 $ 11,254 $ 10,719 $ 11,400 $ 11,785
9/30/95 $ 11,426 $ 10,883 $ 11,531 $ 11,925
10/31/95 $ 11,565 $ 11,016 $ 11,659 $ 12,036
11/30/95 $ 11,636 $ 11,083 $ 11,714 $ 12,114
12/31/95 $ 11,863 $ 11,299 $ 11,863 $ 12,311
1/31/96 $ 12,074 $ 11,500 $ 12,088 $ 12,545
2/29/96 $ 12,180 $ 11,602 $ 12,152 $ 12,620
3/31/96 $ 12,073 $ 11,499 $ 12,120 $ 12,578
4/30/96 $ 12,145 $ 11,568 $ 12,185 $ 12,656
5/31/96 $ 12,236 $ 11,655 $ 12,284 $ 12,752
6/30/96 $ 12,236 $ 11,655 $ 12,311 $ 12,807
7/31/96 $ 12,310 $ 11,725 $ 12,422 $ 12,893
8/31/96 $ 12,531 $ 11,936 $ 12,557 $ 13,084
9/30/96 $ 12,867 $ 12,256 $ 12,773 $ 13,394
10/31/96 $ 12,867 $ 12,256 $ 12,880 $ 13,517
11/30/96 $ 13,113 $ 12,490 $ 13,081 $ 13,766
12/31/96 $ 13,314 $ 12,681 $ 13,336 $ 13,913
1/31/97 $ 13,429 $ 12,792 $ 13,434 $ 14,023
2/28/97 $ 13,720 $ 13,068 $ 13,686 $ 14,264
3/31/97 $ 13,447 $ 12,808 $ 13,533 $ 14,032
4/30/97 $ 13,584 $ 12,938 $ 13,653 $ 14,164
5/31/97 $ 13,921 $ 13,259 $ 13,928 $ 14,491
6/30/97 $ 14,141 $ 13,469 $ 14,117 $ 14,682
7/31/97 $ 14,481 $ 13,793 $ 14,416 $ 15,073
8/31/97 $ 14,522 $ 13,832 $ 14,494 $ 15,082
9/30/97 $ 14,867 $ 14,161 $ 14,781 $ 15,382
10/31/97 $ 14,867 $ 14,161 $ 14,780 $ 15,360
11/30/97 $ 14,991 $ 14,279 $ 14,885 $ 15,499
12/31/97 $ 15,160 $ 14,440 $ 15,020 $ 15,638
1/31/98 $ 15,474 $ 14,739 $ 15,276 $ 15,880
2/28/98 $ 15,559 $ 14,820 $ 15,395 $ 16,003
3/31/98 $ 15,751 $ 15,002 $ 15,472 $ 16,164
4/30/98 $ 15,793 $ 15,043 $ 15,588 $ 16,245
5/31/98 $ 15,815 $ 15,064 $ 15,634 $ 16,268
6/30/98 $ 15,880 $ 15,126 $ 15,667 $ 16,302
7/31/98 $ 16,072 $ 15,309 $ 15,777 $ 16,439
8/31/98 $ 15,013 $ 14,300 $ 14,706 $ 15,374
9/30/98 $ 14,884 $ 14,177 $ 14,704 $ 15,358
10/31/98 $ 14,625 $ 13,930 $ 14,412 $ 15,028
11/30/98 $ 15,586 $ 14,845 $ 15,142 $ 15,856
12/31/98 $ 15,488 $ 14,752 $ 15,107 $ 15,791
1/31/99 $ 15,745 $ 14,997 $ 15,249 $ 15,981
2/28/99 $ 15,764 $ 15,015 $ 15,217 $ 15,899
3/31/99 $ 16,076 $ 15,312 $ 15,356 $ 16,095
4/30/99 $ 16,355 $ 15,579 $ 15,695 $ 16,504
5/31/99 $ 16,050 $ 15,287 $ 15,526 $ 13,599
6/30/99 $ 16,143 $ 15,376 $ 15,534 $ 16,268
7/31/99 $ 16,193 $ 15,424 $ 15,541 $ 16,273
8/31/99 $ 16,120 $ 15,354 $ 15,403 $ 16,111
9/30/99 $ 16,044 $ 15,282 $ 15,284 $ 15,995
10/31/99 $ 16,071 $ 15,308 $ 15,209 $ 15,907
11/30/99 $ 16,341 $ 15,565 $ 15,416 $ 16,166
12/31/99 $ 16,444 $ 15,663 $ 15,603 $ 16,324
1/31/2000 $ 16,262 $ 15,489 $ 15,540 $ 16,262
2/29/2000 $ 16,509 $ 15,725 $ 15,637 $ 16,327
3/31/2000 $ 16,258 $ 15,486 $ 15,402 $ 16,050
4/30/2000 $ 16,152 $ 15,385 $ 15,379 $ 16,047
5/31/2000 $ 15,844 $ 15,091 $ 15,133 $ 15,819
6/30/2000 $ 15,972 $ 15,213 $ 15,472 $ 16,130
7/31/2000 $ 16,133 $ 15,367 $ 15,617 $ 16,272
8/31/2000 $ 16,293 $ 15,519 $ 15,722 $ 16,398
9/30/2000 $ 16,021 $ 15,260 $ 15,577 $ 16,183
10/31/2000 $ 15,321 $ 14,593 $ 15,093 $ 15,709
11/30/2000 $ 14,442 $ 13,756 $ 14,498 $ 15,109
12/31/2000 $ 14,749 $ 14,049 $ 14,790 $ 15,374
1/31/2001 $ 15,913 $ 15,157 $ 15,677 $ 16,306
2/28/2001 $ 15,959 $ 15,201 $ 15,836 $ 16,495
3/31/2001 $ 15,345 $ 14,616 $ 15,520 $ 16,172
4/30/2001 $ 14,986 $ 14,274 $ 15,359 $ 16,002
5/31/2001 $ 15,123 $ 14,405 $ 15,666 $ 16,316
6/30/2001 $ 14,470 $ 13,783 $ 15,423 $ 16,034
7/31/2001 $ 14,459 $ 13,772 $ 15,588 $ 16,195
8/31/2001 $ 14,565 $ 13,874 $ 15,807 $ 16,406
9/30/2001 $ 13,397 $ 12,761 $ 14,811 $ 15,323
10/31/2001 $ 13,881 $ 13,222 $ 15,148 $ 15,705
11/30/2001 $ 14,370 $ 13,687 $ 15,638 $ 16,239
12/31/2001 $ 14,339 $ 13,658 $ 15,647 $ 16,218
1/31/2002 $ 14,489 $ 13,800 $ 15,793 $ 16,336
2/28/2002 $ 14,232 $ 13,556 $ 15,681 $ 16,213
3/31/2002 $ 14,478 $ 13,791 $ 16,040 $ 16,580
4/30/2002 $ 14,600 $ 13,906 $ 16,295 $ 16,832
5/31/2002 $ 14,401 $ 13,717 $ 16,238 $ 16,775
6/30/2002 $ 13,683 $ 13,033 $ 15,673 $ 16,171
7/31/2002 $ 13,304 $ 12,672 $ 15,224 $ 15,721
8/31/2002 $ 13,350 $ 12,716 $ 15,422 $ 15,866
9/30/2002 $ 13,230 $ 12,602 $ 15,233 $ 15,680
10/31/2002 $ 13,093 $ 12,471 $ 15,140 $ 15,567
11/30/2002 $ 13,629 $ 12,982 $ 15,940 $ 16,374
12/31/2002 $ 13,727 $ 13,075 $ 16,135 $ 16,564
1/31/2003 $ 13,998 $ 13,333 $ 16,574 $ 16,994
2/28/2003 $ 14,167 $ 13,494 $ 16,819 $ 17,242
3/31/2003 $ 14,442 $ 13,756 $ 17,250 $ 17,658
4/30/2003 $ 15,173 $ 14,452 $ 18,131 $ 18,534
5/31/2003 $ 15,240 $ 14,516 $ 18,394 $ 18,791
6/30/2003 $ 15,662 $ 14,918 $ 18,931 $ 19,340
7/31/2003 $ 15,551 $ 14,812 $ 18,778 $ 19,218
8/31/2003 $ 15,691 $ 14,945 $ 18,988 $ 19,409
9/30/2003 $ 16,157 $ 15,389 $ 19,507 $ 19,946
10/31/2003 $ 16,480 $ 15,697 $ 19,904 $ 20,317
11/30/2003 $ 16,827 $ 16,028 $ 20,177 $ 20,602
12/31/2003 $ 17,251 $ 16,432 $ 20,643 $ 21,123
1/31/2004 $ 17,565 $ 16,731 $ 21,044 $ 21,509
2/29/2004 $ 17,472 $ 16,642 $ 21,054 $ 21,527
3/31/2004 $ 17,492 $ 16,661 $ 21,195 $ 21,695
4/30/2004 $ 17,511 $ 16,679 $ 21,166 $ 21,614
5/31/2004 $ 17,266 $ 16,446 $ 20,831 $ 21,279
6/30/2004 $ 17,528 $ 16,696 $ 21,154 $ 21,603
7/31/2004 $ 17,716 $ 16,874 $ 21,425 $ 21,875
8/31/2004 $ 17,990 $ 17,136 $ 21,774 $ 22,242
9/30/2004 $ 18,345 $ 17,473 $ 22,105 $ 22,563
10/31/2004 $ 18,666 $ 17,779 $ 22,485 $ 22,942
11/30/2004 $ 19,026 $ 18,122 $ 22,768 $ 23,188
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. The Credit
Suisse First Boston (CSFB) High Yield Index is a broad-based, unmanaged index
that tracks the performance of high-yield bonds. The JP Morgan Global High Yield
Index is designed to mirror the investable universe of the US dollar global
high-yield corporate debt market, including domestic and international 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 11/30/04 (%)
<Table>
<Caption>
SHARE CLASS A B C Z
- -------------------------------------------------------------------------------------------
INCEPTION 10/21/71 06/08/92 01/15/96 01/08/99
- -------------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
6-MONTH (CUMULATIVE) 10.25 5.01 9.84 4.84 9.92 8.92 10.39
1-YEAR 13.11 7.74 12.27 7.27 12.44 11.44 13.40
5-YEAR 3.10 2.10 2.34 2.07 2.49 2.49 3.36
10-YEAR 6.64 6.13 5.85 5.85 5.97 5.97 6.80
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF 09/30/04 (%)
<Table>
<Caption>
SHARE CLASS A B C Z
- -------------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
6-MONTH (CUMULATIVE) 4.88 -0.11 4.49 -0.51 4.57 3.57 5.01
1-YEAR 13.55 8.15 12.71 7.71 12.88 11.88 13.83
5-YEAR 2.72 1.72 1.96 1.69 2.11 2.11 2.97
10-YEAR 6.14 5.63 5.35 5.35 5.46 5.46 6.29
</Table>
THE "WITH SALES CHARGE" RETURNS INCLUDE THE MAXIMUM INITIAL SALES CHARGE OF
4.75% FOR CLASS A SHARES, MAXIMUM CONTINGENT DEFERRED SALES CHARGE OF 5.00% FOR
CLASS B SHARES AND 1.00% FOR CLASS C SHARES FOR THE FIRST YEAR ONLY. THE
"WITHOUT SALES CHARGE" RETURNS DO NOT INCLUDE THE EFFECT OF SALES CHARGES. IF
THEY HAD, RETURNS WOULD BE LOWER.
ALL RESULTS SHOWN ASSUME REINVESTMENT OF DISTRIBUTIONS. CLASS Z SHARES ARE SOLD
AT NET ASSET VALUE WITH NO RULE 12b-1 FEES. 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.
Class C is a newer class of shares. Its performance information includes returns
of the fund's class B shares for periods prior to the inception of class C
shares. Class B shares would have substantially similar annual returns because
class B and class C shares generally have similar expense structures. Class A
shares were initially offered on October 21, 1971, class B shares were initially
offered on June 8, 1992, and class C shares were initially offered on
January 15, 1996.
Class Z is a newer class of shares. Its performance information includes returns
of the fund's class A shares (the oldest existing fund class) for periods prior
to its inception. The returns have not been restated to reflect any differences
in expenses (such as Rule 12b-1 fees) between class A shares and the newer class
of shares. If differences in expenses had been reflected, the returns shown for
periods prior to the inception of the newer class of shares would have been
higher. Class Z shares were initially offered on January 8, 1999.
[SIDENOTE]
PERFORMANCE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04 ($)
<Table>
<Caption>
SALES CHARGE: WITHOUT WITH
- ---------------------------------------------------
Class A 19,026 18,122
Class B 17,651 17,651
Class C 17,852 17,852
Class Z 19,308 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, when
redeemed, 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>
UNDERSTANDING YOUR EXPENSES
COLUMBIA HIGH YIELD OPPORTUNITY FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also continuing costs, which generally
include investment advisory and/or Rule 12b-1 fees, and other fund expenses. The
information on this page is intended to help you understand your ongoing costs
of investing in the fund and to compare this cost with the continuing costs of
investing in other mutual funds.
ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class during the reporting period.
The information in the following table is based on an initial investment of
$1,000, which is invested at the beginning of the reporting period and held for
the entire period. Expense information is calculated two ways and each method
provides you with different information. The amount listed in the "actual"
column is calculated using the fund's actual operating expenses and total return
for the period. The amount listed in the "hypothetical" column for each share
class assumes that the return each year is 5% before expenses and includes the
fund's actual expense ratio. You should not use the hypothetical account values
and expenses to estimate either your actual account balance at the end of the
period or the expenses you paid during this reporting period.
06/01/04 - 11/30/04
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
Class A 1,000.00 1,000.00 1,107.74 1,019.25 6.13 5.87 1.16
Class B 1,000.00 1,000.00 1,103.23 1,015.49 10.07 9.65 1.91
Class C 1,000.00 1,000.00 1,104.13 1,016.24 9.28 8.90 1.76
Class Z 1,000.00 1,000.00 1,109.25 1,020.51 4.81 4.61 0.91
</Table>
Expenses paid during the period are equal to the fund's respective class
annualized expense ratio, multiplied by the average account value over the
period, then multiplied by the number of days in the fund's most recent fiscal
half-year and divided by 365.
Had the distributor not waived or reimbursed a portion of Class C expenses,
Class C total return would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only continuing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided will not help you determine the
relative total costs of owning different funds. If these transactional costs
were included, your costs would have been higher.
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other fund companies, it is important to note that hypothetical
examples are meant to highlight the continuing cost of investing in a fund and
do not reflect any transactional costs, such as sales charges or redemption or
exchange fees.
[SIDENOTE]
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
- - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM COLUMBIA FUNDS
SERVICES, INC., YOUR ACCOUNT BALANCE IS AVAILABLE ONLINE AT
www.columbiafunds.com OR BY CALLING SHAREHOLDER SERVICES AT 800.345.6611
- - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE
FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE
1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT
BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6
2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD,"
LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE
COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1. YOUR
ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING THE
PERIOD
3
<Page>
ECONOMIC UPDATE
COLUMBIA HIGH YIELD OPPORTUNITY FUND
During the six-month period that began June 1, 2004, and ended November 30,
2004, the US economy grew at a healthy pace, despite uncertainty about new job
growth and rising energy prices. The economy encountered a soft patch in the
spring, as the rate of growth slowed from 4.5% to 3.3%. However, the pace picked
up again heading into the final month of the year. For the third quarter, gross
domestic product (GDP) increased by 4.0%.
Job growth dominated the economic news. More than one million jobs were created
in the spring of 2004, and consumer confidence soared to its highest level in
two years. However, job growth fell below expectations in July and August.
Consumer confidence fell--and continued to fall as consumers grew increasingly
cautious about employment prospects.
Consumer spending held up during the period, despite a slowdown in growth during
the summer. Within the business sector, industrial production rose; factories
utilized more of their capacity; and spending on technology, capital equipment
and construction picked up. However, business spending fell short of forecasts
given the level of profit growth and the maturity of the economic cycle.
BONDS DELIVER SOLID RETURNS
Despite a weak start--and a weak finish--all sectors of the US bond market
delivered solid returns for the six-month period. Yields rose and bond prices
fell when job growth picked up in the spring and investors began to anticipate
higher short-term interest rates. However, a shaky stock market, higher energy
prices and some mixed economic data gave the bond market a significant boost
during the summer and into the fall. In November, the 10-year Treasury yield
rose sharply, and bonds gave back some of their earlier gains. In this
environment, the Lehman Brothers Aggregate Bond Index returned 3.82%.
High-yield bonds, which can be less sensitive to changing interest rates, gained
9.31%, as measured by the CSFB High Yield Index. A relatively strong economy
improved credit quality and the sector's high yields attracted investors seeking
income. Municipal and mortgage bonds outperformed Treasury bonds.
STOCKS PICK UP MOMENTUM
Although stock market performance was lackluster, it picked up as economic news
improved and uncertainty surrounding the presidential election was resolved. The
S&P 500 Index returned 5.68% for the six-month period. More than half of that
return was generated in November. Small-and mid-cap stocks led the market and
value stocks outperformed growth stocks. Energy and utilities stocks were the
best-performing sectors for the six-month period. Information technology
rebounded strongly in the second half.
HIGHER SHORT-TERM INTEREST RATES
After a year of the lowest short-term interest rates in recent history, the
Federal Reserve Board (the Fed) raised the federal funds rate, a key short-term
rate, from 1.0% to 2.0% in four equal steps during the period.(1) The Fed
indicated that it would continue to raise short-term interest rates at a
"measured pace," in an attempt to balance economic growth against inflationary
pressures. Because the Fed's moves were widely anticipated, these rate increases
have had little impact on the financial markets since they commenced.
(1) The federal funds rate was raised to 2.25% on December 14, 2004.
[SIDENOTE]
SUMMARY
FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004
- - INVESTMENT-GRADE BONDS DELIVERED SOLID GAINS. THE LEHMAN BROTHERS AGGREGATE
BOND INDEX RETURNED 3.82%. HIGH-YIELD BONDS, WHICH CAN BE LESS SENSITIVE TO
CHANGING INTEREST RATES, LED THE FIXED INCOME MARKETS. THE CSFB HIGH YIELD
INDEX RETURNED 9.31%
[CHART]
<Table>
LEHMAN INDEX 3.82%
CSFB HIGH YIELD INDEX 9.31%
</Table>
- - AFTER A WEAK START, STOCK PRICES BOUNCED BACK IN NOVEMBER, HELPING THE S&P
500 INDEX TO A 5.68% GAIN FOR THE SIX MONTH PERIOD. VALUE STOCKS OUTPERFORMED
GROWTH STOCKS, AS MEASURED BY THE RUSSELL 1000 GROWTH AND VALUE INDICES.
[CHART]
<Table>
S&P 500 INDEX 5.68%
RUSSELL 1000 VALUE INDEX 11.01%
</Table>
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks the performance of fixed-rate, publicly placed, dollar-denominated
non-convertible investment-grade debt issues.
The CSFB High Yield Index is a broad-based, unmanaged index that tracks the
performance of high-yield bonds.
The S&P 500 Index is an unmanaged index that tracks the performance of 500
widely held, large capitalization US stocks.
The Russell 1000 Value Index is an unmanaged index that tracks the performance
of those Russell 1000 Index companies with lower price-to-book ratios and lower
forecasted growth values.
4
<Page>
PORTFOLIO MANAGERS' REPORT
COLUMBIA HIGH YIELD OPPORTUNITY FUND
For the six-month period ended November 30, 2004, class A shares of Columbia
High Yield Opportunity Fund returned 10.25% without sales charge. It
outperformed its benchmarks, the CSFB High Yield Index and the JP Morgan Global
High Yield Index, which returned 9.31% and 9.02%, respectively. The fund also
performed better than the Lipper High Current Yield Funds Category, which
averaged a return of 8.56% for the same period.(1)
ECONOMIC EXPANSION LED TO FURTHER GAINS
High-yield issues continued to deliver strong performance as the US and global
economies expanded and interest rates remained relatively low. Bank lenders
proved accommodating in extending credit. Both equity and bond investors
continued to exhibit a healthy appetite for risk. These factors helped provide
ample liquidity for most high-yield issuers, which was reflected in declining
default rates. Defaults hovered around 2.4% at the end of the period, compared
to a historical average of more than twice that amount.
INVESTORS WERE COMFORTABLE WITH RISK
Just as in the equity markets, where investors bid up returns on riskier,
small-cap stocks, bond investors took on greater risk in pursuit of higher
yields. Lower quality single-B and CCC-rated bonds, which are more leveraged to
economic growth, were stronger performers than BB and higher-rated issues, which
are more sensitive to rising interest rates.
UTILITIES, CHEMICAL AND CONSUMER ISSUES STOOD OUT
Investments in utilities, chemical and consumer sectors bolstered the fund's
return. Bonds of Coastal Corp., Sonat, Inc. and Southern Natural Gas Co., all
subsidiaries of El Paso Corporation, moved higher as El Paso stabilized its
operations. El Paso also allayed earlier concerns about the size of its oil and
gas reserves. A refinancing program at US Unwired, Inc. aided results when our
holdings were called away at favorable prices. New US Unwired bonds, purchased
as part of the refinancing, also rose. Within the generally strong wireless
sector, Dobson Communications Corp. was an exception as revenues for "roaming"
calls shrank and Dobson's bonds declined.
In chemicals, Huntsman ICI Holdings LLC rose on improved earning and on news
that they will be called away at premium prices with proceeds from an equity
initial public offering. Lyondell Chemical Co. and its subsidiary Equistar
Chemicals LP, which manufacture commodity chemicals, both benefited from strong
business conditions within the industry.
CONSUMER, HEALTHCARE ISSUES AND STOCKS CONTRIBUTED
Within the consumer sector, jeans and apparel maker Levi Strauss & Co. continued
its turnaround. Its fundamental operations improved so much that the company
abandoned plans to sell its Dockers line to raise cash. Bonds of Tenet
Healthcare Corp., which we had purchased at attractive valuations, moved higher
as investors shrugged off negative headlines and focused on underlying asset
value and liquidity. The fund's modest commitment to common stocks also
contributed to its return.
(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 11/30/04 ($)
<Table>
Class A 4.81
Class B 4.81
Class C 4.81
Class Z 4.81
</Table>
DISTRIBUTIONS DECLARED PER SHARE 06/01/04 - 11/30/04 ($)
<Table>
Class A 0.19
Class B 0.17
Class C 0.17
Class Z 0.19
</Table>
SEC YIELDS AS OF 11/30/04 (%)
<Table>
Class A 6.68
Class B 6.26
Class C 6.41
Class Z 7.28
</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 per share at
the end of the period.
HOLDINGS DISCUSSED IN THIS REPORT AS OF 11/30/04 (%)
<Table>
Coastal Corp. 0.8
Sonat, Inc. 1.1
Southern Natural Gas Co. 0.3
US Unwired, Inc. 0.5
Dobson Communications Corp. 0.4
Huntsman ICI Holdings LLC 0.9
Lyondell Chemical Co. 0.7
Equistar Chemicals LP 0.6
Levi Strauss & Co. 0.5
Tenet Healthcare Corp. 1.0
Delta Air Lines, Inc. 0.1
Northwest Airlines, Inc. 0.5
Continental Airlines, Inc. 0.4
Merisant Co. 0.3
</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.
5
<Page>
LIGHT ENERGY EXPOSURE, AIRLINE WOES AND COMPANY-SPECIFIC PROBLEMS LIMITED RETURN
Because we expected oil and gas prices to decline sooner than they did, we
maintained an underweight position in energy, a decision that held back returns
for most of the period. Skyrocketing fuel outlays, along with high labor costs,
were problems for Delta and other airlines; we reduced our exposure to Delta Air
Lines, Inc. when prices recovered modestly in November but continued to hold
Northwest Airlines, Inc. and Continental Airlines, Inc. bonds.
Company-specific problems hurt Merisant Co., the maker of Equal sugar
substitute, as it lost market share to Johnson and Johnson's Splenda. Because we
believe that Merisant has the potential to stabilize its operation and regain
market share, we continue to hold its bonds.
DESPITE SOME CAUTION, A GENERALLY FAVORABLE ENVIRONMENT FOR HIGH-YIELD
If the US economy continues to expand and short-term interest rates rise
gradually, we believe that lower-quality issues have the potential to continue
to deliver strong performance. Historically they have been helped by just such
economic conditions. As a result, we have maintained the fund's exposure to
lower-rated issues, emphasizing companies where our rigorous credit analysis
shows the likelihood of improved credit, earnings and cash flows. However, our
enthusiasm for the sector is balanced by an element of caution: High-yield
spreads, a measure of the yield difference between high-yield bonds and US
Treasury bonds, are below historical averages, limiting future return potential.
In addition, the high-yield market has absorbed a record volume of new issues in
2004. Continued heavy issuance of new bonds could eventually put pressure on
prices.
[PHOTO OF THOMAS A. LaPOINTE]
Thomas A. LaPointe, CFA, has co-managed Columbia High Yield Opportunity Fund
since February 2003 and has been with the advisor or its predecessors or
affiliate organizations since February 1999.
/s/ Thomas A. LaPointe
[PHOTO OF KEVIN L. CRONK]
Kevin L. Cronk, CFA has co-managed the fund since February 2003 and has been
with the advisor or its predecessors or affiliate organizations since August
1999.
/s/ Kevin L. Cronk
The values of fixed-income securities generally move inversely with changes in
interest rates such that when interest rates rise, bond values fall and vice
versa. Investing in high-yield bonds involves greater credit risk 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 domestic investments.
[SIDENOTE]
WE HAVE MAINTAINED THE FUND'S EXPOSURE TO LOWER-RATED ISSUES, EMPHASIZING
COMPANIES WHERE OUR RIGOROUS CREDIT ANALYSIS SHOWS THE LIKELIHOOD OF IMPROVED
CREDIT, EARNINGS AND CASH FLOWS.
6
<Page>
FINANCIAL STATEMENTS
NOVEMBER 30, 2004 COLUMBIA HIGH YIELD OPPORTUNITY 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).
7
<Page>
INVESTMENT PORTFOLIO
NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 91.9%
BASIC MATERIALS - 9.6%
CHEMICALS - 5.2%
AGRICULTURAL CHEMICALS - 1.7%
IMC GLOBAL, INC. 10.875% 08/01/13 2,150,000 2,730,500
TERRA CAPITAL, INC. 12.875% 10/15/08 3,220,000 3,976,700
UAP HOLDING CORP. (a) 07/15/12
(10.750% 01/15/08) (b) 2,190,000 1,664,400
UNITED AGRI PRODUCTS 8.250% 12/15/11
(8.750% 12/15/04) (b)(c) 1,900,000 2,023,500
10,395,100
CHEMICALS - DIVERSIFIED - 3.3%
BCP CAYLUX HOLDING LUXEMBOURG SCA 9.625% 06/15/14 (b) 1,410,000 1,586,250
EQUISTAR CHEMICALS LP 10.625% 05/01/11 3,125,000 3,617,188
HMP EQUITY HOLDINGS CORP. (d) 05/15/08 5,330,000 3,504,475
HUNTSMAN ICI HOLDINGS LLC (d) 12/31/09 9,920,000 5,530,400
LYONDELL CHEMICAL CO. 9.625% 05/01/07 3,715,000 4,077,212
NOVA CHEMICALS CORP. 6.500% 01/15/12 780,000 809,398
WESTLAKE CHEMICAL CORP. 8.750% 07/15/11 1,112,000 1,253,780
20,378,703
CHEMICALS - SPECIALTY - 0.2%
CROMPTON CORP. 7.670% 08/01/10 (b)(e) 1,090,000 1,177,200
1,177,200
Chemicals Total 31,951,003
FOREST PRODUCTS & PAPER - 2.5%
FORESTRY - 0.4%
MILLAR WESTERN FOREST PRODUCTS LTD. 7.750% 11/15/13 1,695,000 1,813,650
TEMBEC INDUSTRIES, INC. 8.500% 02/01/11 1,040,000 1,040,000
2,853,650
PAPER & RELATED PRODUCTS - 2.1%
BOISE CASCADE LLC 5.005% 10/15/12 (b)(e) 1,110,000 1,132,200
7.125% 10/15/14 (b) 1,250,000 1,312,500
BUCKEYE TECHNOLOGIES, INC. 8.500% 10/01/13 480,000 528,000
9.250% 09/15/08 1,980,000 1,980,000
CARAUSTAR INDUSTRIES, INC. 9.875% 04/01/11 2,015,000 2,166,125
GEORGIA-PACIFIC CORP. 8.000% 01/15/24 1,150,000 1,334,000
</Table>
See accompanying notes to financial statements.
