<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: 05/31/05
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Date of reporting period: 05/31/05
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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
ANNUAL REPORT
MAY 31, 2005
<Page>
TABLE OF CONTENTS
<Table>
Performance Information 1
Fund Profile 2
Understanding Your Expenses 3
Economic Update 4
Portfolio Managers' 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 35
Financial Highlights 42
Report of Independent Registered Public Accounting Firm 46
Trustees 47
Officers 49
Board Consideration and Approval of Investment Advisory Agreement 50
Important Information About This Report 53
</Table>
The views expressed in the President's Message and Portfolio Managers' Report
reflect the current views of the respective parties. These views are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict so actual outcomes and results may
differ significantly from the views expressed. These views are subject to change
at any time based upon economic, market or other conditions and the respective
parties disclaim any responsibility to update such views. These views may not be
relied on as investment advice and, because investment decisions for a Columbia
Fund are based on numerous factors, may not be relied on as an indication of
trading intent on behalf of any particular Columbia Fund. References to specific
company securities should not be construed as a recommendation or investment
advice.
NOT FDIC MAY LOSE VALUE
INSURED -------------------
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
COLUMBIA HIGH YIELD OPPORTUNITY FUND
[PHOTO OF CHRISTOPHER L. WILSON]
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 may
offer significant benefits for our shareholders. Plans are underway to combine
various Nations Funds and Columbia Funds together to form 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 help 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 may affect you and your account. In this
matter, your timely response will help us to implement the changes in 2005.
The increased efficiencies we expect from a more streamlined 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, we recently announced plans to consolidate the transfer agency of all
of our funds and consolidate custodial services, each under a single vendor. We
have also reduced management fees for many funds as part of our settlement
agreement (See Note 9 in the Notes to Financial Statements) 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 better 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
PRESIDENT, COLUMBIA FUNDS
Christopher L. Wilson is Head of Mutual Funds for Columbia Management, President
of Columbia Funds, President & CEO of Nations Funds and President of Galaxy
Funds, 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 joined Bank of America in August
2004.
<Page>
PERFORMANCE INFORMATION
COLUMBIA HIGH YIELD OPPORTUNITY FUND
[CHART]
VALUE OF A $10,000 INVESTMENT 06/01/95 - 05/31/05
<Table>
<Caption>
CLASS A SHARES CLASS A SHARES CSFB JP MORGAN GLOBAL
WITHOUT SALES CHARGE WITH SALES CHARGE HIGH YIELD INDEX HIGH YIELD INDEX
-------------------- -------------------- --------------------- --------------------
06/1/95 $ 10,000 $ 9,525 $ 10,000 $ 10,000
6/30/95 $ 10,048 $ 9,571 $ 10,066 $ 10,040
7/31/95 $ 10,218 $ 9,732 $ 10,222 $ 10,197
8/31/95 $ 10,235 $ 9,749 $ 10,251 $ 10,236
9/30/95 $ 10,392 $ 9,898 $ 10,369 $ 10,358
10/31/95 $ 10,519 $ 10,019 $ 10,484 $ 10,455
11/30/95 $ 10,583 $ 10,080 $ 10,533 $ 10,522
12/31/95 $ 10,789 $ 10,277 $ 10,667 $ 10,693
1/31/96 $ 10,981 $ 10,460 $ 10,869 $ 10,896
2/29/96 $ 11,078 $ 10,552 $ 10,927 $ 10,961
3/31/96 $ 10,980 $ 10,459 $ 10,897 $ 10,925
4/30/96 $ 11,046 $ 10,521 $ 10,956 $ 10,993
5/31/96 $ 11,129 $ 10,600 $ 11,045 $ 11,077
6/30/96 $ 11,129 $ 10,600 $ 11,069 $ 11,124
7/31/96 $ 11,196 $ 10,664 $ 11,169 $ 11,199
8/31/96 $ 11,397 $ 10,856 $ 11,291 $ 11,365
9/30/96 $ 11,703 $ 11,147 $ 11,485 $ 11,634
10/31/96 $ 11,703 $ 11,147 $ 11,581 $ 11,741
11/30/96 $ 11,926 $ 11,360 $ 11,762 $ 11,957
12/31/96 $ 12,109 $ 11,534 $ 11,991 $ 12,085
1/31/97 $ 12,214 $ 11,634 $ 12,079 $ 12,180
2/28/97 $ 12,478 $ 11,885 $ 12,306 $ 12,390
3/31/97 $ 12,230 $ 11,649 $ 12,168 $ 12,188
4/30/97 $ 12,354 $ 11,768 $ 12,276 $ 12,302
5/31/97 $ 12,661 $ 12,059 $ 12,523 $ 12,587
6/30/97 $ 12,861 $ 12,250 $ 12,694 $ 12,753
7/31/97 $ 13,171 $ 12,545 $ 12,963 $ 13,092
8/31/97 $ 13,208 $ 12,580 $ 13,033 $ 13,100
9/30/97 $ 13,522 $ 12,880 $ 13,291 $ 13,361
10/31/97 $ 13,522 $ 12,880 $ 13,289 $ 13,342
11/30/97 $ 13,634 $ 12,987 $ 13,384 $ 13,462
12/31/97 $ 13,788 $ 13,133 $ 13,506 $ 13,583
1/31/98 $ 14,074 $ 13,405 $ 13,735 $ 13,794
2/28/98 $ 14,151 $ 13,479 $ 13,842 $ 13,900
3/31/98 $ 14,325 $ 13,645 $ 13,911 $ 14,040
4/30/98 $ 14,364 $ 13,682 $ 14,016 $ 14,110
5/31/98 $ 14,384 $ 13,701 $ 14,058 $ 14,130
6/30/98 $ 14,443 $ 13,757 $ 14,087 $ 14,160
7/31/98 $ 14,618 $ 13,923 $ 14,186 $ 14,279
8/31/98 $ 13,654 $ 13,006 $ 13,223 $ 13,354
9/30/98 $ 13,537 $ 12,894 $ 13,221 $ 13,340
10/31/98 $ 13,301 $ 12,670 $ 12,958 $ 13,053
11/30/98 $ 14,175 $ 13,502 $ 13,615 $ 13,773
12/31/98 $ 14,086 $ 13,417 $ 13,584 $ 13,716
1/31/99 $ 14,320 $ 13,640 $ 13,712 $ 13,881
2/28/99 $ 14,337 $ 13,656 $ 13,683 $ 13,810
3/31/99 $ 14,621 $ 13,926 $ 13,807 $ 13,980
4/30/99 $ 14,875 $ 14,169 $ 14,113 $ 14,335
5/31/99 $ 14,597 $ 13,904 $ 13,960 $ 11,812
6/30/99 $ 14,682 $ 13,984 $ 13,967 $ 14,131
7/31/99 $ 14,727 $ 14,028 $ 13,974 $ 14,135
8/31/99 $ 14,661 $ 13,965 $ 13,850 $ 13,993
9/30/99 $ 14,592 $ 13,899 $ 13,743 $ 13,893
10/31/99 $ 14,617 $ 13,923 $ 13,676 $ 13,816
11/30/99 $ 14,862 $ 14,156 $ 13,862 $ 14,042
12/31/99 $ 14,956 $ 14,246 $ 14,029 $ 14,179
1/31/2000 $ 14,790 $ 14,088 $ 13,973 $ 14,125
2/29/2000 $ 15,015 $ 14,302 $ 14,060 $ 14,182
3/31/2000 $ 14,787 $ 14,084 $ 13,849 $ 13,941
4/30/2000 $ 14,691 $ 13,993 $ 13,828 $ 13,938
5/31/2000 $ 14,410 $ 13,725 $ 13,607 $ 13,740
6/30/2000 $ 14,527 $ 13,837 $ 13,912 $ 14,011
7/31/2000 $ 14,673 $ 13,976 $ 14,043 $ 14,134
8/31/2000 $ 14,819 $ 14,115 $ 14,137 $ 14,243
9/30/2000 $ 14,571 $ 13,879 $ 14,007 $ 14,056
10/31/2000 $ 13,934 $ 13,273 $ 13,571 $ 13,644
11/30/2000 $ 13,135 $ 12,511 $ 13,036 $ 13,123
12/31/2000 $ 13,414 $ 12,777 $ 13,298 $ 13,354
1/31/2001 $ 14,473 $ 13,785 $ 14,096 $ 14,163
2/28/2001 $ 14,515 $ 13,825 $ 14,239 $ 14,328
3/31/2001 $ 13,956 $ 13,293 $ 13,955 $ 14,047
4/30/2001 $ 13,629 $ 12,982 $ 13,810 $ 13,899
5/31/2001 $ 13,755 $ 13,101 $ 14,086 $ 14,172
6/30/2001 $ 13,161 $ 12,535 $ 13,868 $ 13,927
7/31/2001 $ 13,150 $ 12,525 $ 14,016 $ 14,067
8/31/2001 $ 13,247 $ 12,618 $ 14,213 $ 14,250
9/30/2001 $ 12,185 $ 11,606 $ 13,317 $ 13,310
10/31/2001 $ 12,625 $ 12,025 $ 13,621 $ 13,641
11/30/2001 $ 13,069 $ 12,448 $ 14,061 $ 14,105
12/31/2001 $ 13,042 $ 12,422 $ 14,069 $ 14,086
1/31/2002 $ 13,177 $ 12,551 $ 14,200 $ 14,189
2/28/2002 $ 12,944 $ 12,329 $ 14,099 $ 14,083
3/31/2002 $ 13,168 $ 12,543 $ 14,422 $ 14,401
4/30/2002 $ 13,279 $ 12,648 $ 14,651 $ 14,620
5/31/2002 $ 13,098 $ 12,476 $ 14,600 $ 14,570
6/30/2002 $ 12,444 $ 11,853 $ 14,092 $ 14,046
7/31/2002 $ 12,100 $ 11,525 $ 13,689 $ 13,655
8/31/2002 $ 12,142 $ 11,565 $ 13,867 $ 13,781
9/30/2002 $ 12,033 $ 11,461 $ 13,696 $ 13,620
10/31/2002 $ 11,908 $ 11,342 $ 13,613 $ 13,522
11/30/2002 $ 12,396 $ 11,807 $ 14,333 $ 14,222
12/31/2002 $ 12,485 $ 11,892 $ 14,508 $ 14,387
1/31/2003 $ 12,731 $ 12,126 $ 14,903 $ 14,761
2/28/2003 $ 12,885 $ 12,273 $ 15,123 $ 14,977
3/31/2003 $ 13,135 $ 12,511 $ 15,510 $ 15,338
4/30/2003 $ 13,800 $ 13,144 $ 16,303 $ 16,098
5/31/2003 $ 13,860 $ 13,202 $ 16,539 $ 16,322
6/30/2003 $ 14,244 $ 13,568 $ 17,022 $ 16,799
7/31/2003 $ 14,143 $ 13,471 $ 16,884 $ 16,693
8/31/2003 $ 14,271 $ 13,593 $ 17,073 $ 16,858
9/30/2003 $ 14,694 $ 13,996 $ 17,539 $ 17,325
10/31/2003 $ 14,988 $ 14,276 $ 17,897 $ 17,647
11/30/2003 $ 15,305 $ 14,578 $ 18,142 $ 17,894
12/31/2003 $ 15,690 $ 14,945 $ 18,562 $ 18,347
1/31/2004 $ 15,976 $ 15,217 $ 18,922 $ 18,683
2/29/2004 $ 15,891 $ 15,136 $ 18,931 $ 18,698
3/31/2004 $ 15,909 $ 15,153 $ 19,058 $ 18,844
4/30/2004 $ 15,926 $ 15,170 $ 19,031 $ 18,774
5/31/2004 $ 15,703 $ 14,957 $ 18,731 $ 18,483
6/30/2004 $ 15,942 $ 15,185 $ 19,021 $ 18,764
7/31/2004 $ 16,112 $ 15,347 $ 19,264 $ 19,000
8/31/2004 $ 16,362 $ 15,585 $ 19,578 $ 19,320
9/30/2004 $ 16,684 $ 15,892 $ 19,876 $ 19,598
10/31/2004 $ 16,976 $ 16,170 $ 20,218 $ 19,927
11/30/2004 $ 17,313 $ 16,490 $ 20,475 $ 20,150
12/31/2004 $ 17,543 $ 16,710 $ 20,782 $ 20,465
1/31/2005 $ 17,513 $ 16,681 $ 20,778 $ 20,462
2/28/2005 $ 17,769 $ 16,925 $ 21,052 $ 20,741
3/31/2005 $ 17,248 $ 16,429 $ 20,549 $ 20,226
4/30/2005 $ 16,991 $ 16,184 $ 20,345 $ 20,050
05/31/2005 $ 17,098 $ 16,286 $ 20,594 $ 20,338
</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 05/31/05 (%)
<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
---------------------------------------------------------------------------------------
1-year 8.93 3.76 8.13 3.13 8.29 7.29 9.21
5-year 3.49 2.48 2.72 2.45 2.88 2.88 3.74
10-year 5.51 5.00 4.72 4.72 4.85 4.85 5.68
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF 03/31/05 (%)
<Table>
<Caption>
SHARE CLASS A B C Z
---------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
---------------------------------------------------------------------------------------
1-year 8.41 3.26 7.61 2.61 7.77 6.77 8.69
5-year 3.13 2.13 2.36 2.09 2.52 2.52 3.38
10-year 6.07 5.56 5.28 5.28 5.40 5.40 6.24
</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 $10,000 INVESTMENT
06/01/95 - 05/31/05 ($)
<Table>
<Caption>
SALES CHARGE: WITHOUT WITH
------------------------------------------------
Class A 17,098 16,286
Class B 15,862 15,862
Class C 16,054 16,054
Class Z 17,373 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.
1
<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 05/31/05 (%)
<Table>
Qwest 2.2
El Paso 1.7
Charter Communications Holdings 1.5
Dex Media 1.1
Hollywood Casino Shreveport 1.1
Spanish Broadcasting System 1.1
Paxson Communications 1.1
MedQuest 0.9
Calpine 0.9
Allied Waste 0.9
</Table>
QUALITY BREAKDOWN AS OF 05/31/05 (%)
<Table>
AAA 1.1
BB 11.5
B 47.9
CCC 29.7
CC 5.5
Non-rated 4.3
</Table>
MATURITY BREAKDOWN AS OF 05/31/05 (%)
<Table>
0-3 years 6.0
3-5 years 11.2
5-7 years 34.3
7-10 years 40.1
10-15 years 1.3
15-20 years 0.6
20-30 years 0.9
Other 5.6
</Table>
PORTFOLIO STRUCTURE AS OF 05/31/05 (%)
<Table>
Corporate fixed-income bonds & notes 91.0
Preferred stocks 2.2
Common Stocks and warrants 2.2
Convertible bonds 0.8
Municipal bond (taxable) 0.6
Cash equivalents, net other assets & 3.2
liabilities
</Table>
Maturity and quality breakdowns are calculated as a percentage of investments.
Ratings shown in the quality breakdown represent the 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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[SIDENOTE]
SUMMARY
- - For the 12-month period ended May 31, 2005, the fund's class A shares
returned 8.93% without sales charge.
- - The fund's return was higher than the average return of the Lipper High
Current Yield category, which was 8.60%, but below that of the Credit Suisse
First Boston and JP Morgan Global High Yield indices, which returned 9.97%
and 10.08%, respectively.
- - The fund's emphasis on low quality bonds aided returns during the first half
of the period but detracted somewhat from its competitive performance during
the second half of the period.
<Table>
CLASS A SHARES 8.93%
CSFB HIGH YIELD INDEX 9.97%
</Table>
The Credit Suisse First Boston (CSFB) High Yield Index is a broad-based,
unmanaged index that tracks the performance of high-yield bonds. It is unmanaged
and unavailable for investment. 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. It is
unmanaged and unavailable for investment.
OBJECTIVE
Seeks high current income and total return
TOTAL NET ASSETS
$510.8 million
MANAGEMENT STYLE
<Table>
<Caption>
FIXED INCOME MATURITY
QUALITY SHORT INTERM LONG
HIGH
MED
LOW X
</Table>
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 ongoing costs, which generally
include investment advisory fees, 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
$1,000, which is invested at the beginning of the reporting period and held for
the entire period. Expense information is calculated two ways and each method
provides you with different information. The amount listed in the "actual"
column is calculated using the fund's actual operating expenses and total return
for the period. The amount listed in the "hypothetical" column for each share
class assumes that the return each year is 5% before expenses and includes the
fund's actual expense ratio. You should not use the hypothetical account values
and expenses to estimate either your actual account balance at the end of the
period or the expenses you paid during this reporting period.
12/01/04 - 05/31/05
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
Class A 1,000.00 1,000.00 988.03 1,019.20 5.70 5.79 1.15
Class B 1,000.00 1,000.00 984.39 1,015.46 9.40 9.55 1.90
Class C 1,000.00 1,000.00 985.09 1,016.21 8.66 8.80 1.75
Class Z 1,000.00 1,000.00 989.28 1,020.44 4.46 4.53 0.90
</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 shares'
expenses, class C shares' 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 or 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 funds 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
The US economy moved ahead at a steady pace during the 12-month period that
began June 1, 2004 and ended May 31, 2005. Gross domestic product expanded at an
estimated annualized rate of approximately 3.7% as job growth helped buoy
consumer spending and rising profits boosted business spending. Record high
energy prices failed to put a damper on growth as the economy actually gained
strength as the period wore on.
Job growth dominated the economic news and drove consumer confidence readings
both up and down, depending on the number of new jobs reported. Overall, the
labor market improved during the period and consumers remained significantly
more optimistic about prospects for the US economy and about their own
employment than they were a year ago.
Consumer spending grew during the period, as retail sales and the housing market
remained strong. The business sector also contributed to the economy's solid
pace. Yet, given a maturing economic cycle, two straight years of double-digit
profit growth and a significant build-up of cash on corporate balance sheets,
business spending was not as robust as expected.
BONDS DELIVERED SOLID GAINS
The US bond market delivered solid returns despite rising short-term interest
rates, which historically have driven yields on other maturity ranges
higher--and bond prices lower. That was not the case over the past 12 months.
After a brief period of volatility early in 2005, the yield on the 10-year U.S.
Treasury note, a bellwether for the bond market, ended the period at
4.0%--significantly lower than where it started the period at 4.6%.
In this environment, the Lehman Brothers Aggregate Bond Index returned 6.82% for
the 12-month period. Municipal bonds did even better as state revenues
strengthened and fiscal constraints helped many states balance their budgets.
High-yield bonds led the fixed income markets, as a stronger economy resulted in
improved credit ratings, stronger balance sheets and higher profits for many
companies in the high-yield universe. The Merrill Lynch US High Yield, Cash Pay
Index returned 10.16%. However, the sector was hit hard late in the period by
news that GM and Ford bonds had been downgraded to junk status, and high-yield
bonds gave back a portion of their earlier gains in the final months of the
period. The riskiest high-yield bonds were hurt the most.
SHORT-TERM INTEREST RATES MOVED HIGHER
After a year of the lowest short-tem 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 3.0%(1) during the period. From the outset, the Fed indicated
that it would raise short-term interest rates at a "measured pace" in an attempt
to balance economic growth against inflationary pressures, and so far each of
the eight increases have been in one-quarter percentage point increments. In
recent testimony, Fed chairman Greenspan suggested that future increases would
likely follow the same gradual course.
STOCKS OUTPERFORMED BONDS
Buoyed by strong gains in the fourth quarter of 2004,
the S&P 500 Index returned 8.24% for the period. Returns were lackluster
throughout most of 2004, but most segments of the stock market bounced back
after the presidential election was settled in November. Stocks retreated early
in 2005 as rising energy prices and higher interest rates turned investors
cautious once again. Small and mid-cap stocks did significantly better than
large cap stocks in the first half of the period, but large-cap stocks pulled
ahead in the second half. Value stocks led growth stocks by a significant
margin.
(1) On June 30, the federal funds rate was raised to 3.25%.
[SIDENOTE]
SUMMARY
FOR THE 12-MONTH PERIOD ENDED
MAY 31, 2005
- - BONDS CHALKED UP SOLID GAINS AS MEASURED BY THE LEHMAN BROTHERS AGGREGATE
BOND INDEX. HIGH-YIELD BONDS LED THE FIXED INCOME MARKETS, AS MEASURED BY THE
MERRILL LYNCH US HIGH YIELD, CASH PAY INDEX. HOWEVER, THEY GAVE BACK SOME OF
THEIR RETURN IN THE LAST MONTHS OF THE PERIOD.
<Table>
LEHMAN INDEX 6.82%
MERRILL LYNCH INDEX 10.16%
</Table>
- - STOCKS OUTPERFORMED MOST SEGMENTS OF THE BOND MARKET, AS MEASURED BY THE S&P
500 INDEX. MOST OF THE PERIOD'S GAINS WERE GENERATED DURING A FOURTH-QUARTER
RALLY IN 2004. VALUE STOCKS OUTPERFORMED GROWTH STOCKS, AS MEASURED BY THE
RUSSELL 1000 VALUE INDEX.
<Table>
S&P 500 INDEX 8.24%
RUSSELL INDEX 15.49%
</Table>
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks the performance of fixed-rate, publicly placed, dollar-denominated, and
non-convertible investment grade debt issues.
The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that
tracks the performance of non-investment-grade corporate 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 12-month period ended May 31, 2005, class A shares of Columbia High
Yield Opportunity Fund returned 8.93% without sales charge. The fund
underperformed its benchmarks, the CSFB High Yield Index and the JP Morgan
Global High Yield Index, which returned 9.97% and 10.08%, respectively. It
outperformed its peer group, the Lipper High Current Yield Funds Category, which
averaged a return of 8.60% for the same period(1). Generally speaking,
performance differences among the fund, the indices and the peer group were
determined by the degree to which they owned lower quality securities. The
fund's emphasis on low quality bonds aided returns during the first half of the
period but detracted somewhat from competitive performance during the second
half of the period.
HIGH-YIELD RALLY PAUSED
When the period began, high-yield bonds were the best-performing asset class in
the fixed-income marketplace. Securities rated below investment-grade were the
primary beneficiaries of the growing economy and the accompanying decline in
corporate default rates. As a result of these positive factors, investors became
increasingly willing to pursue lower quality companies to achieve yield levels
that were unavailable in the Treasury market. Even within the high-yield
category, the lowest quality issues were the strongest performers, a trend that
greatly benefited the fund with its relatively high exposure to the lower end of
the credit spectrum.
However, the landscape began to change in March. Early in the month, the yield
advantage of lower quality bonds over investment-grade securities narrowed to
historical lows. The sector was subsequently hurt by the deteriorating credit
quality of Ford and GM, which created concern that leveraged hedge funds and
investment-grade managers might be forced to sell their positions. By the end of
the period, the average yield spread between high-yield and investment-grade
bonds had widened again--by more than one and one-half percentage points.
TELECOM LED THE MARKET
Bonds of wireless telecom providers were especially strong over the past year,
driven by strong subscriber growth and steady revenue per user. However, the
most important catalyst to the sector's strong market performance was the wave
of consolidation that has swept through the industry. A groundbreaking merger
between Cingular and AT&T Wireless, two companies not in the fund's portfolio,
closed mid way through 2004. Late in 2004, it was announced that Nextel and
Sprint would merge and early in 2005 news broke that ALLTEL would purchase
Western Wireless. The fund registered a solid gain when it sold its Western
Wireless bonds after the takeover announcement. Positions in Nextel bonds (and
common stock) as well as the bonds of several companies affiliated with Sprint
also aided performance.
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the fund. Lipper makes
no adjustment for the effect of sales loads.
[SIDENOTE]
NET ASSET VALUE PER SHARE AS OF 05/31/05 ($)
<Table>
Class A 4.56
Class B 4.56
Class C 4.56
Class Z 4.56
</Table>
DISTRIBUTIONS DECLARED PER SHARE 06/01/04 - 05/31/05 ($)
<Table>
Class A 0.38
Class B 0.35
Class C 0.35
Class Z 0.39
</Table>
SEC YIELDS AS OF 05/31/05 (%)
<Table>
Class A 8.65
Class B 8.33
Class C 8.47
Class Z 9.34
</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 05/31/05 (%)
<Table>
Nextel Communications 0.6
Nextel Partners 0.2
Northwest Airlines 0.5
Tembec Industries 0.2
Abitibi Consolidated 0.3
</Table>
Your fund is actively managed and the composition of its portfolio will change
over time. Holdings discussed are calculated as a percentage of net assets.
5
<Page>
Although the fund benefited from its underweight and higher quality positioning
in the automotive sector, it was hurt by its holdings in the airline and paper
and packaging industries. We sold the fund's Delta Airlines holdings but
retained our position in Northwest Airlines, whose financial condition has since
weakened considerably amid higher oil prices and a protracted wage-and-benefit
struggle with its labor unions. In the paper and packaging industry the
inability to pass on higher costs hurt results, and fund holdings such as
Abitibi Consolidated and Tembec Industries were poor performers.
LOOKING AHEAD
We believe that solid economic growth will continue to create a favorable
environment for the high-yield market, although growth is likely to be slower
than it was in 2004. So far, the Federal Reserve has balanced economic growth
and inflation through a series of short-term interest-rate hikes, which
commenced in June 2004. As long as inflation is kept in check and short-term
rate increases do not exceed expectations, we are optimistic about the prospects
for the high-yield market.
[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
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
Investing in high-yield securities (commonly known as "junk bonds") offers the
potential for high current income and attractive total return, but involves
certain risks. Changes in economic conditions or other circumstances may
adversely affect a junk bond issuer's ability to make principal and interest
payments. Rising interest rates tend to lower the value of all bonds. When
interest rates go up, bond prices typically drop, and vice versa, International
investing involves special risks, including foreign taxation, currency
fluctuation, risks associated with possible differences in financial standards
and other monetary and political risks.
[SIDENOTE]
AS LONG AS INFLATION IS KEPT IN CHECK AND SHORT-TERM RATE INCREASES DO NOT
EXCEED EXPECTATIONS, WE ARE OPTIMISTIC ABOUT THE PROSPECTS FOR THE HIGH-YIELD
MARKET.
6
<Page>
INVESTMENT PORTFOLIO
MAY 31, 2005 COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - 91.0%
BASIC MATERIALS - 9.0%
CHEMICALS - 4.3%
AGRICULTURAL CHEMICALS - 1.9%
IMC Global, Inc. 10.875% 08/01/13 2,150,000 2,515,500
Terra Capital, Inc. 12.875% 10/15/08 3,220,000 3,807,650
UAP Holding Corp. (a) 07/15/12
(10.750% 01/15/08) 2,190,000 1,752,000
United Agri Products 8.250% 12/15/11 1,717,000 1,742,755
9,817,905
CHEMICALS - DIVERSIFIED - 1.8%
BCP Crystal US Holdings Corp. 9.625% 06/15/14 917,000 1,027,040
Equistar Chemicals LP 10.625% 05/01/11 625,000 692,188
Huntsman International LLC 7.375% 01/01/15 (b) 1,415,000 1,390,237
Huntsman LLC 12.000% 07/15/12 (b) 1,570,000 1,805,500
Innophos Investments Holdings, Inc. PIK,
11.268% 02/15/15 (b)(c) 1,039,007 924,707
Lyondell Chemical Co. 9.625% 05/01/07 1,250,000 1,325,000
10.875% 05/01/09 25,000 25,750
NOVA Chemicals Corp. 6.500% 01/15/12 780,000 760,500
Westlake Chemical Corp. 8.750% 07/15/11 1,112,000 1,206,520
9,157,442
CHEMICALS - SPECIALTY - 0.6%
Rhodia SA 8.875% 06/01/11 3,040,000 2,895,600
2,895,600
Chemicals Total 21,870,947
FOREST PRODUCTS & PAPER - 3.4%
FORESTRY - 0.5%
Millar Western Forest Products Ltd. 7.750% 11/15/13 1,695,000 1,550,925
Tembec Industries, Inc. 8.500% 02/01/11 1,605,000 1,243,875
2,794,800
PAPER & RELATED PRODUCTS - 2.9%
Abitibi-Consolidated, Inc. 8.375% 04/01/15 1,375,000 1,350,937
Boise Cascade LLC 6.016% 10/15/12 (b)(c) 1,110,000 1,087,800
7.125% 10/15/14 (b) 1,250,000 1,184,375
</Table>
See accompanying notes to financial statements.
7
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
BASIC MATERIALS - (CONTINUED)
FOREST PRODUCTS & PAPER - (CONTINUED)
Buckeye Technologies, Inc. 8.500% 10/01/13 480,000 494,400
9.250% 09/15/08 1,584,000 1,584,000
Caraustar Industries, Inc. 9.875% 04/01/11 1,175,000 1,142,687
Fraser Papers, Inc. 8.750% 03/15/15 (b) 1,695,000 1,536,094
Georgia-Pacific Corp. 8.000% 01/15/24 1,005,000 1,150,725
Neenah Paper, Inc. 7.375% 11/15/14 (b) 790,000 746,550
Newark Group, Inc. 9.750% 03/15/14 2,385,000 2,074,950
NewPage Corp. 10.000% 05/01/12 (b) 920,000 901,600
12.000% 05/01/13 (b) 1,150,000 1,124,125
Norske Skog Canada Ltd. 8.625% 06/15/11 450,000 454,500
14,832,743
Forest Products & Paper Total 17,627,543
IRON/STEEL - 0.8%
METAL - IRON - 0.5%
Wise Metals Group LLC 10.250% 05/15/12 2,785,000 2,311,550
2,311,550
STEEL - PRODUCERS - 0.2%
Steel Dynamics, Inc. 9.500% 03/15/09 1,080,000 1,150,200
1,150,200
STEEL - SPECIALTY - 0.1%
UCAR Finance, Inc. 10.250% 02/15/12 585,000 609,863
609,863
Iron/Steel Total 4,071,613
METALS & MINING - 0.5%
METAL - ALUMINUM - 0.4%
Kaiser Aluminum & Chemical Corp. 10.875% 10/15/06 (d) 2,385,000 2,086,875
2,086,875
MINING SERVICES - 0.1%
HudBay Mining & Smelting Co., Ltd. 9.625% 01/15/12 (b) 560,000 543,200
543,200
Metals & Mining Total 2,630,075
------------
BASIC MATERIALS TOTAL 46,200,178
</Table>
See accompanying notes to financial statements.
8
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - 18.5%
MEDIA - 8.6%
BROADCAST SERVICES/PROGRAMS - 0.6%
Fisher Communications, Inc. 8.625% 09/15/14 1,060,000 1,126,250
XM Satellite Radio Holdings, Inc. 8.710% 05/01/09 (c) 1,675,000 1,691,750
2,818,000
CABLE TV - 3.6%
Atlantic Broadband Finance LLC 9.375% 01/15/14 (b) 1,855,000 1,743,700
Cablevision Systems Corp. 7.890% 04/01/09 (b)(c) 235,000 245,575
8.000% 04/15/12 (b) 675,000 704,531
Charter Communications Holdings LLC 9.920% 04/01/11 8,210,000 5,993,300
10.250% 09/15/10 1,500,000 1,518,750
CSC Holdings, Inc. 6.750% 04/15/12 (b) 625,000 632,813
7.625% 04/01/11 700,000 742,000
Insight Midwest LP 9.750% 10/01/09 1,255,000 1,311,475
Northland Cable Television, Inc. 10.250% 11/15/07 2,180,000 2,147,300
Pegasus Satellite Communications, Inc. 11.250% 01/15/10 (b)(d) 2,325,000 1,336,875
Telenet Group Holding NV (a) 06/15/14
(11.250% 12/15/08) (b) 2,545,000 1,870,575
18,246,894
MULTIMEDIA - 1.4%
Advanstar Communications, Inc. (a) 10/15/11
(15.000% 10/15/05) 1,825,000 1,770,250
12.000% 02/15/11 1,945,000 2,047,112
Haights Cross Communications, Inc. (a) 08/15/11
(12.500% 02/01/09) 2,325,000 1,418,250
Haights Cross Operating Co. 11.750% 08/15/11 1,250,000 1,356,250
11.750% 08/15/11 (b) 570,000 618,450
7,210,312
PUBLISHING - NEWSPAPERS - 0.5%
Hollinger, Inc. 11.875% 03/01/11 (b)(e) 1,009,000 1,039,270
12.875% 03/01/11 (b) 1,474,000 1,621,400
2,660,670
PUBLISHING - PERIODICALS - 1.6%
CBD Media Holdings LLC & Finance, Inc. 9.250% 07/15/12 1,335,000 1,301,625
</Table>
See accompanying notes to financial statements.
9
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - (CONTINUED)
Dex Media, Inc. (a) 11/15/13
(9.000% 11/15/08) 1,350,000 1,076,625
Dex Media East LLC 12.125% 11/15/12 518,000 620,305
Dex Media West LLC 9.875% 08/15/13 3,607,000 4,130,015
WDAC Subsidiary Corp. 8.375% 12/01/14 (b) 1,385,000 1,294,975
8,423,545
TELEVISION - 0.9%
Paxson Communications Corp. (a) 01/15/09
(12.250% 01/15/06) 1,955,000 1,808,375
10.750% 07/15/08 1,725,000 1,681,875
Sinclair Broadcast Group, Inc. 8.750% 12/15/11 1,000,000 1,060,000
4,550,250
Media Total 43,909,671
TELECOMMUNICATION SERVICES - 9.9%
CELLULAR TELECOMMUNICATIONS - 3.2%
American Cellular Corp. 10.000% 08/01/11 1,955,000 1,906,125
Dobson Cellular Systems 8.375% 11/01/11 (b) 525,000 532,875
Dobson Communications Corp. 8.875% 10/01/13 3,010,000 2,445,625
Horizon PCS, Inc. 11.375% 07/15/12 (b) 325,000 356,687
iPCS Escrow Co. 11.500% 05/01/12 910,000 1,005,550
Nextel Partners, Inc. 8.125% 07/01/11 1,070,000 1,163,625
Rogers Cantel, Inc. 9.750% 06/01/16 2,080,000 2,496,000
Rogers Wireless, Inc. 8.000% 12/15/12 1,295,000 1,385,650
Rural Cellular Corp. 8.250% 03/15/12 1,355,000 1,377,019
UbiquiTel Operating Co. 9.875% 03/01/11 1,520,000 1,641,600
US Unwired, Inc. 10.000% 06/15/12 1,845,000 2,020,275
16,331,031
SATELLITE TELECOMMUNICATIONS - 1.4%
Inmarsat Finance II PLC (a) 11/15/12
(10.375% 11/15/08) 2,285,000 1,679,475
</Table>
See accompanying notes to financial statements.
10
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
TELECOMMUNICATION SERVICES - (CONTINUED)
Intelsat Bermuda Ltd. 8.250% 01/15/13 (b) 2,500,000 2,537,500
New Skies Satellites NV 9.125% 11/01/12 (b) 1,195,000 1,183,050
PanAmSat Corp. 9.000% 08/15/14 696,000 756,900
Zeus Special Subsidiary Ltd. (a) 02/01/15
(9.250% 02/01/10) (b) 1,780,000 1,121,400
7,278,325
TELECOMMUNICATION EQUIPMENT - 0.3%
Lucent Technologies, Inc. 6.450% 03/15/29 1,890,000 1,634,850
1,634,850
TELECOMMUNICATION SERVICES - 1.2%
Axtel SA 11.000% 12/15/13 2,580,000 2,754,150
Time Warner Telecom, Inc. 9.750% 07/15/08 730,000 730,000
10.125% 02/01/11 2,690,000 2,609,300
6,093,450
TELEPHONE - INTEGRATED - 3.0%
Cincinnati Bell, Inc. 8.375% 01/15/14 2,935,000 2,883,637
Qwest Capital Funding, Inc. 7.250% 02/15/11 3,790,000 3,505,750
7.750% 02/15/31 2,385,000 1,949,738
Qwest Services Corp. 14.000% 12/15/10 (b) 5,045,000 5,726,075
US LEC Corp. 11.890% 10/01/09 (c) 1,210,000 1,249,325
15,314,525
WIRELESS EQUIPMENT - 0.8%
American Towers, Inc. 7.250% 12/01/11 1,825,000 1,911,688
SBA Telecommunications, Inc. (a) 12/15/11
(9.750% 12/15/07) 1,320,000 1,155,000
SpectraSite, Inc. 8.250% 05/15/10 1,000,000 1,057,500
4,124,188
Telecommunication Services Total 50,776,369
------------
COMMUNICATIONS TOTAL 94,686,040
</Table>
See accompanying notes to financial statements.
11
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - 19.7%
AIRLINES - 0.9%
Continental Airlines, Inc. 7.568% 12/01/06 2,725,000 2,261,750
Northwest Airlines, Inc. 9.875% 03/15/07 3,820,000 2,387,500
4,649,250
Airlines Total 4,649,250
APPAREL - 1.5%
APPAREL MANUFACTURERS - 1.5%
Broder Brothers Co. 11.250% 10/15/10 795,000 822,825
11.250% 10/15/10 (b) 785,000 812,475
Levi Strauss & Co. 9.750% 01/15/15 (b) 4,010,000 3,899,725
Phillips-Van Heusen Corp. 7.250% 02/15/11 1,010,000 1,032,725
8.125% 05/01/13 1,000,000 1,050,000
7,617,750
Apparel Total 7,617,750
AUTO MANUFACTURERS - 0.5%
AUTO - CARS/LIGHT TRUCKS - 0.2%
General Motors Corp. 8.375% 07/15/33 1,105,000 850,850
850,850
AUTO - MEDIUM & HEAVY DUTY TRUCKS - 0.3%
Navistar International Corp. 7.500% 06/15/11 1,695,000 1,707,713
1,707,713
Auto Manufacturers Total 2,558,563
AUTO PARTS & EQUIPMENT - 1.9%
AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 0.9%
Cooper-Standard Automotive, Inc. 8.375% 12/15/14 2,915,000 2,419,450
Delco Remy International, Inc. 9.375% 04/15/12 1,540,000 1,170,400
Dura Operating Corp. 8.625% 04/15/12 1,300,000 1,176,500
4,766,350
AUTO/TRUCK PARTS & EQUIPMENT - REPLACEMENT - 0.3%
Rexnord Corp. 10.125% 12/15/12 1,360,000 1,431,400
1,431,400
</Table>
See accompanying notes to financial statements.
12
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
AUTO PARTS & EQUIPMENT - (CONTINUED)
RUBBER - TIRES - 0.7%
Goodyear Tire & Rubber Co. 7.857% 08/15/11 2,960,000 2,834,200
11.000% 03/01/11 455,000 505,050
3,339,250
Auto Parts & Equipment Total 9,537,000
DISTRIBUTION/WHOLESALE - 0.2%
DISTRIBUTION/WHOLESALE - 0.2%
Buhrmann US, Inc. 7.875% 03/01/15 (b) 945,000 907,200
907,200
Distribution/Wholesale Total 907,200
ENTERTAINMENT - 2.7%
GAMBLING (NON-HOTEL) - 0.5%
Global Cash Access LLC 8.750% 03/15/12 2,245,000 2,413,375
2,413,375
MUSIC - 0.7%
Steinway Musical Instruments, Inc. 8.750% 04/15/11 1,485,000 1,544,400
Warner Music Group 7.375% 04/15/14 270,000 268,650
WMG Holdings Corp. PIK,
9.760% 12/15/14 (b)(c) 1,730,000 1,711,181
3,524,231
RESORTS/THEME PARKS - 0.6%
Six Flags, Inc. 9.625% 06/01/14 3,550,000 3,070,750
3,070,750
THEATERS - 0.9%
AMC Entertainment, Inc. 9.875% 02/01/12 3,075,000 3,059,717
LCE Acquisition Corp. 9.000% 08/01/14 (b) 1,910,000 1,852,700
4,912,417
Entertainment Total 13,920,773
HOME BUILDERS - 1.4%
BUILDING - RESIDENTIAL/COMMERCIAL - 1.4%
D.R. Horton, Inc. 9.750% 09/15/10 2,400,000 2,820,000
K. Hovnanian Enterprises, Inc. 8.875% 04/01/12 1,435,000 1,528,275
10.500% 10/01/07 1,930,000 2,123,000
</Table>
See accompanying notes to financial statements.
13
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
HOME BUILDERS - (CONTINUED)
Standard-Pacific Corp. 9.250% 04/15/12 625,000 687,500
7,158,775
Home Builders Total 7,158,775
HOME FURNISHINGS - 0.7%
APPLIANCES - 0.3%
ALH Finance LLC 8.500% 01/15/13 1,835,000 1,660,675
1,660,675
HOME FURNISHINGS - 0.4%
WII Components, Inc. 10.000% 02/15/12 1,990,000 1,940,250
1,940,250
Home Furnishings Total 3,600,925
LEISURE TIME - 1.1%
RECREATIONAL CENTERS - 1.1%
AMF Bowling Worldwide, Inc. 10.000% 03/01/10 1,655,000 1,655,000
Equinox Holdings, Inc. 9.000% 12/15/09 2,270,000 2,326,750
Town Sports International, Inc. (a) 02/01/14
(11.000% 02/01/09) 2,670,000 1,535,250
5,517,000
Leisure Time Total 5,517,000
LODGING - 5.3%
CASINO HOTELS - 5.3%
Circus & Eldorado/Silver Legacy Capital Corp. 10.125% 03/01/12 1,870,000 1,958,825
Hard Rock Hotel, Inc. 8.875% 06/01/13 2,405,000 2,561,325
Hollywood Casino Shreveport 13.000% 08/01/06 (f) 7,050,000 5,745,750
Inn of the Mountain Gods Resort & Casino 12.000% 11/15/10 1,620,000 1,871,100
MGM Mirage 6.750% 09/01/12 1,515,000 1,552,875
Mohegan Tribal Gaming Authority 6.125% 02/15/13 (b) 380,000 381,900
Penn National Gaming, Inc. 6.750% 03/01/15 (b) 2,470,000 2,482,350
Pinnacle Entertainment, Inc. 8.250% 03/15/12 955,000 959,775
8.750% 10/01/13 1,685,000 1,743,975
River Rock Entertainment 9.750% 11/01/11 1,295,000 1,398,600
</Table>
See accompanying notes to financial statements.