8
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
BASIC MATERIALS - (CONTINUED)
FOREST PRODUCTS & PAPER - (CONTINUED)
NEENAH PAPER, INC. 7.375% 11/15/14 (b) 790,000 797,900
NEWARK GROUP, INC. 9.750% 03/15/14 (b) 1,550,000 1,623,625
NORSKE SKOG CANADA LTD. 7.375% 03/01/14 695,000 729,750
8.625% 06/15/11 1,200,000 1,296,000
12,900,100
Forest Products & Paper Total 15,753,750
IRON/STEEL - 1.2%
METAL - IRON - 0.5%
WISE METALS GROUP LLC 10.250% 05/15/12 (b) 2,785,000 2,805,888
2,805,888
STEEL - PRODUCERS - 0.2%
STEEL DYNAMICS, INC. 9.500% 03/15/09 1,080,000 1,196,100
1,196,100
STEEL - SPECIALTY - 0.5%
OREGON STEEL MILLS, INC. 10.000% 07/15/09 985,000 1,103,200
UCAR FINANCE, INC. 10.250% 02/15/12 1,890,000 2,173,500
3,276,700
Iron/Steel Total 7,278,688
MINING - 0.7%
METAL - ALUMINUM - 0.3%
KAISER ALUMINUM & CHEMICAL CORP. 10.875% 10/15/06 (f) 2,385,000 2,051,100
2,051,100
METAL - DIVERSIFIED - 0.4%
EARLE M. JORGENSEN CO. 9.750% 06/01/12 2,140,000 2,407,500
2,407,500
Mining Total 4,458,600
----------
BASIC MATERIALS TOTAL 59,442,041
COMMUNICATIONS - 20.4%
ADVERTISING - 0.3%
ADVERTISING SERVICES - 0.3%
WDAC SUBSIDIARY CORP. 8.375% 12/01/14 (b)(g) 1,685,000 1,701,850
1,701,850
Advertising Total 1,701,850
</Table>
See accompanying notes to financial statements.
9
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - 9.0%
BROADCAST SERVICES/PROGRAMS - 0.5%
FISHER COMMUNICATIONS, INC. 8.625% 09/15/14 (b) 1,060,000 1,144,800
XM SATELLITE RADIO HOLDINGS, INC. 7.660% 05/01/09 (e) 1,675,000 1,708,500
2,853,300
CABLE TV - 4.3%
ATLANTIC BROADBAND FINANCE LLC 9.375% 01/15/14 (b) 2,605,000 2,526,850
CABLEVISION SYSTEM CORP. 6.669% 04/01/09 (b)(e) 1,945,000 2,032,525
CHARTER COMMUNICATIONS HOLDINGS LLC 9.920% 04/01/11 9,895,000 8,138,637
10.250% 09/15/10 1,500,000 1,575,000
CSC HOLDINGS, INC. 6.750% 04/15/12 (b) 1,230,000 1,260,750
7.625% 04/01/11 95,000 101,888
DIRECTV HOLDINGS LLC 8.375% 03/15/13 495,000 558,112
ECHOSTAR DBS CORP. 6.375% 10/01/11 685,000 705,550
INSIGHT COMMUNICATIONS (a) 02/15/11
(12.250% 02/15/06) 870,000 839,550
INSIGHT MIDWEST LP 9.750% 10/01/09 1,255,000 1,322,456
NORTHLAND CABLE TELEVISION, INC. 10.250% 11/15/07 3,650,000 3,650,000
PEGASUS SATELLITE COMMUNICATIONS, INC. 11.250% 01/15/10 (b)(f) 2,825,000 1,800,938
TELENET GROUP HOLDING NV (a) 06/15/14
(11.500% 12/15/08) (b) 3,045,000 2,352,263
26,864,519
MULTIMEDIA - 1.5%
ADVANSTAR COMMUNICATIONS, INC. (a) 10/15/11
(15.000% 10/15/05) 1,825,000 1,542,125
12.000% 02/15/11 2,220,000 2,419,800
HAIGHTS CROSS COMMUNICATIONS (a) 08/15/11
(12.500% 02/01/09) 2,325,000 1,499,625
HAIGHTS CROSS OPERATING CO. 11.750% 08/15/11 1,250,000 1,425,000
QUEBECOR MEDIA, INC. 11.125% 07/15/11 2,005,000 2,300,738
9,187,288
PUBLISHING - NEWSPAPERS - 0.4%
HOLLINGER, INC. 11.875% 03/01/11 (b)(h) 1,009,000 1,092,021
12.875% 03/01/11 (b) 1,589,000 1,732,010
2,824,031
</Table>
See accompanying notes to financial statements.
10
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - (CONTINUED)
PUBLISHING - PERIODICALS - 1.4%
CBD MEDIA HOLDINGS & FINANCE, INC. 9.250% 07/15/12 (b) 1,335,000 1,368,375
DEX MEDIA, INC. (a) 11/15/13
(9.000% 11/15/08) 1,850,000 1,419,875
8.000% 11/15/13 450,000 481,500
DEX MEDIA EAST LLC 12.125% 11/15/12 1,518,000 1,859,550
DEX MEDIA WEST LLC 9.875% 08/15/13 2,027,000 2,341,185
YELL FINANCE BV 10.750% 08/01/11 1,034,000 1,204,610
8,675,095
TELEVISION - 0.9%
GRANITE BROADCASTING CORP. 9.750% 12/01/10 3,180,000 2,989,200
PAXSON COMMUNICATIONS 10.750% 07/15/08 1,440,000 1,483,200
SINCLAIR BROADCAST GROUP, INC. 8.750% 12/15/11 800,000 860,000
5,332,400
Media Total 55,736,633
TELECOMMUNICATIONS - 11.1%
CELLULAR TELECOMMUNICATIONS - 4.7%
AMERICAN CELLULAR CORP. Series B,
10.000% 08/01/11 1,955,000 1,647,088
DOBSON CELLULAR SYSTEMS 8.375% 11/01/11 (b) 525,000 538,125
DOBSON COMMUNICATIONS CORP. 8.875% 10/01/13 3,640,000 2,457,000
HORIZON PCS, INC. 11.375% 07/15/12 (b) 1,325,000 1,450,875
iPCS ESCROW CO. 11.500% 05/01/12 (b) 910,000 1,014,650
NEXTEL COMMUNICATIONS, INC. 7.375% 08/01/15 2,000,000 2,200,000
NEXTEL PARTNERS, INC. 8.125% 07/01/11 3,250,000 3,575,000
ROGERS CANTEL, INC. 9.750% 06/01/16 4,130,000 4,863,075
ROGERS WIRELESS, INC. 8.000% 12/15/12 (b) 1,295,000 1,350,037
RURAL CELLULAR CORP. 8.250% 03/15/12 1,355,000 1,412,588
UBIQUITEL OPERATING CO. 9.875% 03/01/11 1,490,000 1,635,275
9.875% 03/01/11 (b) 1,055,000 1,157,862
US UNWIRED, INC. 10.000% 06/15/12 2,845,000 3,157,950
WESTERN WIRELESS CORP. 9.250% 07/15/13 2,660,000 2,872,800
29,332,325
</Table>
See accompanying notes to financial statements.
11
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
TELECOMMUNICATIONS - (CONTINUED)
SATELLITE TELECOMMUNICATIONS - 0.7%
INMARSAT FINANCE II PLC (a) 11/15/12
(10.375% 11/15/08) (b) 790,000 547,075
NEW SKIES SATELLITES NV 9.125% 11/01/12 (b) 1,195,000 1,218,900
PANAMSAT CORP. (a) 11/01/14
(10.375% 11/01/09) (b) 2,560,000 1,536,000
9.000% 08/15/14 (b) 1,070,000 1,150,250
4,452,225
TELECOMMUNICATION EQUIPMENT - 0.2%
LUCENT TECHNOLOGIES, INC. 6.450% 03/15/29 1,890,000 1,620,675
1,620,675
TELECOMMUNICATION SERVICES - 1.6%
AXTEL SA 11.000% 12/15/13 2,580,000 2,741,250
CARRIER1 INTERNATIONAL SA 13.250% 02/15/09 (f) 6,000,000 540,000
FAIRPOINT COMMUNICATIONS, INC. 11.875% 03/01/10 1,150,000 1,308,125
SECURUS TECHNOLOGY, INC. 11.000% 09/01/11 (b) 2,205,000 2,205,000
TIME WARNER TELECOM LLC 9.750% 07/15/08 1,460,000 1,456,350
10.125% 02/01/11 1,760,000 1,689,600
9,940,325
TELEPHONE - INTEGRATED - 3.3%
CINCINNATI BELL, INC. 8.375% 01/15/14 2,645,000 2,658,225
QWEST CAPITAL FUNDING, INC. 7.250% 02/15/11 7,025,000 6,673,750
7.750% 02/15/31 2,385,000 2,039,175
QWEST SERVICES CORP. 13.500% 12/15/10 (b) 6,545,000 7,788,550
US LEC CORP. 10.670% 10/01/09 (b)(e) 1,070,000 1,067,689
20,227,389
WIRELESS EQUIPMENT - 0.6%
AMERICAN TOWERS, INC. 7.250% 12/01/11 1,060,000 1,120,950
SBA COMMUNICATIONS CORP. (a) 12/15/11
(9.750% 12/15/07) 800,000 674,000
SPECTRASITE, INC. 8.250% 05/15/10 1,690,000 1,829,425
3,624,375
Telecommunications Total 69,197,314
-----------
COMMUNICATIONS TOTAL 126,635,797
</Table>
See accompanying notes to financial statements.
12
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER, CYCLICAL - 19.1%
AIRLINES - 1.3%
AIRLINES - 1.3%
CONTINENTAL AIRLINES, INC. 7.568% 12/01/06 2,980,000 2,294,600
DELTA AIR LINES, INC. 7.900% 12/15/09 1,315,000 736,400
NORTHWEST AIRLINES, INC. 9.875% 03/15/07 3,750,000 3,262,500
UNITED AIR LINES, INC. 2.020% 03/02/04 (e)(i) 2,161,873 1,729,498
8,022,998
Airlines Total 8,022,998
APPAREL - 1.2%
APPAREL MANUFACTURERS - 1.2%
BRODER BROTHERS CO. 11.250% 10/15/10 1,320,000 1,372,800
11.250% 10/15/10 (b) 785,000 816,400
LEVI STRAUSS & CO. 12.250% 12/15/12 2,735,000 2,885,425
PHILLIPS VAN-HEUSEN CORP. 7.250% 02/15/11 1,010,000 1,065,550
8.125% 05/01/13 1,000,000 1,095,000
7,235,175
Apparel Total 7,235,175
AUTO MANUFACTURERS - 0.3%
AUTO - MEDIUM & HEAVY DUTY TRUCKS - 0.3%
NAVISTAR INTERNATIONAL CORP. 7.500% 06/15/11 1,970,000 2,127,600
2,127,600
Auto Manufacturers Total 2,127,600
AUTO PARTS & EQUIPMENT - 1.6%
AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 0.9%
ACCURIDE CORP. Series 1998 B,
9.250% 02/01/08 1,225,000 1,246,437
AFFINIA GROUP, INC. 9.000% 11/30/14 (b) 260,000 267,800
DELCO REMY INTERNATIONAL, INC. 11.000% 05/01/09 2,095,000 2,210,225
DURA OPERATING CORP. 8.625% 04/15/12 1,775,000 1,810,500
5,534,962
AUTO/TRUCKS PARTS & EQUIPMENT - REPLACEMENT - 0.2%
REXNORD CORP. 10.125% 12/15/12 1,360,000 1,536,800
1,536,800
</Table>
See accompanying notes to financial statements.
13
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER, CYCLICAL - (CONTINUED)
AUTO PARTS & EQUIPMENT - (CONTINUED)
RUBBER - TIRES - 0.5%
GOODYEAR TIRE & RUBBER CO. 7.857% 08/15/11 2,960,000 2,937,800
2,937,800
Auto Parts & Equipment Total 10,009,562
ENTERTAINMENT - 2.4%
GAMBLING (NON-HOTEL) - 0.4%
GLOBAL CASH ACCESS LLC/GLOBAL CASH FINANCE CORP. 8.750% 03/15/12 2,245,000 2,424,600
2,424,600
MUSIC - 0.5%
STEINWAY MUSICAL INSTRUMENTS, INC. 8.750% 04/15/11 1,485,000 1,611,225
WARNER MUSIC GROUP 7.375% 04/15/14 (b) 1,270,000 1,298,575
2,909,800
RESORTS/THEME PARKS - 0.5%
SIX FLAGS, INC. 8.875% 02/01/10 2,360,000 2,371,800
9.625% 06/01/14 1,040,000 1,027,000
3,398,800
THEATERS - 1.0%
LCE ACQUISITION CORP. 9.000% 08/01/14 (b) 2,280,000 2,451,000
MARQUEE HOLDINGS, INC. (a) 08/15/14
(12.000% 08/15/09) (b) 5,745,000 3,705,525
6,156,525
Entertainment Total 14,889,725
HOME BUILDERS - 1.2%
BUILDING - RESIDENTIAL/COMMERCIAL - 1.2%
D.R. HORTON, INC. 9.750% 09/15/10 2,400,000 2,874,000
K. HOVNANIAN ENTERPRISES, INC. 8.875% 04/01/12 1,435,000 1,578,500
10.500% 10/01/07 1,930,000 2,224,325
STANDARD PACIFIC CORP. 9.250% 04/15/12 625,000 729,687
7,406,512
Home Builders Total 7,406,512
HOME FURNISHINGS - 0.7%
HOME FURNISHINGS - 0.7%
NORCRAFT COMPANIES 9.000% 11/01/11 1,095,000 1,188,075
</Table>
See accompanying notes to financial statements.
14
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER, CYCLICAL - (CONTINUED)
HOME FURNISHINGS - (CONTINUED)
WII COMPONENTS, INC. 10.000% 02/15/12 2,940,000 2,881,200
4,069,275
Home Furnishings Total 4,069,275
LEISURE TIME - 1.7%
CRUISE LINES - 0.1%
NCL CORP. 10.625% 07/15/14 (b) 840,000 865,200
865,200
LEISURE & RECREATIONAL PRODUCTS - 0.6%
BOMBARDIER RECREATIONAL PRODUCTS, INC. 8.375% 12/15/13 2,355,000 2,543,400
K2, INC. 7.375% 07/01/14 (b) 920,000 1,009,700
3,553,100
RECREATIONAL CENTERS - 1.0%
AMF BOWLING WORLDWIDE, INC. 10.000% 03/01/10 1,655,000 1,770,850
EQUINOX HOLDINGS, INC. 9.000% 12/15/09 2,570,000 2,711,350
TOWN SPORTS INTERNATIONAL, INC. (a) 02/01/14
(11.000% 02/01/09) 3,115,000 1,736,613
6,218,813
Leisure Time Total 10,637,113
LODGING - 5.7%
CASINO HOTELS - 5.7%
CIRCUS & ELDORADO/SILVER LEGACY CAPITAL CORP. 10.125% 03/01/12 1,990,000 2,179,050
HARD ROCK HOTEL, INC. 8.875% 06/01/13 2,405,000 2,645,500
HOLLYWOOD CASINO SHREVEPORT 13.000% 08/01/06 (j) 7,050,000 6,204,000
INN OF THE MOUNTAIN GODS RESORT & CASINO 12.000% 11/15/10 2,045,000 2,382,425
MGM MIRAGE 8.375% 02/01/11 2,515,000 2,841,950
MOHEGAN TRIBAL GAMING AUTHORITY 7.125% 08/15/14 (b) 410,000 437,675
PINNACLE ENTERTAINMENT 8.250% 03/15/12 2,190,000 2,277,600
8.750% 10/01/13 3,245,000 3,488,375
PREMIER ENTERTAINMENT BILOXI FINANCIAL LLC 10.750% 02/01/12 1,505,000 1,625,400
RIVER ROCK ENTERTAINMENT 9.750% 11/01/11 2,620,000 2,901,650
SENECA GAMING CORP. 7.250% 05/01/12 2,265,000 2,395,238
</Table>
See accompanying notes to financial statements.
15
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER, CYCLICAL - (CONTINUED)
LODGING - (CONTINUED)
STATION CASINOS, INC. 6.875% 03/01/16 270,000 283,500
TRUMP HOLDINGS & FUNDING PIK,
17.625% 09/15/10 (i) 2,555,875 2,658,110
WYNN LAS VEGAS LLC 6.625% 12/01/14 (b)(g) 1,550,000 1,526,750
12.000% 11/01/10 1,004,000 1,265,040
35,112,263
Lodging Total 35,112,263
RETAIL - 2.5%
RETAIL - AUTOMOBILE - 0.3%
ASBURY AUTOMOTIVE GROUP, INC. 8.000% 03/15/14 1,990,000 1,970,100
1,970,100
RETAIL - DRUG STORES - 0.7%
JEAN COUTU GROUP (PJC), INC. 8.500% 08/01/14 (b) 1,425,000 1,446,375
RITE AID CORP. 9.250% 06/01/13 2,830,000 2,921,975
4,368,350
RETAIL - HOME FURNISHINGS - 0.5%
LEVITZ HOME FURNISHINGS 12.000% 11/01/11 (b) 1,310,000 1,336,200
TEMPUR-PEDIC, INC. 10.250% 08/15/10 1,631,000 1,867,495
3,203,695
RETAIL - JEWELRY - 0.3%
FINLAY FINE JEWELRY CORP. 8.375% 06/01/12 1,700,000 1,853,000
1,853,000
RETAIL - MAJOR DEPARTMENT STORES - 0.1%
SAKS, INC. 7.000% 12/01/13 693,000 705,128
705,128
RETAIL - PROPANE DISTRIBUTORS - 0.3%
FERRELLGAS PARTNERS LP 8.750% 06/15/12 1,830,000 1,994,700
1,994,700
RETAIL - RESTAURANTS - 0.3%
DENNY'S HOLDINGS, INC. 10.000% 10/01/12 (b) 1,590,000 1,673,475
1,673,475
Retail Total 15,768,448
</Table>
See accompanying notes to financial statements.
16
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER, CYCLICAL - (CONTINUED)
TEXTILES - 0.5%
TEXTILE - PRODUCTS - 0.5%
COLLINS & AIKMAN PRODUCTS CO. 9.750% 02/15/10 1,600,000 1,720,000
INVISTA 9.250% 05/01/12 (b) 1,390,000 1,542,900
3,262,900
Textiles Total 3,262,900
-----------
CONSUMER, CYCLICAL TOTAL 118,541,571
CONSUMER, NON-CYCLICAL - 12.6%
AGRICULTURE - 0.6%
AGRICULTURAL OPERATIONS - 0.4%
SEMINIS VEGETABLE SEEDS, INC. 10.250% 10/01/13 2,307,000 2,595,375
2,595,375
TOBACCO - 0.2%
NORTH ATLANTIC TRADING CO., INC. 9.250% 03/01/12 1,545,000 1,236,000
1,236,000
Agriculture Total 3,831,375
BEVERAGES - 0.4%
BEVERAGES - WINES/SPIRITS - 0.4%
CONSTELLATION BRANDS, INC. 8.125% 01/15/12 2,000,000 2,175,000
2,175,000
Beverages Total 2,175,000
BIOTECHNOLOGY - 0.4%
MEDICAL - BIOLOGICAL/GENE - 0.4%
BIO-RAD LABORATORIES, INC. 7.500% 08/15/13 2,515,000 2,747,637
2,747,637
Biotechnology Total 2,747,637
COMMERCIAL SERVICES - 3.5%
COMMERCIAL SERVICES - 0.6%
IRON MOUNTAIN, INC. 7.750% 01/15/15 560,000 569,800
LANGUAGE LINES HOLDINGS, INC. 11.125% 06/15/12 (b) 2,715,000 2,918,625
3,488,425
COMMERCIAL SERVICES - FINANCE - 0.7%
DOLLAR FINANCIAL GROUP, INC. 9.750% 11/15/11 3,720,000 4,017,600
4,017,600
</Table>
See accompanying notes to financial statements.
17
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER, NON-CYCLICAL - (CONTINUED)
COMMERCIAL SERVICES - (CONTINUED)
FUNERAL SERVICES & RELATED ITEMS - 0.5%
SERVICE CORP. INTERNATIONAL 7.700% 04/15/09 2,810,000 3,069,925
3,069,925
PRINTING - COMMERCIAL - 0.7%
AMERICAN COLOR GRAPHICS, INC. 10.000% 06/15/10 1,060,000 911,600
SHERIDAN GROUP 10.250% 08/15/11 (b) 1,515,000 1,655,138
VERTIS, INC. 13.500% 12/07/09 (b) 1,725,000 1,828,500
4,395,238
PRIVATE CORRECTIONS - 0.2%
GEO GROUP, INC. 8.250% 07/15/13 1,260,000 1,341,900
1,341,900
RENTAL AUTO/EQUIPMENT - 0.8%
NATIONSRENT, INC. 9.500% 10/15/10 3,260,000 3,667,500
WILLIAMS SCOTSMAN, INC. 9.875% 06/01/07 1,415,000 1,404,388
5,071,888
Commercial Services Total 21,384,976
COSMETICS/PERSONAL CARE - 0.3%
COSMETICS & TOILETRIES - 0.3%
ELIZABETH ARDEN, INC. 7.750% 01/15/14 1,895,000 2,008,700
2,008,700
Cosmetics/Personal Care Total 2,008,700
FOOD - 2.3%
FOOD - CONFECTIONERY - 0.7%
MERISANT CO. 9.500% 07/15/13 (b) 1,855,000 1,669,500
TABLETOP HOLDINGS, INC. (a) 05/15/14
(12.250% 11/15/08) (b) 5,295,000 2,409,225
4,078,725
FOOD - MISCELLANEOUS/DIVERSIFIED - 1.2%
DEL MONTE CORP. 9.250% 05/15/11 755,000 826,725
DOLE FOOD CO. INC. 8.625% 05/01/09 2,160,000 2,381,400
PINNACLE FOODS HOLDING CORP. 8.250% 12/01/13 (b) 3,380,000 3,058,900
</Table>
See accompanying notes to financial statements.
18
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER, NON-CYCLICAL - (CONTINUED)
FOOD - (CONTINUED)
REDDY ICE HOLDINGS, INC. (a) 11/01/12
(10.500% 11/01/08) (b) 1,660,000 1,153,700
7,420,725
FOOD - RETAIL - 0.4%
STATER BROTHERS HOLDINGS 8.125% 06/15/12 2,360,000 2,513,400
2,513,400
Food Total 14,012,850
HEALTH CARE - PRODUCTS - 3.8%
MEDICAL - HMO - 0.3%
COVENTRY HEALTH CARE, INC. 8.125% 02/15/12 1,870,000 2,057,000
2,057,000
MEDICAL - HOSPITALS - 1.5%
TENET HEALTHCARE CORP. 9.875% 07/01/14 (b) 5,905,000 6,333,113
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. 10.000% 12/15/11 2,600,000 2,970,500
9,303,613
MRI/MEDICAL DIAGNOSTIC IMAGING - 1.6%
INSIGHT HEALTH SERVICES CORP. 9.875% 11/01/11 3,050,000 3,095,750
MEDQUEST, INC. 11.875% 08/15/12 3,020,000 3,533,400
MQ ASSOCIATES, INC. (a) 08/15/12
(12.250% 08/15/08) 4,665,000 3,265,500
9,894,650
PHYSICAL PRACTICE MANAGEMENT - 0.4%
US ONCOLOGY, INC. 9.000% 08/15/12 (b) 2,280,000 2,542,200
2,542,200
Health Care - Products Total 23,797,463
HOUSEHOLD PRODUCTS/WARES - 1.3%
CONSUMER PRODUCTS - MISCELLANEOUS - 1.3%
AAC GROUP HOLDINGS CORP. (a) 10/01/12
(10.250% 10/01/08) (b) 565,000 381,375
AMSCAN HOLDINGS, INC. 8.750% 05/01/14 2,470,000 2,482,350
JOSTENS IH CORP. 7.625% 10/01/12 (b) 1,320,000 1,386,000
PLAYTEX PRODUCTS, INC. 9.375% 06/01/11 3,865,000 4,101,731
8,351,456
Household Products/Wares Total 8,351,456
-----------
CONSUMER, NON-CYCLICAL 78,309,457
</Table>
See accompanying notes to financial statements.
19
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
ENERGY - 6.4%
OIL & GAS - 2.7%
OIL COMPANIES - EXPLORATION & PRODUCTION - 2.0%
CHESAPEAKE ENERGY CORP. 7.500% 06/15/14 1,060,000 1,172,625
COMPTON PETROLEUM CORP. 9.900% 05/15/09 2,675,000 2,942,500
ENCORE ACQUISITION CO. 8.375% 06/15/12 1,870,000 2,085,050
ENERGY PARTNERS LTD. 8.750% 08/01/10 1,570,000 1,727,000
MAGNUM HUNTER RESOURCES, INC. 9.600% 03/15/12 1,469,000 1,674,660
TRANSTEXAS GAS CORP. 15.000% 03/15/05 (j)(k) 475,296 5
WHITING PETROLEUM CORP. 7.250% 05/01/12 2,790,000 2,929,500
12,531,340
OIL & GAS DRILLING - 0.5%
OCEAN RIG NORWAY AS 10.250% 06/01/08 1,816,000 1,870,480
PRIDE INTERNATIONAL, INC. 7.375% 07/15/14 (b) 925,000 1,026,750
2,897,230
OIL REFINING & MARKETING - 0.2%
PREMCOR REFINING GROUP, INC. 7.500% 06/15/15 1,015,000 1,111,425
1,111,425
Oil & Gas Total 16,539,995
OIL & GAS SERVICES - 0.4%
OIL - FIELD SERVICES - 0.4%
HORNBECK OFFSHORE SERVICES, INC. 6.125% 12/01/14 (b) 520,000 520,000
NEWPARK RESOURCES, INC. 8.625% 12/15/07 2,050,000 2,070,500
2,590,500
Oil & Gas Services Total 2,590,500
PIPELINES - 3.3%
PIPELINES - 3.3%
COASTAL CORP. 7.750% 06/15/10 4,840,000 4,979,150
DYNEGY HOLDINGS, INC. 6.875% 04/01/11 2,475,000 2,376,000
9.875% 07/15/10 (b) 1,230,000 1,389,900
NORTHWEST PIPELINE CORP. 8.125% 03/01/10 1,040,000 1,159,600
SONAT, INC. 6.875% 06/01/05 1,500,000 1,518,750
7.625% 07/15/11 4,965,000 5,039,475
SOUTHERN NATURAL GAS CO. 8.875% 03/15/10 1,630,000 1,829,675
</Table>
See accompanying notes to financial statements.
20
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
ENERGY - (CONTINUED)
PIPELINES - (CONTINUED)
WILLIAMS COMPANIES, INC. 8.125% 03/15/12 1,935,000 2,254,275
20,546,825
Pipelines Total 20,546,825
-----------
ENERGY TOTAL 39,677,320
FINANCIALS - 2.0%
DIVERSIFIED FINANCIAL SERVICES - 1.7%
FINANCE - COMMERCIAL - 0.2%
FINOVA GROUP, INC. 7.500% 11/15/09 (l) 3,263,100 1,558,130
1,558,130
FINANCE - INVESTMENT BANKER/BROKER - 1.0%
E*TRADE FINANCIAL CORP. 8.000% 06/15/11 (b) 1,530,000 1,617,975
LABRANCHE & CO. 11.000% 05/15/12 4,155,000 4,425,075
6,043,050
REITS - HOTELS - 0.1%
LA QUINTA PROPERTIES, INC. 7.000% 08/15/12 (b) 585,000 628,875
628,875
REITS - MORTGAGE - 0.4%
THORNBURG MORTGAGE, INC. 8.000% 05/15/13 2,085,000 2,236,163
2,236,163
Diversified
Financial Services Total 10,466,218
SAVINGS & LOANS - 0.3%
SAVINGS & LOANS/THRIFTS - WESTERN US - 0.3%
WESTERN FINANCIAL BANK 9.625% 05/15/12 1,475,000 1,681,500
1,681,500
Savings & Loans Total 1,681,500
-----------
FINANCIALS TOTAL 12,147,718
INDUSTRIALS - 15.9%
AEROSPACE/DEFENSE - 1.4%
AEROSPACE/DEFENSE - EQUIPMENT - 1.4%
ARGO-TECH CORP. 9.250% 06/01/11 1,450,000 1,584,125
BE AEROSPACE, INC. 8.875% 05/01/11 2,080,000 2,173,600
SEQUA CORP. 8.875% 04/01/08 1,458,000 1,596,510
STANDARD AERO HOLDINGS, INC. 8.250% 09/01/14 (b) 1,495,000 1,607,125
</Table>
See accompanying notes to financial statements.
21
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
AEROSPACE/DEFENSE - (CONTINUED)
TRANSDIGM, INC. 8.375% 07/15/11 1,660,000 1,788,650
8,750,010
ELECTRONICS - MILITARY - 0.0%
CONDOR SYSTEMS, INC. 11.875% 05/01/09 (j)(k) 4,000,000 40,000
40,000
Aerospace/Defense Total 8,790,010
BUILDING MATERIALS - 1.6%
BUILDING & CONSTRUCTION PRODUCTS -
MISCELLANEOUS - 0.5%
ASSOCIATED MATERIALS, INC. (a) 03/01/14
(11.250% 03/01/09) 1,350,000 1,005,750
CONGOLEUM CORP. 8.625% 08/01/08 (m) 1,755,000 1,368,900
THL BUILDCO, INC. 8.500% 09/01/14 (b) 830,000 892,250
3,266,900
BUILDING PRODUCTS - CEMENT/AGGREGATION - 0.7%
RMCC ACQUISITION CO. 9.500% 11/01/12 (b) 2,100,000 2,105,250
US CONCRETE, INC. 8.375% 04/01/14 1,880,000 2,006,900
4,112,150
BUILDING PRODUCTS - DOORS & WINDOWS - 0.4%
ATRIUM COMPANIES, INC. Series B,
10.500% 05/01/09 2,210,000 2,320,500
2,320,500
Building Materials Total 9,699,550
ELECTRICAL COMPONENTS & EQUIPMENT - 0.4%
WIRE & CABLE PRODUCTS - 0.4%
COLEMAN CABLE, INC. 9.875% 10/01/12 (b) 2,385,000 2,510,212
2,510,212
Electrical Components &
Equipment Total 2,510,212
ELECTRONICS - 0.1%
ELECTRONIC COMPONENTS - MISCELLANEOUS - 0.1%
FLEXTRONICS INTERNATIONAL LTD. 6.250% 11/15/14 (b) 800,000 788,000
788,000
Electronics Total 788,000
</Table>
See accompanying notes to financial statements.
22
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
ENGINEERING & CONSTRUCTION - 0.4%
BUILDING & CONSTRUCTION - MISCELLANEOUS - 0.4%
J. RAY MCDERMOTT SA 11.000% 12/15/13 (b) 2,530,000 2,764,025
2,764,025
Engineering & Construction
Total 2,764,025
ENVIRONMENTAL CONTROL - 1.4%
NON-HAZARDOUS WASTE DISPOSAL - 1.3%
ALLIED WASTE NORTH AMERICA, INC. 7.875% 04/15/13 4,355,000 4,398,550
8.500% 12/01/08 495,000 520,369
WASTE SERVICES, INC. 9.500% 04/15/14 (b) 3,155,000 3,123,450
8,042,369
RECYCLING - 0.1%
IMCO RECYCLING ESCROW 9.000% 11/15/14 (b) 670,000 693,450
693,450
Environmental Control Total 8,735,819
HAND/MACHINE TOOLS - 0.1%
MACHINE TOOLS & RELATED PRODUCTS - 0.1%
NEWCOR, INC. 8.500% 01/31/13 (k) 847,510 542,406
542,406
Hand/Machine Tools Total 542,406
MACHINERY - CONSTRUCTION & MINING - 0.4%
MACHINERY - CONSTRUCTION & MINING - 0.4%
TEREX CORP. Series 2001 B,
10.375% 04/01/11 2,115,000 2,384,662
2,384,662
Machinery - Construction &
Mining Total 2,384,662
METAL FABRICATED/HARDWARE - 2.1%
METAL PROCESSORS & FABRICATION - 1.5%
ALTRA INDUSTRIAL MOTION, INC. 9.000% 12/01/11 (b) 1,035,000 1,050,525
HAWK CORP. 8.750% 11/01/14 (b) 400,000 413,000
MUELLER GROUP, INC. 10.000% 05/01/12 1,065,000 1,155,525
MUELLER HOLDINGS, INC. (a) 04/15/14
(14.750% 04/15/09) 2,625,000 1,771,875
TRIMAS CORP. 9.875% 06/15/12 4,710,000 4,921,950
9,312,875
</Table>
See accompanying notes to financial statements.
23
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
METAL PRODUCTS - FASTENERS - 0.6%
FASTENTECH, INC. 11.500% 05/01/11 (b) 3,055,000 3,482,700
3,482,700
Metal Fabricated/Hardware
Total 12,795,575
MISCELLANEOUS MANUFACTURERS - 1.6%
ADVANCED MATERIALS/PRODUCTS - 0.3%
HEXCEL CORP. 9.750% 01/15/09 1,800,000 1,885,500
1,885,500
DIVERSIFIED MANUFACTURER OPERATIONS - 1.0%
J.B. POINDEXTER & CO. 8.750% 03/15/14 (b) 1,750,000 1,855,000
KI HOLDINGS, INC. (a) 11/15/14
(9.875% 11/15/09) (b) 2,365,000 1,501,775
KOPPERS INDUSTRIES, INC. 9.875% 10/15/13 1,565,000 1,776,275
TRINITY INDUSTRIES, INC. 6.500% 03/15/14 920,000 911,950
6,045,000
FILTERATION/SEPARATION PRODUCTS - 0.3%
POLYPORE, INC. (a) 10/01/12
(10.500% 10/01/08) (b) 2,730,000 1,754,025
1,754,025
Miscellaneous Manufacturers
Total 9,684,525
PACKAGING & CONTAINERS - 2.6%
CONTAINERS - METAL/GLASS - 1.0%
CROWN EUROPEAN HOLDINGS SA 10.875% 03/01/13 2,550,000 3,002,625
OWENS-BROCKWAY GLASS CONTAINER 8.250% 05/15/13 1,045,000 1,141,662
OWENS-ILLINOIS, INC. 7.350% 05/15/08 1,550,000 1,615,875
7.500% 05/15/10 620,000 653,325
6,413,487
CONTAINERS - PAPER/PLASTIC - 1.6%
CONSOLIDATED CONTAINER CO. LLC (a) 06/15/09 1,700,000 1,428,000
(10.750% 06/15/07)
MDP ACQUISITIONS PLC 9.625% 10/01/12 2,600,000 2,938,000
PORTOLA PACKAGING, INC. 8.250% 02/01/12 1,700,000 1,326,000
SMURFIT-STONE CONTAINER CORP. 8.250% 10/01/12 1,675,000 1,834,125
</Table>
See accompanying notes to financial statements.
24
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
CONTAINERS - PAPER/PLASTIC - (CONTINUED)
TEKNI-PLEX, INC. 12.750% 06/15/10 2,300,000 2,035,500
9,561,625
Packaging & Containers Total 15,975,112
TRANSPORTATION - 3.8%
TRANSPORTATION - MARINE - 1.7%
SHIP FINANCE INTERNATIONAL LTD. 8.500% 12/15/13 4,060,000 4,171,650
STENA AB 7.000% 12/01/16 (b) 785,000 771,262
7.500% 11/01/13 2,675,000 2,768,625
9.625% 12/01/12 1,630,000 1,833,750
TEEKAY SHIPPING CORP. 8.875% 07/15/11 865,000 1,003,400
10,548,687
TRANSPORTATION - RAIL - 0.5%
TFM SA DE CV 12.500% 06/15/12 3,030,000 3,439,050
3,439,050
TRANSPORTATION - SERVICES - 0.9%
CHC HELICOPTER CORP. 7.375% 05/01/14 1,820,000 1,924,650
PETROLEUM HELICOPTERS, INC. 9.375% 05/01/09 3,125,000 3,375,000
RAILWORKS CORP. 11.500% 04/15/09 (j) 600,000 30,000
5,329,650
TRANSPORTATION - TRUCK - 0.7%
ALLIED HOLDINGS, INC. Series 1997 B,
8.625% 10/01/07 1,835,000 1,559,750
QDI CAPITAL CORP. 9.000% 11/15/10 (b) 2,810,000 2,802,975
4,362,725
Transportation Total 23,680,112
-----------
INDUSTRIALS TOTAL 98,350,008
TECHNOLOGY - 0.5%
SEMICONDUCTORS - 0.5%
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.5%
AMKOR TECHNOLOGY, INC. 9.250% 02/15/08 2,910,000 2,859,075
2,859,075
Semiconductors Total 2,859,075
-----------
TECHNOLOGY TOTAL 2,859,075
</Table>
See accompanying notes to financial statements.
25
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
UTILITIES - 5.4%
ELECTRIC - 5.4%
ELECTRIC - GENERATION - 1.1%
AES CORP. 9.000% 05/15/15 (b) 610,000 701,500
9.500% 06/01/09 1,253,000 1,437,818
EDISON MISSION ENERGY 9.875% 04/15/11 3,090,000 3,661,650
MISSION ENERGY HOLDING 13.500% 07/15/08 825,000 1,037,438
6,838,406
ELECTRIC - INTEGRATED - 1.4%
CMS ENERGY CORP. 8.900% 07/15/08 1,990,000 2,208,900
NEVADA POWER CO. 9.000% 08/15/13 985,000 1,152,450
10.875% 10/15/09 1,765,000 2,065,050
PSE&G ENERGY HOLDINGS, INC. 8.625% 02/15/08 2,955,000 3,268,969
8,695,369
INDEPENDENT POWER PRODUCERS - 2.9%
CAITHNESS COSO FUNDING CORP. 9.050% 12/15/09 3,381,457 3,753,418
CALPINE CORP. 8.500% 07/15/10 (b) 2,750,000 2,158,750
CALPINE GENERATING CO. LLC 11.169% 04/01/11 (b)(e) 3,575,000 3,387,313
11.500% 04/01/11 (b) 2,125,000 1,955,000
MSW ENERGY HOLDINGS LLC 7.375% 09/01/10 910,000 960,050
8.500% 09/01/10 2,260,000 2,486,000
ORION POWER HOLDINGS, INC. 12.000% 05/01/10 2,270,000 2,882,900
17,583,431
Electric Total 33,117,206
-----------
UTILITIES TOTAL 33,117,206
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES
(COST OF $557,233,868) 569,080,193
</Table>
See accompanying notes to financial statements.
26
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
MUNICIPAL BOND (TAXABLE) - 0.5%
CONSUMER CYCLICAL - 0.5%
LODGING - 0.5%
CASINO HOTELS - 0.5%
CABAZON BAND MISSION INDIANS 13.000% 10/01/11 (h) 3,250,000 3,224,097
3,224,097
Lodging Total 3,224,097
-----------
CONSUMER CYCLICAL TOTAL 3,224,097
TOTAL MUNICIPAL BOND (TAXABLE)
(COST OF $3,250,000) 3,224,097
CONVERTIBLE BONDS - 0.7%
COMMUNICATIONS - 0.4%
TELECOMMUNCIATIONS - 0.4%
TELECOMMUNICATION EQUIPMENT - 0.4%
NORTEL NETWORKS LTD. 4.250% 09/01/08 2,640,000 2,531,469
2,531,469
Telecommunications Total 2,531,469
-----------
COMMUNICATIONS TOTAL 2,531,469
UTILITIES - 0.3%
ELECTRIC - 0.3%
INDEPENDENT POWER PRODUCER - 0.3%
MIRANT CORP. 2.500% 06/15/21 (f) 2,125,000 1,509,706
1,509,706
Electric Total 1,509,706
-----------
UTILITIES TOTAL 1,509,706
TOTAL CONVERTIBLE BONDS
(COST OF $3,864,973) 4,041,175
<Caption>
SHARES
PREFERRED STOCKS - 3.1%
COMMUNICATIONS - 2.0%
MEDIA - 2.0%
BROADCASTING SERVICES/PROGRAMS - 1.1%
SPANISH BROADCASTING SYSTEM, INC. 10.750% 6,284 6,943,820
6,943,820
TELEVISION - 0.3%
PAXSON COMMUNICATIONS 14.250% PIK 273 2,047,500
PTV, INC. 19 104
2,047,604
</Table>
See accompanying notes to financial statements.
27
<Page>
<Table>
<Caption>
SHARES VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
PREFERRED STOCKS - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - (CONTINUED)
PUBLISHING PERIODICALS - 0.6%
PRIMEDIA, INC. Series D,
10.000% 17,700 1,690,350
Series F,
9.200% 20,390 1,835,100
Series H,
8.625% 220 19,360
3,544,810
Media Total 12,536,234
-----------
COMMUNICATIONS TOTAL 12,536,234
FINANCIALS - 0.6%
FINANCIAL - 0.6%
REAL ESTATE - 0.6%
iSTAR FINANCIAL, INC. Series E,
7.875% 86,769 2,215,325
Series F,
7.800% 57,000 1,442,813
3,658,138
Financial Total 3,658,138
-----------
FINANCIALS TOTAL 3,658,138
UTILITIES - 0.5%
ELECTRIC - 0.5%
ELECTRIC - INTEGRATED - 0.5%
TNP ENTERPRISES, INC. 14.500% PIK 2,788 3,220,140
3,220,140
Electric Total 3,220,140
-----------
UTILITIES TOTAL 3,220,140
TOTAL PREFERRED STOCKS
(COST OF $18,655,533) 19,414,512
COMMON STOCKS (n) - 2.6%
COMMUNICATIONS - 1.9%
MEDIA - 0.7%
CABLE TV - 0.5%
NTL, INC. 46,154 3,211,395
ONO FINANCE PLC (k)(o) 5,700 --
3,211,395
</Table>
See accompanying notes to financial statements.
28
<Page>
<Table>
<Caption>
SHARES VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
COMMON STOCKS (n) - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - (CONTINUED)
MULTIMEDIA - 0.2%
HAIGHTS CROSS COMMUNICATIONS, INC. 18,220 965,660
965,660
Media Total 4,177,055
TELECOMMUNICATIONS - 1.2%
CELLULAR TELECOMMUNICATIONS - 0.8%
AIRGATE PCS, INC. 22,468 729,536
HORIZON PCS, INC. Class A 73,617 1,612,212
NEXTEL COMMUNICATIONS, INC. Class A 100,000 2,846,000
5,187,748
WIRELESS EQUIPMENT - 0.4%
SBA COMMUNICATIONS CORP. Class A 235,910 2,264,736
2,264,736
Telecommunications Total 7,452,484
-----------
COMMUNICATIONS TOTAL 11,629,539
CONSUMER, CYCLICAL - 0.1%
LEISURE TIME - 0.1%
CASINO SERVICES - 0.1%
ALLIANCE GAMING CORP. 55,000 664,950
664,950
Leisure Time Total 664,950
-----------
CONSUMER, CYCLICAL TOTAL 664,950
ENERGY - 0.2%
OIL& GAS - 0.0%
OIL& GAS DRILLING - 0.0%
COHO ENERGY, INC. (p) 750 --
HORIZON NATURAL RESOURCES CO. (k) 16,000 16
ORION REFINING CORP. (k)(o) 10 --
16
Oil & Gas Total 16
</Table>
See accompanying notes to financial statements.
29
<Page>
<Table>
<Caption>
SHARES VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
COMMON STOCKS (n) - (CONTINUED)
ENERGY - (CONTINUED)
PIPELINES -0.2%
PIPELINES - 0.2%
DYNEGY, INC. Class A 233,000 1,316,450
1,316,450
Pipelines Total 1,316,450
-----------
ENERGY TOTAL 1,316,466
INDUSTRIALS - 0.3%
ENVIRONMENT CONTROL - 0.3%
NON-HARZARDOUS WASTE DISPOSAL - 0.3%
ALLIED WASTE INDUSTRIES, INC. 72,500 659,025
FAIRLANE MANAGEMENT CORP. (k)(o) 50,004 --
WASTE SERVICES, INC. 327,000 1,206,368
1,865,393
Environmental Control Total 1,865,393
-----------
INDUSTRIALS TOTAL 1,865,393
UTILITIES - 0.1%
ELECTRIC - 0.0%
ELECTRIC INTEGRATED - 0.0%
BAYCORP HOLDINGS LTD. 3 38
38
Electric Total 38
OIL & GAS SERVICES - 0.1%
OIL - FIELD SERVICES - 0.1%
HORNBECK OFFSHORE SERVICES, INC. 27,300 551,460
551,460
Oil & Gas Services Total 551,498
-----------
UTILITIES TOTAL 551,498
TOTAL COMMON STOCKS
(COST OF $16,778,114) 16,027,846
</Table>
See accompanying notes to financial statements.
30
<Page>
<Table>
<Caption>
UNITS VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
WARRANTS (n)- 0.0%
COMMUNICATIONS - 0.0%
MEDIA - 0.0%
CABLE TV - 0.0%
CABLE SATISFACTION INTERNATIONAL, INC. expires 03/01/05 (b)(k)(o) 7,550 --
ONO FINANCE PLC expires 02/15/11 (b)(k)(o) 1,200 --
--
BROADCASTING SERVICES/PROGRAMS - 0.0%
XM SATELLITE RADIO HOLDINGS, INC. expires 03/15/10 (b) 2,435 194,800
194,800
MULTIMEDIA - 0.0%
HAIGHTS CROSS COMMUNICATIONS, INC. expires 12/10/11 (p) 20 --
expires 12/10/12 18,044 361
361
Media Total 195,161
TELECOMMUNICATIONS - 0.0%
CELLULAR TELECOMMUNICATIONS - 0.0%
HORIZON PCS, INC. expires 10/01/10 (b)(k)(o) 4,705 --
METRONET COMMUNICATIONS CORP. expires 08/15/07 (b)(k)(o) 1,250 --
--
TELECOMMUNICATION SERVICES - 0.0%
CARRIER1 INTERNATIONAL expires 02/19/09 (b)(f)(k)(o) 2,780 --
IPCS, INC. expires 07/15/10 (b) 2,500 25
JAZZTEL PLC expires 07/15/10 (b)(k)(o) EUR 1,435 --
UBIQUITEL, INC. expires 04/15/10 (b)(k)(o) USD 5,250 --
25
Telecommunications Total 25
-----------
COMMUNICATIONS TOTAL 195,186
CONSUMER, NON-CYCLICAL - 0.0%
FOOD - 0.0%
FOOD RETAIL - 0.0%
PATHMARK STORES, INC. expires 09/19/10 58,758 14,689
14,689
Food Total 14,689
-----------
CONSUMER, NON-CYCLICAL TOTAL 14,689
</Table>
See accompanying notes to financial statements.
31
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- -------------------------------------------------- --------------------------------------------------------------------------
WARRANTS (n)- (CONTINUED)
INDUSTRIALS - 0.0%
AEROSPACE/DEFENSE - 0.0%
AEROSPACE/DEFENSE - EQUIPMENT - 0.0%
LORAL SPACE & COMMUNICATIONS LTD. expires 01/15/07 12,000 120
120
Aerospace/Defense Total 120
METAL FABRICATED/HARDWARE - 0.0%
METAL PROCESSORS & FABRICATE - 0.0%
MUELLER HOLDINGS, INC. expires 04/15/14 2,625 183,750
183,750
Metal Fabricated/Hardware
Total 183,750
TRANSPORTATION - 0.0%
TRANSPORTATION - TRUCK - 0.0%
QDI LLC expires 06/15/06 (b)(k) 10,207 31,744
31,744
Transportation Total 31,744
-----------
INDUSTRIALS TOTAL 215,614
TOTAL WARRANTS
(COST OF $8,220,915) 425,489
SHORT-TERM OBLIGATION - 0.1%
Repurchase agreement with
State Street Bank & Trust Co.
dated 11/30/04, due 12/01/04
at 1.870%, collateralized by
a U.S. Treasury Bond maturing
02/15/10, market value
$675,863 (repurchase proceeds
$658,034) 658,000 658,000
TOTAL SHORT-TERM OBLIGATION
(COST OF $658,000) 658,000
TOTAL INVESTMENTS - 98.9%
(COST OF $608,661,403) (Q) 612,871,312
OTHER ASSETS & LIABILITIES,
NET - 1.1% 6,500,764
NET ASSETS - 100.0% 619,372,076
</Table>
See accompanying notes to financial statements.
32
<Page>
NOTES TO INVESTMENT PORTFOLIO:
(a) Step bond. This security is currently not paying coupon. Shown
parenthetically is the interest rate to be paid and the date the Fund will
begin accruing at this rate.
(b) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933.These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. As of
November 30, 2004, these securities amounted to $137,602,365, which
represents 22.2% of net assets.
(c) Step bond. Shown parenthetically is the next interest rate to be paid and
the date the Fund will begin accruing at this rate.
(d) Zero coupon bond.
(e) Floating rate note. The interest rate shown reflects the rate as of
November 30, 2004.
(f) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. As of
November 30, 2004, the value of these securities amounted to $5,901,744,
which represents 1.0% of net assets.
(g) Security purchased on a delayed delivery basis.
(h) Illiquid security.
(i) The issuer has filed for bankruptcy protection under Chapter 11 and is in
default of certain debt convenants. Income is being accrued. As of November
30, 2004, the value of these securities amounted to $4,387,608, which
represents 0.7% of net assets.
(j) This issuer is in default of certain debt convenants. Income is not being
accrued. As of November 30, 2004, the value of these securities amounted to
$6,274,005, which represents 1.0% of net assets.
(k) Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(l) Issued as part of bankruptcy reorganization.
(m) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt convenants, however, under the issuer's plan of
reorganization, the issuer has guaranteed all interest due and therefore
income is still being accrued. As of November 30, 2004, the value of this
security represents 0.2% of net assets.
(n) Non-income producing security.
(o) Security has no value.
(p) Rounds to less than $1.
(q) Cost for federal income tax purposes is $608,724,959.
At November 30, 2004, the Fund held investments in the following sectors:
<Table>
<Caption>
% OF NET
ASSETS
- ------------------------------------------------------------------------
Communications 24.7
Consumer, Cyclical 19.7
Industrials 16.2
Consumer, Non-Cyclical 12.6
Basic Materials 9.6
Energy 6.6
Utilities 6.3
Financials 2.6
Technology 0.5
Short-Term Obligation 0.1
Other assets & liabilities, net 1.1
-----
100.0
=====
</Table>
<Table>
<Caption>
ACRONYM NAME
EUR Euro
PIK Payment-In-Kind
REIT Real Estate Investment Trust
</Table>
See accompanying notes to financial statements.
33
<Page>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
($)
- -------------------------------------------------- --------------------------------------------------------------------------
ASSETS Investments, at cost 608,661,403
--------------
Investments, at value 612,871,312
Cash 372,719
Receivable for:
Investments sold 1,810,571
Investments sold on a delayed delivery
basis 1,207,742
Fund shares sold 331,061
Interest 12,506,455
Dividends 70,494
Deferred Trustees' compensation plan 32,572
-------------
Total Assets 629,202,926
LIABILITIES Payable for:
Investments purchased 936,330
Investments purchased on a delayed
delivery basis 4,436,084
Fund shares repurchased 1,161,038
Distributions 1,926,250
Investment advisory fee 306,439
Transfer agent fee 172,908
Pricing and bookkeeping fees 23,805
Custody fee 1,143
Distribution and service fees 299,415
Deferred Trustees' fees 32,572
Other liabilities 534,866
-------------
Total Liabilities 9,830,850
NET ASSETS 619,372,076
COMPOSITION OF NET ASSETS Paid-in capital 1,002,685,447
Undistributed net investment income 2,126,906
Accumulated net realized loss (389,650,186)
Net unrealized appreciation on investments 4,209,909
NET ASSETS 619,372,076
CLASS A Net assets 315,736,279
Shares outstanding 65,672,962
Net asset value per share 4.81(a)
Maximum offering price per share ($4.81/0.9525) 5.05(b)
CLASS B Net assets 241,873,446
Shares outstanding 50,310,116
Net asset value and offering price per share 4.81(a)
CLASS C Net assets 43,693,108
Shares outstanding 9,088,195
Net asset value and offering price per share 4.81(a)
CLASS Z Net assets 18,069,243
Shares outstanding 3,758,123
Net asset value, offering and redemption
price per share 4.81
</Table>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See accompanying notes to financial statements.
34
<Page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004 (UNAUDITED)
COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
($)
- -------------------------------------------------- --------------------------------------------------------------------------
INVESTMENT INCOME Interest 26,596,403
Dividends 672,943
-------------
Total Investment Income 27,269,346
EXPENSES Investment advisory fee 1,851,513
Distribution fee:
Class B 917,639
Class C 167,380
Service fee:
Class A 391,586
Class B 305,879
Class C 55,960
Transfer agent fee 678,330
Pricing and bookkeeping fees 102,766
Trustees' fees 9,769
Custody fee 23,299
Non-recurring costs (See Note 7) 11,824
Other expenses 141,486
-------------
Total Expenses 4,657,431
Fees waived by Distributor - Class C (33,077)
Non-recurring costs assumed by Investment
Advisor (See Note 7) (11,824)
Custody earnings credit (5,181)
-------------
Net Expenses 4,607,349
-------------
Net Investment Income 22,661,997
NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain (loss) on:
INVESTMENTS AND FOREIGN CURRENCY Investments 13,610,253
Foreign currency transactions (59,080)
-------------
Net realized gain 13,551,173
Net change in unrealized
appreciation/depreciation on:
Investments 22,493,771
Foreign currency translations 61,151
-------------
Net change in unrealized
appreciation/depreciation 22,554,922
-------------
Net Gain 36,106,095
-------------
Net Increase in Net Assets
from Operations 58,768,092
</Table>
See accompanying notes to financial statements.