14
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
LODGING - (CONTINUED)
Seneca Gaming Corp. 7.250% 05/01/12 1,870,000 1,891,038
Station Casinos, Inc. 6.875% 03/01/16 270,000 276,750
Virgin River Casino Corp. (a) 01/15/13
(12.750% 01/15/09) (b) 1,380,000 883,200
9.000% 01/15/12 (b) 747,000 769,410
Wynn Las Vegas LLC 6.625% 12/01/14 (b) 2,455,000 2,356,800
26,833,673
Lodging Total 26,833,673
RETAIL - 2.9%
RETAIL - AUTOMOBILES - 0.4%
Asbury Automotive Group, Inc. 8.000% 03/15/14 1,990,000 1,900,450
1,900,450
RETAIL - DRUG STORES - 0.5%
Jean Coutu Group, Inc. (PJC) 8.500% 08/01/14 1,425,000 1,385,812
Rite Aid Corp. 7.500% 01/15/15 (b) 630,000 584,325
9.250% 06/01/13 670,000 634,825
2,604,962
RETAIL - HOME FURNISHINGS - 0.3%
Tempur-Pedic, Inc. 10.250% 08/15/10 1,631,000 1,794,100
1,794,100
RETAIL - JEWELRY - 0.3%
Finlay Fine Jewelry Corp. 8.375% 06/01/12 1,725,000 1,474,875
1,474,875
RETAIL - MAJOR DEPARTMENT STORES - 0.4%
Saks, Inc. 7.000% 12/01/13 2,283,000 2,080,384
2,080,384
RETAIL - PROPANE DISTRIBUTORS - 0.4%
Ferrellgas Partners LP 8.750% 06/15/12 1,455,000 1,433,175
Suburban Propane Partners 6.875% 12/15/13 (b) 920,000 864,800
2,297,975
RETAIL - RESTAURANTS - 0.3%
Landry's Restaurants, Inc. 7.500% 12/15/14 (b) 1,570,000 1,464,025
1,464,025
</Table>
See accompanying notes to financial statements.
15
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
RETAIL - (CONTINUED)
RETAIL - VIDEO RENTAL - 0.3%
Movie Gallery, Inc. 11.000% 05/01/12 (b) 1,335,000 1,375,050
1,375,050
Retail Total 14,991,821
TEXTILES - 0.6%
TEXTILE - PRODUCTS - 0.6%
Collins & Aikman Floorcoverings, Inc. 9.750% 02/15/10 1,500,000 1,578,750
INVISTA 9.250% 05/01/12 (b) 1,390,000 1,511,625
3,090,375
Textiles Total 3,090,375
------------
CONSUMER CYCLICAL TOTAL 100,383,105
CONSUMER NON-CYCLICAL - 13.6%
AGRICULTURE - 0.2%
TOBACCO - 0.2%
Alliance One International, Inc. 11.000% 05/15/12 (b) 1,220,000 1,241,350
1,241,350
Agriculture Total 1,241,350
BEVERAGES - 0.1%
BEVERAGES - WINE/SPIRITS - 0.1%
Constellation Brands, Inc. 8.125% 01/15/12 320,000 334,400
334,400
Beverages Total 334,400
BIOTECHNOLOGY - 0.4%
MEDICAL - BIOMEDICAL/GENE - 0.4%
Bio-Rad Laboratories, Inc. 7.500% 08/15/13 2,015,000 2,115,750
2,115,750
Biotechnology Total 2,115,750
COMMERCIAL SERVICES - 4.0%
COMMERCIAL SERVICES - 0.8%
Iron Mountain, Inc. 7.750% 01/15/15 1,110,000 1,093,350
Language Line Holdings, Inc. 11.125% 06/15/12 2,860,000 2,831,400
3,924,750
</Table>
See accompanying notes to financial statements.
16
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
COMMERCIAL SERVICES - (CONTINUED)
COMMERCIAL SERVICES - FINANCE - 0.5%
Dollar Financial Group, Inc. 9.750% 11/15/11 2,315,000 2,413,388
2,413,388
FUNERAL SERVICES & RELATED ITEMS - 0.4%
Service Corp. International 7.700% 04/15/09 2,135,000 2,263,100
2,263,100
PRINTING - COMMERCIAL - 0.7%
Sheridan Group 10.250% 08/15/11 1,515,000 1,560,450
Vertis, Inc. 13.500% 12/07/09 (b) 2,565,000 1,923,750
3,484,200
PRIVATE CORRECTIONS - 0.8%
Corrections Corp. of America 6.250% 03/15/13 (b) 1,955,000 1,891,462
GEO Group, Inc. 8.250% 07/15/13 2,200,000 2,117,500
4,008,962
RENTAL AUTO/EQUIPMENT - 0.8%
NationsRent, Inc. 9.500% 10/15/10 1,455,000 1,542,300
9.500% 05/01/15 (b) 1,305,000 1,285,425
Williams Scotsman, Inc. 9.875% 06/01/07 1,415,000 1,386,700
4,214,425
Commercial Services Total 20,308,825
COSMETICS/PERSONAL CARE - 1.1%
COSMETICS & TOILETRIES - 1.1%
DEL Laboratories, Inc. 8.000% 02/01/12 (b) 2,195,000 1,865,750
Elizabeth Arden, Inc. 7.750% 01/15/14 1,395,000 1,415,925
Revlon Consumer Products Corp. 8.625% 02/01/08 1,405,000 1,299,625
9.500% 04/01/11 (b) 1,245,000 1,145,400
5,726,700
Cosmetics/Personal Care Total 5,726,700
FOOD - 2.1%
FOOD - CONFECTIONERY - 0.6%
Merisant Co. 9.500% 07/15/13 (b) 1,855,000 1,363,425
Tabletop Holdings, Inc. (a) 05/15/14
(12.250% 11/15/08) (b) 5,295,000 1,906,200
3,269,625
</Table>
See accompanying notes to financial statements.
17
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
FOOD - (CONTINUED)
FOOD - MISCELLANEOUS/DIVERSIFIED - 0.9%
Dole Food Co., Inc. 8.625% 05/01/09 1,650,000 1,740,750
Pinnacle Foods Holding Corp. 8.250% 12/01/13 2,310,000 1,963,500
Reddy Ice Holdings, Inc. (a) 11/01/12
(10.500% 11/01/08) (b) 1,220,000 835,700
4,539,950
FOOD - RETAIL - 0.6%
Stater Brothers Holdings, Inc. 8.125% 06/15/12 2,970,000 2,880,900
2,880,900
Food Total 10,690,475
HEALTHCARE SERVICES - 3.6%
DIALYSIS CENTERS - 0.3%
DaVita, Inc. 7.250% 03/15/15 (b) 1,330,000 1,336,650
1,336,650
MEDICAL - HMO - 0.2%
Coventry Health Care, Inc. 8.125% 02/15/12 945,000 1,013,513
1,013,513
MEDICAL - HOSPITALS - 0.8%
Tenet Healthcare Corp. 9.875% 07/01/14 3,865,000 4,135,550
4,135,550
MEDICAL - OUTPATIENT/HOME MEDICAL - 0.2%
Select Medical Corp. 7.625% 02/01/15 (b) 1,115,000 1,095,487
1,095,487
MRI/MEDICAL DIAGNOSTIC IMAGING - 1.4%
InSight Health Services Corp. 9.875% 11/01/11 3,050,000 2,607,750
MedQuest, Inc. 11.875% 08/15/12 2,095,000 2,095,000
MQ Associates, Inc. (a) 08/15/12
(12.250% 08/15/08) 4,665,000 2,659,050
7,361,800
PHYSICIAN PRACTICE MANAGEMENT - 0.7%
US Oncology Holdings, Inc. 8.620% 03/15/15 (b)(c) 1,085,000 1,030,750
</Table>
See accompanying notes to financial statements.
18
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
HEALTHCARE SERVICES - (CONTINUED)
US Oncology, Inc. 9.000% 08/15/12 2,280,000 2,416,800
3,447,550
Healthcare Services Total 18,390,550
HOUSEHOLD PRODUCTS/WARES - 1.1%
CONSUMER PRODUCTS - MISCELLANEOUS - 1.1%
Amscan Holdings, Inc. 8.750% 05/01/14 2,470,000 2,297,100
Jostens IH Corp. 7.625% 10/01/12 620,000 598,300
Playtex Products, Inc. 9.375% 06/01/11 2,760,000 2,898,000
5,793,400
Household Products/Wares Total 5,793,400
PHARMACEUTICALS - 1.0%
MEDICAL - DRUGS - 0.7%
Elan Finance PLC 7.750% 11/15/11 (b) 2,690,000 2,313,400
Warner Chilcott Corp. 8.750% 02/01/15 (b) 1,160,000 1,090,400
3,403,800
MEDICAL - WHOLESALE DRUG DISTRIBUTION - 0.3%
Nycomed A/S PIK,
11.750% 09/15/13 (b) EUR 1,530,000 1,693,429
1,693,429
Pharmaceuticals Total 5,097,229
------------
CONSUMER NON-CYCLICAL TOTAL 69,698,679
ENERGY - 6.2%
OIL & GAS - 2.8%
OIL & GAS DRILLING - 0.6%
Ocean Rig Norway AS 10.250% 06/01/08 USD 1,816,000 1,834,160
Pride International, Inc. 7.375% 07/15/14 960,000 1,039,200
2,873,360
OIL COMPANIES - EXPLORATION & PRODUCTION - 2.0%
Chesapeake Energy Corp. 7.500% 06/15/14 1,145,000 1,230,875
Compton Petroleum Corp. 9.900% 05/15/09 2,175,000 2,321,813
Delta Petroleum Corp. 7.000% 04/01/15 (b) 1,060,000 983,150
Energy Partners Ltd. 8.750% 08/01/10 1,570,000 1,624,950
</Table>
See accompanying notes to financial statements.
19
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
ENERGY - (CONTINUED)
OIl & GAS - (CONTINUED)
Magnum Hunter Resources, Inc. 9.600% 03/15/12 469,000 520,590
Petroquest Energy, Inc. 10.375% 05/15/12 (b) 1,130,000 1,107,400
Whiting Petroleum Corp. 7.250% 05/01/12 2,355,000 2,349,112
10,137,890
OIL REFINING & MARKETING - 0.2%
Premcor Refining Group, Inc. 7.500% 06/15/15 1,015,000 1,101,275
1,101,275
Oil & Gas Total 14,112,525
OIL & GAS SERVICES - 0.4%
OIL - FIELD SERVICES - 0.4%
Newpark Resources, Inc. 8.625% 12/15/07 2,050,000 2,039,750
2,039,750
Oil & Gas Services Total 2,039,750
PIPELINES - 3.0%
PIPELINES - 3.0%
Coastal Corp. 7.625% 09/01/08 500,000 493,750
7.750% 06/15/10 3,765,000 3,746,175
Dynegy Holdings, Inc. 6.875% 04/01/11 1,875,000 1,781,250
9.875% 07/15/10 (b) 1,230,000 1,331,475
Northwest Pipeline Corp. 8.125% 03/01/10 1,040,000 1,128,400
Sonat, Inc. 7.625% 07/15/11 2,965,000 2,920,525
Southern Natural Gas Co. 8.875% 03/15/10 1,630,000 1,770,588
Williams Companies, Inc. 8.125% 03/15/12 1,935,000 2,191,387
15,363,550
Pipelines Total 15,363,550
------------
ENERGY TOTAL 31,515,825
FINANCIALS - 2.0%
DIVERSIFIED FINANCIAL SERVICES - 1.2%
FINANCE - AUTO LOANS - 0.1%
General Motors Acceptance Corp. 6.875% 09/15/11 435,000 381,843
381,843
</Table>
See accompanying notes to financial statements.
20
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
FINANCIALS - (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES - (CONTINUED)
FINANCE - INVESTMENT BANKER/BROKER - 1.1%
E*Trade Financial Corp. 8.000% 06/15/11 1,530,000 1,598,850
LaBranche & Co., Inc. 11.000% 05/15/12 3,755,000 4,055,400
5,654,250
Diversified Financial Services Total 6,036,093
REAL ESTATE INVESTMENT TRUSTS - 0.5%
REITS - HOTELS - 0.1%
La Quinta Properties, Inc. 7.000% 08/15/12 585,000 604,012
604,012
REITS - MORTGAGE - 0.4%
Thornburg Mortgage, Inc. 8.000% 05/15/13 1,885,000 1,885,000
1,885,000
Real Estate Investment Trusts Total 2,489,012
SAVINGS & LOANS - 0.3%
SAVINGS & LOANS/ THRIFTS - WESTERN US - 0.3%
Western Financial Bank 9.625% 05/15/12 1,310,000 1,408,250
1,408,250
Savings & Loans Total 1,408,250
------------
FINANCIALS TOTAL 9,933,355
INDUSTRIALS - 16.6%
AEROSPACE & DEFENSE - 1.7%
AEROSPACE/DEFENSE - EQUIPMENT - 1.7%
Argo-Tech Corp. 9.250% 06/01/11 1,450,000 1,555,125
BE Aerospace, Inc. 8.875% 05/01/11 1,755,000 1,790,100
Sequa Corp. 8.875% 04/01/08 1,048,000 1,110,880
9.000% 08/01/09 890,000 952,300
Standard Aero Holdings, Inc. 8.250% 09/01/14 (b) 1,495,000 1,539,850
TransDigm, Inc. 8.375% 07/15/11 1,660,000 1,726,400
8,674,655
ELECTRONICS - MILITARY - 0.0%
Condor Systems, Inc. 11.875% 05/01/09 (d)(g) 4,000,000 40,000
40,000
------------
Aerospace & Defense Total 8,714,655
</Table>
See accompanying notes to financial statements.
21
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
BUILDING MATERIALS - 1.4%
BUILDING & CONSTRUCTION PRODUCTS -
MISCELLANEOUS - 0.4%
Associated Materials, Inc. (a) 03/01/14
(11.250% 03/01/09) 1,600,000 952,000
Nortek, Inc. 8.500% 09/01/14 1,110,000 993,450
1,945,450
BUILDING PRODUCTS - CEMENT/AGGREGATION - 0.7%
RMCC Acquisition Co. 9.500% 11/01/12 (b) 2,100,000 2,037,000
US Concrete, Inc. 8.375% 04/01/14 1,660,000 1,535,500
3,572,500
BUILDING PRODUCTS - DOORS & WINDOWS - 0.3%
ACIH, Inc. (a) 12/15/12
(11.500% 12/15/07) (b) 2,400,000 1,512,000
1,512,000
Building Materials Total 7,029,950
ELECTRICAL COMPONENTS & EQUIPMENT - 0.4%
WIRE & CABLE PRODUCTS - 0.4%
Coleman Cable, Inc. 9.875% 10/01/12 (b) 2,385,000 2,206,125
2,206,125
Electrical Components &
Equipment Total 2,206,125
ELECTRONICS - 0.5%
ELECTRONIC COMPONENTS - MISCELLANEOUS - 0.5%
Flextronics International Ltd. 6.250% 11/15/14 800,000 800,000
Sanmina-SCI Corp. 6.750% 03/01/13 (b) 1,825,000 1,724,625
2,524,625
Electronics Total 2,524,625
ENGINEERING & CONSTRUCTION - 0.6%
BUILDING & CONSTRUCTION - MISCELLANEOUS - 0.6%
J. Ray McDermott SA 11.000% 12/15/13 (b) 2,710,000 2,981,000
2,981,000
Engineering & Construction Total 2,981,000
</Table>
See accompanying notes to financial statements.
22
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
ENVIRONMENTAL CONTROL - 1.5%
NON-HAZARDOUS WASTE DISPOSAL - 1.4%
Allied Waste North America, Inc. 7.250% 03/15/15 (b) 1,050,000 992,250
7.875% 04/15/13 2,355,000 2,366,775
8.500% 12/01/08 495,000 512,325
Waste Services, Inc. 9.500% 04/15/14 (b) 2,994,000 2,949,090
6,820,440
RECYCLING - 0.1%
IMCO Recycling Escrow, Inc. 9.000% 11/15/14 (b) 670,000 691,775
691,775
Environmental Control Total 7,512,215
HAND/MACHINE TOOLS - 0.1%
MACHINE TOOLS & RELATED PRODUCTS - 0.1%
Newcor, Inc. 6.000% 01/31/13
(7.500% 01/31/08) (g)(h) 847,510 516,981
516,981
Hand/Machine Tools Total 516,981
MACHINERY - DIVERSIFIED - 0.4%
MACHINERY - GENERAL INDUSTRY - 0.4%
Douglas Dynamics LLC 7.750% 01/15/12 (b) 1,980,000 1,910,700
1,910,700
Machinery - Diversified Total 1,910,700
METAL FABRICATE/HARDWARE - 1.5%
METAL PROCESSORS & FABRICATION - 1.0%
Altra Industrial Motion, Inc. 9.000% 12/01/11 (b) 1,360,000 1,305,600
Mueller Holdings, Inc. (a) 04/15/14
(14.750% 04/15/09) 1,490,000 1,065,350
10.000% 05/01/12 1,065,000 1,118,250
TriMas Corp. 9.875% 06/15/12 1,725,000 1,388,625
4,877,825
METAL PRODUCTS - FASTENERS - 0.5%
FastenTech, Inc. 11.500% 05/01/11 2,500,000 2,637,500
2,637,500
Metal Fabricate/Hardware Total 7,515,325
</Table>
See accompanying notes to financial statements.
23
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
MISCELLANEOUS MANUFACTURING - 2.0%
DIVERSIFIED MANUFACTURING OPERATORS - 1.4%
Bombardier, Inc. 6.300% 05/01/14 (b) 2,991,000 2,632,080
JB Poindexter & Co. 8.750% 03/15/14 1,915,000 1,809,675
Koppers Industries, Inc. 9.875% 10/15/13 1,565,000 1,666,725
Trinity Industries, Inc. 6.500% 03/15/14 920,000 887,800
6,996,280
FILTRATION/SEPARATE PRODUCTS - 0.3%
Polypore International, Inc. (a) 10/01/12
(10.500% 11/01/08) (b) 2,730,000 1,371,825
1,371,825
MISCELLANEOUS MANUFACTURING - 0.3%
Samsonite Corp. 8.875% 06/01/11 1,615,000 1,687,675
1,687,675
Miscellaneous
Manufacturing Total 10,055,780
PACKAGING & CONTAINERS - 2.8%
CONTAINERS - METAL/GLASS - 1.2%
Crown European Holdings SA 10.875% 03/01/13 2,550,000 2,938,875
Owens-Brockway Glass Container 6.750% 12/01/14 1,300,000 1,313,000
8.250% 05/15/13 1,045,000 1,128,600
Owens-Illinois, Inc. 7.500% 05/15/10 620,000 654,100
6,034,575
CONTAINERS - PAPER/PLASTIC - 1.6%
Consolidated Container Co. LLC (a) 06/15/09
(10.750% 06/15/07) 1,700,000 1,309,000
Jefferson Smurfit Corp. 8.250% 10/01/12 1,675,000 1,658,250
PIK,
11.500% 10/01/15 (b) EUR 2,431,474 2,304,718
MDP Acquisitions PLC 9.625% 10/01/12 USD 1,990,000 1,980,050
Portola Packaging, Inc. 8.250% 02/01/12 1,700,000 1,062,500
Tekni-Plex, Inc. 8.750% 11/15/13 (b) 230,000 200,100
8,514,618
Packaging & Containers Total 14,549,193
</Table>
See accompanying notes to financial statements.