35
<Page>
STATEMENT OF CHANGES IN NET ASSETS
COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, MAY 31,
2004 ($) 2004 ($)
- -------------------------------------------------- ----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS Net investment income 22,661,997 54,237,943
Net realized gain on investments and foreign
currency transactions 13,551,173 8,270,746
Net change in unrealized appreciation
/depreciation on investments and foreign
currency translations 22,554,922 32,880,100
--------------------------------
Net Increase from Operations 58,768,092 95,388,789
DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income:
Class A (12,539,947) (25,897,731)
Class B (8,879,829) (18,878,503)
Class C (1,656,703) (3,515,106)
Class Z (598,186) (1,901,969)
--------------------------------
Total Distributions Declared to
Shareholders (23,674,665) (50,193,309)
SHARE TRANSACTIONS Class A:
Subscriptions 33,074,365 189,024,773
Distributions reinvested 6,599,221 13,650,967
Redemptions (67,383,365) (276,813,657)
--------------------------------
Net Decrease (27,709,779) (74,137,917)
Class B:
Subscriptions 9,642,732 41,567,784
Distributions reinvested 4,403,891 8,876,772
Redemptions (38,515,319) (120,128,028)
--------------------------------
Net Decrease (24,468,696) (69,683,472)
Class C:
Subscriptions 1,209,911 26,520,739
Distributions reinvested 1,106,392 2,226,590
Redemptions (7,497,553) (37,179,218)
--------------------------------
Net Decrease (5,181,250) (8,431,889)
Class Z:
Subscriptions 5,753,875 31,287,165
Distributions reinvested 445,990 1,483,445
Redemptions (3,150,243) (66,364,258)
--------------------------------
Net Increase (Decrease) 3,049,622 (33,593,648)
Net Decrease from Share
Transactions (54,310,103) (185,846,926)
--------------------------------
Total Decrease in Net Assets (19,216,676) (140,651,446)
NET ASSETS Beginning of period 638,588,752 779,240,198
End of period (including undistributed net
investment income of $2,126,906 and
$3,139,574, respectively) 619,372,076 638,588,752
CHANGES IN SHARES Class A:
Subscriptions 7,104,512 42,769,227
Issued for distributions reinvested 1,409,647 3,017,589
Redemptions (14,571,594) (61,621,799)
--------------------------------
Net Decrease (6,057,435) (15,834,983)
Class B:
Subscriptions 2,053,006 9,297,993
Issued for distributions reinvested 940,769 1,963,545
Redemptions (8,282,478) (26,516,181)
--------------------------------
Net Decrease (5,288,703) (15,254,643)
Class C:
Subscriptions 259,853 5,944,258
Issued for distributions reinvested 236,421 492,263
Redemptions (1,610,956) (8,189,751)
--------------------------------
Net Decrease (1,114,682) (1,753,230)
Class Z:
Subscriptions 1,217,367 7,069,802
Issued for distributions reinvested 95,152 327,668
Redemptions (680,618) (14,917,379)
--------------------------------
Net Increase (Decrease) 631,901 (7,519,909)
</Table>
See accompanying notes to financial statements.
36
<Page>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA HIGH YIELD OPPORTUNITY FUND
NOTE 1. ORGANIZATION
Columbia High Yield Opportunity Fund (the "Fund"), a series of Columbia Funds
Trust I (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 high current income and total return.
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.
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 pricing services 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 data, as well as broker quotes. 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.
Equity securities are valued at the last sale price on the principal exchange on
which they trade, except for securities traded on the NASDAQ, which are valued
at the NASDAQ official close price. Unlisted securities or listed securities for
which there were no sales during the day are valued at the closing bid price on
such exchanges or over-the-counter markets.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Foreign securities are generally valued at the last sale price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events
affecting the values of such foreign securities and such exchange rates may
occur between the times at which they are determined and the close of the
customary trading session of the NYSE, which would not be reflected in the
computation of the Fund's
37
<Page>
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. Corporate actions
and dividend income are recorded on the ex-date. The value of additional
securities received as an income payment is recorded as income and as the cost
basis of such 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 tax-exempt or taxable income, if any, for its tax year,
and as such will not be subject to federal income taxes. In addition, the Fund
intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Fund should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
38
<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 tax character of distributions paid during the Fund's fiscal year ended May
31, 2004 was as follows:
<Table>
<Caption>
MAY 31,
2004
- -----------------------------------------------------------
Distributions paid from:
Ordinary income $ 50,193,309
Long-term capital gains --
</Table>
Unrealized appreciation (depreciation) at November 30, 2004, based on cost of
investments for federal income tax purposes, was:
<Table>
Unrealized appreciation $ 40,254,232
Unrealized depreciation (36,107,879)
-------------------------------------------------------
Net unrealized appreciation $ 4,146,353
</Table>
The following capital loss carryforwards, determined as of May 31, 2004, 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 CAPITAL LOSS
EXPIRATION CARRYFORWARD
- -----------------------------------------------------
2007 $ 7,774,983
2008 44,818,986
2009 161,087,717
2010 171,019,187
2011 18,463,873
$ 403,164,746
</Table>
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Fund. Columbia, the transfer agent and the distributor, are each indirect,
wholly owned subsidiaries of Bank of America Corporation.
INVESTMENT ADVISORY FEE
Columbia provides administrative and other services to the Fund in addition to
investment advisory services. 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 0.60%
Next $1 billion 0.55%
Over $2 billion 0.50%
</Table>
For the six-months ended November 30, 2004, the Fund's annualized effective
investment advisory fee rate was 0.60%.
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"). As a result, Columbia pays the total fees received
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 based on the number of securities held by
the Fund. For the six months ended November 30, 2004, the Fund's annualized
effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses,
was 0.033%.
TRANSFER AGENT FEE
Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia,
provides shareholder services to the Fund and has subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. 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 a portion of the transfer agent fee
so that the transfer agent fee will not exceed 0.23% (exclusive of out-of-pocket
expenses) annually of the Fund's average daily net
39
<Page>
assets. Columbia, at its discretion, may revise or discontinue this arrangement
any time.
For the six months ended November 30, 2004, the Fund's annualized effective
transfer agent fee rate, inclusive of out-of-pocket fees, was 0.22%. Columbia
did not reimburse any transfer agent fees during the six-months ended November
30, 2004.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia,
is the principal underwriter of the Fund. For the six months ended November 30,
2004, the Distributor has retained net underwriting discounts of $7,056 on sales
of the Fund's Class A shares and received CDSC fees of $6,461, $353,398 and
$6,037 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 equal to 0.25% annually of the average
daily net assets attributable to Class A, Class B and Class C shares. The Plan
also requires the payment of a monthly distribution fee to the Distributor equal
to 0.75% annually 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.
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 credits are recorded as a reduction of total
expenses on the Statement of Operations. 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
With the exception of one officer, all officers of the Fund are employees of
Columbia or its affiliates and receive no compensation from the Fund. Effective
August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to
the Fund in accordance with federal securities regulations. The Fund, along with
other affiliated funds, will pay its pro-rata share of the expenses associated
with the Office of the Chief Compliance Officer. The Fund's fee will not exceed
$15,000 per year.
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 the
Fund's assets.
OTHER
Columbia provides certain services to the Fund related to Sarbanes-Oxley
compliance. For the six months ended November 30, 2004, the Fund paid $1,249 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended November 30, 2004, the cost of purchases and proceeds
from sales of securities, excluding short-term obligations, were $224,332,794
and $268,758,986, respectively.
NOTE 6. LINE OF CREDIT
The Fund and other affiliated funds participate in a $350,000,000 committed
unsecured revolving line of credit provided by State Street Bank and Trust
Company. Borrowings are used for temporary or emergency purposes to facilitate
portfolio liquidity. Interest is charged to each participating fund based on its
borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In
addition, a commitment fee of 0.10% per annum is accrued and apportioned among
the participating funds based on their pro-rata portion of the unutilized line
of credit. The commitment fee is included in "Other expenses" on the Statement
of Operations. For the six months ended November 30, 2004, the Fund did not
borrow under this arrangement.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
INDUSTRY FOCUS
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
40
<Page>
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 and industry events 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 to the extent
there is no established secondary market.
FOREIGN SECURITIES
There are certain additional risks involved when investing in foreign securities
that are not inherent with investments in domestic securities. These risks may
involve foreign currency exchange rate fluctuations, adverse political and
economic developments and the possible prevention of currency exchange or other
foreign governmental laws or restrictions. In addition, the liquidity of foreign
securities may be more limited than that of domestic securities.
Investments in emerging market countries are subject to additional risk. The
risk of foreign investments is typically increased in less developed countries.
These countries are also more likely to experience high levels of inflation,
deflation or currency devaluation which could hurt their economies and
securities markets.
LEGAL PROCEEDINGS
Columbia, the Distributor, and certain of their affiliates (collectively, "The
Columbia Group") have received information requests and subpoenas from various
regulatory and law enforcement authorities in connection with their
investigations of late trading and market timing in mutual funds as well as
other industry wide issues. The Columbia Group has not uncovered any instances
where Columbia or the Distributor were knowingly involved in late trading of
mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and the Distributor, alleging that they had
violated certain provisions of the federal securities laws in connection with
trading activity in mutual fund shares. Also on February 24, 2004, the New York
Attorney General ("NYAG") filed a civil complaint in New York Supreme Court,
County of New York against Columbia and the Distributor alleging that Columbia
and the Distributor had violated certain New York anti-fraud statutes. If either
Columbia or the Distributor is unsuccessful in its defense of these proceedings,
it could be barred from serving as an investment advisor or distributor for any
investment company registered under the Investment Company Act of 1940, as
amended (a "registered investment company"). Such results could prevent
Columbia, the Distributor or any company that is an affiliated person of
Columbia and the Distributor from serving as an investment advisor or
distributor for any registered investment company, including your fund. Your
fund has been informed by Columbia and the Distributor that, if these results
occur, they will seek exemptive relief from the SEC to permit them to continue
to serve as your fund's investment advisor and distributor. There is no
assurance that such exemptive relief will be granted. On March 15, 2004,
Columbia and the Distributor entered into agreements in principle with the SEC
Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and the Distributor agreed, among other things, to the
following conditions: payment of $70 million in disgorgement; payment of $70
million in civil penalties; an order requiring Columbia and the Distributor to
cease and desist from violations of the antifraud provisions and other
provisions of the federal securities laws; governance changes designed to
maintain the independence of the mutual fund boards of trustees and ensure
compliance with securities laws and their fiduciary duties; and retention of an
independent consultant to review Columbia's and the Distributor's compliance
policies and procedures. The agreement requires the final approval of the SEC.
In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc
of America Capital Management, LLC have agreed to collectively reduce mutual
fund fees by $160 million over a five-year period.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
41
<Page>
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston Financial
Corporation ("FleetBoston") (and affiliated entities). More than 300 cases
(including those filed against entities unaffiliated with the funds, their
Boards and/or FleetBoston and its affiliated entities) have been consolidated in
a multi-district proceeding and transferred to the Federal District Court in
Maryland. Recently, certain Columbia funds and affiliated entities have been
named as defendants in several derivative actions under various sections of the
Investment Company Act of 1940, as amended, alleging, among other things, that
the fees and expenses paid by those funds are excessive. The funds and the other
defendants to these actions, including Columbia and various of its affiliates,
certain other mutual funds advised by Columbia and its affiliates, and various
directors of such funds, have denied these allegations and are contesting the
plaintiffs' claims. These suits and certain regulatory investigations are
ongoing, however, based on currently available information, Columbia believes
that these lawsuits are without merit, that the likelihood they will have a
material adverse impact on any fund is remote, and that the lawsuits are not
likely to materially affect its ability to provide investment management
services to its clients, including the funds.
For the six months ended November 30, 2004, Columbia has assumed $11,824 of
legal, consulting services and Trustees' fees incurred by the Fund in connection
with these matters.
42
<Page>
FINANCIAL HIGHLIGHTS
COLUMBIA HIGH YIELD OPPORTUNITY FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS A SHARES 2004 2004 2003(a) 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.76
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.18(b) 0.35(b) 0.14(b) 0.34(b) 0.52(b)(c) 0.61(d) 0.60(d)
Net realized and
unrealized gain (loss)
on investments
and foreign currency 0.28 0.21 0.30 (0.53) (0.65)(c) (1.24) (0.20)
--------- ---------- ---------- --------- --------- --------- ---------
Total from Investment
Operations 0.46 0.56 0.44 (0.19) (0.13) (0.63) 0.40
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.19) (0.32) (0.15) (0.39) (0.51) (0.62) (0.61)
Return of capital -- -- -- (0.03) (0.04) -- --
--------- ---------- ---------- --------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.19) (0.32) (0.15) (0.42) (0.55) (0.62) (0.61)
NET ASSET VALUE, END OF
PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
Total return (e) 10.25%(f) 13.30%(g) 11.01%(f)(g) (4.27)% (2.78)% (10.28)% 6.17%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL
DATA:
Expenses (h) 1.16%(i) 1.19% 1.29%(i) 1.31% 1.22% 1.16% 1.21%
Net investment income (h) 7.68%(i) 7.65% 8.24%(i) 7.92% 10.34%(c) 10.00% 9.02%
Waiver/reimbursement -- 0.01% --%(i)(j) -- -- -- --
Portfolio turnover rate 37%(f) 75% 45%(f) 63% 62% 28% 42%
Net assets, end of
period (000's) $ 315,736 $ 325,658 $ 376,944 $ 361,780 $ 369,043 $ 390,917 $ 540,201
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund 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 December 31, 2001 was to increase net investment
income per share by $0.05, decrease net realized and unrealized loss per
share by $0.05 and increase the ratio of net investment income to average
net assets from 9.76% to 10.34%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Total return at net asset value assuming all distributions
reinvested and no initial sales charge or contingent deferred sales charge.
(f) Not annualized.
(g) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
(j) Rounds to less than 0.01%.
43
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS B SHARES 2004 2004 2003(a) 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.76
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.16(b) 0.31(b) 0.13(b) 0.31(b) 0.48(b)(c) 0.56(d) 0.55(d)
Net realized and
unrealized gain (loss)
on investments
and foreign currency 0.28 0.22 0.29 (0.54) (0.65)(c) (1.24) (0.20)
--------- ---------- ---------- --------- --------- --------- ---------
Total from Investment
Operations 0.44 0.53 0.42 (0.23) (0.17) (0.68) 0.35
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.17) (0.29) (0.13) (0.35) (0.47) (0.57) (0.56)
Return of capital -- -- -- (0.03) (0.04) -- --
--------- ---------- ---------- --------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.17) (0.29) (0.13) (0.38) (0.51) (0.57) (0.56)
NET ASSET VALUE, END OF
PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
Total return (e) 9.84%(f) 12.46%(g) 10.67%(f)(g) (4.99)% (3.51)% (10.96)% 5.38%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL
DATA:
Expenses (h) 1.91%(i) 1.94% 2.04%(i) 2.06% 1.97% 1.91% 1.96%
Net investment income (h) 6.93%(i) 6.90% 7.49%(i) 7.17% 9.59%(c) 9.25% 8.27%
Waiver/reimbursement -- 0.01% --%(i)(j) -- -- -- --
Portfolio turnover rate 37%(f) 75% 45%(f) 63% 62% 28% 42%
Net assets, end of
period (000's) $ 241,873 $ 252,415 $ 305,021 $ 280,220 $ 350,464 $ 433,949 $ 627,057
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund 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 December 31, 2001 was to increase net investment
income per share by $0.05, decrease net realized and unrealized loss per
share by $0.05 and increase the ratio of net investment income to average
net assets from 9.02% to 9.59%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Total return at net asset value assuming all distributions reinvested and no
contingent deferred sales charge.
(f) Not annualized.
(g) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
(j) Rounds to less than 0.01%.
44
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS C SHARES 2004 2004 2003(a) 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.76
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.17(b) 0.32(b) 0.13(b) 0.31(b) 0.49(b)(c) 0.57(d) 0.56(d)
Net realized and
unrealized gain (loss)
on investments
and foreign currency 0.27 0.21 0.29 (0.53) (0.65)(c) (1.24) (0.20)
--------- ---------- ---------- --------- --------- --------- ---------
Total from Investment
Operations 0.44 0.53 0.42 (0.22) (0.16) (0.67) 0.36
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.17) (0.29) (0.13) (0.36) (0.48) (0.58) (0.57)
Return of capital -- -- -- (0.03) (0.04) -- --
--------- ---------- ---------- --------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.17) (0.29) (0.13) (0.39) (0.52) (0.58) (0.57)
NET ASSET VALUE, END OF
PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
Total return (e)(f) 9.92%(g) 12.63% 10.74%(g) (4.85)% (3.37)% (10.78)% 5.54%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL
DATA:
Expenses (h) 1.76%(i) 1.79% 1.89%(i) 1.91% 1.82% 1.76% 1.81%
Net investment income (h) 7.08%(i) 7.05% 7.64%(i) 7.32% 9.74%(c) 9.40% 8.42%
Waiver/reimbursement 0.15%(i) 0.16% 0.15%(i) 0.15% 0.15% 0.15% 0.15%
Portfolio turnover rate 37%(g) 75% 45%(g) 63% 62% 28% 42%
Net assets, end of
period (000's) $ 43,693 $ 46,322 $ 51,471 $ 46,568 $ 52,122 $ 48,904 $ 56,068
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund 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 December 31, 2001 was to increase net investment
income per share by $0.05, decrease net realized and unrealized loss per
share by $0.05 and increase the ratio of net investment income to average
net assets from 9.16% to 9.74%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Total return at net asset value assuming all distributions reinvested and no
contingent deferred sales charge.
(f) Had the Investment Advisor and/or Distributor not waived a portion of
expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
45
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS Z SHARES 2004 2004 2003(a) 2002 2001 2000 1999(b)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.79
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.19(c) 0.36(c) 0.15(c) 0.33(c) 0.53(c)(d) 0.62(e) 0.60(e)
Net realized and
unrealized gain (loss)
on investments
and foreign currency 0.27 0.21 0.29 (0.51) (0.65)(d) (1.24) (0.23)
--------- ---------- ---------- ---------- ---------- --------- --------
Total from Investment
Operations 0.46 0.57 0.44 (0.18) (0.12) (0.62) 0.37
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.19) (0.33) (0.15) (0.40) (0.52) (0.63) (0.61)
Return of capital -- -- -- (0.03) (0.04) -- --
--------- ---------- ---------- ---------- ---------- --------- --------
Total Distributions
Declared to Shareholders (0.19) (0.33) (0.15) (0.43) (0.56) (0.63) (0.61)
NET ASSET VALUE, END OF
PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
Total return (f) 10.39%(g) 13.58%(h) 11.12%(g)(h) (4.03)% (2.53)% (10.06)% 5.83%(g)
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL
DATA:
Expenses (i) 0.91%(j) 0.94% 1.04%(j) 1.06% 0.97% 0.91% 0.95%(j)
Net investment income (i) 7.93%(j) 7.92% 8.49%(j) 8.17% 10.59%(d) 10.25% 9.22%(j)
Waiver/reimbursement -- 0.01% --%(j)(k) -- -- -- --
Portfolio turnover rate 37%(g) 75% 45%(g) 63% 62% 28% 42%
Net assets, end of
period (000's) $ 18,069 $ 14,194 $ 45,803 $ 35,541 $ 1,978 $ 566 $ 418
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Class Z shares were initially offered on January 8, 1999. Per share data and
total return reflect activity from that date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Effective January 1, 2001, the Fund 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 December 31, 2001 was to increase net investment
income per share by $0.05, decrease net realized and unrealized loss per
share by $0.05 and increase the ratio of net investment income to average
net assets from 10.01% to 10.59%. Per share data and ratios for periods
prior to December 31, 2001 have not been restated to reflect this change in
presentation.
(e) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(f) Total return at net asset value assuming all distributions reinvested.
(g) Not annualized.
(h) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(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%.
46
<Page>
COLUMBIA FUNDS
COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
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
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 Opportunity
Columbia Income
Columbia Intermediate Bond
Columbia Intermediate Government Income
Columbia Quality Plus Bond
Columbia Short Term Bond
Columbia Strategic Income
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
</Table>
47
<Page>
<Table>
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 Global Equity
Columbia International Equity*
Columbia International Stock
Columbia Newport Greater China
Columbia Newport Tiger
INDEX Columbia Large Company Index
Columbia Small Company Index
Columbia U.S. Treasury Index
</Table>
* The fund was closed to new investments after the close of business on
November 10, 2004. The fund's trustees have approved the merger, which will
take effect on or about February 26, 2005, pending shareholder approval.
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 is the primary investment management division of Bank of
America Corporation. Columbia Management entities furnish investment management
services and advise institutional and mutual fund portfolios.
48
<Page>
IMPORTANT INFORMATION ABOUT THIS REPORT
COLUMBIA HIGH YIELD OPPORTUNITY 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 High Yield
Opportunity 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 fund's proxy voting policies and procedures is available
(i) on the fund's website, www.columbiamanagement.com; (ii) on the Securities
and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon
request, by calling 800-368-0346. Information regarding how the fund voted
proxies relating to portfolio securities during the 12-month period ended June
30, 2004 is available from the SEC's website. Information regarding how the fund
voted proxies relating to portfolio securities is also available from the fund's
website.
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at www.sec.gov and may be reviewed and copied at
the SEC's Public Reference Room in Washington, DC. Information on the operation
of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Columbia Management is the primary investment management division of Bank of
America Corporation. Columbia Management entities furnish investment management
services and advise institutional and mutual fund portfolios.
49
<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 HIGH YIELD OPPORTUNITY FUND SEMIANNUAL REPORT, NOVEMBER 30, 2004
PRSRT STD
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
[COLUMBIAFUNDS (R) LOGO]
A MEMBER OF COLUMBIA MANAGEMENT
(C) 2004 COLUMBIA FUNDS DISTRIBUTOR, INC.
ONE FINANCIAL CENTER, BASTON, MA 02111-2621
800.345.6611 www.columbiafunds.com
730-03/744T-1104 (01/05) 05/3942
<Page>
[GRAPHIC]
COLUMBIA STRATEGIC INCOME FUND
SEMIANNUAL REPORT
NOVEMBER 30, 2004
[COLUMBIAFUNDS(R) LOGO]
A MEMBER OF COLUMBIA MANAGEMENT
<Page>
TABLE OF CONTENTS
<Table>
Fund Profile 1
Performance Information 2
Understanding Your Expenses 3
Economic Update 4
Portfolio Manager's Report 5
Investment Portfolio 7
Statement of Assets and Liabilities 32
Statement of Operations 33
Statement of Changes in Net Assets 34
Notes to Financial Statements 36
Financial Highlights 42
Columbia Funds 47
Important Information About This Report 49
</Table>
Economic and market conditions change frequently. There is no assurance that
trends described in this report will continue or commence.
NOT FDIC MAY LOSE VALUE
INSURED -------------------
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
COLUMBIA STRATEGIC INCOME FUND
DEAR SHAREHOLDER:
In 2004, Columbia Funds became part of the Bank of America family, one of the
largest, most respected financial institutions in the United States. As a direct
result of this merger, a number of changes are in the works that we believe
offer significant potential benefits for our shareholders. Plans are underway to
bring Nations Funds and Columbia Funds together in a single fund family that
covers a wide range of markets, sectors, and asset classes under the management
of talented, seasoned investment professionals. As a result, some funds will be
merged in order to eliminate redundancies and fund management teams will be
aligned to maximize performance potential. You will receive more detailed
information about these proposed mergers, and you will be asked to vote on
certain fund changes that affect you and your account. In this matter, your
timely response will enable us to implement the changes in 2005.
The increased efficiencies we expect from a more stream-lined offering of funds
may help us reduce fees charged to the funds, because larger funds often benefit
from size and scale of operations. For example, significant savings for the
combined complex may result from the consolidation of certain vendor agreements.
In fact, negotiations are currently underway to consolidate the transfer agency
of all of our funds and to consolidate custodial services, each under a single
vendor. We will also be reducing management fees for many funds as part of our
agreement in principle with the New York Attorney General.
As a result of these changes, we believe we will offer shareholders an even
stronger lineup of investment options, with management expenses that continue to
be competitive and fair. What will not change as we enter this next phase of
consolidation is our commitment to the highest standards of performance and our
dedication to superior service. Change for the good has another name: it's
called improvement. It helps move us forward, and we believe that it represents
progress for all our shareholders in their quest for long-term financial
success.
In the pages that follow, you'll find a discussion of the economic environment
during the period followed by a detailed report from the fund's manager or
managers on key factors that influenced performance. We hope that you will read
the manager reports carefully and discuss any questions you might have with your
financial advisor.
As always, we thank you for choosing Columbia Funds. We appreciate your
continued confidence. And, we look forward to helping you keep your long-term
financial goals on target in the years to come.
Sincerely,
/s/ Christopher L. Wilson
Christopher L. Wilson
HEAD OF MUTUAL FUNDS, COLUMBIA MANAGEMENT
Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible
for the day-to-day delivery of mutual fund services to the firm's investors.
With the exception of distribution, Chris oversees all aspects of the mutual
fund services operation, including treasury, investment accounting and
shareholder and broker services. Chris serves as Columbia Management's liaison
to the mutual fund boards of trustees.
Chris joined Bank of America in August 2004.
<Page>
FUND PROFILE
COLUMBIA STRATEGIC 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.
TOP 5 COUNTRIES AS OF 11/30/04 (%)
<Table>
USA 63.2
Canada 4.0
Sweden 3.4
Germany 3.2
United Kingdom 3.2
</Table>
PORTFOLIO STRUCTURE AS OF 11/30/04 (%)
<Table>
Corporate fixed-income
bonds and Notes 40.9
Foreign government obligations 35.7
US government obligations 16.5
US government agencies 6.1
Asset-backed securities 0.7
Convertible bonds 0.3
Municipal bond (taxable) 0.2
Cash equivalents, net other
assets & liabilities (0.4)
</Table>
QUALITY BREAKDOWN AS OF 11/30/04 (%)
<Table>
AAA 40.0
AA 3.6
A 1.8
BBB 3.8
BB 11.7
B 23.9
CCC 11.8
CC 1.8
D 0.1
Non-rated 1.5
</Table>
Quality breakdown is 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 nationally-recognized rating agencies:
Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc. or Fitch Ratings Ltd.
Country breakdown and portfolio structure are calculated as a percentage of net
assets.
Management Style is determined by Columbia Management and is based on the
investment strategy and process as outlined in the fund's prospectus.
[SIDENOTE]
SUMMARY
- - FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004, THE FUND'S CLASS A SHARES
RETURNED 9.63% WITHOUT SALES CHARGE.
- - THE FUND'S RETURN WAS SIGNIFICANTLY HIGHER THAN THE RETURN OF THE LEHMAN
BROTHERS GOVERNMENT/CREDIT BOND INDEX AND THE AVERAGE RETURN OF THE LIPPER
MULTI-SECTOR INCOME FUNDS CATEGORY AVERAGE, WHICH WERE 3.72% AND 8.14%,
RESPECTIVELY.
- - THE FUND'S HIGH-YIELD AND FOREIGN DEBT POSITIONS HELPED TO PRODUCE
ABOVE-AVERAGE RESULTS.
[CHART]
<Table>
CLASS A SHARES 9.63%
LEHMAN BROTHERS GOVERNMENT/CREDIT BOND INDEX 3.72%
</Table>
OBJECTIVE
Seeks current income
consistent with prudent risk and
also seeks maximum total return
TOTAL NET ASSETS
$1,276.7 million
MANAGEMENT STYLE
[GRAPHIC]
1
<Page>
PERFORMANCE INFORMATION
COLUMBIA STRATEGIC INCOME FUND
[CHART]
VALUE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04
<Table>
<Caption>
CLASS A SHARES CLASS A SHARES LEHMAN BROTHERS GOVERNMENT/
WITHOUT SALES CHARGE WITH SALES CHARGE CREDIT BOND INDEX
12/1/1994 $ 10,000 $ 9,525 $ 10,000
12/31/1994 $ 10,045 $ 9,568 $ 10,066
1/31/1995 $ 10,151 $ 9,669 $ 10,259
2/28/1995 $ 10,398 $ 9,904 $ 10,497
3/31/1995 $ 10,600 $ 10,096 $ 10,568
4/30/1995 $ 10,834 $ 10,320 $ 10,716
5/31/1995 $ 11,149 $ 10,620 $ 11,165
6/30/1995 $ 11,178 $ 10,647 $ 11,254
7/31/1995 $ 11,304 $ 10,767 $ 11,210
8/31/1995 $ 11,349 $ 10,810 $ 11,353
9/30/1995 $ 11,558 $ 11,009 $ 11,469
10/31/1995 $ 11,718 $ 11,162 $ 11,638
11/30/1995 $ 11,847 $ 11,284 $ 11,830
12/31/1995 $ 12,077 $ 11,503 $ 12,004
1/31/1996 $ 12,274 $ 11,691 $ 12,078
2/29/1996 $ 12,170 $ 11,591 $ 11,822
3/31/1996 $ 12,132 $ 11,556 $ 11,723
4/30/1996 $ 12,214 $ 11,634 $ 11,642
5/31/1996 $ 12,245 $ 11,663 $ 11,622
6/30/1996 $ 12,311 $ 11,726 $ 11,777
7/31/1996 $ 12,377 $ 11,790 $ 11,804
8/31/1996 $ 12,550 $ 11,953 $ 11,774
9/30/1996 $ 12,812 $ 12,203 $ 11,984
10/31/1996 $ 12,986 $ 12,369 $ 12,263
11/30/1996 $ 13,287 $ 12,656 $ 12,489
12/31/1996 $ 13,315 $ 12,683 $ 12,350
1/31/1997 $ 13,311 $ 12,679 $ 12,365
2/28/1997 $ 13,418 $ 12,780 $ 12,391
3/31/1997 $ 13,155 $ 12,530 $ 12,243
4/30/1997 $ 13,299 $ 12,668 $ 12,422
5/31/1997 $ 13,539 $ 12,896 $ 12,538
6/30/1997 $ 13,723 $ 13,071 $ 12,688
7/31/1997 $ 14,061 $ 13,393 $ 13,076
8/31/1997 $ 14,000 $ 13,335 $ 12,930
9/30/1997 $ 14,304 $ 13,624 $ 13,133
10/31/1997 $ 14,261 $ 13,584 $ 13,343
11/30/1997 $ 14,335 $ 13,654 $ 13,414
12/31/1997 $ 14,463 $ 13,776 $ 13,555
1/31/1998 $ 14,696 $ 13,997 $ 13,746
2/28/1998 $ 14,751 $ 14,051 $ 13,718
3/31/1998 $ 14,868 $ 14,162 $ 13,761
4/30/1998 $ 14,944 $ 14,234 $ 13,830
5/31/1998 $ 15,001 $ 14,288 $ 13,978
6/30/1998 $ 14,996 $ 14,284 $ 14,120
7/31/1998 $ 15,129 $ 14,411 $ 14,132
8/31/1998 $ 14,503 $ 13,814 $ 14,407
9/30/1998 $ 14,798 $ 14,095 $ 14,819
10/31/1998 $ 14,772 $ 14,071 $ 14,714
11/30/1998 $ 15,213 $ 14,490 $ 14,802
12/31/1998 $ 15,208 $ 14,486 $ 14,839
1/31/1999 $ 15,311 $ 14,584 $ 14,945
2/28/1999 $ 15,112 $ 14,395 $ 14,589
3/31/1999 $ 15,325 $ 14,598 $ 14,662
4/30/1999 $ 15,540 $ 14,802 $ 14,698
5/31/1999 $ 15,206 $ 14,484 $ 14,547
6/30/1999 $ 15,201 $ 14,479 $ 14,502
7/31/1999 $ 15,195 $ 14,474 $ 14,461
8/31/1999 $ 15,124 $ 14,405 $ 14,450
9/30/1999 $ 15,165 $ 14,444 $ 14,580
10/31/1999 $ 15,160 $ 14,440 $ 14,618
11/30/1999 $ 15,294 $ 14,567 $ 14,609
12/31/1999 $ 15,404 $ 14,672 $ 14,520
1/31/2000 $ 15,236 $ 14,512 $ 14,516
2/29/2000 $ 15,466 $ 14,731 $ 14,697
3/31/2000 $ 15,389 $ 14,658 $ 14,910
4/30/2000 $ 15,241 $ 14,517 $ 14,837
5/31/2000 $ 15,069 $ 14,353 $ 14,824
6/30/2000 $ 15,377 $ 14,647 $ 15,126
7/31/2000 $ 15,494 $ 14,758 $ 15,286
8/31/2000 $ 15,614 $ 14,872 $ 15,502
9/30/2000 $ 15,436 $ 14,702 $ 15,561
10/31/2000 $ 15,107 $ 14,389 $ 15,659
11/30/2000 $ 14,826 $ 14,122 $ 15,927
12/31/2000 $ 15,302 $ 14,575 $ 16,240
1/31/2001 $ 15,934 $ 15,177 $ 16,513
2/28/2001 $ 15,954 $ 15,197 $ 16,683
3/31/2001 $ 15,586 $ 14,846 $ 16,760
4/30/2001 $ 15,419 $ 14,687 $ 16,634
5/31/2001 $ 15,513 $ 14,776 $ 16,731
6/30/2001 $ 15,318 $ 14,590 $ 16,811
7/31/2001 $ 15,414 $ 14,682 $ 17,230
8/31/2001 $ 15,673 $ 14,929 $ 17,450
9/30/2001 $ 15,159 $ 14,439 $ 17,611
10/31/2001 $ 15,600 $ 14,859 $ 18,058
11/30/2001 $ 15,795 $ 15,045 $ 17,762
12/31/2001 $ 15,770 $ 15,021 $ 17,622
1/31/2002 $ 15,800 $ 15,049 $ 17,750
2/28/2002 $ 15,830 $ 15,078 $ 17,901
3/31/2002 $ 15,881 $ 15,126 $ 17,538
4/30/2002 $ 16,189 $ 15,420 $ 17,878
5/31/2002 $ 16,270 $ 15,497 $ 18,043
6/30/2002 $ 16,003 $ 15,243 $ 18,196
7/31/2002 $ 15,814 $ 15,063 $ 18,414
8/31/2002 $ 16,067 $ 15,304 $ 18,827
9/30/2002 $ 16,144 $ 15,377 $ 19,231
10/31/2002 $ 16,178 $ 15,410 $ 19,047
11/30/2002 $ 16,540 $ 15,755 $ 19,058
12/31/2002 $ 17,025 $ 16,216 $ 19,563
1/31/2003 $ 17,270 $ 16,450 $ 19,563
2/28/2003 $ 17,578 $ 16,743 $ 19,912
3/31/2003 $ 17,736 $ 16,893 $ 19,886
4/30/2003 $ 18,417 $ 17,542 $ 20,098
5/31/2003 $ 18,914 $ 18,016 $ 20,669
6/30/2003 $ 19,073 $ 18,167 $ 20,587
7/31/2003 $ 18,606 $ 17,722 $ 19,724
8/31/2003 $ 18,704 $ 17,816 $ 19,854
9/30/2003 $ 19,338 $ 18,420 $ 20,484
10/31/2003 $ 19,437 $ 18,514 $ 20,223
11/30/2003 $ 19,791 $ 18,851 $ 20,278
12/31/2003 $ 20,309 $ 19,345 $ 20,479
1/31/2004 $ 20,474 $ 19,501 $ 20,665
2/29/2004 $ 20,576 $ 19,599 $ 20,917
3/31/2004 $ 20,743 $ 19,758 $ 21,110
4/30/2004 $ 20,218 $ 19,258 $ 20,462
5/31/2004 $ 20,091 $ 19,136 $ 20,357
6/30/2004 $ 20,296 $ 19,332 $ 20,441
7/31/2004 $ 20,537 $ 19,562 $ 20,657
8/31/2004 $ 20,950 $ 19,955 $ 21,095
9/30/2004 $ 21,262 $ 20,252 $ 21,169
10/31/2004 $ 21,645 $ 20,617 $ 21,353
11/30/2004 $ 22,004 $ 20,959 $ 21,117
</Table>
The graph and table do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. The Lehman
Brothers Government/Credit Bond Index is an unmanaged index that tracks the
performance of U.S. Government and corporate bonds rated investment grade or
better, with maturities of at least one year. 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 11/30/04 (%)
<Table>
<Caption>
SHARE CLASS A B C J Z
- -------------------------------------------------------------------------------------------------------------
INCEPTION 04/21/77 05/15/92 07/01/97 11/02/98 01/29/99
- -------------------------------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
6-MONTH (CUMULATIVE) 9.63 4.43 9.06 4.06 9.31 8.31 9.29 6.01 9.66
1-YEAR 11.29 6.00 10.46 5.46 10.62 9.62 10.95 7.62 11.65
5-YEAR 7.56 6.52 6.73 6.43 6.92 6.92 7.18 6.53 7.71
10-YEAR 8.21 7.68 7.38 7.38 7.52 7.52 7.96 7.63 8.29
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF 09/30/04 (%)
<Table>
<Caption>
SHARE CLASS A B C J Z
- -------------------------------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
6-MONTH (CUMULATIVE) 2.49 -2.38 2.10 -2.86 2.18 1.18 2.32 -0.75 2.63
1-YEAR 9.93 4.70 9.11 4.11 9.27 8.27 9.59 6.30 10.09
5-YEAR 6.98 5.94 6.18 5.89 6.34 6.34 6.61 5.96 7.09
10-YEAR 7.77 7.25 6.97 6.97 7.09 7.09 7.55 7.22 7.85
</Table>
THE "WITH SALES CHARGE" RETURNS INCLUDE THE MAXIMUM INITIAL SALES CHARGE OF
4.75% FOR CLASS A SHARES AND 3.00% FOR CLASS J SHARES, AND MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 5.00% FOR CLASS B SHARES AND 1.00% FOR CLASS C SHARES
FOR THE FIRST YEAR ONLY. THE "WITHOUT SALES CHARGE" RETURNS DO NOT INCLUDE THE
EFFECT OF SALES CHARGES. IF THEY HAD, RETURNS WOULD BE LOWER. ALL RESULTS SHOWN
ASSUME REINVESTMENT OF DISTRIBUTIONS. CLASS Z SHARES ARE SOLD AT NET ASSET VALUE
WITH NO RULE 12b-1 FEES. PERFORMANCE FOR DIFFERENT SHARE CLASSES WILL VARY BASED
ON DIFFERENCES IN SALES CHARGES AND FEES ASSOCIATED WITH EACH CLASS. PERFORMANCE
REFLECTS ANY VOLUNTARY WAIVERS OR REIMBURSEMENTS OF FUND EXPENSES BY THE ADVISOR
OR ITS AFFILIATES. ABSENT THESE WAIVERS OR REIMBURSEMENT ARRANGEMENTS,
PERFORMANCE WOULD HAVE BEEN LOWER.
The share performance information for classes J and Z (newer class shares)
includes returns of the fund's class A shares (the oldest existing fund class)
for periods prior to the inception of the newer class shares. These class A
share returns are not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between Class A shares and the newer class shares. If differences in
expenses had been reflected, the returns shown for periods prior to the
inception of class J shares would have been lower and the returns for the
class Z shares would have been higher. Class C is a newer class of shares. Its
performance information includes returns of the fund's class B shares for
periods prior to the inception of class C shares. Class B shares would have
substantially similar annual returns because class B and class C shares have
similar expense structures. Class A shares were initially offered on April 21,
1977, class B shares were initially offered on May 15, 1992, class C shares
initially offered on July 1, 1997, class J shares were initially offered on
November 2, 1998 and class Z shares were initially offered on January 29, 1999.
[SIDENOTE]
PERFORMANCE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04 ($)
<Table>
<Caption>
SALES CHARGE: WITHOUT WITH
- ------------------------------------------
Class A 22,004 20,959
Class B 20,390 20,390
Class C 20,649 20,649
Class J 21,509 20,864
Class Z 22,174 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, when
redeemed, 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>
UNDERSTANDING YOUR EXPENSES
COLUMBIA STRATEGIC INCOME FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also continuing costs, which generally
include investment advisory and/or Rule 12b-1 fees, and other fund expenses. The
information on this page is intended to help you understand your ongoing costs
of investing in the fund and to compare this cost with the continuing costs of
investing in other mutual funds.
ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class during the reporting period.
The information in the following table is based on an initial investment of
$1,000, which is invested at the beginning of the reporting period and held for
the entire period. Expense information is calculated two ways and each method
provides you with different information. The amount listed in the "actual"
column is calculated using the fund's actual operating expenses and total return
for the period. The amount listed in the "hypothetical" column for each share
class assumes that the return each year is 5% before expenses and includes the
fund's actual expense ratio. You should not use the hypothetical account values
and expenses to estimate either your actual account balance at the end of the
period or the expenses you paid during this reporting period.
06/01/04 - 11/30/04
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%)
CLASS A 1,000.00 1,000.00 1,100.98 1,019.40 5.95 5.72 1.13
CLASS B 1,000.00 1,000.00 1,094.66 1,015.64 9.87 9.50 1.88
CLASS C 1,000.00 1,000.00 1,097.42 1,016.39 9.10 8.74 1.73
CLASS J 1,000.00 1,000.00 1,097.22 1,017.65 7.78 7.49 1.48
CLASS Z 1,000.00 1,000.00 1,101.28 1,020.61 4.69 4.51 0.89
</Table>
Expenses paid during the period are equal to the fund's respective class
annualized expense ratio, multiplied by the average account value over the
period, then multiplied by the number of days in the fund's most recent fiscal
half-year and divided by 365.
Had the distributor not waived or reimbursed a portion of Class C expenses,
Class C total return would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only continuing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided will not help you determine the
relative total costs of owning different funds. If these transactional costs
were included, your costs would have been higher.
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other fund companies, it is important to note that hypothetical
examples are meant to highlight the continuing cost of investing in a fund and
do not reflect any transactional costs, such as sales charges or redemption or
exchange fees.
[SIDENOTE]
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
- - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM COLUMBIA FUNDS
SERVICES, INC., YOUR ACCOUNT BALANCE IS AVAILABLE ONLINE AT
www.columbiafunds.com OR BY CALLING SHAREHOLDER SERVICES AT 800.345.6611
- - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE
FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE
1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT
BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6
2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD,"
LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE
COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1.
YOUR ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING
THE PERIOD
3
<Page>
ECONOMIC UPDATE
COLUMBIA STRATEGIC INCOME FUND
During the six-month period that began June 1, 2004, and ended November 30,
2004, the US economy grew at a healthy pace, despite uncertainty about new job
growth and rising energy prices. The economy encountered a soft patch in the
spring, as the rate of growth slowed from 4.5% to 3.3%. However, the pace picked
up again heading into the final month of the year. For the third quarter, gross
domestic product (GDP) increased by 4.0%.
Job growth dominated the economic news. More than one million jobs were created
in the spring of 2004, and consumer confidence soared to its highest level in
two years. However, job growth fell below expectations in July and August.
Consumer confidence fell--and continued to fall--as consumers grew increasingly
cautious about employment prospects.
Consumer spending held up during the period, despite a slowdown in growth during
the summer. Within the business sector, industrial production rose; factories
utilized more of their capacity; and spending on technology, capital equipment
and construction picked up. However, business spending fell short of forecasts
given the level of profit growth and the maturity of the economic cycle.
BONDS DELIVER SOLID RETURNS
Despite a weak start--and a weak finish--all sectors of the US bond market
delivered solid returns for the six-month period. Yields rose and bond prices
fell when job growth picked up in the spring and investors began to anticipate
higher short-term interest rates. However, a shaky stock market, higher energy
prices and some mixed economic data gave the bond market a significant boost
during the summer and into the fall. In November, the 10-year Treasury yield
rose sharply and bonds gave back some of their earlier gains. In this
environment, the Lehman Brothers Aggregate Bond Index returned 3.82%.
High-yield bonds, which can be less sensitive to changing interest rates, gained
9.31%, as measured by the CSFB High Yield Index. A relatively strong economy
improved credit quality, and the sector's high yields attracted investors
seeking income. Municipal and mortgage bonds outperformed Treasury bonds.
STOCKS PICK UP MOMENTUM
Although stock market performance was lackluster, it picked up as economic news
improved and uncertainty surrounding the presidential election was resolved. The
S&P 500 Index returned 5.68% for the six-month period. More than half of that
return was generated in November. Small-and mid-cap stocks led the market and
value stocks outperformed growth stocks. Energy and utilities stocks were the
best-performing sectors for the six-month period. Information technology
rebounded strongly in the second half.
HIGHER SHORT-TERM INTEREST RATES
After a year of the lowest short-term interest rates in recent history, the
Federal Reserve Board (the Fed) raised the federal funds rate, a key short-term
rate, from 1.0% to 2.0% in four equal steps during the period.(1) The Fed
indicated that it would continue to raise short-term interest rates at a
"measured pace," in an attempt to balance economic growth against inflationary
pressures. Because the Fed's moves were widely anticipated, these rate increases
have had little impact on the financial markets since they commenced.
(1) The federal funds rate was raised to 2.25% on December 14, 2004.
[SIDENOTE]
SUMMARY FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004
- - INVESTMENT-GRADE BONDS DELIVERED SOLID GAINS. THE LEHMAN BROTHERS AGGREGATE
BOND INDEX RETURNED 3.82%. HIGH-YIELD BONDS, WHICH CAN BE LESS SENSITIVE TO
CHANGING INTEREST RATES, LED THE FIXED INCOME MARKETS. THE CSFB HIGH YIELD
INDEX RETURNED 9.31%
[CHART]
<Table>
LEHMAN INDEX 3.82%
CSFB HIGH YIELD INDEX 9.31%
</Table>
- - AFTER A WEAK START, STOCK PRICES BOUNCED BACK IN NOVEMBER, HELPING THE S&P
500 INDEX TO A 5.68% GAIN FOR THE SIX MONTH PERIOD. VALUE STOCKS
OUTPERFORMED GROWTH STOCKS, AS MEASURED BY THE RUSSELL 1000 GROWTH AND
VALUE INDICES.
[CHART]
<Table>
S&P 500 INDEX 5.68%
RUSSELL 1000 VALUE INDEX 11.01%
</Table>
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks the performance of fixed-rate, publicly placed, dollar-denominated,
non-convertible investment-grade debt issues.
The CSFB High Yield Index is a broad-based, unmanaged index that tracks the
performance of high-yield bonds.
The S&P 500 Index is an unmanaged index that tracks the performance of 500
widely held, large capitalization US stocks.
The Russell 1000 Value Index is an unmanaged index that tracks the performance
of those Russell 1000 Index companies with lower price-to-book ratios and lower
forecasted growth values.
4
<Page>
PORTFOLIO MANAGER'S REPORT
COLUMBIA STRATEGIC INCOME FUND
For the six-month period ended November 30, 2004, class A shares of Columbia
Strategic Income Fund returned 9.63% without sales charge. Fund performance was
greater than the Lehman Brothers Government/Credit Bond Index, which returned
3.72% for the period. The fund also surpassed the average return of the Lipper
Multi-Sector Income Funds Category, which was 8.14%.(1) The fund's exposure to
high-yield securities and to foreign government bonds was instrumental in
producing above-average returns.
HIGH YIELD CONTINUES TO OUTPERFORM
Lower-quality corporate bonds outperformed US Treasury obligations during this
reporting period, continuing a pattern that has been in place for most of the
last two years. With approximately 40% of assets invested in the US high-yield
marketplace, the fund has been positioned to take advantage of an environment
that rewarded holders of bonds with lower credit quality.
The fund's high-yield holdings carry an average credit quality of single B,
compared to a weighted average of BBB+ for the fund as a whole. An overweight
position in B and CCC-rated bonds in this sector paid off handsomely, especially
during the equity rally that followed the US election in early November. For the
six months as a whole, the CSFB High Yield Index was up approximately 9%,
compared to gains of just 4% from the 10-year US Treasury index. The fund's
position in Treasury securities was limited to just 17% of the fund's total
assets during the period.
Specific holdings that helped the fund included Levi Strauss & Co., the casual
clothing maker, and chemicals manufacturer Huntsman ICI Holdings LLC. Levi
Strauss stabilized its operation as it investigated a possible sale of its
Docker's brand. (In October, the company announced plans to retain the brand.)
Bonds of chemical producer Huntsman rose as commodity chemical prices trended
higher, and in anticipation of a proposed transaction that would retire the
bonds at a premium. Poor performers included Delta Air Lines, Inc., which faced
high fuel prices and high labor costs, and Merisant Co., the manufacturer of the
sugar substitute Equal. Equal lost market share to Johnson & Johnson's Splenda.
FOREIGN BONDS OUTPERFORM DOMESTIC HOLDINGS
Throughout the period, approximately 40% of the fund's total assets were
invested outside of the United States. The fund's exposure to non-dollar
denominated bonds of developed countries was approximately 20%. Exposure to
foreign currencies, notably the euro and the British pound, was of particular
value to the fund because the US dollar declined, adding to the gains of bonds
denominated in these currencies.
(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 11/30/04 (%)
<Table>
CLASS A 6.40
CLASS B 6.39
CLASS C 6.40
CLASS J 6.38
CLASS Z 6.35
</Table>
DISTRIBUTIONS DECLARED PER SHARE 06/01/04 - 11/30/04 ($)
<Table>
CLASS A 0.19
CLASS B 0.17
CLASS C 0.17
CLASS J 0.18
CLASS Z 0.20
</Table>
SEC YIELDS AS OF 11/30/04 (%)
<Table>
CLASS A 5.10
CLASS B 4.60
CLASS C 4.76
CLASS J 4.77
CLASS Z 5.59
</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 per share at
the end of the period.
5
<Page>
Bonds from emerging markets accounted for approximately 14-15% of the fund's
total assets. Emerging market bonds performed well during the period as the
global interest rate environment remained favorable and the demand for
commodities strong. In particular, oil producing countries such as Russia,
Venezuela and Mexico benefited from the sustained strength in oil prices. The
credit quality of many emerging market issuers has improved over the past two
years, adding to the strong performance of emerging market debt. Recent
rating-agency credit upgrades include Brazil, Bulgaria, Peru and Venezuela.
PREPARING FOR HIGHER RATES AND A LOWER DOLLAR
We have structured the fund to benefit from continued stable economic growth in
the United States and abroad. As long as the US economy continues to grow at a
reasonable rate, we expect the Federal Reserve Board (the Fed) to continue to
raise short-term rates, a course that it set in motion with four increases
during this reporting period. The Fed has said that it is not currently
concerned that inflation could become a problem, which has helped it keep recent
rate hikes relatively small. We continue to maintain substantial allocations to
the high yield and foreign government sectors, including exposure to foreign
currency. Although the dollar has been weak for some time now, investors are
paying increasing attention to America's fiscal, current account and trade
deficits. If the financial markets bid the dollar down even further to adjust
these imbalances, the fund is positioned to benefit.
[PHOTO OF LAURA A. OSTRANDER]
Laura A. Ostrander has managed or co-managed the Columbia Strategic Income Fund
since September 2000 and has been with the advisor or its predecessors or
affiliate organizations since December 1996.
/s/ Laura A. Ostrander
The values of fixed-income securities generally move inversely with changes in
interest rates such that when interest rates rise, bond values fall and vice
versa. Investing in high-yield securities offers the potential for high current
income and attractive total return, but involves certain risks. Lower-rated bond
risks include default of the issuer, rising interest rates and risk associated
with investing in securities of foreign and emerging markets, including currency
exchange rate fluctuations and economic and political change. 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 HAVE STRUCTURED THE FUND TO BENEFIT FROM CONTINUED ECONOMIC GROWTH IN THE
UNITED STATES AND ABROAD.
HOLDINGS DISCUSSED IN THIS REPORT AS OF 11/30/04 (%)
<Table>
Levi Strauss & Co. 0.2
Huntsman ICI Holdings LLC 0.4
Delta Air Lines, Inc. 0.1
Merisant Co. 0.1
</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.
6
<Page>
INVESTMENT PORTFOLIO
NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - 40.9%
BASIC MATERIALS - 4.0%
CHEMICALS - 2.1%
AGRICULTURAL CHEMICALS - 0.7%
IMC GLOBAL, INC. 10.875% 08/01/13 1,835,000 2,330,450
TERRA CAPITAL, INC. 12.875% 10/15/08 2,990,000 3,692,650
UAP HOLDING CORP. (a) 07/15/12
(10.750% 01/15/08) (b) 1,630,000 1,238,800
UNITED AGRI PRODUCTS 8.250% 12/15/11
(8.750% 12/15/04) (b)(c) 1,535,000 1,634,775
8,896,675
CHEMICALS - DIVERSIFIED - 1.3%
BCP CAYLUX HOLDING LUXEMBOURG SCA 9.625% 06/15/14 (b) 1,180,000 1,327,500
EQUISTAR CHEMICALS LP 10.625% 05/01/11 2,615,000 3,026,862
HMP EQUITY HOLDINGS CORP. (d) 05/15/08 4,620,000 3,037,650
HUNTSMAN ICI HOLDINGS LLC (d) 12/31/09 9,530,000 5,312,975
LYONDELL CHEMICAL CO. 9.625% 05/01/07 2,825,000 3,100,438
NOVA CHEMICALS CORP. 6.500% 01/15/12 780,000 809,398
WESTLAKE CHEMICAL CORP. 8.750% 07/15/11 767,000 864,793
17,479,616
CHEMICALS - SPECIALTY - 0.1%
CROMPTON CORP. 7.670% 08/01/10 (b)(e) 940,000 1,015,200
1,015,200
Chemicals Total 27,391,491
FOREST PRODUCTS & PAPER - 0.9%
FORESTRY - 0.2%
MILLAR WESTERN FOREST PRODUCTS LTD. 7.750% 11/15/13 1,260,000 1,348,200
TEMBEC INDUSTRIES, INC. 8.500% 02/01/11 900,000 900,000
2,248,200
PAPER & RELATED PRODUCTS - 0.7%
BOISE CASCADE LLC 5.005% 10/15/12 (b)(e) 915,000 933,300
7.125% 10/15/14 (b) 1,030,000 1,081,500
BUCKEYE TECHNOLOGIES, INC. 8.500% 10/01/13 390,000 429,000
CARAUSTAR INDUSTRIES, INC. 9.875% 04/01/11 1,605,000 1,725,375
GEORGIA-PACIFIC CORP. 8.000% 01/15/24 1,025,000 1,189,000
NEENAH PAPER, INC. 7.375% 11/15/14 (b) 680,000 686,800
</Table>
See accompanying notes to financial statements.
7
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
BASIC MATERIALS - (CONTINUED)
FOREST PRODUCTS & PAPER - (CONTINUED)
NEWARK GROUP, INC. 9.750% 03/15/14 (b) 1,335,000 1,398,413
NORSKE SKOG CANADA LTD. 7.375% 03/01/14 565,000 593,250
8.625% 06/15/11 850,000 918,000
8,954,638
Forest Products & Paper Total 11,202,838
IRON/STEEL - 0.6%
METAL - IRON - 0.2%
WISE METALS GROUP LLC 10.250% 05/15/12 (b) 2,295,000 2,312,213
2,312,213
STEEL - PRODUCERS - 0.1%
BAYOU STEEL CORP. 9.000% 03/31/11 750,000 705,000
STEEL DYNAMICS, INC. 9.500% 03/15/09 940,000 1,041,050
1,746,050
STEEL - SPECIALTY - 0.3%
OREGON STEEL MILLS, INC. 10.000% 07/15/09 995,000 1,114,400
UCAR FINANCE, INC. 10.250% 02/15/12 2,200,000 2,530,000
3,644,400
Iron/Steel Total 7,702,663
MINING - 0.4%
METAL - ALUMINUM - 0.2%
KAISER ALUMINUM & CHEMICAL CORP. 10.875% 10/15/06 (f) 3,200,000 2,752,000
2,752,000
METAL - DIVERSIFIED - 0.2%
EARLE M. JORGENSEN & CO. 9.750% 06/01/12 2,045,000 2,300,625
2,300,625
Mining Total 5,052,625
----------
BASIC MATERIALS TOTAL 51,349,617
COMMUNICATIONS - 9.8%
ADVERTISING - 0.1%
ADVERTISING SERVICES - 0.1%
WDAC SUBSIDIARY CORP. 8.375% 12/01/14 (b)(g) 1,455,000 1,469,550
1,469,550
Advertising Total 1,469,550
</Table>
See accompanying notes to financial statements.