24
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
Transportation - 3.7%
TRANSPORTATION - MARINE - 1.5%
Ship Finance International Ltd. 8.500% 12/15/13 4,060,000 3,887,450
Stena AB 7.500% 11/01/13 2,405,000 2,314,812
9.625% 12/01/12 1,505,000 1,614,113
7,816,375
TRANSPORTATION - RAIL - 0.6%
TFM SA de CV 9.375% 05/01/12 (b) 1,955,000 2,023,425
12.500% 06/15/12 780,000 904,800
2,928,225
TRANSPORTATION - SERVICES - 1.2%
CHC Helicopter Corp. 7.375% 05/01/14 1,820,000 1,756,300
7.375% 05/01/14 (b) 1,355,000 1,307,575
Petroleum Helicopters, Inc. 9.375% 05/01/09 3,125,000 3,234,375
6,298,250
TRANSPORTATION - TRUCK - 0.4%
Allied Holdings, Inc. 8.625% 10/01/07 730,000 270,100
QDI LLC 9.000% 11/15/10 1,970,000 1,792,700
2,062,800
Transportation Total 19,105,650
-----------
INDUSTRIALS TOTAL 84,622,199
TECHNOLOGY - 0.3%
SEMICONDUCTORS - 0.3%
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.3%
Amkor Technology, Inc. 9.250% 02/15/08 1,925,000 1,694,000
1,694,000
Semiconductors Total 1,694,000
-----------
TECHNOLOGY TOTAL 1,694,000
UTILITIES - 5.1%
ELECTRIC - 5.1%
ELECTRIC - GENERATION - 1.1%
AES Corp. 9.000% 05/15/15 (b) 610,000 681,675
9.500% 06/01/09 1,553,000 1,723,830
Edison Mission Energy 9.875% 04/15/11 2,090,000 2,424,400
</Table>
See accompanying notes to financial statements.
25
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
UTILITIES - (CONTINUED)
ELECTRIC - (CONTINUED)
Texas Genco LLC 6.875% 12/15/14 (b) 525,000 540,094
5,369,999
ELECTRIC - INTEGRATED - 1.2%
CMS Energy Corp. 8.900% 07/15/08 1,900,000 2,033,000
Nevada Power Co. 9.000% 08/15/13 985,000 1,103,200
10.875% 10/15/09 1,765,000 1,967,975
PSE&G Energy Holdings LLC 8.625% 02/15/08 955,000 1,007,525
6,111,700
INDEPENDENT POWER PRODUCER - 2.8%
Caithness Coso Funding Corp. 9.050% 12/15/09 3,117,775 3,336,019
Calpine Corp. 8.500% 07/15/10 (b) 1,770,000 1,292,100
Calpine Generating Co. LLC 11.500% 04/01/11 125,000 107,500
12.390% 04/01/11 (c) 3,575,000 3,146,000
MSW Energy Holdings LLC 7.375% 09/01/10 910,000 916,825
8.500% 09/01/10 2,260,000 2,339,100
Orion Power Holdings, Inc. 12.000% 05/01/10 2,620,000 3,137,450
14,274,994
Electric Total 25,756,693
-----------
UTILITIES TOTAL 25,756,693
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES (COST OF $482,403,841) 464,490,074
<Caption>
PREFERRED STOCKS - 2.2%
COMMUNICATIONS - 1.5% SHARES
MEDIA - 1.5%
Paxson Communications Corp. PIK,
14.250% 292 1,915,554
Primedia, Inc. Series H,
8.625% 220 21,505
PTV, Inc. 10.000% 18 55
Spanish Broadcasting System, Inc. PIK,
10.750% 5,325 5,724,375
Media Total 7,661,489
---------
COMMUNICATIONS TOTAL 7,661,489
</Table>
See accompanying notes to financial statements.
26
<Page>
<Table>
<Caption>
SHARES VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
PREFERRED STOCKS - (CONTINUED)
FINANCIALS - 0.7%
REAL ESTATE INVESTMENT TRUSTS - 0.7%
iStar Financial, Inc. Series E,
7.875% 86,769 2,228,879
Series F,
7.800% 57,000 1,446,375
Real Estate Investment Trusts Total 3,675,254
FINANCIALS TOTAL 3,675,254
----------
TOTAL PREFERRED STOCKS
(COST OF $10,898,458) 11,336,743
COMMON STOCKS - 2.1%
CONSUMER DISCRETIONARY - 0.2%
Hotels, Restaurants & Leisure - 0.2% Alliance Gaming Corp. (i) 55,000 714,450
Trump Entertainment Resorts, Inc. (i) 6,798 88,374
Hotels, Restaurants & Leisure Total 802,824
----------
CONSUMER DISCRETIONARY TOTAL 802,824
ENERGY - 0.1%
Energy Equipment & Services - 0.1% Hornbeck Offshore Services, Inc. (i) 27,300 672,945
Energy Equipment & Services Total 672,945
Oil & Gas - 0.0% Horizon Natural Resources Co. (g)(i) 16,000 16
Oil & Gas Total 16
----------
ENERGY TOTAL 672,961
INDUSTRIALS - 0.1%
Commercial Services & Supplies - 0.1% Allied Waste Industries, Inc. (i) 72,500 558,975
Fairlane Management Corp. (g)(j) 50,004 --
Commercial Services & Supplies Total 558,975
----------
INDUSTRIALS TOTAL 558,975
MATERIALS - 0.1%
Chemicals - 0.1% Lyondell Chemical Co. 30,000 712,200
Chemicals Total 712,200
----------
MATERIALS TOTAL 712,200
TELECOMMUNICATION SERVICES - 1.4%
Diversified Telecommunication Services - 0.4% NTL, Inc. (i) 31,154 2,002,579
Diversified Telecommunication Services Total 2,002,579
Wireless Telecommunication Services - 1.0% Alamosa Holdings, Inc. (i) 79,483 981,615
Nextel Communications, Inc., Class A (i) 100,000 3,018,000
SBA Communications Corp., Class A (i) 80,410 898,984
Wireless Telecommunication Services Total 4,898,599
----------
TELECOMMUNICATION SERVICES TOTAL 6,901,178
</Table>
See accompanying notes to financial statements.
27
<Page>
<Table>
<Caption>
SHARES VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
UTILITIES - 0.2%
ELECTRIC UTILITIES - 0.0% BayCorp Holdings Ltd. (i) 3 41
Electric Utilities Total 41
MULTI-UTILITIES & UNREGULATED POWER - 0.2% Dynegy Holdings, Inc., Class A (i) 233,000 1,083,450
Multi-Utilities &
Unregulated Power Total 1,083,450
----------
UTILITIES TOTAL 1,083,491
TOTAL COMMON STOCKS
(COST OF $12,239,131) 10,731,629
<Caption>
CONVERTIBLE BONDS - 0.8%
COMMUNICATIONS - 0.5% PAR ($)
TELECOMMUNICATION SERVICES - 0.5%
TELECOMMUNICATIONS EQUIPMENT- 0.5%
Nortel Networks Corp. 4.250% 09/01/08 2,640,000 2,424,840
2,424,840
Telecommunication Services Total 2,424,840
---------
COMMUNICATIONS TOTAL 2,424,840
UTILITIES - 0.3%
ELECTRIC - 0.3%
INDEPENDENT POWER PRODUCER - 0.3%
Mirant Corp. 2.500% 06/15/21 (d) 2,125,000 1,678,729
1,678,729
Electric Total 1,678,729
---------
UTILITIES TOTAL 1,678,729
TOTAL CONVERTIBLE BONDS
(COST OF $3,883,706) 4,103,569
MUNICIPAL BOND (TAXABLE) - 0.6%
CALIFORNIA - 0.6%
CA Cabazon Band Mission Indians 13.000% 10/01/11 (e) 3,250,000 3,378,277
---------
CALIFORNIA TOTAL 3,378,277
TOTAL MUNICIPAL BOND (TAXABLE)
(COST OF $3,250,000) 3,378,277
</Table>
See accompanying notes to financial statements.
28
<Page>
<Table>
<Caption>
UNITS VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
WARRANTS (i) - 0.1%
COMMUNICATIONS - 0.0%
MEDIA - 0.0%
BROADCAST SERVICES/PROGRAMS - 0.0%
XM Satellite Radio Holdings, Inc. Expires 03/15/10 (b) 2,435 153,405
Media Total 153,405
TELECOMMUNICATION SERVICES - 0.0%
CELLULAR TELECOMMUNICATIONS - 0.0%
UbiquiTel, Inc. Expires 04/15/10 (e) 5,250 52
52
TELECOMMUNICATION SERVICES - 0.0%
Jazztel PLC Expires 07/15/10 (g)(j) 1,435 --
--
Telecommunication Services
Total 52
---------
COMMUNICATIONS TOTAL 153,457
CONSUMER NON-CYCLICAL - 0.0%
FOOD - 0.0%
FOOD RETAIL - 0.0%
Pathmark Stores, Inc. Expires 09/19/10 (e) 58,758 20,565
20,565
Food Total 20,565
---------
CONSUMER NON-CYCLICAL TOTAL 20,565
INDUSTRIALS - 0.1%
METAL FABRICATE/HARDWARE - 0.1%
METAL PROCESSORS & FABRICATION - 0.1%
Mueller Holdings, Inc. Expires 04/15/14 (b) 2,625 301,875
301,875
Metal Fabricate/Hardware
Total 301,875
TRANSPORTATION - 0.0%
TRANSPORTATION - TRUCK - 0.0%
QDI LLC Expires 01/15/07 (b)(e)(g) 10,207 30,009
30,009
Transportation Total 30,009
---------
INDUSTRIALS TOTAL 331,884
TOTAL WARRANTS
(COST OF $7,829,465) 505,906
</Table>
See accompanying notes to financial statements.
29
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- ------------------------------------------------------- ----------------------------------------------------------------------
SHORT-TERM OBLIGATION - 1.1%
Repurchase agreement with State Street
Bank & Trust Co., dated 05/31/05, due
06/01/05 at 2.900%, collateralized by a
U.S. Treasury Note maturing 06/30/06,
market value of $5,576,192 (repurchase
proceeds $5,465,440) 5,465,000 5,465,000
TOTAL SHORT-TERM OBLIGATION
(COST OF $5,465,000) 5,465,000
TOTAL INVESTMENTS - 97.9%
(COST OF $525,969,601) (k) 500,011,198
OTHER ASSETS & LIABILITIES, NET - 2.1% 10,747,863
NET ASSETS - 100.0% 510,759,061
</Table>
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. At
May 31, 2005, these securities, which did not include any illiquid
securities, except for the following, amounted to $113,980,237, which
represents 22.3% of net assets.
<Table>
<Caption>
ACQUISITION
SECURITY DATE PAR/UNIT COST VALUE
-----------------------------------------------------------------------------
Hollinger, Inc 09/30/04 $ 1,009,000 $ 1,009,000 $ 1,039,270
QDI LLC 05/28/02 10,207 0 30,009
--------------
$ 1,069,279
==============
</Table>
(c) The interest rate shown on floating rate or variable rate securities
reflects the rate at May 31, 2005.
(d) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. At May 31,
2005, the value of these securities amounted to $5,142,479, which
represents 1.0% of net assets.
(e) Illiquid security.
(f) The issuer is in default of certain debt covenants. Income is not being
accrued. At May 31, 2005, the value of this security represents 1.1% of net
assets.
(g) Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(h) Step bond. Shown parenthetically is the next interest rate to be paid.
(i) Non-income producing security.
(j) Security has no value.
(k) Cost for federal income tax purposes is $526,595,193.
See accompanying notes to financial statements.
30
<Page>
At May 31, 2005, the Fund had entered into the following forward currency
exchange contracts:
<Table>
<Caption>
FORWARD CURRENCY AGGREGATE SETTLEMENT UNREALIZED
CONTRACTS TO BUY VALUE FACE VALUE DATE DEPRECIATION
- -----------------------------------------------------------------------------
EUR $ 492,681 $ 517,224 06/20/2005 $ (24,543)
<Caption>
FORWARD CURRENCY AGGREGATE SETTLEMENT UNREALIZED
CONTRACTS TO SELL VALUE FACE VALUE DATE APPRECIATION
- -----------------------------------------------------------------------------
EUR $ 3,424,129 $ 3,566,740 06/20/2005 $ 142,611
EUR 8,622 8,881 06/20/2005 259
EUR 908,781 930,639 07/27/2005 21,858
--------------
$ 164,728
--------------
</Table>
At May 31, 2005, the asset allocation of the Fund is as follows:
<Table>
<Caption>
% OF
ASSET ALLOCATION (UNAUDITED) NET ASSETS
- ----------------------------------------------------------------------------
Corporate Fixed-Income Bonds & Notes 91.0%
Preferred Stocks 2.2
Common Stocks 2.1
Convertible Bonds 0.8
Municipal Bond (Taxable) 0.6
Warrants 0.1
Short-Term Obligation 1.1
Other Assets & Liabilities, Net 2.1
----------
100.0%
==========
</Table>
<Table>
<Caption>
ACRONYM NAME
EUR Euro
PIK Payment-In-Kind
REIT Real Estate Investment Trust
USD United States Dollar
</Table>
See accompanying notes to financial statements.
31
<Page>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2005 COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
($)
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS Investments, at cost 525,969,601
------------
Investments, at value 500,011,198
Foreign currency (cost of $40) 39
Net unrealized appreciation on foreign forward currency contracts 164,728
Receivable for:
Investments sold 6,351,111
Fund shares sold 866,923
Interest 11,123,846
Dividends 77,244
Due from Investment Advisor (See Note 7) 4,024
Deferred Trustees' compensation plan 37,039
Receivable due from closed foreign forward
currency contracts 22,324
------------
Total Assets 518,658,476
LIABILITIES Payable to custodian bank 1,368,490
Net unrealized depreciation on foreign forward currency contracts 24,543
Payable for:
Investments purchased 2,417,624
Fund shares repurchased 1,226,347
Distributions 1,587,839
Investment advisory fee 264,832
Transfer agent fee 164,630
Pricing and bookkeeping fees 14,773
Custody fee 3,865
Distribution and service fees 254,747
Deferred Trustees' fees 37,039
Other liabilities 534,686
------------
Total Liabilities 7,899,415
NET ASSETS 510,759,061
COMPOSITION OF NET ASSETS Paid-in capital 923,261,271
Undistributed net investment income 994,259
Accumulated net realized loss (388,173,213)
Net unrealized appreciation (depreciation) on:
Investments (25,958,403)
Foreign currency translations 635,147
NET ASSETS 510,759,061
CLASS A Net assets 273,104,407
Shares outstanding 59,871,490
Net asset value per share 4.56(a)
Maximum offering price per share ($4.56/0.9525) 4.79(b)
CLASS B Net assets 194,459,611
Shares outstanding 42,630,501
Net asset value and offering price per share 4.56(a)
CLASS C Net assets 30,365,997
Shares outstanding 6,656,818
Net asset value and offering price per share 4.56(a)
CLASS Z Net assets 12,829,046
Shares outstanding 2,812,452
Net asset value, offering and redemption price per share 4.56
</Table>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See accompanying notes to financial statements.
32
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 2005 COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
($)
- ---------------------------------------- ---------------------------------------------------------------------------------
INVESTMENT INCOME Dividends 1,385,603
Interest 50,380,944
----------------
Total Investment Income 51,766,547
EXPENSES Investment advisory fee 3,546,400
Distribution fee:
Class B 1,745,004
Class C 317,167
Service fee:
Class A 761,825
Class B 581,668
Class C 105,867
Transfer agent fee 1,298,518
Pricing and bookkeeping fees 200,820
Trustees' fees 29,847
Custody fee 43,011
Non-recurring costs (See Note 9) 19,488
Other expenses 272,697
----------------
Total Expenses 8,922,312
Fees waived by Distributor - Class C (63,090)
Non-recurring costs assumed by Investment Advisor (See Note 9) (19,488)
Custody earnings credit (11,854)
----------------
Net Expenses 8,827,880
----------------
Net Investment Income 42,938,667
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY Net realized gain (loss) on:
Investments 16,458,457
Foreign currency transactions 28,408
Net realized loss on disposal of investments
purchased/sold in error (See Note 8) --
----------------
Net realized gain 16,486,865
Net change in unrealized
appreciation (depreciation) on:
Investments (7,674,541)
Foreign currency translations 696,298
----------------
Net change in unrealized
appreciation (depreciation) (6,978,243)
----------------
Net Gain 9,508,622
----------------
Net Increase in Net Assets
from Operations 52,447,289
</Table>
See accompanying notes to financial statements.
33
<Page>
STATEMENT OF CHANGES IN NET ASSETS
COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
YEAR ENDED MAY 31,
2005 ($) 2004 ($)
---------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS Net investment income 42,938,667 54,237,943
Net realized gain on investments and foreign
currency transactions 16,486,865 8,270,746
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations (6,978,243) 32,880,100
---------------------------------
Net Increase from Operations 52,447,289 95,388,789
DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income:
Class A (24,843,221) (25,897,731)
Class B (17,229,500) (18,878,503)
Class C (3,195,340) (3,515,106)
Class Z (1,286,008) (1,901,969)
---------------------------------
Total Distributions Declared to Shareholders (46,554,069) (50,193,309)
SHARE TRANSACTIONS Class A:
Subscriptions 51,631,025 189,024,773
Distributions reinvested 12,970,332 13,650,967
Redemptions (119,788,196) (276,813,657)
---------------------------------
Net Decrease (55,186,839) (74,137,917)
Class B:
Subscriptions 15,033,791 41,567,784
Distributions reinvested 8,549,272 8,876,772
Redemptions (84,300,266) (120,128,028)
---------------------------------
Net Decrease (60,717,203) (69,683,472)
Class C:
Subscriptions 2,313,673 26,520,739
Distributions reinvested 2,060,574 2,226,590
Redemptions (20,777,439) (37,179,218)
---------------------------------
Net Decrease (16,403,192) (8,431,889)
Class Z:
Subscriptions 8,036,535 31,287,165
Distributions reinvested 964,387 1,483,445
Redemptions (10,416,599) (66,364,258)
---------------------------------
Net Decrease (1,415,677) (33,593,648)
Net Decrease from share
Transactions (133,722,911) (185,846,926)
---------------------------------
Total Decrease in Net Assets (127,829,691) (140,651,446)
NET ASSETS Beginning of period 638,588,752 779,240,198
End of period 510,759,061 638,588,752
Undistributed net investment income
at end of period 994,259 3,139,574
---------------------------------
CHANGES IN SHARES Class A:
Subscriptions 11,017,719 42,769,227
Issued for distributions reinvested 2,760,651 3,017,589
Redemptions (25,637,277) (61,621,799)
---------------------------------
Net Decrease (11,858,907) (15,834,983)
Class B:
Subscriptions 3,195,705 9,297,993
Issued for distributions reinvested 1,819,533 1,963,545
Redemptions (17,983,556) (26,516,181)
---------------------------------
Net Decrease (12,968,318) (15,254,643)
Class C:
Subscriptions 492,732 5,944,258
Issued for distributions reinvested 438,421 492,263
Redemptions (4,477,212) (8,189,751)
---------------------------------
Net Decrease (3,546,059) (1,753,230)
Class Z:
Subscriptions 1,698,113 7,069,802
Issued for distributions reinvested 204,777 327,668
Redemptions (2,216,660) (14,917,379)
---------------------------------
Net Decrease (313,770) (7,519,909)
</Table>
See accompanying notes to financial statements.
34
<Page>
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2005 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 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.
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.
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
35
<Page>
the times at which they are determined and the close of the customary trading
session of the NYSE, which would not be reflected in the computation of the
Fund's net asset value. If events materially affecting the values of such
foreign securities occur and it is determined that market quotations are not
reliable, then these foreign securities will be valued at their fair value using
procedures approved by the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
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.
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.
36
<Page>
DETERMINATION OF CLASS NET ASSET VALUES
All income, expenses (other than class-specific expenses, as shown on the
Statement of Operations) and realized and unrealized gains (losses) are
allocated to each class of the Fund on a daily basis for purposes of determining
the net asset value of each class. Income and expenses are allocated to each
class based on the settled shares method, while realized and unrealized gains
(losses) are allocated based on the relative net assets of each class.
FEDERAL INCOME TAX STATUS
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its 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 timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended May 31, 2005, permanent book and tax basis differences
resulting primarily from differing treatments for discount accretion/premium
amortization on debt securities, market discount reclassifications, paydown
reclassifications, Section 988 reclassifications of foreign currency and
non-deductible excise tax paid were identified and reclassified among the
components of the Fund's net assets as follows:
<Table>
<Caption>
UNDISTRIBUTED
NET INVESTMENT ACCUMULATED PAID-IN
INCOME NET REALIZED LOSS CAPITAL
- ---------------------------------------------------------------
$ 1,470,087 $ (1,458,719) $ (11,368)
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years ended May 31, 2005 and
May 31, 2004 was as follows:
<Table>
<Caption>
MAY 31, 2005 MAY 31, 2004
- ----------------------------------------------------------
Distributions paid from:
Ordinary income $ 46,554,069 $ 50,193,309
Long-term capital gains -- --
</Table>
As of May 31, 2005, the components of distributable earnings on a tax basis were
as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS DEPRECIATION*
- ------------------------------------------------------------
$ 3,740,121 $ -- $ (26,089,033)
</Table>
* The differences between book-basis and tax-basis net unrealized depreciation
are primarily due to deferral of losses from wash sales and discount
accretion/premium amortization on debt securities.