8
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES -(CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - 4.8%
BROADCAST SERVICES/PROGRAMS - 0.4%
FISHER COMMUNICATIONS, INC. 8.625% 09/15/14 (b) 925,000 999,000
TV AZTECA SA DE CV 10.500% 02/15/07 2,345,000 2,403,625
XM SATELLITE RADIO HOLDINGS, INC. 7.660% 05/01/09 (e) 1,380,000 1,407,600
4,810,225
CABLE TV - 1.9%
ATLANTIC BROADBAND FINANCE LLC 9.375% 01/15/14 (b) 1,965,000 1,906,050
CABLEVISION SYSTEMS CORP. 6.669% 04/01/09 (b)(e) 1,580,000 1,651,100
CHARTER COMMUNICATIONS HOLDING LLC 9.920% 04/01/11 9,135,000 7,513,537
10.250% 09/15/10 1,130,000 1,186,500
CSC HOLDINGS, INC. 6.750% 04/15/12 (b) 1,310,000 1,342,750
7.625% 04/01/11 180,000 193,050
DIRECTV HOLDINGS LLC 8.375% 03/15/13 945,000 1,065,488
ECHOSTAR DBS CORP. 6.375% 10/01/11 1,960,000 2,018,800
INSIGHT COMMUNICATIONS (a) 02/15/11
(12.250% 02/15/06) 955,000 921,575
INSIGHT MIDWEST LP 9.750% 10/01/09 1,020,000 1,074,825
NORTHLAND CABLE TELEVISION, INC. 10.250% 11/15/07 2,835,000 2,835,000
PEGASUS SATELLITE COMMUNICATIONS, INC. 11.250% 01/15/10 (b)(f) 2,290,000 1,459,875
TELENET GROUP HOLDING NV (a) 06/15/14
(11.500% 12/15/08) (b) 2,210,000 1,707,225
24,875,775
MULTIMEDIA - 0.7%
ADVANSTAR COMMUNICATIONS, INC. (a) 10/15/11
(15.000% 10/15/05) 1,555,000 1,313,975
12.000% 02/15/11 1,840,000 2,005,600
HAIGHTS CROSS COMMUNICATIONS (a) 08/15/11
(12.500% 02/15/09) 1,735,000 1,119,075
HAIGHTS CROSS OPERATING CO. 11.750% 08/15/11 1,690,000 1,926,600
QUEBECOR MEDIA, INC. 11.125% 07/15/11 1,830,000 2,099,925
8,465,175
</Table>
See accompanying notes to financial statements.
9
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - (CONTINUED)
PUBLISHING - NEWSPAPERS - 0.1%
HOLLINGER, INC. 11.875% 03/01/11 (b)(h) 734,000 794,394
12.875% 03/01/11 (b) 1,157,000 1,261,130
2,055,524
PUBLISHING - PERIODICALS - 1.0%
CBD MEDIA HOLDINGS & FINANCE, INC. 9.250% 07/15/12 (b) 1,160,000 1,189,000
DEX MEDIA, INC. (a) 11/15/13
(9.000% 11/15/08) 1,375,000 1,055,312
8.000% 11/15/13 1,800,000 1,926,000
DEX MEDIA EAST LLC 12.125% 11/15/12 1,677,000 2,054,325
DEX MEDIA WEST LLC 9.875% 08/15/13 1,621,000 1,872,255
PRIMEDIA, INC. 8.875% 05/15/11 2,330,000 2,399,900
YELL FINANCE BV 10.750% 08/01/11 1,560,000 1,817,400
12,314,192
RADIO - 0.2%
SPANISH BROADCASTING SYSTEM 9.625% 11/01/09 2,325,000 2,441,250
2,441,250
TELEVISION - 0.5%
GRANITE BROADCASTING CORP. 9.750% 12/01/10 2,875,000 2,702,500
PAXSON COMMUNICATIONS 10.750% 07/15/08 2,830,000 2,914,900
SINCLAIR BROADCAST GROUP, INC. 8.750% 12/15/11 960,000 1,032,000
6,649,400
Media Total 61,611,541
TELECOMMUNICATIONS - 4.9%
CELLULAR TELECOMMUNICATIONS - 2.1%
AMERICAN CELLULAR CORP. Series B,
10.000% 08/01/11 1,430,000 1,204,775
DOBSON CELLULAR SYSTEMS 8.375% 11/01/11 (b) 450,000 461,250
DOBSON COMMUNICATIONS CORP. 8.875% 10/01/13 2,980,000 2,011,500
HORIZON PCS, INC. 11.375% 07/15/12 (b) 1,150,000 1,259,250
iPCS ESCROW CO. 11.500% 05/01/12 (b) 705,000 786,075
NEXTEL COMMUNICATIONS, INC. 7.375% 08/01/15 3,700,000 4,070,000
</Table>
See accompanying notes to financial statements.
10
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
TELECOMMUNICATIONS - (CONTINUED)
NEXTEL PARTNERS, INC. 8.125% 07/01/11 2,855,000 3,140,500
ROGERS CANTEL, INC. 9.750% 06/01/16 3,580,000 4,215,450
ROGERS WIRELESS, INC. 8.000% 12/15/12 (b) 1,125,000 1,172,812
RURAL CELLULAR CORP. 8.250% 03/15/12 1,215,000 1,266,637
UBIQUITEL OPERATING CO. 9.875% 03/01/11 1,255,000 1,377,363
9.875% 03/01/11 (b) 915,000 1,004,213
US UNWIRED, INC. 10.000% 06/15/12 2,465,000 2,736,150
WESTERN WIRELESS CORP. 9.250% 07/15/13 2,205,000 2,381,400
27,087,375
SATELLITE TELECOMMUNICATIONS - 0.3%
INMARSAT FINANCE II PLC (a) 11/15/12
(10.375% 11/15/08) (b) 690,000 477,825
NEW SKIES SATELLITES NV 9.125% 11/01/12 (b) 1,035,000 1,055,700
PANAMSAT CORP. (a) 11/01/14
(10.375% 11/01/09) (b) 2,240,000 1,344,000
9.000% 08/15/14 (b) 910,000 978,250
3,855,775
TELECOMMUNICATION EQUIPMENT - 0.1%
LUCENT TECHNOLOGIES, INC. 6.450% 03/15/29 1,700,000 1,457,750
1,457,750
TELECOMMUNICATION SERVICES - 0.8%
AXTEL SA 11.000% 12/15/13 2,260,000 2,401,250
CARRIER1 INTERNATIONAL SA 13.250% 02/15/09 (f) 6,000,000 540,000
FAIRPOINT COMMUNICATIONS, INC. 11.875% 03/01/10 1,670,000 1,899,625
SECURUS TECHNOLOGIES, INC. 11.000% 09/01/11 (b) 1,855,000 1,855,000
TIME WARNER TELECOM LLC 9.750% 07/15/08 2,120,000 2,114,700
10.125% 02/01/11 750,000 720,000
9,530,575
TELEPHONE - INTEGRATED - 1.3%
CINCINNATI BELL, INC. 8.375% 01/15/14 2,335,000 2,346,675
QWEST CAPITAL FUNDING, INC. 7.250% 02/15/11 5,045,000 4,792,750
7.750% 02/15/31 2,065,000 1,765,575
</Table>
See accompanying notes to financial statements.
11
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
TELECOMMUNICATIONS - (CONTINUED)
QWEST SERVICES CORP. 13.500% 12/15/10 (b) 5,505,000 6,550,950
US LEC CORP. 10.670% 10/01/09 (b)(e) 935,000 932,980
16,388,930
WIRELESS EQUIPMENT - 0.3%
AMERICAN TOWERS, INC. 7.250% 12/01/11 1,150,000 1,216,125
SBA COMMUNICATIONS CORP. (a) 12/15/11
(9.750% 12/15/07) 1,100,000 926,750
SPECTRASITE INC. 8.250% 05/15/10 1,120,000 1,212,400
3,355,275
Telecommunications Total 61,675,680
-----------
COMMUNICATIONS TOTAL 124,756,771
CONSUMER CYCLICAL - 8.2%
AIRLINES - 0.5%
AIRLINES - 0.5%
CONTINENTAL AIRLINES, INC. 7.568% 12/01/06 2,450,000 1,886,500
DELTA AIR LINES, INC. 7.900% 12/15/09 1,115,000 624,400
NORTHWEST AIRLINES, INC. 9.875% 03/15/07 3,230,000 2,810,100
UNITED AIR LINES, INC. 2.020% 03/02/04 (e)(i) 1,755,069 1,404,055
6,725,055
Airlines Total 6,725,055
APPAREL - 0.5%
APPAREL MANUFACTURERS - 0.5%
BRODER BROTHERS CO. 11.250% 10/15/10 1,360,000 1,414,400
11.250% 10/15/10 (b) 670,000 696,800
LEVI STRAUSS & CO. 12.250% 12/15/12 2,325,000 2,452,875
PHILLIPS-VAN HEUSEN CORP. 7.250% 02/15/11 815,000 859,825
8.125% 05/01/13 850,000 930,750
6,354,650
Apparel Total 6,354,650
AUTO MANUFACTURERS - 0.1%
AUTO - MEDIUM & HEAVY DUTY TRUCKS - 0.1%
NAVISTAR INTERNATIONAL CORP. 7.500% 06/15/11 1,450,000 1,566,000
1,566,000
Auto Manufacturers Total 1,566,000
</Table>
See accompanying notes to financial statements.
12
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
AUTO PARTS & EQUIPMENT - 0.7%
AUTO/TRUCK PARTS &
EQUIPMENT - ORIGINAL - 0.4%
ACCURIDE CORP. 9.250% 02/01/08 875,000 890,312
AFFINIA GROUP, INC. 9.000% 11/30/14 (b) 230,000 236,900
DELCO REMY INTERNATIONAL, INC. 11.000% 05/01/09 1,695,000 1,788,225
DURA OPERATING CORP. 8.625% 04/15/12 2,125,000 2,167,500
5,082,937
AUTO/TRUCK PARTS &
EQUIPMENT - REPLACEMENT - 0.1%
REXNORD CORP. 10.125% 12/15/12 1,040,000 1,175,200
1,175,200
RUBBER - TIRES - 0.2%
GOODYEAR TIRE & RUBBER CO. 7.857% 08/15/11 2,565,000 2,545,763
2,545,763
Auto Parts & Equipment Total 8,803,900
ENTERTAINMENT - 1.1%
GAMBLING (NON-HOTEL) - 0.2%
GLOBAL CASH ACCESS LLC/GLOBAL CASH
FINANCE CORP. 8.750% 03/15/12 1,945,000 2,100,600
2,100,600
MUSIC - 0.3%
STEINWAY MUSICAL INSTRUMENTS, INC. 8.750% 04/15/11 1,260,000 1,367,100
WARNER MUSIC GROUP 7.375% 04/15/14 (b) 1,920,000 1,963,200
3,330,300
RESORTS/THEME PARKS - 0.2%
SIX FLAGS, INC. 8.875% 02/01/10 2,005,000 2,015,025
9.625% 06/01/14 895,000 883,813
2,898,838
THEATERS - 0.4%
LCE ACQUISITION CORP. 9.000% 08/01/14 (b) 2,435,000 2,617,625
MARQUEE HOLDINGS, INC. (a) 08/15/14
(12.000% 08/15/09) (b) 4,935,000 3,183,075
5,800,700
Entertainment Total 14,130,438
</Table>
See accompanying notes to financial statements.
13
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
HOME BUILDERS - 0.7%
BUILDING - RESIDENTIAL/COMMERCIAL - 0.7%
D.R. HORTON, INC. 9.750% 09/15/10 2,855,000 3,418,862
K. HOVNANIAN ENTERPRISES, INC. 8.875% 04/01/12 1,270,000 1,397,000
10.500% 10/01/07 1,470,000 1,694,175
STANDARD PACIFIC CORP. 9.250% 04/15/12 1,770,000 2,066,475
8,576,512
Home Builders Total 8,576,512
HOME FURNISHINGS - 0.3%
HOME FURNISHINGS - 0.3%
NORCRAFT COMPANIES 9.000% 11/01/11 835,000 905,975
WII COMPONENTS, INC. 10.000% 02/15/12 2,535,000 2,484,300
3,390,275
Home Furnishings Total 3,390,275
LEISURE TIME - 0.7%
CRUISE LINES - 0.1%
NCL CORP. 10.625% 07/15/14 (b) 710,000 731,300
731,300
LEISURE & RECREATIONAL PRODUCTS - 0.2%
BOMBARDIER RECREATIONAL PRODUCTS, INC. 8.375% 12/15/13 1,935,000 2,089,800
K2, INC. 7.375% 07/01/14 (b) 990,000 1,086,525
3,176,325
RECREATIONAL CENTERS - 0.4%
AMF BOWLING WORLDWIDE, INC. 10.000% 03/01/10 1,340,000 1,433,800
EQUINOX HOLDINGS, INC. 9.000% 12/15/09 2,130,000 2,247,150
TOWN SPORTS INTERNATIONAL, INC. (a) 02/01/14
(11.000% 02/01/09) 2,395,000 1,335,213
5,016,163
Leisure Time Total 8,923,788
LODGING - 2.3%
CASINO HOTELS - 2.2%
AMERISTAR CASINOS, INC. 10.750% 02/15/09 750,000 842,812
CIRCUS & ELDORADO/SILVER LEGACY
CAPITAL CORP. 10.125% 03/01/12 1,495,000 1,637,025
</Table>
See accompanying notes to financial statements.
14
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
LODGING - (CONTINUED)
HARD ROCK HOTEL, INC. 8.875% 06/01/13 1,555,000 1,710,500
HOLLYWOOD CASINO SHREVEPORT 13.000% 08/01/06 (j) 5,220,000 4,593,600
INN OF THE MOUNTAIN GODS RESORT & CASINO 12.000% 11/15/10 1,680,000 1,957,200
MGM MIRAGE 8.375% 02/01/11 2,135,000 2,412,550
MOHEGAN TRIBAL GAMING AUTHORITY 7.125% 08/15/14 (b) 355,000 378,962
PARK PLACE ENTERTAINMENT CORP. 9.375% 02/15/07 660,000 730,950
PINNACLE ENTERTAINMENT 8.250% 03/15/12 3,835,000 3,988,400
8.750% 10/01/13 1,855,000 1,994,125
PREMIER ENTERTAINMENT BILOXI FINANCIAL LLC 10.750% 02/01/12 1,120,000 1,209,600
RIVER ROCK ENTERTAINMENT 9.750% 11/01/11 2,090,000 2,314,675
SENECA GAMING CORP. 7.250% 05/01/12 1,860,000 1,966,950
STATION CASINOS, INC. 6.875% 03/01/16 520,000 546,000
WYNN LAS VEGAS LLC 6.625% 12/01/14 (b)(g) 1,345,000 1,324,825
12.000% 11/01/10 796,000 1,002,960
28,611,134
HOTELS & MOTELS - 0.1%
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. 7.875% 05/01/12 1,130,000 1,292,438
1,292,438
Lodging Total 29,903,572
RETAIL - 1.1%
RETAIL - AUTOMOBILES - 0.1%
ASBURY AUTOMOTIVE GROUP, INC. 8.000% 03/15/14 1,630,000 1,613,700
1,613,700
RETAIL - DRUG STORES - 0.3%
JEAN COUTU GROUP (PJC), INC. 8.500% 08/01/14 (b) 1,205,000 1,223,075
RITE AID CORP. 9.250% 06/01/13 2,435,000 2,514,137
3,737,212
RETAIL - HOME FURNISHINGS - 0.2%
LEVITZ HOME FURNISHINGS 12.000% 11/01/11 (b) 1,130,000 1,152,600
TEMPUR-PEDIC, INC. 10.250% 08/15/10 1,446,000 1,655,670
2,808,270
</Table>
See accompanying notes to financial statements.
15
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
RETAIL - (CONTINUED)
RETAIL - JEWELRY - 0.1%
FINLAY FINE JEWELRY CORP. 8.375% 06/01/12 1,460,000 1,591,400
1,591,400
RETAIL - MAJOR DEPARTMENT STORES - 0.1%
SAKS, INC. 7.000% 12/01/13 533,000 542,328
542,328
RETAIL - PROPANE DISTRIBUTORS - 0.2%
FERRELLGAS PARTNERS LP 8.750% 06/15/12 1,520,000 1,656,800
1,656,800
RETAIL - RESTAURANTS - 0.1%
DENNY'S HOLDINGS, INC. 10.000% 10/01/12 (b) 1,380,000 1,452,450
1,452,450
Retail Total 13,402,160
TEXTILES - 0.2%
TEXTILE - PRODUCTS - 0.2%
COLLINS & AIKMAN FLOOR COVERING, INC. 9.750% 02/15/10 1,400,000 1,505,000
INVISTA 9.250% 05/01/12 (b) 1,150,000 1,276,500
2,781,500
Textiles Total 2,781,500
-----------
CONSUMER CYCLICAL TOTAL 104,557,850
CONSUMER NON-CYCLICAL - 5.2%
AGRICULTURE - 0.3%
AGRICULTURAL OPERATIONS - 0.2%
SEMINIS VEGETABLE SEEDS, INC. 10.250% 10/01/13 2,332,000 2,623,500
2,623,500
TOBACCO - 0.1%
NORTH ATLANTIC TRADING CO., INC. 9.250% 03/01/12 1,245,000 996,000
996,000
Agriculture Total 3,619,500
BEVERAGES - 0.1%
BEVERAGES - WINE/SPIRITS - 0.1%
CONSTELLATION BRANDS, INC. 8.125% 01/15/12 1,175,000 1,277,812
1,277,812
Beverages Total 1,277,812
</Table>
See accompanying notes to financial statements.
16
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
BIOTECHNOLOGY - 0.2%
MEDICAL - BIOMEDICAL/GENE - 0.2%
BIO-RAD LABORATORIES, INC. 7.500% 08/15/13 2,020,000 2,206,850
2,206,850
Biotechnology Total 2,206,850
COMMERCIAL SERVICES - 1.4%
COMMERCIAL SERVICES - 0.2%
IRON MOUNTAIN, INC. 7.750% 01/15/15 470,000 478,225
LANGUAGE LINE HOLDINGS, INC. 11.125% 06/15/12 (b) 2,365,000 2,542,375
3,020,600
COMMERCIAL SERVICES - FINANCE - 0.3%
DOLLAR FINANCIAL GROUP, INC. 9.750% 11/15/11 3,140,000 3,391,200
3,391,200
FUNERAL SERVICES & RELATED ITEMS - 0.2%
SERVICE CORP. INTERNATIONAL 7.700% 04/15/09 2,385,000 2,605,612
2,605,612
PRINTING - COMMERCIAL - 0.3%
AMERICAN COLOR GRAPHICS, INC. 10.000% 06/15/10 895,000 769,700
SHERIDAN GROUP 10.250% 08/15/11 (b) 1,290,000 1,409,325
VERTIS, INC. 13.500% 12/07/09 (b) 1,465,000 1,552,900
3,731,925
PRIVATE CORRECTIONS - 0.1%
GEO GROUP, INC. 8.250% 07/15/13 940,000 1,001,100
1,001,100
RENTAL AUTO/EQUIPMENT - 0.3%
NATIONSRENT, INC. 9.500% 10/15/10 2,575,000 2,896,875
WILLIAMS SCOTSMAN, INC. 9.875% 06/01/07 1,130,000 1,121,525
4,018,400
Commercial Services Total 17,768,837
COSMETICS/PERSONAL CARE - 0.1%
COSMETICS & TOILETRIES - 0.1%
ELIZABETH ARDEN, INC. 7.750% 01/15/14 1,365,000 1,446,900
1,446,900
Cosmetics/Personal Care Total 1,446,900
</Table>
See accompanying notes to financial statements.
17
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
FOOD - 1.0%
FOOD - CONFECTIONERY - 0.2%
MERISANT CO. 9.500% 07/15/13 (b) 1,425,000 1,282,500
TABLETOP HOLDINGS, INC. (a) 05/15/14
(12.250% 11/15/08) (b) 4,055,000 1,845,025
3,127,525
FOOD - MISCELLANEOUS/DIVERSIFIED - 0.6%
DEL MONTE CORP. 9.250% 05/15/11 1,600,000 1,752,000
DOLE FOOD CO., INC. 8.625% 05/01/09 1,880,000 2,072,700
PINNACLE FOODS HOLDING CORP. 8.250% 12/01/13 (b) 2,945,000 2,665,225
REDDY ICE HOLDINGS, INC. (a) 11/01/12
(10.500% 11/01/08) (b) 1,375,000 955,625
7,445,550
FOOD - RETAIL - 0.2%
STATER BROTHERS HOLDINGS 8.125% 06/15/12 2,085,000 2,220,525
2,220,525
Food Total 12,793,600
HEALTHCARE - SERVICES - 1.5%
MEDICAL - HMO - 0.1%
COVENTRY HEALTH CARE, INC. 8.125% 02/15/12 1,690,000 1,859,000
1,859,000
MEDICAL - HOSPITALS - 0.6%
TENET HEALTHCARE CORP. 9.875% 07/01/14 (b) 4,790,000 5,137,275
UNITED SURGICAL PARTNERS
INTERNATIONAL, INC. 10.000% 12/15/11 2,235,000 2,553,488
7,690,763
MRI/MEDICAL DIAGNOSTIC IMAGING - 0.6%
INSIGHT HEALTH SERVICES CORP. 9.875% 11/01/11 2,400,000 2,436,000
MEDQUEST, INC. 11.875% 08/15/12 2,460,000 2,878,200
MQ ASSOCIATES, INC. (a) 08/15/12
(12.250% 08/15/08) 3,945,000 2,761,500
8,075,700
</Table>
See accompanying notes to financial statements.
18
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
HEALTHCARE - SERVICES - (CONTINUED)
PHYSICAL PRACTICE MANAGEMENT - 0.2%
US ONCOLOGY, INC. 9.000% 08/15/12 (b) 1,955,000 2,179,825
2,179,825
Healthcare - Services Total 19,805,288
HOUSEHOLD PRODUCTS/WARES - 0.6%
CONSUMER PRODUCTS - MISCELLANEOUS - 0.6%
AAC GROUP HOLDINGS CORP. (a) 10/01/12
(10.250% 10/01/08) (b) 480,000 324,000
AMSCAN HOLDINGS, INC. 8.750% 05/01/14 2,255,000 2,266,275
JOSTENS IH CORP. 7.625% 10/01/12 (b) 1,155,000 1,212,750
PLAYTEX PRODUCTS, INC. 9.375% 06/01/11 3,160,000 3,353,550
7,156,575
Household Products/Wares Total 7,156,575
----------
CONSUMER NON-CYCLICAL TOTAL 66,075,362
ENERGY - 3.5%
OIL & GAS - 2.1%
OIL COMPANIES - EXPLORATION & PRODUCTION - 1.8%
CHESAPEAKE ENERGY CORP. 7.500% 06/15/14 885,000 979,031
COMPTON PETROLEUM CORP. 9.900% 05/15/09 2,200,000 2,420,000
ENCORE ACQUISITION CO. 8.375% 06/15/12 1,885,000 2,101,775
ENERGY PARTNERS LTD. 8.750% 08/01/10 1,150,000 1,265,000
GAZPROM 9.625% 03/01/13 5,760,000 6,648,768
MAGNUM HUNTER RESOURCES, INC. 9.600% 03/15/12 1,472,000 1,678,080
PEMEX FINANCE LTD. 9.150% 11/15/18 2,485,000 3,084,158
10.610% 08/15/17 1,650,000 2,207,271
TRANSTEXAS GAS CORP. 15.000% 03/15/05 (j)(k) 465,296 5
WHITING PETROLEUM CORP. 7.250% 05/01/12 2,290,000 2,404,500
22,788,588
OIL & GAS DRILLING - 0.2%
OCEAN RIG NORWAY AS 10.250% 06/01/08 1,585,000 1,632,550
PRIDE INTERNATIONAL, INC. 7.375% 07/15/14 (b) 865,000 960,150
2,592,700
</Table>
See accompanying notes to financial statements.
19
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
ENERGY - (CONTINUED)
OIL & GAS - (CONTINUED)
OIL REFINING & MARKETING - 0.1%
PREMCOR REFINING GROUP, INC. 7.500% 06/15/15 1,430,000 1,565,850
1,565,850
Oil & Gas Total 26,947,138
OIL & GAS SERVICES - 0.1%
OIL - FIELD SERVICES - 0.1%
HORNBECK OFFSHORE SERVICES, INC. 6.125% 12/01/14 (b) 460,000 460,000
NEWPARK RESOURCES, INC. 8.625% 12/15/07 1,560,000 1,575,600
2,035,600
Oil & Gas Services Total 2,035,600
PIPELINES - 1.3%
PIPELINES - 1.3%
COASTAL CORP. 7.750% 06/15/10 3,550,000 3,652,062
DYNEGY HOLDINGS, INC. 6.875% 04/01/11 1,895,000 1,819,200
9.875% 07/15/10 (b) 960,000 1,084,800
NORTHWEST PIPELINE CORP. 8.125% 03/01/10 760,000 847,400
SONAT, INC. 6.875% 06/01/05 1,000,000 1,012,500
7.625% 07/15/11 4,230,000 4,293,450
SOUTHERN NATURAL GAS CO. 8.875% 03/15/10 1,335,000 1,498,538
WILLIAMS COMPANIES, INC. 8.125% 03/15/12 1,780,000 2,073,700
16,281,650
Pipelines Total 16,281,650
----------
ENERGY TOTAL 45,264,388
FINANCIALS - 0.8%
DIVERSIFIED FINANCIAL SERVICES - 0.5%
FINANCE - COMMERCIAL - 0.1%
FINOVA Group, Inc. 7.500% 11/15/09 (l) 2,409,000 1,150,298
1,150,298
FINANCE - INVESTMENT BANKER/BROKER - 0.4%
E*TRADE FINANCIAL CORP. 8.000% 06/15/11 (b) 1,370,000 1,448,775
LABRANCHE & CO., INC. 11.000% 05/15/12 3,545,000 3,775,425
5,224,200
Diversified Financial Services Total 6,374,498
</Table>
See accompanying notes to financial statements.
20
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
FINANCIALS - (CONTINUED)
REITS - 0.2%
REITS - HOTELS - 0.1%
LA QUINTA PROPERTIES, INC. 7.000% 08/15/12 (b) 500,000 537,500
537,500
REITS - MORTGAGES - 0.1%
THORNBURG MORTGAGE, INC. 8.000% 05/15/13 1,545,000 1,657,013
1,657,013
REITS Total 2,194,513
SAVINGS & LOANS - 0.1%
SAVINGS & LOANS/ THRIFTS - WESTERN US - 0.1%
WESTERN FINANCIAL BANK 9.625% 05/15/12 1,090,000 1,242,600
1,242,600
Savings & Loans Total 1,242,600
---------
FINANCIALS TOTAL 9,811,611
INDUSTRIALS - 6.8%
AEROSPACE/DEFENSE - 0.6%
AEROSPACE/DEFENSE - EQUIPMENT - 0.6%
ARGO-TECH CORP. 9.250% 06/01/11 1,215,000 1,327,387
BE AEROSPACE, INC. 8.875% 05/01/11 2,095,000 2,189,275
SEQUA CORP. 8.875% 04/01/08 1,335,000 1,461,825
STANDARD AERO HOLDINGS, INC. 8.250% 09/01/14 (b) 1,370,000 1,472,750
TRANSDIGM, INC. 8.375% 07/15/11 1,175,000 1,266,063
7,717,300
ELECTRONICS - MILITARY - 0.0%
CONDOR SYSTEMS, INC. 11.875% 05/01/09 (j)(k) 4,000,000 40,000
40,000
Aerospace/Defense Total 7,757,300
BUILDING MATERIALS - 0.8%
BUILDING & CONSTRUCTION PRODUCTS -
MISCELLANEOUS - 0.2%
ASSOCIATED MATERIALS, INC. (a) 03/01/14
(11.250% 03/01/09) 1,095,000 815,775
CONGOLEUM CORP. 8.625% 08/01/08 (m) 1,305,000 1,017,900
</Table>
See accompanying notes to financial statements.
21
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
BUILDING MATERIALS - (CONTINUED)
NORTEK HOLDINGS, INC. 8.500% 09/01/14 (b) 695,000 747,125
2,580,800
BUILDING PRODUCTS - CEMENT/AGGREGATION - 0.3%
RMCC ACQUISITION CO. 9.500% 11/01/12 (b) 1,810,000 1,814,525
US CONCRETE, INC. 8.375% 04/01/14 1,670,000 1,782,725
3,597,250
BUILDING PRODUCTS - DOORS & WINDOWS - 0.3%
ATRIUM COMPANIES, INC. Series B,
10.500% 05/01/09 3,885,000 4,079,250
4,079,250
Building Materials Total 10,257,300
ELECTRICAL COMPONENTS & EQUIPMENT - 0.2%
WIRE & CABLE PRODUCTS - 0.2%
COLEMAN CABLE, INC. 9.875% 10/01/12 (b) 2,065,000 2,173,412
2,173,412
Electrical Components & Equipment Total 2,173,412
ELECTRONICS - 0.1%
ELECTRONIC COMPONENTS - MISCELLANEOUS - 0.1%
FLEXTRONICS INTERNATIONAL LTD. 6.250% 11/15/14 (b) 670,000 659,950
659,950
Electronics Total 659,950
ENGINEERING & CONSTRUCTION - 0.2%
BUILDING & CONSTRUCTION - MISCELLANEOUS - 0.2%
J. RAY MCDERMOTT SA 11.000% 12/15/13 (b) 2,160,000 2,359,800
2,359,800
Engineering & Construction Total 2,359,800
ENVIRONMENTAL CONTROL - 0.6%
NON-HAZARDOUS WASTE DISPOSAL - 0.5%
ALLIED WASTE NORTH AMERICA, INC. 7.875% 04/15/13 1,500,000 1,515,000
8.500% 12/01/08 2,330,000 2,449,412
WASTE SERVICES, INC. 9.500% 04/15/14 (b) 2,735,000 2,707,650
6,672,062
</Table>
See accompanying notes to financial statements.
22
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
RECYCLING - 0.1%
IMCO RECYCLING ESCROW 9.000% 11/15/14 (b) 575,000 595,125
595,125
Environmental Control Total 7,267,187
HAND/MACHINE TOOLS - 0.0%
MACHINE TOOLS & RELATED PRODUCTS - 0.0%
NEWCOR, INC. 6.000% 01/01/13 (k) 847,510 542,406
542,406
Hand/Machine Tools Total 542,406
MACHINERY - CONSTRUCTION & MINING - 0.1%
MACHINERY - CONSTRUCTION & MINING - 0.1%
TEREX CORP. Series 2001 B,
10.375% 04/01/11 1,700,000 1,916,750
1,916,750
Machinery - Construction & Mining Total 1,916,750
METAL FABRICATED/HARDWARE - 0.9%
METAL PROCESSORS & FABRICATION - 0.7%
ALTRA INDUSTRIAL MOTION, INC. 9.000% 12/01/11 (b) 895,000 908,425
HAWK CORP. 8.750% 11/01/14 (b) 345,000 356,213
MUELLER GROUP, INC. 10.000% 05/01/12 1,700,000 1,844,500
MUELLER HOLDINGS, INC. (a) 04/15/14
(14.750% 04/15/09) 2,083,000 1,406,025
TRIMAS CORP. 9.875% 06/15/12 4,165,000 4,352,425
8,867,588
METAL PRODUCTS - FASTENERS - 0.2%
FASTENTECH, INC. 11.500% 05/01/11 (b) 2,680,000 3,055,200
3,055,200
Metal Fabricated/Hardware Total 11,922,788
MISCELLANEOUS MANUFACTURERS - 0.7%
ADVANCED MATERIALS/PRODUCTS - 0.1%
HEXCEL CORP. 9.750% 01/15/09 1,385,000 1,450,787
1,450,787
DIVERSIFIED MANUFACTURER OPERATIONS - 0.5%
J.B. POINDEXTER & CO. 8.750% 03/15/14 (b) 1,835,000 1,945,100
</Table>
See accompanying notes to financial statements.
23
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
MISCELLANEOUS MANUFACTURERS - (CONTINUED)
KI HOLDINGS, INC. (a) 11/15/14
(9.875% 11/15/09) (b) 2,025,000 1,285,875
KOPPERS INDUSTRIES, INC. 9.875% 10/15/13 1,960,000 2,224,600
TRINITY INDUSTRIES, INC. 6.500% 03/15/14 740,000 733,525
6,189,100
FILTERATION/SEPARATION PRODUCTS - 0.1%
POLYPORE, INC. (a) 10/01/12
(10.500% 10/01/08) (b) 2,365,000 1,519,513
1,519,513
Miscelleaneous Manufacturers Total 9,159,400
PACKAGING & CONTAINERS - 1.1%
CONTAINERS - METAL/GLASS - 0.4%
CROWN EUROPEAN HOLDINGS SA 10.875% 03/01/13 1,800,000 2,119,500
OWENS-BROCKWAY GLASS CONTAINER 8.250% 05/15/13 340,000 371,450
OWENS-ILLINOIS, INC. 7.350% 05/15/08 1,950,000 2,032,875
7.500% 05/15/10 440,000 463,650
4,987,475
CONTAINERS - PAPER/PLASTIC - 0.7%
CONSOLIDATED CONTAINER CO. LLC (a) 06/15/09
(10.750% 06/15/07) 1,500,000 1,260,000
MDP ACQUISITIONS PLC 9.625% 10/01/12 2,800,000 3,164,000
PORTOLA PACKAGING, INC. 8.250% 02/01/12 1,460,000 1,138,800
SMURFIT-STONE CONTAINER CORP. 8.250% 10/01/12 1,600,000 1,752,000
TEKNI-PLEX, INC. 12.750% 06/15/10 1,755,000 1,553,175
8,867,975
Packaging & Containers Total 13,855,450
TRANSPORTATION - 1.5%
TRANSPORTATION - MARINE - 0.7%
SHIP FINANCE INTERNATIONAL LTD. 8.500% 12/15/13 3,795,000 3,899,363
STENA AB 7.000% 12/01/16 (b) 670,000 658,275
7.500% 11/01/13 2,215,000 2,292,525
9.625% 12/01/12 1,425,000 1,603,125
TEEKAY SHIPPING CORP. 8.875% 07/15/11 485,000 562,600
9,015,888
</Table>
See accompanying notes to financial statements.
24
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
TRANSPORTATION - (CONTINUED)
TRANSPORTATION - RAIL - 0.2%
TFM SA DE CV 12.500% 06/15/12 2,210,000 2,508,350
2,508,350
TRANSPORTATION - SERVICES - 0.3%
CHC HELICOPTER CORP. 7.375% 05/01/14 1,450,000 1,533,375
PETROLEUM HELICOPTERS, INC. 9.375% 05/01/09 2,710,000 2,926,800
4,460,175
TRANSPORTATION - TRUCK - 0.3%
ALLIED HOLDINGS, INC. 8.625% 10/01/07 1,410,000 1,198,500
QDI CAPITAL CORP. 9.000% 11/15/10 (b) 2,060,000 2,054,850
3,253,350
Transportation Total 19,237,763
----------
INDUSTRIALS TOTAL 87,109,506
TECHNOLOGY - 0.2%
SEMICONDUCTORS - 0.2%
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.2%
AMKOR TECHNOLOGY, INC. 9.250% 02/15/08 2,505,000 2,461,162
2,461,162
Semiconductors Total 2,461,162
----------
TECHNOLOGY TOTAL 2,461,162
UTILITIES - 2.4%
ELECTRIC - 2.4%
ELECTRIC - GENERATION - 0.5%
AES CORP. 9.000% 05/15/15 (b) 585,000 672,750
9.500% 06/01/09 1,646,000 1,888,785
EDISON MISSION ENERGY 9.875% 04/15/11 2,290,000 2,713,650
MISSION ENERGY HOLDING 13.500% 07/15/08 710,000 892,825
6,168,010
ELECTRIC - INTEGRATED - 0.8%
CMS ENERGY CORP. 8.900% 07/15/08 2,360,000 2,619,600
NEVADA POWER CO. 9.000% 08/15/13 1,060,000 1,240,200
10.875% 10/15/09 2,025,000 2,369,250
PSE&G ENERGY HOLDINGS, INC. 8.625% 02/15/08 2,495,000 2,760,094
</Table>
See accompanying notes to financial statements.
25
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CORPORATE FIXED-INCOME
BONDS & NOTES - (CONTINUED)
UTILITIES - (CONTINUED)
ELECTRIC - (CONTINUED)
TNP ENTERPRISES, INC. 10.250% 04/01/10 1,630,000 1,744,100
10,733,244
INDEPENDENT POWER PRODUCERS - 1.1%
CAITHNESS COSO FUNDING CORP. 9.050% 12/15/09 2,585,820 2,870,260
CALPINE CORP. 8.500% 07/15/10 (b) 2,345,000 1,840,825
CALPINE GENERATING CO. LLC 11.169% 04/01/11 (b)(e) 2,950,000 2,795,125
11.500% 04/01/11 (b) 1,725,000 1,587,000
MSW ENERGY HOLDINGS LLC 7.375% 09/01/10 800,000 844,000
8.500% 09/01/10 2,130,000 2,343,000
ORION POWER HOLDINGS, INC. 12.000% 05/01/10 1,520,000 1,930,400
14,210,610
Electric Total 31,111,864
-----------
UTILITIES TOTAL 31,111,864
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES
(COST OF $495,964,694) 522,498,131
MUNICIPAL BOND (TAXABLE) - 0.2%
CONSUMER CYCLICAL - 0.2%
LODGING - 0.2%
CASINO HOTELS - 0.2%
CABAZON BAND MISSION INDIANS 13.000% 10/01/11 (h) 2,820,000 2,797,525
2,797,525
Lodging Total 2,797,525
-----------
CONSUMER CYCLICAL 2,797,525
TOTAL MUNICIPAL BOND (TAXABLE)
(COST OF $2,820,000) 2,797,525
</Table>
See accompanying notes to financial statements.
26
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 35.7%
FOREIGN GOVERNMENT BONDS - 35.7%
SOVEREIGN - 35.7%
ARIES VERMOGENSVERWALTNG 7.750% 10/25/09 (b) EUR 2,500,000 3,707,330
CANADIAN GOVERNMENT BOND 5.250% 06/01/13 CAD 6,200,000 5,544,803
COMMONWEALTH OF AUSTRALIA 8.750% 08/15/08 AUD 13,580,000 11,777,509
EUROPEAN INVESTMENT BANK 7.625% 12/07/07 GBP 5,110,000 10,535,729
FEDERAL REPUBLIC OF BRAZIL 7.720% 06/29/09 (e) USD 6,350,000 7,128,700
8.250% 01/20/34 4,595,000 4,238,887
11.500% 04/02/09 EUR 4,250,000 6,677,294
14.500% 10/15/09 USD 12,750,000 16,670,625
GOVERNMENT OF CANADA 10.000% 06/01/08 CAD 24,110,000 24,635,158
GOVERNMENT OF NEW ZEALAND 6.000% 11/15/11 NZD 21,400,000 15,358,594
6.500% 04/15/13 27,600,000 20,453,385
GOVERNMENT OF NORWAY 5.500% 05/15/09 NOK 41,770,000 7,487,444
GOVERNMENT OF SPAIN 5.500% 07/30/17 EUR 7,635,000 11,666,432
GOVERNMENT OF SWEDEN 5.000% 01/28/09 SEK 153,580,000 24,338,189
6.750% 05/05/14 86,735,000 15,587,070
PERU GOVERNMENT INTERNATIONAL BOND 7.500% 10/14/14 EUR 2,475,000 3,416,655
POLAND GOVERNMENT BOND 8.500% 05/12/07 PLN 29,915,000 9,867,862
REPUBLIC OF BULGARIA 2.750% 07/28/11 (e) USD 7,280,000 7,269,080
8.250% 01/15/15 4,215,000 5,220,278
REPUBLIC OF COLOMBIA 9.750% 04/09/11 2,697,672 3,102,323
10.000% 01/23/12 5,523,000 6,254,798
11.500% 05/31/11 EUR 3,010,000 4,959,051
11.750% 02/25/20 USD 4,620,000 5,781,930
REPUBLIC OF FRANCE 4.000% 04/25/14 EUR 8,220,000 11,144,559
REPUBLIC OF GERMANY 4.250% 07/04/14 11,740,000 16,238,812
6.000% 07/04/07 10,280,000 14,830,731
REPUBLIC OF GREECE 5.350% 05/18/11 5,000,000 7,353,689
REPUBLIC OF ITALY 5.000% 02/01/12 23,170,000 33,678,825
REPUBLIC OF PANAMA 8.875% 09/30/27 USD 6,230,000 6,572,650
REPUBLIC OF PERU 9.875% 02/06/15 6,100,000 7,091,250
REPUBLIC OF PHILIPPINES 10.625% 03/16/25 3,100,000 3,216,250
</Table>
See accompanying notes to financial statements.
27
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
FOREIGN GOVERNMENT
OBLIGATIONS - (CONTINUED)
FOREIGN GOVERNMENT BONDS - (CONTINUED)
SOVEREIGN - (CONTINUED)
REPUBLIC OF SOUTH AFRICA 5.250% 05/16/13 EUR 11,030,000 15,378,960
13.000% 08/31/10 ZAR 24,700,000 5,162,893
REPUBLIC OF VENEZUELA 9.250% 09/15/27 USD 6,945,000 7,222,800
RUSSIAN FEDERATION 5.000% 03/31/30 6,060,000 6,024,852
11.000% 07/24/18 5,752,000 7,760,598
12.750% 06/24/28 7,430,000 11,757,975
UNITED KINGDOM TREASURY 5.000% 03/07/12 GBP 2,540,000 4,979,174
7.500% 12/07/06 6,535,000 13,223,957
9.000% 07/12/11 4,750,000 11,356,471
UNITED MEXICAN STATES 7.500% 03/08/10 EUR 5,040,000 7,745,048
7.500% 04/08/33 USD 9,255,000 9,643,710
11.375% 09/15/16 7,590,000 11,062,425
WESTERN AUSTRALIA TREASURY 7.500% 10/15/09 AUD 14,665,000 12,370,794
455,495,549
Sovereign Total 455,495,549
-----------
FOREIGN GOVERNMENT BONDS TOTAL 455,495,549
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(COST OF $395,156,538) 455,495,549
GOVERNMENT AGENCIES & OBLIGATIONS - 22.6%
AGENCY - 0.7%
FEDERAL FARM CREDIT BANK 5.000% 08/25/10 USD 8,600,000 8,698,805
8,698,805
AGENCY TOTAL 8,698,805
MORTGAGE-BACKED SECURITIES - 5.4%
FEDERAL HOME LOAN MORTGAGE CORP. 7.500% 03/01/16 9,958 10,198
8.000% 04/01/06 - 05/01/16 69,083 71,157
8.500% 02/01/07 - 07/01/10 60,487 63,439
8.750% 06/01/08 - 07/01/08 12,161 12,742
9.000% 06/01/08 - 01/01/22 80,013 87,207
9.250% 08/01/08 - 05/01/16 90,430 99,671
9.500% 11/01/08 - 08/01/16 41,253 44,388
9.750% 12/01/08 - 09/01/16 10,489 11,313
10.000% 07/01/09 - 11/01/19 129,749 140,277
10.500% 01/01/20 - 10/01/24 94,091 105,498
10.750% 05/01/10 - 09/01/13 136,987 150,364
11.250% 10/01/10 - 11/01/15 143,394 159,779
</Table>
See accompanying notes to financial statements.
28
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
GOVERNMENT AGENCIES &
OBLIGATIONS - (CONTINUED)
MORTGAGE-BACKED SECURITIES - (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOCIATION 7.500% 02/01/06 - 11/01/11 23,209 23,494
8.000% 07/01/08 - 07/01/09 48,933 51,133
8.250% 11/01/07 25,210 25,592
8.500% 05/01/08 - 09/01/21 146,215 153,628
9.000% 11/01/08 - 08/01/21 414,610 448,810
9.250% 05/01/16 95,113 106,649
10.000% 11/01/13 - 03/01/16 262,172 291,236
10.500% 03/01/14 - 03/01/16 269,997 300,160
TBA,
6.500% 12/13/34 (g) 60,590,000 63,562,667
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 8.500% 02/15/06 1,393 1,447
9.000% 08/15/08 - 12/15/17 1,295,681 1,442,820
9.500% 06/15/09 - 11/15/17 615,793 676,383
10.000% 11/15/09 - 09/15/21 174,793 193,570
10.500% 12/15/10 - 04/15/21 54,966 61,409
11.000% 12/15/09 - 10/15/15 294,440 329,998
11.750% 08/15/13 8,765 9,860
12.000% 05/15/14 491 559
68,635,448
-----------
MORTGAGE-BACKED SECURITIES TOTAL 68,635,448
U.S. TREASURY BONDS & NOTES - 16.5%
U.S. TREASURY BONDS 7.500% 11/15/24 12,000,000 15,722,808
8.875% 02/15/19 9,000,000 12,772,620
10.375% 11/15/12 52,000,000 62,243,584
10.625% 08/15/15 29,415,000 44,798,133
12.500% 08/15/14 52,151,000 71,782,983
207,320,128
U.S. TREASURY NOTE 4.875% 02/15/12 3,500,000 3,668,711
3,668,711
-----------
U.S. TREASURY BONDS & NOTES TOTAL 210,988,839
TOTAL GOVERNMENT AGENCIES & OBLIGATIONS
(COST OF $298,268,248) 288,323,092
ASSET-BACKED SECURITIES - 0.7%
EQUITY ONE ABS, INC. 4.205% 04/25/34 5,050,000 4,922,437
GMAC MORTGAGE CORP. 4.865% 09/25/34 4,130,000 4,078,052
9,000,489
TOTAL ASSET-BACKED SECURITIES
(COST OF $9,143,703) 9,000,489
</Table>
See accompanying notes to financial statements.
29
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------ ----------------------------------------------------------------------------
CONVERTIBLE BONDS - 0.3%
UTILITIES - 0.3%
ELECTRIC - 0.3%
INDEPENDENT POWER PRODUCERS - 0.3%
MIRANT CORP. 2.500% 06/15/21 (f) 1,565,000 1,111,854
NORTEL NETWORKS CORP. 4.250% 09/01/08 2,265,000 2,171,886
Electric Total 3,283,740
-------------
UTILITIES TOTAL 3,283,740
TOTAL CONVERTIBLE BONDS
(COST OF $3,115,519) 3,283,740
SHORT-TERM OBLIGATION - 2.9%
Repurchase agreement with State Street
Bank & Trust Co., dated 11/30/04, due
12/01/04 at 1.870%, collateralized by a
U.S. Treasury Note maturing 07/15/09,
market value of $37,775,244 (repurchase
proceeds $37,031,924) 37,030,000 37,030,000
TOTAL SHORT-TERM OBLIGATION
(COST OF $37,030,000) 37,030,000
TOTAL INVESTMENTS - 103.3%
(COST OF $1,241,498,702) (n) 1,318,428,526
OTHER ASSETS & LIABILITIES, NET - (3.3)% (41,719,039)
NET ASSETS - 100.0% 1,276,709,487
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Step bond. This security is currently not paying coupon. Shown
parenthetically is the next interest rate to be paid and the date the Fund
will begin accruing at this rate.
(b) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. As of
November 30, 2004, these securities amounted to $121,125,585, which
represents 9.5% of net assets.
(c) Step bond. Shown parenthetically is the next interest rate to be paid and
the date the Fund will begin accruing at this rate.
(d) Zero coupon bond.
(e) Floating rate note. The interest rate shown reflects the rate as of
November 30, 2004.
(f) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. As of
November 30, 2004, the value of these securities amounted to $5,863,729,
which represents 0.5% of net assets.
(g) Securities purchased on a delayed delivery basis.
See accompanying notes to financial statements.
30
<Page>
(h) Illiquid security.
(i) The issuer has filed for bankruptcy protection under Chapter 11 and is
default of certain debt convenants. Income is being accrued. As of November
30, 2004, the value of this security represents 0.1% of net assets.
(j) The issuer is in default of certain debt convenants. Income is not being
accrued. As of November 30, 2004, the value of these securities amounted to
$4,633,605, which represents 0.4% of net assets.
(k) Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(l) Issued as part of bankruptcy reorganization.
(m) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt convenants, however, under the issuer's plan of
reorganization, the issuer has guaranteed all interest due and therefore
income is still being accrued. As of November 30, 2004, the value of this
security represents 0.1% of net assets.
(n) Cost for federal income tax purposes is $1,255,758,829.
<Table>
<Caption>
FORWARD CURRENCY AGGREGATE SETTLEMENT UNREALIZED
CONTRACTS TO SELL VALUE FACE VALUE DATE DEPRECIATION
----------------------------------------------------------------------------------
EUR 13,480,000 $ 17,911,604 $ 17,564,575 12/23/04 $ (347,029)
EUR 3,751,000 4,984,934 4,905,258 01/26/05 (79,676)
EUR 6,620,750 8,798,722 8,660,868 01/26/05 (137,854)
EUR 4,462,500 5,930,638 5,840,431 01/31/05 (90,207)
GBP 7,020,000 13,402,654 12,916,800 12/13/04 (485,854)
GBP 3,530,000 6,719,968 6,572,860 01/26/05 (147,108)
--------------
$ (1,287,728)
--------------
</Table>
AT NOVEMBER 30, 2004, THE FUND HELD INVESTMENTS IN THE FOLLOWING SECTORS:
<Table>
<Caption>
% OF NET
ASSETS
---------------------------------------------------------------------------
Corporate Fixed-Income Bonds & Notes 40.9
Foreign Government Bonds 35.7
Government Agencies & Obligations 22.6
Asset-Backed Securities 0.7
Convertible Bonds 0.3
Municipal Bond 0.2
Short-Term Obligation 2.9
Other Assets & Liabilities, Net (3.3)
-----
100.0
-----
</Table>
<Table>
<Caption>
ACRONYM NAME
AUD Australian Dollar
CAD Canadian Dollar
EUR Euro
GBP British Pound
NOK Norwegian Krona
NZD New Zealand Dollar
PIK Payment-In-Kind
PLN Polish Zloty
REIT Real Estate Investment Trust
SEK Swedish Krona
TBA To Be Announced
USD United States Dollar
ZAR South African Rand
</Table>
See accompanying notes to financial statements.
31
<Page>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
($)
- ------------------------------------------ ----------------------------------------------------------------------------
ASSETS Investments, at cost 1,241,498,702
---------------
Investments, at value 1,318,428,526
Cash 456,166
Foreign currency (cost of $46) 45
Receivable for:
Investments sold 1,540,801
Investments sold on a delayed delivery basis 1,046,710
Fund shares sold 1,385,183
Dollar roll fee income 351,678
Interest 26,094,965
Foreign tax reclaim 160,686
Deferred Trustees' compensation plan 48,463
---------------
Total Assets 1,349,513,223
LIABILITIES Net unrealized depreciation on foreign forward currency
contracts 1,287,728
Payable for:
Investments purchased 813,363
Investments purchased on a delayed delivery basis 67,506,648
Fund shares repurchased 1,535,704
Investment advisory fee 669,532
Transfer agent fee 248,252
Pricing and bookkeeping fees 44,032
Custody fee 29,931
Distribution and service fees 572,773
Deferred Trustees' fees 48,463
Other liabilities 47,310
---------------
Total Liabilities 72,803,736
NET ASSETS 1,276,709,487
COMPOSITION OF NET ASSETS Paid-in capital 1,537,591,199
Overdistributed net investment income (813,390)
Accumulated net realized loss (336,357,512)
Net unrealized appreciation (depreciation) on:
Investments 76,929,824
Foreign currency translations (640,634)
NET ASSETS 1,276,709,487
CLASS A Net assets 605,709,092
Shares outstanding 94,708,301
Net asset value per share 6.40(a)
Maximum offering price per share ($6.40/0.9525) 6.72(b)
CLASS B Net assets 389,011,586
Shares outstanding 60,867,234
Net asset value and offering price per share 6.39(a)
CLASS C Net assets 43,505,634
Shares outstanding 6,802,019
Net asset value and offering price per share 6.40(a)
CLASS J Net assets 228,672,912
Shares outstanding 35,829,636
Net asset value and redemption price per share 6.38(a)
Maximum offering price per share ($6.38/0.9700) 6.58(b)
CLASS Z Net assets 9,810,263
Shares outstanding 1,545,602
Net asset value, offering and redemption price per share 6.35
</Table>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See accompanying notes to financial statements.
32
<Page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30,
2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
($)
- ------------------------------------------ ----------------------------------------------------------------------------
INVESTMENT INCOME Interest 43,076,857
Dollar roll fee income 972,877
---------------
Total Investment Income (net of foreign taxes withheld
of $101,358) 44,049,734
EXPENSES Investment advisory fee 4,015,730
Distribution fee:
Class B 1,490,185
Class C 155,471
Class J 402,453
Service fee:
Class A 697,681
Class B 476,986
Class C 49,623
Class J 276,199
Transfer agent fee 1,095,143
Pricing and bookkeeping fees 194,740
Trustees' fees 12,261
Custody fee 113,980
Non-recurring costs (See Note 7) 23,458
Other expenses 174,643
---------------
Total Expenses 9,178,553
Fees waived by Distributor - Class C (30,843)
Non-recurring costs assumed by Investment Advisor (See
Note 7) (23,458)
Custody earnings credit (6,111)
---------------
Net Expenses 9,118,141
---------------
Net Investment Income 34,931,593
NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain (loss) on:
INVESTMENTS AND FOREIGN CURRENCY Investments 14,368,944
Foreign currency transactions (5,527,153)
---------------
Net realized gain 8,841,791
Net change in unrealized
appreciation/depreciation on:
Investments 67,421,600
Foreign currency translations 657,114
---------------
Net change in unrealized
appreciation/depreciation 68,078,714
---------------
Net Gain 76,920,505
---------------
Net Increase in Net Assets
from Operations 111,852,098
</Table>
See accompanying notes to financial statements.
33
<Page>
STATEMENT OF CHANGES IN NET ASSETS
COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, MAY 31,
2004 ($) 2004 ($)
- ------------------------------------------ ----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS Net investment income 34,931,593 74,531,176
Net realized gain on investments and
foreign currency transactions 8,841,791 43,311,979
Net change in unrealized
appreciation/depreciation on
investments and foreign currency
translations 68,078,714 (39,526,227)
------------------------------------
Net Increase from Operations 111,852,098 78,316,928
DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income:
Class A (17,894,034) (42,467,084)
Class B (10,687,371) (29,338,162)
Class C (1,152,780) (2,896,843)
Class J (6,691,004) (16,932,962)
Class Z (172,143) (64,839)
------------------------------------
Total Distributions Declared to
Shareholders (36,597,332) (91,699,890)
SHARE TRANSACTIONS Class A:
Subscriptions 43,781,997 68,039,895
Distributions reinvested 10,105,223 22,542,999
Redemptions (49,371,074) (113,152,672)
------------------------------------
Net Increase (Decrease) 4,516,146 (22,569,778)
Class B:
Subscriptions 11,807,135 40,064,707
Distributions reinvested 6,145,954 16,158,239
Redemptions (61,044,544) (128,322,218)
------------------------------------
Net Decrease (43,091,455) (72,099,272)
Class C:
Subscriptions 4,742,489 8,693,636
Distributions reinvested 666,921 1,571,832
Redemptions (5,910,683) (13,809,960)
------------------------------------
Net Decrease (501,273) (3,544,492)
Class J:
Subscriptions 1,496,496 5,771,627
Redemptions (15,751,320) (32,286,028)
------------------------------------
Net Decrease (14,254,824) (26,514,401)
Class Z:
Subscriptions 8,690,366 1,051,458
Distributions reinvested 38,899 55,898
Redemptions (406,537) (1,113,389)
------------------------------------
Net Increase (Decrease) 8,322,728 (6,033)
Net Decrease from Share
Transactions (45,008,678) (124,733,976)
------------------------------------
Total Increase (Decrease) in Net Assets 30,246,088 (138,116,938)
NET ASSETS Beginning of period 1,246,463,399 1,384,580,337
End of period (including undistributed
(overdistributed) net investment income
of $(813,390) and $852,349, respectively) 1,276,709,487 1,246,463,399
</Table>
See accompanying notes to financial statements.