Unrealized appreciation and depreciation at May 31, 2005, based on cost of
investments for federal income tax purposes, was:
<Table>
Unrealized appreciation $ 17,346,806
Unrealized depreciation (43,930,801)
--------------
Net unrealized depreciation $ (26,583,995)
</Table>
The following capital loss carryforwards may be available to reduce taxable
income arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
2008 $ 37,575,496
2009 161,087,717
2010 171,019,187
2011 18,463,873
$ 388,146,273
</Table>
Of the capital loss carryforwards attributable to the Fund $3,086,545
($2,216,468 will expire May 31, 2008 and $870,077 will expire May 31, 2009) was
obtained in the merger with Stein Roe High Yield Fund.
Capital loss carryforwards of $15,048,207 were utilized during the year ended
May 31, 2005.
37
<Page>
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Fund and provides administrative and other services to the Fund. Effective
November 1, 2004, Columbia receives a monthly investment advisory fee based on
the Fund's average daily net assets at the following annual rates:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
- ------------------------------------------------------------
First $500 million 0.60%
$500 million to $1 billion 0.55%
$1 billion to $1.5 billion 0.52%
Over $1.5 billion 0.49%
</Table>
Prior to November 1, 2004, Columbia received a monthly investment advisory fee
based on the Fund's average daily net assets at the following annual rates:
<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 year ended May 31, 2005, the Fund's 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 year ended May 31, 2005, the Fund's effective pricing and
bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.034%.
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 waive 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 assets. Columbia, at its
discretion, may revise or discontinue this arrangement any time.
For the year ended May 31, 2005, the Fund's effective transfer agent fee rate,
inclusive of out-of-pocket fees and after fee waivers, was 0.22%. Columbia did
not reimburse any transfer agent fees during the year ended May 31, 2005.
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 year ended May 31, 2005, the
Distributor has retained net underwriting discounts of $18,380 on sales of the
Fund's Class A shares and received net CDSC fees of $6,551, $656,147 and $9,909
on Class A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan") which allows 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.
38
<Page>
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.
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 for the Office
of the Chief Compliance Officer 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 year ended May 31, 2005, the Fund paid $2,106 to Columbia
for such services. This amount is included in "Other expenses" on the Statement
of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the year ended May 31, 2005, the cost of purchases and proceeds from sales
of securities, excluding short-term obligations, were $385,673,357 and
$522,549,289, 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 year ended May 31, 2005, the Fund did not borrow under this arrangement.
NOTE 7. SHARES OF BENEFICIAL INTEREST
As of May 31, 2005, the Fund had shareholders whose shares were beneficially
owned by participant accounts over which Bank of America and/or its affiliates
had either sole or joint investment discretion. Subscription and redemption
activity of these accounts may have a significant effect on the operations of
the Fund. The number of such accounts and the percentage of shares of beneficial
interest outstanding held therein are as follows:
<Table>
<Caption>
NUMBER OF SHAREHOLDERS % OF SHARES OUTSTANDING HELD
- --------------------------------------------------------------
1 0.1%
</Table>
NOTE 8. TRADING LOSS
OTHER
During the year ended May 31, 2005 the Fund entered into a foreign forward
currency exchange contract which resulted in a trading error. This position was
subsequently closed at a loss of $4,024 and the Fund is in the process of being
reimbursed by Columbia.
NOTE 9. 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.
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. Government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns may disrupt the high yield market and impair the ability of issuers to
repay principal and interest. Also, an increase in
39
<Page>
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
On February 9, 2005, Columbia and the Distributor (collectively, the "Columbia
Group") entered into an Assurance of Discontinuance with the New York Attorney
General ("NYAG") (the "NYAG Settlement") and consented to the entry of a
cease-and-desist order by the Securities and Exchange Commission ("SEC") (the
"SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively
as the "Settlements". The Settlements contain substantially the same terms and
conditions as outlined in the agreements in principle which Columbia Group
entered into with the SEC and NYAG in March 2004.
Under the terms of the SEC Order, the Columbia Group has agreed among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution consultant
(see below). The Columbia Funds have also undertaken to implement certain
governance measures designed to maintain the independence of their boards of
trustees. The NYAG Settlement also, among other things, requires Columbia and
its affiliates, Banc of America Capital Management, LLC and BACAP Distributors,
LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds
management fees collectively by $32 million per year for five years, for a
projected total of $160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan to be developed by an independent distribution consultant, who
is acceptable to the SEC staff and the Columbia Funds' independent trustees. The
distribution plan must be based on a methodology developed in consultation with
the Columbia Group and the Fund's independent trustees and not unacceptable to
the staff of the SEC. At this time, the distribution plan is still under
development. As such, any gain to the fund or its shareholders can not currently
be determined.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A
copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005.
In connection with events described in detail above, various parties have filed
suit against certain funds, the Trustees of the Columbia Funds, FleetBoston
Financial Corporation and its affiliated entities and/or Bank of America
Corporation and its affiliated entities. More than 300 cases including those
filed against entities unaffiliated with the funds, their Boards, FleetBoston
Financial Corporation and its affiliated entities and/or Bank of America
Corporation and its affiliated entities have been transferred to the Federal
District Court in Maryland and consolidated in a multi-district proceeding (the
"MDL").
The derivative cases purportedly brought on behalf of the Columbia Funds
in the MDL have been consolidated under the lead case. The fund derivative
plaintiffs allege that the funds were harmed by market timing and late trading
activity and seek, among other
40
<Page>
things, removal of the trustees of the Columbia Funds, removal of the Columbia
Group, disgorgement of all management fees and monetary damages.
On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts
state court alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has conditionally ordered its transfer to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, can not currently be made.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the
Columbia Funds and Columbia. The lawsuit alleges that defendants violated common
law duties to fund shareholders as well as sections of the Investment Company
Act of 1940, by failing to ensure that the Fund and other affiliated funds
participated in securities class action settlements for which the funds were
eligible. Specifically, plaintiffs allege that defendants failed to submit proof
of claims in connection with settlements of securities class action lawsuits
filed against companies in which the funds held positions.
In 2004, certain Columbia funds, advisers and affiliated entities were named as
defendants in certain purported shareholder class and derivative actions making
claims, including claims under the Investment Company and the Investment
Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees
and expenses paid by the funds are excessive and that the advisers and their
affiliates inappropriately used fund assets to distribute the funds and for
other improper purpose. On March 2, 2005, the actions were consolidated in the
Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The
plaintiffs filed a consolidated amended complaint on June 9, 2005.
The Fund 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 proceedings 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 Fund.
For the year ended May 31, 2005, Columbia has assumed $19,488 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
41
<Page>
FINANCIAL HIGHLIGHTS
COLUMBIA HIGH YIELD OPPORTUNITY FUND
SELECTED DATA FOR ASHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS A SHARES 2005 2004 2003(a) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.35(b) 0.35(b) 0.14(b) 0.34(b) 0.52(b)(c) 0.61(d)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.05 0.21 0.30 (0.53) (0.65)(c) (1.24)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.40 0.56 0.44 (0.19) (0.13) (0.63)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.38) (0.32) (0.15) (0.39) (0.51) (0.62)
Return of capital -- -- -- (0.03) (0.04) --
--------- --------- --------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.38) (0.32) (0.15) (0.42) (0.55) (0.62)
NET ASSET VALUE, END OF PERIOD $ 4.56 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30
Total return (e) 8.93%(f) 13.30%(g) 11.01%(g)(h) (4.27)% (2.78)% (10.28)%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA:
Expenses (i) 1.15% 1.19% 1.29%(j) 1.31% 1.22% 1.16%
Net investment income (i) 7.55% 7.65% 8.24%(j) 7.92% 10.34%(c) 10.00%
Waiver/reimbursement -- 0.01% --%(j)(k) -- -- --
Portfolio turnover rate 67% 75% 45%(h) 63% 62% 28%
Net assets, end of
period (000's) $ 273,104 $ 325,658 $ 376,944 $ 361,780 $ 369,043 $ 390,917
</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) Total return includes a voluntary reimbursement by the Investment Advisor
for a realized investment loss. This reimbursement had an impact of less
than 0.01% on the Fund's total return.
(g) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
(k) Rounds to less than 0.01%.
42
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS B SHARES 2005 2004 2003(a) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.32(b) 0.31(b) 0.13(b) 0.31(b) 0.48(b)(c) 0.56(d)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.05 0.22 0.29 (0.54) (0.65)(c) (1.24)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.37 0.53 0.42 (0.23) (0.17) (0.68)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.35) (0.29) (0.13) (0.35) (0.47) (0.57)
Return of capital -- -- -- (0.03) (0.04) --
--------- --------- --------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.35) (0.29) (0.13) (0.38) (0.51) (0.57)
NET ASSET VALUE, END OF PERIOD $ 4.56 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30
Total return (e) 8.13%(f) 12.46%(g) 10.67%(g)(h) (4.99)% (3.51)% (10.96)%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA:
Expenses (i) 1.90% 1.94% 2.04%(j) 2.06% 1.97% 1.91%
Net investment income (i) 6.80% 6.90% 7.49%(j) 7.17% 9.59%(c) 9.25%
Waiver/reimbursement -- 0.01% --%(j)(k) -- -- --
Portfolio turnover rate 67% 75% 45%(h) 63% 62% 28%
Net assets, end of
period (000's) $ 194,460 $ 252,415 $ 305,021 $ 280,220 $ 350,464 $ 433,949
</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) Total return includes a voluntary reimbursement by the Investment Advisor
for a realized investment loss. This reimbursement had an impact of less
than 0.01% on the Fund's total return.
(g) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
(k) Rounds to less than 0.01%.
43
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS C SHARES 2005 2004 2003(a) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.33(b) 0.32(b) 0.13(b) 0.31(b) 0.49(b)(c) 0.57(d)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.04 0.21 0.29 (0.53) (0.65)(c) (1.24)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.37 0.53 0.42 (0.22) (0.16) (0.67)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.35) (0.29) (0.13) (0.36) (0.48) (0.58)
Return of capital -- -- -- (0.03) (0.04) --
--------- --------- --------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.35) (0.29) (0.13) (0.39) (0.52) (0.58)
NET ASSET VALUE, END OF PERIOD $ 4.56 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30
Total return (e)(f) 8.29%(g) 12.63% 10.74%(h) (4.85)% (3.37)% (10.78)%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA:
Expenses (i) 1.75% 1.79% 1.89%(j) 1.91% 1.82% 1.76%
Net investment income (i) 6.95% 7.05% 7.64%(j) 7.32% 9.74%(c) 9.40%
Waiver/reimbursement 0.15% 0.16% 0.15%(j) 0.15% 0.15% 0.15%
Portfolio turnover rate 67% 75% 45%(h) 63% 62% 28%
Net assets, end of
period (000's) $ 30,366 $ 46,322 $ 51,471 $ 46,568 $ 52,122 $ 48,904
</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) Total return includes a voluntary reimbursement by the Investment Advisor
for a realized investment loss. This reimbursement had an impact of less
than 0.01% on the Fund's total return.
(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.
44
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS Z SHARES 2005 2004 2003(a) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.37(b) 0.36(b) 0.15(b) 0.33(b) 0.53(b)(c) 0.62(d)
Net realized and
unrealized gain (loss)
on investments and
foreign currency 0.04 0.21 0.29 (0.51) (0.65)(c) (1.24)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.41 0.57 0.44 (0.18) (0.12) (0.62)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.39) (0.33) (0.15) (0.40) (0.52) (0.63)
Return of capital -- -- -- (0.03) (0.04) --
--------- --------- --------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.39) (0.33) (0.15) (0.43) (0.56) (0.63)
NET ASSET VALUE, END OF PERIOD $ 4.56 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30
Total return (e) 9.21%(f) 13.58%(g) 11.12%(g)(h) (4.03)% (2.53)% (10.06)%
RATIOS TO AVERAGE
NET ASSETS/SUPPLEMENTAL DATA:
Expenses (i) 0.90% 0.94% 1.04%(j) 1.06% 0.97% 0.91%
Net investment income (i) 7.80% 7.92% 8.49%(j) 8.17% 10.59%(c) 10.25%
Waiver/reimbursement -- 0.01% --%(j)(k) -- -- --
Portfolio turnover rate 67% 75% 45%(h) 63% 62% 28%
Net assets, end of
period (000's) $ 12,829 $ 14,194 $ 45,803 $ 35,541 $ 1,978 $ 566
</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 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.
(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.
(f) Total return includes a voluntary reimbursement by the Investment Advisor
for a realized investment loss. This reimbursement had an impact of less
than 0.01% on the Fund's total return.
(g) Had the Investment Advisor not waived a portion of expenses, total return
would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
(k) Rounds to less than 0.01%.
45
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
COLUMBIA HIGH YIELD OPPORTUNITY FUND
TO THE TRUSTEES OF THE COLUMBIA FUNDS TRUST I AND THE SHAREHOLDERS OF COLUMBIA
HIGH YIELD OPPORTUNITY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Columbia High Yield Opportunity
Fund (the "Fund") (a series of Columbia Funds Trust I) at May 31, 2005, the
results of its operations, the changes in its net assets and its financial
highlights for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.We believe that our audits, which included
confirmation of securities at May 31, 2005 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 27, 2005
46
<Page>
TRUSTEES
COLUMBIA HIGH YIELD OPPORTUNITY FUND
The Trustrees/Directors serve terms of indefinite duration. The names, addresses
and ages of the Trustees/Directors and officers of the Funds in the Columbia
Funds Complex, the year each was first elected or appointed to office, their
principal business occupations during at least the last five years, the number
of portfolios overseen by each Trustee/Director and other directorships they
hold are shown below. Each officer listed below serves as an officer of each
Fund in the Columbia Funds Complex.
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
DOUGLAS A. HACKER (age 49) Executive Vice President-Strategy of United Airlines (airline) since December, 2002
P.O. Box 66100 (formerly President of UAL Loyalty Services (airline) from September, 2001 to
Chicago, IL 60666 December, 2002; Executive Vice President and Chief Financial Officer of United
Trustee (since 1996) Airlines from July, 1999 to September, 2001; Senior Vice President-Finance from
March, 1993 to July, 1999). Oversees 104, Nash Finch Company (food distributor)
JANET LANGFORD KELLY (age 47) Partner, Zelle, Hofmann,Voelbel,Mason & Gette LLP (law firm); Adjunct Professor of
9534 W. Gull Lake Drive Law, Northwestern University, since September, 2004 (formerly Chief Administrative
Richland, MI 49083-8530 Officer and Senior Vice President, Kmart Holding Corporation (consumer goods), from
Trustee (since 1996) September, 2003 to March, 2004; Executive Vice President-Corporate Development and
Administration, General Counsel and Secretary, Kellogg Company (food manufacturer),
from September, 1999 to August, 2003; Senior Vice President, Secretary and General
Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer)
from January, 1995 to September, 1999). Oversees 104, None
RICHARD W. LOWRY (age 69) Private Investor since August, 1987 (formerly Chairman and Chief Executive Officer,
10701 Charleston Drive U.S. Plywood Corporation (building products manufacturer)). Oversees 106(3), None
Vero Beach, FL 32963
Trustee (since 1995)
CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January, 1976; Ford and
Department of Economics Louisa Van Voorhis Professor of Political Economy, University of Washington, since
University of Washington September, 1993 (formerly Director, Institute for Economic Research, University of
Seattle, WA 98195 Washington from September, 2001 to June, 2003) Adjunct Professor of Statistics,
Trustee (since 1981) University of Washington, since September, 1980; Associate Editor, Journal of Money
Credit and Banking, since September, 1993; consultant on econometric and statistical
matters. Oversees 104, None
JOHN J. NEUHAUSER (age 62) Academic Vice President and Dean of Faculties since August, 1999, Boston College
84 College Road (formerly Dean, Boston College School of Management from September, 1977 to August,
Chestnut Hill, MA 02467-3838 1999). Oversees 106(3), Saucony, Inc. (athletic footwear)
Trustee (since 1985)
PATRICK J. SIMPSON (age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 104, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
</Table>
47
<Page>
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
THOMAS E. STITZEL (age 69) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999,
2208 Tawny Woods Place College of Business, Boise State University); Chartered Financial Analyst. Oversees
Boise, ID 83706 104, None
Trustee (since 1998)
THOMAS C. THEOBALD (age 68) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) since
8 Sound Shore Drive, September, 2004 (formerly Managing Director,William Blair Capital Partners (private
Suite 285 equity investing) from September, 1994 to September, 2004). Oversees 104, Anixter
Greenwich, CT 06830 International (network support equipment distributor); Ventas, Inc. (real estate
Trustee and Chairman of the Board(4) investment trust); Jones Lang LaSalle (real estate management services) and Ambac
(since 1996) Financial Group (financial guaranty insurance)
ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM
359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 104, Chairman of
Hopkinton, NH 03229 the Board of Directors, Enesco Group, Inc. (designer, importer and distributor of
Trustee (since 1998) giftware and collectibles)
RICHARD L. WOOLWORTH (age 64) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The
100 S.W. Market Street Regence Group (regional health insurer); Chairman and Chief Executive Officer,
#1500 BlueCross BlueShield of Oregon; Certified Public Accountant,Arthur Young & Company).
Portland, OR 97207 Oversees 104, Northwest Natural Gas Co. (natural gas service provider)
Trustee (since 1991)
INTERESTED TRUSTEE
WILLIAM E. MAYER(2) (age 65) Partner, Park Avenue Equity Partners (private equity) since February, 1999 (formerly
399 Park Avenue Partner, Development Capital LLC from November 1996 to February, 1999). Oversees
Suite 3204 106(3), Lee Enterprises (print media), WR Hambrecht + Co. (financial service
New York, NY 10022 provider); Reader's Digest (publishing); OPENFIELD Solutions (retail industry
Trustee (since 1994) technology provider)
</Table>
(1) In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds Complex.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the
Liberty All-Star Funds, currently consisting of 2 funds, which are advised
by an affiliate of the Advisor.
(4) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
The Statement of Additional Information Includes additional information
about the Trustees of the Funds and is available, without charge, upon
request by calling 800-426-3750.
48
<Page>
OFFICERS
COLUMBIA HIGH YIELD OPPORTUNITY FUND
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH
COLUMBIA FUNDS, YEAR FIRST ELECTED OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
APPOINTED TO OFFICE
CHRISTOPHER L. WILSON (age 47) Head of Mutual Funds since August, 2004 and Senior Vice President of the Advisor
One Financial Center since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe
Boston, MA 02111 Funds since October, 2004; President and Chief Executive Officer of the Nations
President (since 2004) Funds since January, 2005; President of the Galaxy Funds since April 2005; Director
of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of
America Capital Management (Ireland), Limited since May 2005; Senior Vice President
of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since
January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since
January, 2005; Director of Columbia Funds Services, Inc. since January, 2005
(formerly President and Chief Executive Officer, CDC IXIS Asset Management Services,
Inc. from September, 1998 to August, 2004).
J. KEVIN CONNAUGHTON (age 40) Treasurer of the Columbia Funds since October, 2003 and of the Liberty Funds, Stein
One Financial Center Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor
Boston, MA 02111 since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein
Treasurer (since 2000) Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and
Controller of the Liberty Funds and All-Star Funds from February, 1998 to October,
2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from
December, 2002 to December, 2004 and President from February, 2004 to December, 2004
of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of
Colonial Management Associates, Inc. from February, 1998 to October, 2000).
MARY JOAN HOENE (age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds, Liberty
40 West 57th Street Funds, Stein Roe Funds and All-Star Funds since August, 2004 (formerly Partner,
New York, NY 10005 Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter,
Senior Vice President and Chief Compliance Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and
Officer (since 2004) Counsel, Equitable Life Assurance Society of the United States from April, 1998 to
November, 1999).
MICHAEL G. CLARKE (age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein Roe Funds and
One Financial Center All-Star Funds since October, 2004 (formerly Controller of the Columbia Funds,
Boston, MA 02111 Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004;
Chief Accounting Officer (since 2004) Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy &
Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June,
2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star
Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Touche LLP from
May, 1997 to August, 1999).
JEFFREY R. COLEMAN (age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds
One Financial Center since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services,
Boston, MA 02111 Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from
Controller (since 2004) February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset
Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from
August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to
August, 2000).
R. SCOTT HENDERSON (age 45) Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds since December,
One Financial Center 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004;
Boston, MA 02111 Executive Director and General Counsel, Massachusetts Pension Reserves Investment
Secretary (since 2004) Management Board from September, 1997 to March, 2001).