34
<Page>
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, MAY 31,
2004 ($) 2004 ($)
- ------------------------------------------ ----------------------------------------------------------------------------------
CHANGES IN SHARES Class A:
Subscriptions 7,033,298 11,072,096
Issued for distributions reinvested 1,631,632 3,674,542
Redemptions (7,986,373) (18,468,207)
------------------------------------
Net Increase (Decrease) 678,557 (3,721,569)
Class B:
Subscriptions 1,906,071 6,545,770
Issued for distributions reinvested 993,441 2,635,178
Redemptions (9,880,024) (20,955,613)
------------------------------------
Net Decrease (6,980,512) (11,774,665)
Class C:
Subscriptions 759,845 1,417,309
Issued for distributions reinvested 107,712 256,111
Redemptions (959,305) (2,263,480)
------------------------------------
Net Decrease (91,748) (590,060)
Class J:
Subscriptions 239,070 931,651
Redemptions (2,539,845) (5,247,368)
------------------------------------
Net Decrease (2,300,775) (4,315,717)
Class Z:
Subscriptions 1,412,621 171,694
Issued for distributions reinvested 6,302 9,156
Redemptions (65,764) (184,806)
------------------------------------
Net Increase (Decrease) 1,353,159 (3,956)
</Table>
See accompanying notes to financial statements.
35
<Page>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND
NOTE 1. ORGANIZATION
Columbia Strategic Income Fund (the "Fund"), a series of Columbia Funds Trust I
(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 current income consistent with prudent risk. The Fund also seeks
maximum total return.
FUND SHARES
The Fund may issue an unlimited number of shares and offers five classes of
shares: Class A, Class B, Class C, Class J 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 J shares are subject to a 3% front-end
sales charge and are available for purchase only by residents or citizens of
Japan. 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.
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 pricing services 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.
Forward currency exchange contracts are valued at the prevailing forward
exchange rate of the underlying currencies.
Foreign securities are generally valued at the last sale price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events
affecting the values of such foreign securities and such exchange rates may
occur between the times at which they are determined and the close of the
customary trading session of the NYSE, which would not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
values
36
<Page>
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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts are agreements to exchange one
currency for another at a future date at a specified price. These contracts are
used to minimize the exposure to foreign exchange rate fluctuations during the
period between trade and settlement date of the contracts. The Fund may utilize
forward foreign currency exchange contracts in connection with the settlement of
purchases and sales of securities. The Fund may also enter into these contracts
to hedge certain other foreign currency denominated assets. Contracts to buy
generally are used to acquire exposure to foreign currencies, while contracts to
sell are used to hedge the Fund's investments against currency fluctuations.
Forward currency contracts are valued daily at the current exchange rate of the
underlying currency, resulting in unrealized gains (losses) which become
realized at the time the foreign currency contracts are closed or mature.
Realized and unrealized gains (losses) arising from such transactions are
included in net realized and unrealized gains (losses) on foreign currency
transactions. The use of forward currency contracts does not eliminate
fluctuations in the prices of the Fund's portfolio securities. While the maximum
potential loss from such contracts is the aggregate face value in U.S. dollars
at the time the contract was opened, exposure is typically limited to the change
in value of the contract (in U.S. dollars) over the period it remains open. The
Fund could also be exposed to risk if the counterparties of the contracts are
unable to fulfill the terms of the contracts.
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.
MORTGAGE DOLLAR ROLL TRANSACTIONS
The Fund may enter into mortgage dollar roll transactions. A mortgage dollar
roll transaction involves a sale by the Fund of securities that it holds with an
agreement by the Fund to repurchase substantially similar securities at an
agreed upon price and date. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on the
securities sold. Mortgage dollar roll transactions involve the risk that the
market value of the securities sold by the Fund may decline below the repurchase
price of those securities. In the event the buyer of the securities under a
mortgage dollar roll transaction files for bankruptcy or becomes insolvent, the
Fund's use of proceeds of the transaction may be restricted pending a
determination by or with respect to the other party. The Fund identifies U.S.
Government securities or other liquid high grade debt obligations as segregated
with the custodian in an amount equal to the mortgage dollar roll transactions.
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.
37
<Page>
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities. The value of
additional securities received as an income payment is recorded as income and as
the cost basis of such securities. Fee income attributable to mortgage dollar
roll transactions is recorded on the accrual basis over the term of the
transaction.
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 tax-exempt or taxable income, if any, for its tax year,
and as such will not be subject to federal income taxes. In addition, the Fund
intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Fund should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
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 tax character of distributions paid during the Fund's fiscal year ended May
31, 2004 was as follows:
<Table>
<Caption>
MAY 31,2004
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 91,699,890
Long-Term Capital Gains --
</Table>
Unrealized appreciation (depreciation) at November 30, 2004, based on cost of
investments for federal income tax purposes, was:
<Table>
Unrealized appreciation $ 96,880,515
Unrealized depreciation (34,210,818)
Net unrealized appreciation $ 62,669,697
</Table>
The following capital loss carryforwards, determined as of May 31, 2004, 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 CAPITAL LOSS
EXPIRATION CARRYFORWARD
- --------------------------------------------------------------------------------
2007 $ 8,852,750
2008 63,518,542
2009 136,912,288
2010 135,415,014
2011 318,608
$ 345,017,202
</Table>
Capital loss carryforwards of $12,688,939 were utilized during the year ended
May 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
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Fund. Columbia, the transfer agent and the distributor, are each indirect,
wholly owned subsidiaries of Bank of America Corporation.
38
<Page>
INVESTMENT ADVISORY FEE
Columbia provides administrative and other services to the Fund in addition to
investment advisory services. 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 0.65%
Next $1 billion 0.60%
Over $2 billion 0.55%
</Table>
For the six-months ended November 30, 2004, the Fund's annualized effective
investment advisory fee rate was 0.64%.
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"). As a result, Columbia pays the total fees received
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 based on the number of securities held by
the Fund. For the six months ended November 30, 2004, the Fund's annualized
effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses,
was 0.031%.
TRANSFER AGENT FEE
Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia,
provides shareholder services to the Fund and has a subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. 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.
For the six months ended November 30, 2004, the Fund's annualized effective
transfer agent fee rate, inclusive of out-of-pocket fees, was 0.17%.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia,
is the principal underwriter of the Fund. For the six months ended November 30,
2004, the Distributor has retained net underwriting discounts of $43,301 sales
of the Fund's Class A shares and received CDSC fees of $226, $548,609 and $2,375
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. The service fee is equal to 0.15%
annually of the average daily net assets attributable to outstanding Class A and
Class B shares issued prior to January 1, 1993 and 0.25% annually of the average
daily net assets attributable to outstanding Class A, Class B, Class C and Class
J shares issued thereafter. This arrangement results in an effective service fee
between the 0.15% and 0.25% annual rates. For the six months ended November 30,
2004, the annualized effective service fee rate was 0.24% for Class A, Class B,
Class C and Class J shares of the Fund.
The Plan also requires the payment of a monthly distribution fee to the
Distributor equal to 0.75% annually of the average daily net assets attributable
to Class B and Class C shares and 0.35% annually of the average daily net assets
attributable to Class J shares. 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.
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. These credits are recorded as a reduction of
total expenses on the Statement of Operations. 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.
39
<Page>
FEES PAID TO OFFICERS AND TRUSTEES
With the exception of one officer, all officers of the Fund are employees of
Columbia or its affiliates and receive no compensation from the Fund. Effective
August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to
the Fund in accordance with federal securities regulations. The Fund, along with
other affiliated funds, will pay its pro-rata share of the expenses associated
with the Office of the Chief Compliance Officer. The Fund's fee will not exceed
$15,000 per year.
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.
OTHER
Columbia provides certain services to the Fund related to Sarbanes-Oxley
compliance. For the six months ended November 30, 2004, the Fund paid $1,697 to
Columbia for such services. This amount is included in "Other expenses" on the
Statement of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the six months ended November 30, 2004, the cost of purchases and proceeds
from sales of securities, excluding short-term obligations, were $342,473,704
and $375,296,521, respectively.
NOTE 6. LINE OF CREDIT
The Fund and other affiliated funds participate in a $350,000,000 committed
unsecured revolving line of credit provided by State Street Bank and Trust
Company. Borrowings are used for temporary or emergency purposes to facilitate
portfolio liquidity. Interest is charged to each participating fund based on its
borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In
addition, a commitment fee of 0.10% per annum is accrued and apportioned among
the participating funds based on their pro-rata portion of the unutilized line
of credit. The commitment fee is included in "Other expenses" on the Statement
of Operations. For the six months ended November 30, 2004, the Fund did not
borrow under this arrangement.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
FOREIGN SECURITIES
There are certain additional risks involved when investing in foreign securities
that are not inherent with investments in domestic securities. These risks may
involve foreign currency exchange rate fluctuations, adverse political and
economic developments and the possible prevention of currency exchange or other
foreign governmental laws or restrictions. In addition, the liquidity of foreign
securities may be more limited than that of domestic securities.
Investments in emerging market countries are subject to additional risk. The
risk of foreign investments is typically increased in less developed countries.
These countries are also more likely to experience high levels of inflation,
deflation or currency devaluation which could hurt their economies and
securities markets.
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 and industry events 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 to the extent
there is no established secondary market.
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
40
<Page>
various regulatory and law enforcement authorities in connection with their
investigations of late trading and market timing in mutual funds as well as
other industry wide issues. The Columbia Group has not uncovered any instances
where Columbia or the Distributor were knowingly involved in late trading of
mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and the Distributor, alleging that they had
violated certain provisions of the federal securities laws in connection with
trading activity in mutual fund shares. Also on February 24, 2004, the New York
Attorney General ("NYAG") filed a civil complaint in New York Supreme Court,
County of New York against Columbia and the Distributor alleging that Columbia
and the Distributor had violated certain New York anti-fraud statutes. If either
Columbia or the Distributor is unsuccessful in its defense of these proceedings,
it could be barred from serving as an investment advisor or distributor for any
investment company registered under the Investment Company Act of 1940, as
amended (a "registered investment company"). Such results could prevent
Columbia, the Distributor or any company that is an affiliated person of
Columbia and the Distributor from serving as an investment advisor or
distributor for any registered investment company, including your fund. Your
fund has been informed by Columbia and the Distributor that, if these results
occur, they will seek exemptive relief from the SEC to permit them to continue
to serve as your fund's investment advisor and distributor. There is no
assurance that such exemptive relief will be granted. On March 15, 2004,
Columbia and the Distributor entered into agreements in principle with the SEC
Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and the Distributor agreed, among other things, to the
following conditions: payment of $70 million in disgorgement; payment of $70
million in civil penalties; an order requiring Columbia and the Distributor to
cease and desist from violations of the antifraud provisions and other
provisions of the federal securities laws; governance changes designed to
maintain the independence of the mutual fund boards of trustees and ensure
compliance with securities laws and their fiduciary duties; and retention of an
independent consultant to review Columbia's and the Distributor's compliance
policies and procedures. The agreement requires the final approval of the SEC.
In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc
of America Capital Management, LLC have agreed to collectively reduce mutual
fund fees by $160 million over a five-year period.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston Financial
Corporation ("FleetBoston") (and affiliated entities). More than 300 cases
(including those filed against entities unaffiliated with the funds, their
Boards and/or FleetBoston and its affiliated entities) have been consolidated in
a multi-district proceeding and transferred to the Federal District Court in
Maryland. Recently, certain Columbia funds and affiliated entities have been
named as defendants in several derivative actions under various sections of the
Investment Company Act of 1940, as amended, alleging, among other things, that
the fees and expenses paid by those funds are excessive. The funds and the other
defendants to these actions, including Columbia and various of its affiliates,
certain other mutual funds advised by Columbia and its affiliates, and various
directors of such funds, have denied these allegations and are contesting the
plaintiffs' claims. These suits and certain regulatory investigations are
ongoing, however, based on currently available information, Columbia believes
that these lawsuits are without merit, that the likelihood they will have a
material adverse impact on any fund is remote, and that the lawsuits are not
likely to materially affect its ability to provide investment management
services to its clients, including the funds.
For the six months ended November 30, 2004, Columbia has assumed $23,458 of
legal, consulting services and Trustees' fees incurred by the Fund in connection
with these matters.
41
<Page>
FINANCIAL HIGHLIGHTS
COLUMBIA STRATEGIC INCOME FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31,
CLASS A SHARES 2004 2004 2003(a)
- -----------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.63
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.18(b) 0.36(b) 0.16(b)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.39 0.01 0.46
------------ ------------ ------------
Total from Investment
Operations 0.57 0.37 0.62
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.19) (0.44) (0.16)
Return of capital -- -- --
------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.19) (0.44) (0.16)
NET ASSET VALUE, END OF PERIOD $ 6.40 $ 6.02 $ 6.09
Total return (f) 9.63%(g) 6.21% 11.10%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.13%(i) 1.17% 1.27%(i)
Net investment income (h) 5.90%(i) 5.90% 6.52%(i)
Portfolio turnover rate 29%(g) 68% 59%(g)
Net assets, end of
period (000's) $ 605,709 $ 566,269 $ 595,223
<Caption>
YEAR ENDED DECEMBER 31,
CLASS A SHARES 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.64 $ 6.00 $ 6.62 $ 7.11
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.38(b) 0.48(b)(c) 0.58(d) 0.57(d)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.05 (0.30)(c) (0.62) (0.48)
------------ ------------ ------------ ------------
Total from Investment
Operations 0.43 0.18 (0.04) 0.09
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.42) (0.50) (0.53) (0.58)(e)
Return of capital (0.02) (0.04) (0.05) --
------------ ------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.44) (0.54) (0.58) (0.58)
NET ASSET VALUE, END OF PERIOD $ 5.63 $ 5.64 $ 6.00 $ 6.62
Total return (f) 7.97% 3.07% (0.68)% 1.28%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.23% 1.21% 1.17% 1.19%
Net investment income (h) 6.75% 8.22%(c) 9.12% 8.30%
Portfolio turnover rate 62% 106% 35% 44%
Net assets, end of
period (000's) $ 552,737 $ 575,791 $ 536,481 $ 669,795
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund 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 December 31, 2001 was to decrease net investment
income per share by $0.02, increase net realized and unrealized loss per
share by $0.02 and decrease the ratio of net investment income to average
net assets from 8.60% to 8.22%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Distributions from income include currency gains and gains on securities
treated as ordinary income for tax purposes.
(f) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(g) Not annualized
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
42
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31,
CLASS B SHARES 2004 2004 2003(a)
- -----------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.62
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.16(b) 0.32(b) 0.14(b)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.38 0.01 0.47
------------ ------------ ------------
Total from Investment
Operations 0.54 0.33 0.61
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.17) (0.40) (0.14)
Return of capital -- -- --
------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.17) (0.40) (0.14)
NET ASSET VALUE, END OF PERIOD $ 6.39 $ 6.02 $ 6.09
Total return (f) 9.06%(g) 5.42% 10.95%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.88%(i) 1.92% 2.02%(i)
Net investment income (h) 5.15%(i) 5.15% 5.77%(i)
Portfolio turnover rate 29%(g) 68% 59%(g)
Net assets, end of
period (000's) $ 389,012 $ 408,345 $ 484,540
<Caption>
YEAR ENDED DECEMBER 31,
CLASS B SHARES 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.63 $ 6.00 $ 6.62 $ 7.11
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.34(b) 0.44(b)(c) 0.53(d) 0.51(d)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.04 (0.32)(c) (0.62) (0.48)
------------ ------------ ------------ ------------
Total from Investment
Operations 0.38 0.12 (0.09) 0.03
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.37) (0.45) (0.48) (0.52)(e)
Return of capital (0.02) (0.04) (0.05) --
------------ ------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.39) (0.49) (0.53) (0.52)
NET ASSET VALUE, END OF PERIOD $ 5.62 $ 5.63 $ 6.00 $ 6.62
Total return (f) 7.17% 2.12% (1.41)% 0.52%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.98% 1.96% 1.92% 1.94%
Net investment income (h) 6.00% 7.47%(c) 8.37% 7.55%
Portfolio turnover rate 62% 106% 35% 44%
Net assets, end of
period (000's) $ 456,563 $ 533,406 $ 693,733 $ 914,145
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund 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 December 31, 2001 was to decrease net investment
income per share by $0.02, increase net realized and unrealized loss per
share by $0.02 and decrease the ratio of net investment income to average
net assets from 7.85% to 7.47%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Distributions from income include currency gains and gains on securities
treated as ordinary income for tax purposes.
(f) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
43
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31,
CLASS C SHARES 2004 2004 2003(a)
- ---------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.63
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.16(b) 0.33(b) 0.14(b)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.39 0.01 0.46
------------ ------------ ------------
Total from Investment
Operations 0.55 0.34 0.60
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.17) (0.41) (0.14)
Return of capital -- -- --
------------ ------------ ------------
Total Distributions
Declared to
Shareholders (0.17) (0.41) (0.14)
NET ASSET VALUE, END
OF PERIOD $ 6.40 $ 6.02 $ 6.09
Total return (g) 9.31%(h)(i) 5.57%(h) 10.82%(h)(i)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (j) 1.73%(k) 1.77% 1.87%(k)
Net investment income (j) 5.30%(k) 5.31% 5.92%(k)
Waiver/reimbursement 0.15%(k) 0.15% 0.15%(k)
Portfolio turnover
rate 29%(i) 68% 59%(i)
Net assets, end of
period (000's) $ 43,506 $ 41,520 $ 45,572
<Caption>
YEAR ENDED DECEMBER 31,
CLASS C SHARES 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.64 $ 6.00 $ 6.62 $ 7.11
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.35(b) 0.45(b)(c) 0.54(d)(e) 0.52(d)(e)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.04 (0.31)(c) (0.62) (0.48)
------------ ------------ ------------ ------------
Total from Investment
Operations 0.39 0.14 (0.08) 0.04
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.38) (0.46) (0.49) (0.53)(f)
Return of capital (0.02) (0.04) (0.05) --
------------ ------------ ------------ ------------
Total Distributions
Declared to
Shareholders (0.40) (0.50) (0.54) (0.53)
NET ASSET VALUE, END
OF PERIOD $ 5.63 $ 5.64 $ 6.00 $ 6.62
Total return (g) 7.32%(h) 2.45% (1.26)%(h) 0.67%(h)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (j) 1.83% 1.81% 1.77%(d) 1.79%(d)
Net investment income (j) 6.15% 7.62%(c) 8.52%(d) 7.70%(d)
Waiver/reimbursement 0.15% -- 0.15% 0.15%
Portfolio turnover
rate 62% 106% 35% 44%
Net assets, end of
period (000's) $ 38,923 $ 42,906 $ 43,538 $ 57,246
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund 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 December 31, 2001 was to decrease net investment
income per share by $0.02, increase net realized and unrealized loss per
share by $0.02 and decrease the ratio of net investment income to average
net assets from 8.00% to 7.62%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) Net of fees waived by the Distributor which amounted to $0.02 and $0.01 per
share and 0.15% and 0.15% for the periods ended December 31, 2000 and 1999,
respectively.
(e) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(f) Distributions from income include currency gains and gains on securities
treated as ordinary income for tax purposes.
(g) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(h) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(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.
44
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31,
CLASS J SHARES 2004 2004 2003(a)
- -----------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.01 $ 6.08 $ 5.62
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.17(b) 0.34(b) 0.15(b)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.38 0.01 0.46
------------ ------------ ------------
Total from Investment
Operations 0.55 0.35 0.61
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.18) (0.42) (0.15)
Return of capital -- -- --
------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.18) (0.42) (0.15)
NET ASSET VALUE, END OF PERIOD $ 6.38 $ 6.01 $ 6.08
Total return (f) 9.29%(g) 5.88% 10.97%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.48%(i) 1.52% 1.62%(i)
Net investment income (h) 5.55%(i) 5.55% 6.17%(i)
Portfolio turnover rate 29%(g) 68% 59%(g)
Net assets, end of
period (000's) $ 228,673 $ 229,179 $ 258,057
<Caption>
YEAR ENDED DECEMBER 31,
CLASS J SHARES 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.63 $ 6.00 $ 6.62 $ 7.10
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.36(b) 0.46(b)(c) 0.55(d) 0.54(d)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.05 (0.31)(c) (0.62) (0.47)
------------ ------------ ------------ ------------
Total from Investment
Operations 0.41 0.15 (0.07) 0.07
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.40) (0.48) (0.50) (0.55)(e)
Return of capital (0.02) (0.04) (0.05) --
------------ ------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.42) (0.52) (0.55) (0.55)
NET ASSET VALUE, END OF PERIOD $ 5.62 $ 5.63 $ 6.00 $ 6.62
Total return (f) 7.61% 2.56% (1.02)% 1.07%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.58% 1.56% 1.52% 1.54%
Net investment income (h) 6.40% 7.87%(c) 8.77% 7.95%
Portfolio turnover rate 62% 106% 35% 44%
Net assets, end of
period (000's) $ 271,733 $ 323,866 $ 508,079 $ 568,311
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund 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 December 31, 2001 was to decrease net investment
income per share by $0.02, increase net realized and unrealized loss per
share by $0.02 and decrease the ratio of net investment income to average
net assets from 8.25% to 7.87%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(e) Distributions from income include currency gains and gains on securities
treated as ordinary income for tax purposes.
(f) Total return at net asset value assuming all distributions reinvested and
no initial sales charge.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
45
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
NOVEMBER 30, MAY 31, MAY 31,
CLASS Z SHARES 2004 2004 2003(a)
- -----------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.98 $ 6.05 $ 5.59
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.19(c) 0.38(c) 0.17(c)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.38 0.01 0.45
------------ ------------ ------------
Total from Investment
Operations 0.57 0.39 0.62
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.20) (0.46) (0.16)
Return of capital -- -- --
------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.20) (0.46) (0.16)
NET ASSET VALUE, END OF PERIOD $ 6.35 $ 5.98 $ 6.05
Total return (g) 9.66%(h) 6.52% 11.29%(h)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (i) 0.89%(j) 0.93% 1.03%(j)
Net investment income (i) 6.14%(j) 6.15% 6.76%(j)
Portfolio turnover rate 29%(h) 68% 59%(h)
Net assets, end of
period (000) $ 9,810 $ 1,150 $ 1,188
<Caption>
YEAR ENDED DECEMBER 31,
CLASS Z SHARES 2002 2001 2000 1999(b)
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.62 $ 5.99 $ 6.62 $ 7.10
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.39(c) 0.49(c)(d) 0.59(e) 0.53(e)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.03 (0.31)(d) (0.63) (0.47)
------------ ------------ ------------ ------------
Total from Investment
Operations 0.42 0.18 (0.04) 0.06
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.43) (0.51) (0.54) (0.54)(f)
Return of capital (0.02) (0.04) (0.05) --
------------ ------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.45) (0.55) (0.59) (0.54)
NET ASSET VALUE, END OF PERIOD $ 5.59 $ 5.62 $ 5.99 $ 6.62
Total return (g) 7.87% 3.14% (0.59)% 1.50%(h)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (i) 0.99% 0.98% 0.93% 0.95%(j)
Net investment income (i) 6.99% 8.45%(d) 9.36% 8.54%(j)
Portfolio turnover rate 62% 106% 35% 44%
Net assets, end of
period (000) $ 3 $ 1,860 $ 1 $ 4,928
</Table>
(a) The Fund changed its fiscal year end from December 31 to May 31.
(b) Class Z shares were initially offered on January 29, 1999. Per share data
and total return reflect activity from that date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Effective January 1, 2001, the Fund 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 December 31, 2001 was to decrease net investment
income per share by $0.02, increase net realized and unrealized loss per
share by $0.02 and decrease the ratio of net investment income to average
net assets from 8.84% to 8.45%. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(e) The per share net investment income amount does not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(f) Distributions from income include currency gains and gains on securities
treated as ordinary income for tax purposes.
(g) Total return at net asset value assuming all distributions reinvested.
(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.
46
<Page>
COLUMBIA FUNDS
COLUMBIA STRATEGIC INCOME FUND
<Table>
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
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 Opportunity
Columbia Income
Columbia Intermediate Bond
Columbia Intermediate Government Income
Columbia Quality Plus Bond
Columbia Short Term Bond
Columbia Strategic Income
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
</Table>
47
<Page>
<Table>
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 Global Equity
Columbia International Equity*
Columbia International Stock
Columbia Newport Greater China
Columbia Newport Tiger
INDEX Columbia Large Company Index
Columbia Small Company Index
Columbia U.S. Treasury Index
</Table>
* The fund was closed to new investments after the close of business on
November 10, 2004. The fund's trustees have approved the merger, which will
take effect on or about February 26, 2005, pending shareholder approval.
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 is the primary investment management division of Bank of
America Corporation. Columbia Management entities furnish investment management
services and advise institutional and mutual fund portfolios.
48
<Page>
IMPORTANT INFORMATION ABOUT THIS REPORT
COLUMBIA STRATEGIC 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 Strategic 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 fund's proxy voting policies and procedures is available
(i) on the fund's website, www.columbiamanagement.com; (ii) on the Securities
and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon
request, by calling 800-368-0346. Information regarding how the fund voted
proxies relating to portfolio securities during the 12-month period ended June
30, 2004 is available from the SEC's website. Information regarding how the fund
voted proxies relating to portfolio securities is also available from the fund's
website.
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at www.sec.gov and may be reviewed and copied at
the SEC's Public Reference Room in Washington, DC. Information on the operation
of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Columbia Management is the primary investment management division of Bank of
America Corporation. Columbia Management entities furnish investment management
services and advise institutional and mutual fund portfolios.
49
<Page>
[GRAPHIC]
eDELIVERY
Help your fund reduce printing and postage costs! Elect to get your shareholder
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COLUMBIA STRATEGIC INCOME FUND SEMIANNUAL REPORT, PRSRT STD
NOVEMBER 30, 2004 U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
[COLUMBIAFUNDS LOGO]
A MEMBER OF COLUMBIA MANAGEMENT
(C) 2004 COLUMBIA FUNDS DISTRIBUTOR, INC.
ONE FINANCIAL CENTER, BOSTON, MA 02111-2621
800.345.6611 www.columbiafunds.com
716-03/751T-1104 (01/05) 05/3938
<Page>
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
<Page>
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have not been any material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors, since those
procedures were last disclosed in response to the requirements of Item
7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officers, based on their evaluation of the registrant's disclosure controls
and procedures as of a date within 90 days of the filing of this report,
have 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 second fiscal quarter of
the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not
applicable at this time.
(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 I
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By (Signature and Title) /S/ Christopher L. Wilson
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Christopher L. Wilson, President
Date January 26, 2005
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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/ Christopher L. Wilson
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Christopher L. Wilson, President
Date January 26, 2005
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By (Signature and Title) /S/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date January 26, 2005
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