</Table>
49
<Page>
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT
COLUMBIA HIGH YIELD OPPORTUNITY FUND
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") requires
that the Board of Trustees/Directors (the "Board") of the Columbia Funds (the
"Funds"), including a majority of the Trustees and Directors (collectively, the
"Trustees") who are not "interested persons" of the Trusts, as defined in the
1940 Act (the "Independent Trustees"), annually review and approve the terms of
the Funds' investment advisory agreements. At a meeting held on October 13,
2004, the Board reviewed and approved the management contracts ("Advisory
Agreement") with Columbia Management Advisors, Inc. ("CMA") for the Fund.
At meetings held on September 23, 2004 and October 12, 2004, the Advisory Fees
and Expenses Committee (the "Committee") of the Board considered the factors
described below relating to the selection of CMA and the approval of the
Advisory Agreement. At a meeting held on October 13, 2004, the Board, including
the Independent Trustees (who were advised by their independent legal counsel),
considered these factors and reached the conclusions described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered information regarding the nature, extent and quality of
services that CMA provides to the Fund under the Advisory Agreement. CMA
provided the most recent investment adviser registration form ("Form ADV") and
code of ethics for CMA to the Board. The Board reviewed information on the
status of Securities and Exchange Commission ("SEC") and New York Attorney
General ("NYAG") proceedings against CMA and certain of its affiliates,
including the agreement in principle entered into with the SEC and the NYAG on
March 15, 2004 to settle civil complaints filed by the SEC and the NYAG relating
to trading activity in mutual fund shares.(1)
The Board evaluated the ability of CMA, including its resources, reputation and
other attributes, to attract and retain highly qualified research, advisory and
supervisory investment professionals. The Board considered information regarding
CMA's compensation program for its personnel involved in the management of the
Fund.
Based on these considerations and other factors, including those referenced
below, the Board concluded that they were generally satisfied with the nature,
extent and quality of the investment advisory services provided to the Fund by
CMA.
FUND PERFORMANCE AND EXPENSES
CMA provided the Board with relative performance and expense information for the
Fund in a report prepared by Lipper Inc. ("Lipper") an independent provider of
investment company data. The Board considered the total return performance
information, which included the ranking of the Fund within a performance
universe made up of funds with the same Lipper investment classification and
objective (the "Performance Universe") by total return for one-year, three-year,
five-year, ten-year or life of fund periods, as applicable. They also considered
the Fund's performance in comparison to the performance results of a group (the
"Performance Peer Group") of funds selected by Lipper based on similarities in
fund type (e.g. open-end), investment classification and objective, asset size,
load type and 12b-1/service fees and other expense features, and to the
performance results of the Fund's benchmark index. The Board reviewed a
description of Lipper's methodology for selecting the mutual funds in the Fund's
Performance Peer Group and Performance Universe.
The Board considered statistical information regarding the Fund's total expenses
and certain components thereof, including management fees (both actual
management fees based on expenses for advisory and administrative fees including
any reductions for fee waivers and expense reimbursements as well as contractual
management fees that are computed for a hypothetical level of assets), actual
non-management expenses, and fee waivers/caps and expense reimbursements. They
also considered comparisons of these expenses to the expense information for
funds within a group (the "Expense Peer Group") selected by Lipper based on
similarities in fund type (e.g. open-end), investment classification and
objective, asset size, load type and 12b-1/service fees and other expense
features (but which, unlike the Performance Peer Group, may include funds with
several different investment classifications and objectives) and an expense
universe ("Expense Universe") selected by Lipper based on the criteria for
determining the Expense Peer Group other than asset size. The expense
(1) On February 9, 2005, CMA and its affiliate, Columbia Funds Distributor,
Inc., entered into settlement agreements with the SEC and the NYAG that
contain substantially the terms outlined in the agreements in principle.
50
<Page>
information in the Lipper report took into account all existing fee waivers and
expense reimbursements as well as all voluntary advisory fee reductions
applicable to certain Funds that were being proposed by management in order to
reduce the aggregate advisory fees received from mutual funds advised by CMA and
Banc of America Capital Management, LLC ("BACAP") by $32 million per year for
five years as contemplated by the agreement in principle with the NYAG.
The Committee also considered the projected impact on expenses of these Funds
resulting from the overall cost reductions that management anticipated would
result from the proposed shift to a common group of service providers for
transfer agency, fund accounting and custody services for mutual funds advised
by Bank of America affiliates.
The Board also considered information in the Lipper report that ranked each Fund
based on (i) each Fund's one-year performance and actual management fees, (ii)
each Fund's one-year performance and total expenses and (iii) each Fund's 3-year
performance and total expenses. Based on these comparisons and expense and
performance rankings of the Fund in the Lipper Report, CMA determined an overall
score for the Fund. The Committee and the Board also considered projected
savings to the Fund that would result from certain modifications in soft dollar
arrangements.
The Committee also considered more detailed information relating to certain
Funds that were highlighted for additional review based upon the fact that they
ranked poorly in terms of overall expense or management fees, maintained poor
performance or demonstrated a combination of below average to poor performance
while maintaining below average or poor expense rankings. At its September 23,
2004 meeting, the Committee discussed these Funds with management and in
executive session. The Committee requested additional information from
management regarding the cause(s) of the below-average relative performance of
these Funds, any remedial actions management recommended to improve performance
and the general standards for review of portfolio manager performance. At its
October 12, 2004 meeting, the Committee considered additional information
provided by management regarding these Funds. The Board also considered
management's proposal to merge or liquidate some of these Funds.
Based on these considerations and other factors, the Board concluded that the
overall performance and expense results supported by the approval of the
Advisory Agreements for each Fund.
INVESTMENT ADVISORY FEE RATES
The Board reviewed and considered the proposed contractual investment advisory
fee rates (the "Advisory Agreement Rates") payable by the Funds to CMA for
investment advisory services. In addition, the Board reviewed and considered the
existing and proposed fee waiver and reimbursement arrangements applicable to
the Advisory Agreement Rates and considered the Advisory Agreement Rates after
taking the fee waivers and reimbursements into account (the "Net Advisory
Rates"). At previous meetings, the Committee had separately considered
management's proposal to reduce annual investment advisory fees for certain
Funds under the NYAG agreement in principle and the impact of these reductions
on each affected Fund. Additionally, the Board considered information comparing
the Advisory Agreement Rates and Net Advisory Rates (both on a stand-alone basis
and on a combined basis with the Funds' administration fee rates) with those of
the other funds in the Expense Peer Group. The Board concluded that the Advisory
Agreement Rates and Net Advisory Rates represented reasonable compensation to
CMA, in light of the nature, extent and quality of the services provided to the
Funds, the fees paid and expenses borne by comparable funds and the costs that
CMA incurs in providing these services to the Funds.
PROFITABILITY
The Board considered a detailed profitability analysis of CMA based on 2003
financial statements, adjusted to take into account advisory fee reductions
implemented in November 2003 and proposed reductions under the NYAG proposed
settlement. The Board concluded that, in light of the costs of providing
investment management and other services to the Funds, the profits and other
ancillary benefits that CMA and its affiliates received for providing these
services to the Funds were not unreasonable.
ECONOMIES OF SCALE
In evaluating potential economies of scale, the Board considered CMA's proposal
to implement a standardized breakpoint schedule for combined
51
<Page>
advisory and administrative fees for the majority of the funds of the same
general asset type within the Columbia Funds complex (other than index and
closed-end funds). The Board noted that the standardization of the breakpoints
would not result in a fee increase for any Fund. The Board concluded that any
actual or potential economies of scale are, or will be, shared fairly with Fund
shareholders, including most particularly through Advisory Agreement Rate
breakpoints at current and reasonably foreseeable asset levels.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
In evaluating the proposed fee reductions under the NYAG agreement in principle,
the Board considered information regarding the advisory fee rates charged by
BACAP for the Nations Funds. Members of the Committee and the Board had also
separately reviewed advisory fee rates for variable insurance product funds
advised by CMA. This information assisted the Board in assessing the
reasonableness of fees paid under the Advisory Agreements in light of the
nature, extent and quality of services provided under those agreements.
OTHER BENEFITS TO CMA
The Board considered information regarding potential "fall-out" or ancillary
benefits received by CMA and its affiliates as a result of their relationship
with the Funds. These benefits could include benefits directly attributable to
the relationship of CMA with the Funds (such as soft dollar credits) and
benefits potentially derived from an increase in the business of CMA as a result
of their relationship with the Funds (such as the ability to market to
shareholders other financial products offered by CMA and its affiliates).
OTHER FACTORS AND BROADER REVIEW
The Board reviews detailed materials provided by CMA annually as part of the
approval process under Section 15(c) of the 1940 Act. The Board also regularly
reviews and assesses the quality of the services that the Funds receive
throughout the year. In this regard, the Board reviews information provided by
CMA at their regular meetings, including, among other things, a detailed
portfolio review, and detailed fund performance reports. In addition, the Board
interviews the heads of each investment area at each regular meeting of the
Board and selected portfolio managers of the Funds at various times throughout
the year. After considering the above-described factors and based on the
deliberations and their evaluation of the information provided to them, the
Board concluded that re-approval of the Advisory Agreements for each of the
Funds was in the best interest of the Funds and their shareholders. Accordingly,
the Board unanimously approved the Advisory Agreements.
52
<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 policies and procedures that the fund uses to determine how
to vote proxies and a copy of the fund's voting record are available (i) at
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. Columbia
Management Advisors, Inc. (CMA) is a SEC registered investment advisor and
wholly owned subsidiary of Bank of America, N.A. CMA is part of Columbia
Management.
53
<Page>
[GRAPHIC]
Help your fund reduce printing and postage costs! Elect to get your shareholder
reports by eletronic 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 ANNUAL REPORT, MAY 31, 2005 PRSRT STD
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
[COLUMBIA MANAGEMENT(R) LOGO]
(C)2005 COLUMBIA FUNDS DISTRIBUTOR, INC.
ONE FINANCIAL CENTER, BOSTON, MA 02111-2621
800.345.6611 www.columbiafunds.com
SHC-42/87062-0605 (07/05) 05/6594
<Page>
[GRAPHIC]
COLUMBIA STRATEGIC INCOME FUND
ANNUAL REPORT
MAY 31, 2005
<Page>
TABLE OF CONTENTS
<Table>
Performance Information 1
Fund Profile 2
Understanding Your Expenses 3
Economic Update 4
Portfolio Managers' 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 43
Report of Independent Registered
Public Accounting Firm 48
Trustees 49
Officers 51
Board Consideration and Approval of
Investment Advisory Agreement 52
Columbia Funds 55
Important Information
About This Report 57
</Table>
The views expressed in the President's Message and Portfolio Managers' Report
reflect the current views of the respective parties. These views are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict so actual outcomes and results may
differ significantly from the views expressed. These views are subject to change
at any time based upon economic, market or other conditions and the respective
parties disclaim any responsibility to update such views. These views may not be
relied on as investment advice and, because investment decisions for a Columbia
Fund are based on numerous factors, may not be relied on as an indication of
trading intent on behalf of any particular Columbia Fund. References to specific
company securities should not be construed as a recommendation or investment
advice.
NOT FDIC MAY LOSE VALUE
INSURED -------------------
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
COLUMBIA STRATEGIC INCOME FUND
[PHOTO OF CHRISTOPHER L. WILSON]
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 may
offer significant benefits for our shareholders. Plans are underway to combine
various Nations Funds and Columbia Funds together to form 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 help 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 may affect you and your account. In this
matter, your timely response will help us to implement the changes in 2005.
The increased efficiencies we expect from a more streamlined 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, we recently announced plans to consolidate the transfer agency of all
of our funds and consolidate custodial services, each under a single vendor. We
have also reduced management fees for many funds as part of our settlement
agreement (See Note 8 in the Notes to Financial Statements) 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 better 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
PRESIDENT, COLUMBIA FUNDS
Christopher L. Wilson is Head of Mutual Funds for Columbia Management, President
of Columbia Funds, President & CEO of Nations Funds and President of Galaxy
Funds, 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 joined Bank of America in August
2004.
<Page>
PERFORMANCE INFORMATION
COLUMBIA STRATEGIC INCOME FUND
[CHART]
VALUE OF A $10,000 INVESTMENT 06/01/95 - 05/31/05
<Table>
<Caption>
CLASS A SHARES WITHOUT SALES CHARGE CLASS A SHARES WITH SALES CHARGE LEHMAN BROTHERS GOVERNMENT/CREDIT BOND INDEX
06/1/1995 $ 10,000 $ 9,525 $ 10,000
6/30/1995 $ 10,026 $ 9,550 $ 10,080
7/31/1995 $ 10,138 $ 9,657 $ 10,041
8/31/1995 $ 10,179 $ 9,695 $ 10,169
9/30/1995 $ 10,366 $ 9,874 $ 10,273
10/31/1995 $ 10,510 $ 10,011 $ 10,424
11/30/1995 $ 10,626 $ 10,121 $ 10,596
12/31/1995 $ 10,832 $ 10,317 $ 10,752
1/31/1996 $ 11,009 $ 10,486 $ 10,818
2/29/1996 $ 10,915 $ 10,397 $ 10,589
3/31/1996 $ 10,881 $ 10,364 $ 10,500
4/30/1996 $ 10,955 $ 10,435 $ 10,428
5/31/1996 $ 10,983 $ 10,461 $ 10,410
6/30/1996 $ 11,042 $ 10,517 $ 10,548
7/31/1996 $ 11,101 $ 10,574 $ 10,573
8/31/1996 $ 11,256 $ 10,721 $ 10,546
9/30/1996 $ 11,491 $ 10,945 $ 10,734
10/31/1996 $ 11,647 $ 11,094 $ 10,984
11/30/1996 $ 11,917 $ 11,351 $ 11,186
12/31/1996 $ 11,943 $ 11,375 $ 11,062
1/31/1997 $ 11,939 $ 11,372 $ 11,075
2/28/1997 $ 12,034 $ 11,463 $ 11,098
3/31/1997 $ 11,799 $ 11,238 $ 10,966
4/30/1997 $ 11,928 $ 11,362 $ 11,127
5/31/1997 $ 12,143 $ 11,566 $ 11,230
6/30/1997 $ 12,308 $ 11,724 $ 11,365
7/31/1997 $ 12,611 $ 12,012 $ 11,712
8/31/1997 $ 12,557 $ 11,960 $ 11,581
9/30/1997 $ 12,829 $ 12,220 $ 11,763
10/31/1997 $ 12,791 $ 12,183 $ 11,951
11/30/1997 $ 12,857 $ 12,247 $ 12,015
12/31/1997 $ 12,972 $ 12,356 $ 12,141
1/31/1998 $ 13,181 $ 12,554 $ 12,312
2/28/1998 $ 13,231 $ 12,602 $ 12,287
3/31/1998 $ 13,335 $ 12,702 $ 12,326
4/30/1998 $ 13,403 $ 12,767 $ 12,387
5/31/1998 $ 13,454 $ 12,815 $ 12,520
6/30/1998 $ 13,450 $ 12,811 $ 12,647
7/31/1998 $ 13,570 $ 12,925 $ 12,657
8/31/1998 $ 13,008 $ 12,390 $ 12,904
9/30/1998 $ 13,272 $ 12,642 $ 13,273
10/31/1998 $ 13,249 $ 12,620 $ 13,179
11/30/1998 $ 13,644 $ 12,996 $ 13,258
12/31/1998 $ 13,640 $ 12,992 $ 13,291
1/31/1999 $ 13,733 $ 13,081 $ 13,386
2/28/1999 $ 13,554 $ 12,911 $ 13,067
3/31/1999 $ 13,746 $ 13,093 $ 13,132
4/30/1999 $ 13,938 $ 13,276 $ 13,165
5/31/1999 $ 13,638 $ 12,991 $ 13,030
6/30/1999 $ 13,634 $ 12,987 $ 12,989
7/31/1999 $ 13,629 $ 12,981 $ 12,953
8/31/1999 $ 13,565 $ 12,920 $ 12,943
9/30/1999 $ 13,601 $ 12,955 $ 13,059
10/31/1999 $ 13,597 $ 12,951 $ 13,093
11/30/1999 $ 13,717 $ 13,065 $ 13,085
12/31/1999 $ 13,816 $ 13,159 $ 13,005
1/31/2000 $ 13,665 $ 13,016 $ 13,001
2/29/2000 $ 13,871 $ 13,213 $ 13,164
3/31/2000 $ 13,802 $ 13,146 $ 13,355
4/30/2000 $ 13,670 $ 13,020 $ 13,289
5/31/2000 $ 13,515 $ 12,873 $ 13,277
6/30/2000 $ 13,792 $ 13,137 $ 13,548
7/31/2000 $ 13,897 $ 13,237 $ 13,692
8/31/2000 $ 14,004 $ 13,339 $ 13,885
9/30/2000 $ 13,844 $ 13,187 $ 13,938
10/31/2000 $ 13,549 $ 12,906 $ 14,026
11/30/2000 $ 13,297 $ 12,666 $ 14,265
12/31/2000 $ 13,724 $ 13,072 $ 14,546
1/31/2001 $ 14,291 $ 13,612 $ 14,791
2/28/2001 $ 14,310 $ 13,630 $ 14,943
3/31/2001 $ 13,979 $ 13,315 $ 15,012
4/30/2001 $ 13,830 $ 13,173 $ 14,899
5/31/2001 $ 13,914 $ 13,253 $ 14,986
6/30/2001 $ 13,739 $ 13,086 $ 15,058
7/31/2001 $ 13,825 $ 13,168 $ 15,433
8/31/2001 $ 14,057 $ 13,390 $ 15,630
9/30/2001 $ 13,596 $ 12,951 $ 15,774
10/31/2001 $ 13,992 $ 13,327 $ 16,175
11/30/2001 $ 14,167 $ 13,494 $ 15,909
12/31/2001 $ 14,144 $ 13,472 $ 15,784
1/31/2002 $ 14,171 $ 13,498 $ 15,899
2/28/2002 $ 14,198 $ 13,524 $ 16,034
3/31/2002 $ 14,243 $ 13,567 $ 15,708
4/30/2002 $ 14,520 $ 13,830 $ 16,013
5/31/2002 $ 14,592 $ 13,899 $ 16,161
6/30/2002 $ 14,353 $ 13,671 $ 16,298
7/31/2002 $ 14,184 $ 13,510 $ 16,493
8/31/2002 $ 14,411 $ 13,726 $ 16,863
9/30/2002 $ 14,480 $ 13,792 $ 17,225
10/31/2002 $ 14,510 $ 13,821 $ 17,060
11/30/2002 $ 14,835 $ 14,131 $ 17,070
12/31/2002 $ 15,270 $ 14,545 $ 17,523
1/31/2003 $ 15,490 $ 14,754 $ 17,523
2/28/2003 $ 15,766 $ 15,017 $ 17,835
3/31/2003 $ 15,907 $ 15,152 $ 17,811
4/30/2003 $ 16,518 $ 15,734 $ 18,002
5/31/2003 $ 16,964 $ 16,158 $ 18,513
6/30/2003 $ 17,107 $ 16,294 $ 18,439
7/31/2003 $ 16,688 $ 15,895 $ 17,667
8/31/2003 $ 16,776 $ 15,979 $ 17,783
9/30/2003 $ 17,345 $ 16,521 $ 18,347
10/31/2003 $ 17,433 $ 16,605 $ 18,114
11/30/2003 $ 17,751 $ 16,907 $ 18,163
12/31/2003 $ 18,216 $ 17,350 $ 18,343
1/31/2004 $ 18,363 $ 17,491 $ 18,510
2/29/2004 $ 18,455 $ 17,578 $ 18,735
3/31/2004 $ 18,604 $ 17,721 $ 18,908
4/30/2004 $ 18,134 $ 17,272 $ 18,327
5/31/2004 $ 18,020 $ 17,164 $ 18,234
6/30/2004 $ 18,203 $ 17,339 $ 18,309
7/31/2004 $ 18,420 $ 17,545 $ 18,503
8/31/2004 $ 18,790 $ 17,898 $ 18,895
9/30/2004 $ 19,070 $ 18,164 $ 18,961
10/31/2004 $ 19,413 $ 18,491 $ 19,126
11/30/2004 $ 19,757 $ 18,819 $ 18,914
12/31/2004 $ 20,047 $ 19,095 $ 19,114
1/31/2005 $ 19,959 $ 19,011 $ 19,248
2/28/2005 $ 20,125 $ 19,169 $ 19,121
3/31/2005 $ 19,716 $ 18,780 $ 18,987
4/30/2005 $ 19,787 $ 18,847 $ 19,272
05/31/2005 $ 19,872 $ 18,928 $ 19,514
</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 05/31/05 (%)
<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
-----------------------------------------------------------------------------------------------------------------
1-year 10.37 5.12 9.55 4.55 9.71 8.71 10.01 6.71 10.53
5-year 8.02 6.97 7.22 6.92 7.37 7.37 7.65 6.99 8.14
10-year 7.11 6.59 6.31 6.31 6.44 6.44 6.86 6.54 7.20
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF 03/31/05 (%)
<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
-----------------------------------------------------------------------------------------------------------------
1-year 5.95 0.92 5.17 0.26 5.32 4.34 5.61 2.44 6.43
5-year 7.38 6.34 6.58 6.28 6.74 6.74 7.01 6.36 7.54
10-year 7.56 7.03 6.76 6.76 6.88 6.88 7.32 6.99 7.66
</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, 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 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 shares and the newer class shares. Had the expense differential
been reflected, the returns 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 $10,000 INVESTMENT
06/01/95 - 05/31/05 ($)
<Table>
<Caption>
SALES CHARGE WITHOUT WITH
----------------------------------------------------------------------------
Class A 19,872 18,928
Class B 18,442 18,442
Class C 18,660 18,660
Class J 19,423 18,840
Class Z 20,050 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.
1
<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.
PORTFOLIO STRUCTURE AS OF 05/31/05 (%)
<Table>
Government agencies & obligations 53.4
Corporate fixed-income
bonds & notes 38.0
Mortgage-backed securities 5.3
Asset-backed securities 0.7
Convertible bonds 0.3
Municipal bond (taxable) 0.2
Cash equivalents, net other
assets & liabilities 2.1
</Table>
QUALITY BREAKDOWN AS OF 05/31/05 (%)
<Table>
AAA 44.8
AA 1.7
A 1.3
BBB 6.6
BB 9.2
B 22.0
CCC 11.1
CC 1.8
Non-rated 1.5
</Table>
Quality breakdown is calculated as a percentage of total investments. Ratings
shown in the quality breakdown represent the 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 is 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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[SIDENOTE]
SUMMARY
- - FOR THE 12-MONTH PERIOD ENDED MAY 31, 2005, THE FUND'S CLASS A SHARES
RETURNED 10.37% WITHOUT SALES CHARGE.
- - THE FUND OUTPERFORMED BOTH ITS BENCHMARK AND ITS PEER GROUP, IN LARGE PART
BECAUSE OF ITS WILLINGNESS TO TAKE ON SOME ADDITIONAL RISK IN ORDER TO
PRODUCE HIGHER CURRENT YIELDS.
- - PERFORMANCE BENEFITED FROM EXPOSURE TO HIGH-YIELD AND FOREIGN GOVERNMENT
BONDS, INCLUDING EMERGING MARKETS, WHICH WERE THE STRONGEST ASSET CLASSES
DURING THE PERIOD.
<Table>
CLASS A SHARES 10.37%
LEHMAN BROTHERS GOVERNMENT/CREDIT BOND INDEX 7.00%
</Table>
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. It is unmanaged and
unavailable for investment.
OBJECTIVE
Seeks current income consistent with prudent risk
and also seeks maximum total return
TOTAL NET ASSETS
$1,276.1 million
MANAGEMENT STYLE
<Table>
<Caption>
FIXED INCOME MATURITY
SHORT INTERM. LONG
QUALITY
LOW
MED X
HIGH
</Table>
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 ongoing costs, which generally
include investment advisory fees, 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
$1,000, which is invested at the beginning of the reporting period and held for
the entire period. Expense information is calculated two ways and each method
provides you with different information. The amount listed in the "actual"
column is calculated using the fund's actual operating expenses and total return
for the period. The amount listed in the "hypothetical" column for each share
class assumes that the return each year is 5% before expenses and includes the
fund's actual expense ratio. You should not use the hypothetical account values
and expenses to estimate either your actual account balance at the end of the
period or the expenses you paid during this reporting period.
12/01/04 - 05/31/05
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
Class A 1,000.00 1,000.00 1,006.68 1,019.75 5.20 5.24 1.04
Class B 1,000.00 1,000.00 1,004.54 1,016.01 8.95 9.00 1.79
Class C 1,000.00 1,000.00 1,003.64 1,016.75 8.19 8.25 1.64
Class J 1,000.00 1,000.00 1,006.58 1,018.00 6.95 6.99 1.39
Class Z 1,000.00 1,000.00 1,007.93 1,020.94 4.00 4.03 0.80
</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 shares'
expenses, class C shares' 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 or 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 funds 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
ECONOMIC UPDATE
The US economy moved ahead at a steady pace during the 12-month period that
began June 1, 2004 and ended May 31, 2005. Gross domestic product (GDP) expanded
at an estimated annualized rate of approximately 3.7% as job growth helped buoy
consumer spending and rising profits boosted business spending. Record high
energy prices failed to put a damper on growth as the economy actually gained
strength as the period wore on.
Job growth dominated the economic news and drove consumer confidence readings
both up and down, depending on the number of new jobs reported. Overall, the
labor market improved during the period and consumers remained significantly
more optimistic about prospects for the US economy and about their own
employment than they were a year ago.
Consumer spending grew during the period, as retail sales and the housing market
remained strong. The business sector also contributed to the economy's solid
pace. Yet, given a maturing economic cycle, two straight years of double-digit
profit growth and a significant build-up of cash on corporate balance sheets,
business spending was not as robust as expected.
BONDS DELIVERED SOLID GAINS
The US bond market delivered solid returns despite rising short-term interest
rates, which historically have driven yields on other maturity ranges
higher--and bond prices lower. That was not the case over the past 12 months.
After a brief period of volatility early in 2005, the yield on the 10-year U.S.
Treasury note, a bellwether for the bond market, ended the period at
4.0%--significantly lower than where it started the period at 4.6%.
In this environment, the Lehman Brothers Aggregate Bond Index returned 6.82% for
the 12-month period. Municipal bonds did even better as state revenues
strengthened and fiscal constraints helped many states balance their budgets.
High-yield bonds led the fixed income markets, as a stronger economy resulted in
improved credit ratings, stronger balance sheets and higher profits for many
companies in the high-yield universe. The Merrill Lynch US High Yield, Cash Pay
Index returned 10.16%. However, the sector was hit hard late in the period by
news that GM and Ford bonds had been downgraded to junk status, and high-yield
bonds gave back a portion of their earlier gains in the final months of the
period. The riskiest high-yield bonds were hurt the most.
SHORT-TERM INTEREST RATES MOVED HIGHER
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 3.0%(1) during the period. From the outset, the Fed indicated
that it would raise short-term interest rates at a "measured pace" in an attempt
to balance economic growth against inflationary pressures, and so far each of
the eight increases have been in one-quarter percentage point increments. In
recent testimony, Fed chairman Greenspan suggested that future increases would
likely follow the same gradual course.
STOCKS OUTPERFORMED BONDS
Buoyed by strong gains in the fourth quarter of 2004, the S&P 500 Index returned
8.24% for the period. Returns were lackluster throughout most of 2004, but most
segments of the stock market bounced back after the presidential election was
settled in November. Stocks retreated early in 2005 as rising energy prices and
higher interest rates turned investors cautious once again. Small and mid-cap
stocks did significantly better than large cap stocks in the first half of the
period, but large-cap stocks pulled ahead in the second half. Value stocks led
growth stocks by a significant margin.
(1) On June 30, the federal funds rate was raised to 3.25%.
[SIDENOTE]
SUMMARY FOR THE 12-MONTH PERIOD ENDED MAY 31, 2005
- - BONDS CHALKED UP SOLID GAINS AS MEASURED BY THE LEHMAN BROTHERS AGGREGATE
BOND INDEX. HIGH-YIELD BONDS LED THE FIXED INCOME MARKETS, AS MEASURED BY
THE MERRILL LYNCH US HIGH YIELD, CASH PAY INDEX. HOWEVER, THEY GAVE BACK
SOME OF THEIR RETURN IN THE LAST MONTHS OF THE PERIOD.
<Table>
LEHMAN INDEX 6.82%
MERRILL LYNCH INDEX 10.16%
</Table>
- - STOCKS OUTPERFORMED MOST SEGMENTS OF THE BOND MARKET, AS MEASURED BY THE
S&P 500 INDEX. MOST OF THE PERIOD'S GAINS WERE GENERATED DURING A
FOURTH-QUARTER RALLY IN 2004. VALUE STOCKS OUTPERFORMED GROWTH STOCKS, AS
MEASURED BY THE RUSSELL(R) 1000 VALUE INDEX.
<Table>
S&P 500 INDEX 8.24%
RUSSELL INDEX 15.49%
</Table>
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks the performance of fixed-rate, publicly placed, dollar-denominated, and
non-convertible investment grade debt issues.
The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that
tracks the performance of non-investment-grade corporate 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 STRATEGIC INCOME FUND
For the 12-month period ended May 31, 2005, class A shares of Columbia Strategic
Income Fund returned 10.37% without sales charge. Fund performance was greater
than the Lehman Brothers Government/Credit Bond Index, which returned 7.00% for
the period. The fund also exceeded the average return of the Lipper Multi-Sector
Income Funds Category, which was 9.81%.(1) All three of the fund's major
sectors--high-yield corporate, foreign government and US government bonds--made
positive contributions to total return. However, the fund's emphasis on
low-quality high-yield debt and emerging market debt was the most important
factor behind its above-average results.
HIGH-YIELD LED THE WAY
The high-yield segment, which accounted for approximately 39% of the fund's
assets during the past 12 months, made the most significant contribution to
overall performance. For most of the period, lower-quality assets outperformed
stronger credits as investors sought higher yields than those available from the
US Treasury market. This trend reversed itself in March and April, and we cut
back somewhat on lower quality credits.
FOREIGN INVESTMENTS ADDED TO RETURN
Investor interest in yield also benefited emerging market bonds, which accounted
for approximately 15% of the fund's assets. Higher prices for commodities such
as oil helped to drive the prices of emerging market exports higher, and many
countries were able to improve their fiscal positions. The fund's investments in
Brazil and Russia were especially productive during the period.
The fund's investments in developed markets were aided by favorable currency
translations, as the Canadian, Australian and New Zealand dollars rose strongly
versus the US dollar. The euro also outperformed the dollar for much of the
period, but gave back much of its gains late in the period amid uncertainty
related to the European constitution and its subsequent rejection by voters in
France and the Netherlands. However, the downward trends in European interest
rates allowed European bonds to outperform Treasury bonds over the 12-month
period. Altogether, the fund's investments in developed foreign markets
accounted for approximately 20% of the total portfolio.
TREASURIES PLAYED CATCH-UP
The US Treasury market got off to a slow start during the 12-month period, as
the Federal Reserve (the Fed) began what has become a protracted effort to push
up short-term interest rates. Given the higher-rate environment, Treasury bonds
with longer maturities held up surprisingly well, and produced positive results
for the period. Treasuries finished the period on a high note, having gained
momentum when the high-yield market began to retreat in March.
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return (assuming reinvestment of distributions) for mutual
funds with investment objectives similar to those of the fund. Lipper makes
no adjustment for the effect of sales loads.
[SIDENOTE]
NET ASSET VALUE PER SHARE AS OF 05/31/05 (%)
<Table>
Class A 6.15
Class B 6.15
Class C 6.15
Class J 6.14
Class Z 6.10
</Table>
DISTRIBUTIONS DECLARED PER SHARE 06/01/04 - 05/31/05 ($)
<Table>
Class A 0.48
Class B 0.44
Class C 0.45
Class J 0.46
Class Z 0.50
</Table>
SEC YIELDS AS OF 05/31/05 (%)
<Table>
Class A 5.15
Class B 4.66
Class C 4.81
Class J 4.81
Class Z 5.66
</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>
LOOKING AHEAD
With expectations of slightly slower economic growth in the United States and
the potential for increased political uncertainty in emerging markets, we have
reduced our commitment to some of the riskier areas of the fixed-income
marketplace. In the United States, we expect the Fed to continue to raise
short-term interest rates, but we do not envision the federal funds rate above
4.0%. Overseas, we expect the dollar to continue to move lower over time,
despite recent US dollar strength. As a result of currency gains over the past
few years, we have reduced our currency exposure to bring the fund more in line
with its peer group. Finally, we will continue to pay attention to political
developments in emerging markets, where elections slated in a number of
countries, including Mexico and Brazil, have the potential to affect their
respective bond markets in the year ahead.
[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
[PHOTO OF KEVIN L. CRONK]
Kevin L. Cronk, CFA, a member of the advisor's High Yield Portfolio Management
Team, has co-managed the fund since June 2005. Mr. Cronk joined an affiliate of
the advisor in August 1999 as a research analyst specializing in the chemicals,
healthcare and telecom industries.
/s/ Kevin L. Cronk
[PHOTO OF THOMAS A. LAPOINTE]
Thomas A. LaPointe, CFA, a member of the advisor's High Yield Portfolio
Management Team, has co-managed the fund since June 2005. Mr. LaPointe joined an
affiliate of the advisor in February 1999 as a senior member of the Fixed Income
Department's research group and has provided high-yield analytical support to
mutual funds investing in the metals, gaming and European telecom industries.
/s/ Thomas A. LaPointe
Investing in fixed-income securities may involve certain risks, including the
credit quality of individual issuers, possible prepayments, market or economic
developments and yield and share price fluctuations due to changes in interest
rates. When interest rates go up, bond prices typically drop, and vice versa.
Investing in high-yield or "junk bonds" offers the potential for higher income
than investments in investment-grade bonds but they also have a higher degree of
risk. Changes in economic conditions or other circumstances may adversely affect
a high-yield bond issuer's ability to make timely principal and interest
payments. High-yield bonds issued by foreign entities have greater potential
risks, including foreign taxation, currency fluctuations, risks associated with
possible differences in financial standards and other monetary and political
risks.
[SIDENOTE]
WITH EXPECTATIONS OF SLIGHTLY SLOWER ECONOMIC GROWTH IN THE UNITED STATES AND
THE POTENTIAL FOR INCREASED POLITICAL UNCERTAINTY IN EMERGING MARKETS, WE HAVE
REDUCED OUR COMMITMENT TO SOME OF THE RISKIER AREAS OF THE FIXED-INCOME
MARKETPLACE.
6
<Page>
INVESTMENT PORTFOLIO
May 31, 2005 COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
PAR VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
GOVERNMENT AGENCIES & OBLIGATIONS - 53.4%
FOREIGN GOVERNMENT BONDS - 33.1%
Aries Vermoegensverwaltungs GmbH 7.750% 10/25/09 (a) EUR 2,500,000 3,562,060
Corp. Andina de Fomento 6.375% 06/18/09 4,000,000 5,544,797
European Investment Bank 7.625% 12/07/07 GBP 5,110,000 9,988,795
Federal Republic of Brazil 4.250% 04/15/24 (b) USD 8,250,000 7,631,250
8.750% 02/04/25 2,475,000 2,493,563
11.500% 04/02/09 EUR 4,250,000 6,300,861
14.500% 10/15/09 USD 12,750,000 16,575,000
Federal Republic of Germany 4.250% 07/04/14 EUR 11,740,000 15,657,168
5.000% 07/04/12 5,010,000 6,964,347
6.000% 07/04/07 10,280,000 13,627,684
Government of Canada 5.250% 06/01/13 CAD 6,200,000 5,418,722
10.000% 06/01/08 24,110,000 23,017,108
Government of New Zealand 6.000% 11/15/11 NZD 21,400,000 15,303,488
6.500% 04/15/13 13,800,000 10,207,292
Kingdom of Norway 5.500% 05/15/09 NOK 41,770,000 7,070,301
6.000% 05/16/11 27,300,000 4,842,677
Kingdom of Spain 5.500% 07/30/17 EUR 7,635,000 11,306,596
Kingdom of Sweden 5.000% 01/28/09 SEK 153,580,000 22,447,832
6.750% 05/05/14 86,735,000 14,901,967
Republic of Bulgaria 8.250% 01/15/15 USD 7,065,000 8,840,434
Republic of Colombia 9.750% 04/09/11 5,095,403 5,745,067
11.500% 05/31/11 EUR 3,010,000 4,659,236
11.750% 02/25/20 USD 4,620,000 5,925,150
Republic of France 4.000% 04/25/14 EUR 8,220,000 10,743,753
Republic of Italy 5.000% 02/01/12 15,535,000 21,415,261
Republic of Panama 8.875% 09/30/27 USD 6,230,000 7,254,835
Republic of Peru 7.500% 10/14/14 EUR 2,475,000 3,374,110
9.875% 02/06/15 USD 6,100,000 7,417,600
Republic of Philippines 10.625% 03/16/25 3,100,000 3,472,000
Republic of Poland 8.500% 05/12/07 PLN 14,958,000 4,706,248
Republic of South Africa 5.250% 05/16/13 EUR 11,030,000 14,799,337
Republic of Venezuela 9.250% 09/15/27 USD 6,945,000 6,983,198
Russian Federation 5.000% 03/31/30 6,060,000 6,652,062
8.750% 07/24/05 5,000,000 5,035,000
11.000% 07/24/18 5,752,000 8,446,237
12.750% 06/24/28 7,430,000 13,212,026
</Table>
See Accompanying Notes to Financial Statements.
7
<Page>
<Table>
<Caption>
PAR VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
GOVERNMENT AGENCIES & OBLIGATIONS - (CONTINUED)
FOREIGN GOVERNMENT BONDS - (CONTINUED)
United Kingdom Treasury 5.000% 03/07/12 GBP 2,540,000 4,814,443
7.500% 12/07/06 6,535,000 12,443,816
9.000% 07/12/11 4,750,000 10,815,789
United Mexican States 7.500% 03/08/10 EUR 5,040,000 7,269,830
7.500% 04/08/33 USD 9,255,000 10,587,720
11.375% 09/15/16 7,590,000 11,339,460
Victoria Treasury Corp. 7.500% 08/15/08 AUD 15,195,000 12,217,537
Western Australia Treasury Corp. 8.000% 10/15/07 14,930,000 11,948,793
FOREIGN GOVERNMENT BONDS TOTAL 422,980,450
U.S. GOVERNMENT AGENCIES & OBLIGATIONS - 20.3%
Federal Farm Credit Banks 5.000% 08/25/10 USD 8,600,000 8,631,424
U.S. Treasury Bond 7.500% 11/15/24 12,000,000 16,851,096
8.875% 02/15/19 11,400,000 16,836,375
10.375% 11/15/12 52,000,000 60,098,584
10.625% 08/15/15 29,415,000 45,428,938
12.500% 08/15/14 52,151,000 69,745,861
U.S. Treasury Note 5.000% 02/15/11 19,500,000 20,711,126
7.000% 07/15/06 20,000,000 20,769,540
U.S. GOVERNMENT AGENCIES & OBLIGATIONS TOTAL 259,072,944
TOTAL GOVERNMENT AGENCIES & OBLIGATIONS
(COST OF $651,615,294) 682,053,394
CORPORATE FIXED-INCOME BONDS & NOTES - 38.0%
BASIC MATERIALS - 4.0%
CHEMICALS - 1.7%
AGRICULTURAL CHEMICALS - 0.7%
IMC Global, Inc. 10.875% 08/01/13 1,835,000 2,146,950
Terra Capital, Inc. 12.875% 10/15/08 2,990,000 3,535,675
UAP Holding Corp. (c) 07/15/12
(10.750% 01/15/08) 1,630,000 1,304,000
United Agri Products 8.250% 12/15/11 1,387,000 1,407,805
8,394,430
CHEMICALS - DIVERSIFIED - 0.8%
BCP Crystal US Holdings Corp. 9.625% 06/15/14 767,000 859,040
EquiStar Chemicals LP 10.625% 05/01/11 2,615,000 2,896,112
</Table>
See Accompanying Notes to Financial Statements.
8
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
BASIC MATERIALS -(CONTINUED)
CHEMICALS - (CONTINUED)
Huntsman International LLC 7.375% 01/01/15 (a) 1,145,000 1,124,963
Huntsman LLC 12.000% 07/15/12 (a) 1,735,000 1,995,250
Innophos Investments Holdings, Inc. PIK,
11.268% 02/15/15 (a)(b) 951,566 846,887
Lyondell Chemical Co. 9.625% 05/01/07 1,150,000 1,219,000
10.875% 05/01/09 20,000 20,600
NOVA Chemicals Corp. 6.500% 01/15/12 780,000 760,500
Westlake Chemical Corp. 8.750% 07/15/11 767,000 832,195
10,554,547
CHEMICALS - SPECIALTY - 0.2%
Rhodia SA 8.875% 06/01/11 2,435,000 2,319,337
2,319,337
Chemicals Total 21,268,314
FOREST PRODUCTS & PAPER - 1.2%
FORESTRY - 0.2%
Millar Western Forest Products Ltd. 7.750% 11/15/13 1,260,000 1,152,900
Tembec Industries, Inc. 8.500% 02/01/11 1,455,000 1,127,625
2,280,525
PAPER & RELATED PRODUCTS - 1.0%
Abitibi-Consolidated, Inc. 8.375% 04/01/15 1,235,000 1,213,387
Boise Cascade LLC 6.016% 10/15/12 (a)(b) 915,000 896,700
7.125% 10/15/14 (a) 1,030,000 975,925
Buckeye Technologies, Inc. 8.500% 10/01/13 1,165,000 1,199,950
Caraustar Industries, Inc. 9.875% 04/01/11 1,145,000 1,113,513
Fraser Papers, Inc. 8.750% 03/15/15 (a) 1,360,000 1,232,500
Georgia-Pacific Corp. 8.000% 01/15/24 1,025,000 1,173,625
Neenah Paper, Inc. 7.375% 11/15/14 (a) 680,000 642,600
Newark Group, Inc. 9.750% 03/15/14 2,025,000 1,761,750
NewPage Corp. 10.000% 05/01/12 (a) 835,000 818,300
12.000% 05/01/13 (a) 1,040,000 1,016,600
Norske Skog Canada Ltd. 8.625% 06/15/11 850,000 858,500
12,903,350
Forest Products & Paper Total 15,183,875
</Table>
See Accompanying Notes to Financial Statements.
9
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
BASIC MATERIALS - (CONTINUED)
IRON/STEEL - 0.4%
METAL - IRON - 0.1%
Wise Metals Group LLC 10.250% 05/15/12 2,295,000 1,904,850
1,904,850
STEEL - PRODUCERS - 0.1%
Steel Dynamics, Inc. 9.500% 03/15/09 940,000 1,001,100
1,001,100
STEEL - SPECIALTY - 0.2%
UCAR Finance, Inc. 10.250% 02/15/12 2,200,000 2,293,500
2,293,500
Iron/Steel Total 5,199,450
METALS & MINING - 0.7%
METAL - ALUMINUM - 0.2%
Kaiser Aluminum & Chemical Corp. 10.875% 10/15/06 (d) 3,200,000 2,800,000
2,800,000
MINING SERVICES - 0.0%
HudBay Mining & Smelting Co., Ltd. 9.625% 01/15/12 (a) 515,000 499,550
499,550
NON-FERROUS METALS - 0.5%
Codelco, Inc. 5.500% 10/15/13 6,000,000 6,200,400
6,200,400
Metals & Mining Total 9,499,950
------------
BASIC MATERIALS TOTAL 51,151,589
COMMUNICATIONS - 8.4%
MEDIA - 4.0%
BROADCAST SERVICES/PROGRAMS - 0.2%
Fisher Communications, Inc. 8.625% 09/15/14 925,000 982,813
XM Satellite Radio Holdings, Inc. 8.710% 05/01/09 (b) 1,380,000 1,393,800
2,376,613
CABLE TV - 1.5%
Atlantic Broadband Finance LLC 9.375% 01/15/14 (a) 1,965,000 1,847,100
Cablevision Systems Corp. 7.880% 04/01/09 (a)(b) 1,580,000 1,651,100
8.000% 04/15/12 (a) 620,000 647,125
Charter Communications Holdings LLC 9.920% 04/01/11 8,080,000 5,898,400
10.250% 09/15/10 1,130,000 1,144,125
</Table>
See Accompanying Notes to Financial Statements.
10
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES -(CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - (CONTINUED)
CSC Holdings, Inc. 6.750% 04/15/12 (a) 665,000 673,312
7.625% 04/01/11 825,000 874,500
Insight Midwest LP 9.750% 10/01/09 1,020,000 1,065,900
Northland Cable Television, Inc. 10.250% 11/15/07 1,985,000 1,955,225
Pegasus Satellite Communications, Inc. 11.250% 01/15/10 (a)(d) 2,290,000 1,316,750
Telenet Group Holding NV (c) 06/15/14
(11.500% 12/15/08) (a) 2,210,000 1,624,350
18,697,887
MULTIMEDIA - 0.6%
Advanstar Communications, Inc. (c) 10/15/11
(15.000% 10/15/05) 1,555,000 1,508,350
12.000% 02/15/11 1,615,000 1,699,788
Haights Cross Communications, Inc. (c) 08/15/11
(12.500% 02/15/09) 1,735,000 1,058,350
Haights Cross Operating Co. 11.750% 08/15/11 1,690,000 1,833,650
11.750% 08/15/11 (a) 655,000 710,675
Quebecor Media, Inc. 11.125% 07/15/11 1,260,000 1,395,450
8,206,263
PUBLISHING - NEWSPAPERS - 0.2%
Hollinger, Inc. 11.875% 03/01/11 (a)(e) 734,000 756,020
12.875% 03/01/11 (a) 1,072,000 1,179,200
1,935,220
PUBLISHING - PERIODICALS - 0.9%
CBD Media Holdings LLC & Finance, Inc. 9.250% 07/15/12 1,160,000 1,131,000
Dex Media East LLC 12.125% 11/15/12 877,000 1,050,208
Dex Media West LLC 9.875% 08/15/13 3,471,000 3,974,295
Dex Media, Inc. (c) 11/15/13
(9.000% 11/15/08) 1,375,000 1,096,562
PriMedia, Inc. 8.875% 05/15/11 2,330,000 2,440,675
WDAC Subsidiary Corp. 8.375% 12/01/14 (a) 1,455,000 1,360,425
11,053,165
RADIO - 0.2%
Spanish Broadcasting System, Inc. 9.625% 11/01/09 2,325,000 2,444,156
2,444,156
</Table>
See Accompanying Notes to Financial Statements.
11
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
MEDIA - (CONTINUED)
TELEVISION - 0.4%
Paxson Communications Corp. (c) 01/15/09
(12.250% 01/15/06) 1,775,000 1,641,875
10.750% 07/15/08 2,215,000 2,159,625
Sinclair Broadcast Group, Inc. 8.750% 12/15/11 1,740,000 1,844,400
5,645,900
Media Total 50,359,204
TELECOMMUNICATION SERVICES - 4.4%
CELLULAR TELECOMMUNICATIONS - 1.8%
American Cellular Corp. 10.000% 08/01/11 1,430,000 1,394,250
Dobson Cellular Systems 8.375% 11/01/11 (a) 450,000 456,750
Dobson Communications Corp. 8.875% 10/01/13 2,720,000 2,210,000
Horizon PCS, Inc. 11.375% 07/15/12 (a) 945,000 1,037,137
iPCS Escrow Co. 11.500% 05/01/12 705,000 779,025
Nextel Communications, Inc. 7.375% 08/01/15 2,860,000 3,095,950
Nextel Partners, Inc. 8.125% 07/01/11 1,820,000 1,979,250
Rogers Cantel, Inc. 9.750% 06/01/16 1,890,000 2,268,000
Rogers Wireless, Inc. 8.000% 12/15/12 1,125,000 1,203,750
Rural Cellular Corp. 8.250% 03/15/12 1,215,000 1,234,744
UbiquiTel Operating Co. 9.875% 03/01/11 2,170,000 2,343,600
US Unwired, Inc. 10.000% 06/15/12 2,465,000 2,699,175
Western Wireless Corp. 9.250% 07/15/13 2,205,000 2,513,700
23,215,331
SATELLITE TELECOMMUNICATIONS - 0.5%
Inmarsat Finance II PLC (c) 11/15/12
(10.375% 11/15/08) 2,090,000 1,536,150
Intelsat Bermuda Ltd. 8.250% 01/15/13 (a) 2,230,000 2,263,450
New Skies Satellites NV 9.125% 11/01/12 (a) 1,035,000 1,024,650
PanAmSat Corp. 9.000% 08/15/14 592,000 643,800
Zeus Special Subsidiary Ltd. (c) 02/01/15
(9.250% 02/01/10) (a) 1,620,000 1,020,600
6,488,650
</Table>
See Accompanying Notes to Financial Statements.
12
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
TELECOMMUNICATION SERVICES - (CONTINUED)
TELECOMMUNICATION EQUIPMENT - 0.1%
Lucent Technologies, Inc. 6.450% 03/15/29 1,700,000 1,470,500
1,470,500
TELECOMMUNICATION SERVICES - 0.4%
Axtel SA 11.000% 12/15/13 2,260,000 2,412,550
Time Warner Telecom, Inc. 9.750% 07/15/08 1,060,000 1,060,000
10.125% 02/01/11 1,995,000 1,935,150
5,407,700
TELEPHONE - INTEGRATED - 1.3%
Cincinnati Bell, Inc. 8.375% 01/15/14 2,685,000 2,638,012
Qwest Capital Funding, Inc. 7.250% 02/15/11 4,390,000 4,060,750
7.750% 02/15/31 2,065,000 1,688,138
Qwest Services Corp. 13.500% 12/15/10 (a) 5,505,000 6,248,175
US LEC Corp. 11.890% 10/01/09 (b) 1,040,000 1,073,800
15,708,875
WIRELESS EQUIPMENT - 0.3%
American Towers, Inc. 7.250% 12/01/11 1,465,000 1,534,587
SBA Telecommunications, Inc. (c) 12/15/11
(9.750% 12/15/07) 1,540,000 1,347,500
SpectraSite, Inc. 8.250% 05/15/10 785,000 830,138
3,712,225
Telecommunication Services Total 56,003,281
------------
COMMUNICATIONS TOTAL 106,362,485
CONSUMER CYCLICAL - 7.6%
AIRLINES - 0.4%
AIRLINES - 0.4%
Continental Airlines, Inc. 7.568% 12/01/06 2,780,000 2,307,400
Northwest Airlines, Inc. 9.875% 03/15/07 3,445,000 2,153,125
4,460,525
Airlines Total 4,460,525
APPAREL - 0.5%
APPAREL MANUFACTURERS - 0.5%
Broder Brothers Co. 11.250% 10/15/10 795,000 822,825
11.250% 10/15/10 (a) 670,000 693,450
</Table>
See Accompanying Notes to Financial Statements.
13
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
APPAREL - (CONTINUED)
Levi Strauss & Co. 9.750% 01/15/15 (a) 3,850,000 3,744,125
Phillips-Van Heusen Corp. 7.250% 02/15/11 815,000 833,337
8.125% 05/01/13 870,000 913,500
7,007,237
Apparel Total 7,007,237
AUTO MANUFACTURERS - 0.2%
AUTO - CARS/LIGHT TRUCKS - 0.1%
General Motors Corp. 8.375% 07/15/33 1,300,000 1,001,000
1,001,000
AUTO - MEDIUM & HEAVY DUTY TRUCKS - 0.1%
Navistar International Corp. 7.500% 06/15/11 1,535,000 1,546,513
1,546,513
Auto Manufacturers Total 2,547,513
AUTO PARTS & EQUIPMENT - 0.8%
AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 0.4%
Cooper-Standard Automotive, Inc. 8.375% 12/15/14 3,000,000 2,490,000
Delco Remy International, Inc. 9.375% 04/15/12 1,900,000 1,444,000
Dura Operating Corp. 8.625% 04/15/12 1,740,000 1,574,700
5,508,700
AUTO/TRUCK PARTS & EQUIPMENT -
REPLACEMENT - 0.1%
Rexnord Corp. 10.125% 12/15/12 1,040,000 1,094,600
1,094,600
RUBBER - TIRES - 0.3%
Goodyear Tire & Rubber Co. 7.857% 08/15/11 2,365,000 2,264,487
12.250% 03/01/11 685,000 760,350
3,024,837
Auto Parts & Equipment Total 9,628,137
DISTRIBUTION/WHOLESALE - 0.1%
DISTRIBUTION/WHOLESALE - 0.1%
Buhrmann US, Inc. 7.875% 03/01/15 (a) 795,000 763,200
763,200
Distribution/Wholesale Total 763,200
</Table>
See Accompanying Notes to Financial Statements.
14
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
ENTERTAINMENT - 1.1%
GAMBLING (NON-HOTEL) - 0.1%
Global Cash Access LLC 8.750% 03/15/12 1,945,000 2,090,875
2,090,875
MUSIC - 0.4%
Steinway Musical Instruments, Inc. 8.750% 04/15/11 1,260,000 1,310,400
Warner Music Group 7.375% 04/15/14 1,920,000 1,910,400
WMG Holdings Corp. PIK,
9.760% 12/15/14 (a)(b) 1,400,000 1,384,771
4,605,571
RESORTS/THEME PARKS - 0.2%
Six Flags, Inc. 9.625% 06/01/14 3,325,000 2,876,125
2,876,125
THEATERS - 0.4%
AMC Entertainment, Inc. 9.875% 02/01/12 2,900,000 2,885,587
LCE Acquisition Corp. 9.000% 08/01/14 (a) 1,815,000 1,760,550
4,646,137
Entertainment Total 14,218,708
HOME BUILDERS - 0.6%
BUILDING - RESIDENTIAL/COMMERCIAL - 0.6%
D.R. Horton, Inc. 9.750% 09/15/10 2,855,000 3,354,625
K. Hovnanian Enterprises, Inc. 8.875% 04/01/12 1,270,000 1,352,550
10.500% 10/01/07 1,470,000 1,617,000
Standard-Pacific Corp. 9.250% 04/15/12 1,770,000 1,947,000
8,271,175
Home Builders Total 8,271,175
HOME FURNISHINGS - 0.2%
APPLIANCES - 0.1%
ALH Finance LLC 8.500% 01/15/13 1,660,000 1,502,300
1,502,300
HOME FURNISHINGS - 0.1%
WII Components, Inc. 10.000% 02/15/12 1,640,000 1,599,000
1,599,000
Home Furnishings Total 3,101,300
</Table>
See Accompanying Notes to Financial Statements.
15
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
LEISURE TIME - 0.5%
LEISURE & RECREATIONAL PRODUCTS - 0.1%
K2, Inc. 7.375% 07/01/14 990,000 1,024,650
1,024,650
RECREATIONAL CENTERS - 0.4%
AMF Bowling Worldwide, Inc. 10.000% 03/01/10 1,825,000 1,825,000
Equinox Holdings, Inc. 9.000% 12/15/09 1,930,000 1,978,250
Town Sports International, Inc. (c) 02/01/14
(11.000% 02/01/09) 2,395,000 1,377,125
5,180,375
Leisure Time Total 6,205,025
LODGING - 1.9%
CASINO HOTELS - 1.9%
Circus & Eldorado/Silver Legacy Capital Corp. 10.125% 03/01/12 1,740,000 1,822,650
Hard Rock Hotel, Inc. 8.875% 06/01/13 2,040,000 2,172,600
Hollywood Casino Shreveport 13.000% 08/01/06 (f) 5,220,000 4,254,300
Inn of the Mountain Gods Resort & Casino 12.000% 11/15/10 1,710,000 1,975,050
MGM Mirage 6.750% 09/01/12 2,135,000 2,188,375
Mohegan Tribal Gaming Authority 6.125% 02/15/13 (a) 1,025,000 1,030,125
Penn National Gaming, Inc. 6.750% 03/01/15 (a) 1,890,000 1,899,450
Pinnacle Entertainment, Inc. 8.250% 03/15/12 880,000 884,400
8.750% 10/01/13 1,550,000 1,604,250
River Rock Entertainment 9.750% 11/01/11 1,165,000 1,258,200
Seneca Gaming Corp. 7.250% 05/01/12 1,540,000 1,557,325
Station Casinos, Inc. 6.875% 03/01/16 520,000 533,000
Virgin River Casino Corp. (c) 01/15/13
(12.750% 01/15/09) (a) 1,205,000 771,200
9.000% 01/15/12 (a) 664,000 683,920
Wynn Las Vegas LLC 6.625% 12/01/14 (a) 2,190,000 2,102,400
24,737,245
Lodging Total 24,737,245
</Table>
See Accompanying Notes to Financial Statements.
16
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
RETAIL - 1.1%
RETAIL - AUTOMOBILES - 0.1%
Asbury Automotive Group, Inc. 8.000% 03/15/14 1,630,000 1,556,650
1,556,650
RETAIL - DRUG STORES - 0.2%
Jean Coutu Group, Inc. (PJC) 8.500% 08/01/14 1,205,000 1,171,862
Rite Aid Corp. 7.500% 01/15/15 (a) 555,000 514,763
9.250% 06/01/13 1,325,000 1,255,437
2,942,062
RETAIL - HOME FURNISHINGS - 0.1%
Tempur-Pedic, Inc. 10.250% 08/15/10 1,446,000 1,590,600
1,590,600
RETAIL - JEWELRY - 0.1%
Finlay Fine Jewelry Corp. 8.375% 06/01/12 1,510,000 1,291,050
1,291,050
RETAIL - MAJOR DEPARTMENT STORES - 0.2%
Saks, Inc. 7.000% 12/01/13 1,843,000 1,679,434
1,679,434
RETAIL - PROPANE DISTRIBUTORS - 0.2%
Ferrellgas Partners LP 8.750% 06/15/12 1,310,000 1,290,350
Suburban Propane Partners 6.875% 12/15/13 (a) 825,000 775,500
2,065,850
RETAIL - RESTAURANTS - 0.1%
Landry's Restaurants, Inc. 7.500% 12/15/14 (a) 1,435,000 1,338,138
1,338,138
RETAIL - VIDEO RENTAL - 0.1%
Movie Gallery, Inc. 11.000% 05/01/12 (a) 1,120,000 1,153,600
1,153,600
Retail Total 13,617,384
TEXTILES - 0.2%
TEXTILE - PRODUCTS - 0.2%
Collins & Aikman Floorcoverings, Inc. 9.750% 02/15/10 1,400,000 1,473,500
</Table>
See Accompanying Notes to Financial Statements.
17
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
TEXTILES - (CONTINUED)
INVISTA 9.250% 05/01/12 (a) 1,150,000 1,250,625
2,724,125
Textiles Total 2,724,125
------------
CONSUMER CYCLICAL TOTAL 97,281,574
CONSUMER NON-CYCLICAL - 5.2%
AGRICULTURE - 0.1%
TOBACCO - 0.1%
Alliance One International, Inc. 11.000% 05/15/12 (a) 1,130,000 1,149,775
1,149,775
Agriculture Total 1,149,775
BEVERAGES - 0.1%
BEVERAGES - WINE/SPIRITS - 0.1%
Constellation Brands, Inc. 8.125% 01/15/12 1,175,000 1,227,875
1,227,875
Beverages Total 1,227,875
BIOTECHNOLOGY - 0.2%
MEDICAL - BIOMEDICAL/GENE - 0.2%
Bio-Rad Laboratories, Inc. 7.500% 08/15/13 2,020,000 2,121,000
2,121,000
Biotechnology Total 2,121,000
COMMERCIAL SERVICES - 1.4%
COMMERCIAL SERVICES - 0.2%
Iron Mountain, Inc. 7.750% 01/15/15 1,025,000 1,009,625
Language Line Holdings, Inc. 11.125% 06/15/12 2,365,000 2,341,350
3,350,975
COMMERCIAL SERVICES - FINANCE - 0.2%
Dollar Financial Group, Inc. 9.750% 11/15/11 2,385,000 2,486,362
2,486,362
FUNERAL SERVICES & RELATED ITEMS - 0.2%
Service Corp. International 7.700% 04/15/09 2,385,000 2,528,100
2,528,100
PRINTING - COMMERCIAL - 0.2%
Sheridan Group 10.250% 08/15/11 1,290,000 1,328,700
Vertis, Inc. 13.500% 12/07/09 (a) 2,300,000 1,725,000
3,053,700
</Table>
See Accompanying Notes to Financial Statements.
18
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
COMMERCIAL SERVICES - (CONTINUED)
PRIVATE CORRECTIONS - 0.3%
Corrections Corp. of America 6.250% 03/15/13 (a) 1,555,000 1,504,463
GEO Group, Inc. 8.250% 07/15/13 1,965,000 1,891,312
3,395,775
RENTAL AUTO/EQUIPMENT - 0.3%
NationsRent, Inc. 9.500% 10/15/10 1,355,000 1,436,300
9.500% 05/01/15 (a) 1,220,000 1,201,700
Williams Scotsman, Inc. 9.875% 06/01/07 1,130,000 1,107,400
3,745,400
Commercial Services Total 18,560,312
COSMETICS/PERSONAL CARE - 0.4%
COSMETICS & TOILETRIES - 0.4%
DEL Laboratories, Inc. 8.000% 02/01/12 (a) 1,745,000 1,483,250
Elizabeth Arden, Inc. 7.750% 01/15/14 1,365,000 1,385,475
Revlon Consumer Products Corp. 8.625% 02/01/08 1,130,000 1,045,250
9.500% 04/01/11 (a) 1,360,000 1,251,200
5,165,175
Cosmetics/Personal Care Total 5,165,175
FOOD - 0.7%
FOOD - CONFECTIONERY - 0.2%
Merisant Co. 9.500% 07/15/13 (a) 1,425,000 1,047,375
Tabletop Holdings, Inc. (c) 05/15/14
(12.250% 11/15/08) (a) 4,055,000 1,459,800
2,507,175
FOOD - MISCELLANEOUS/DIVERSIFIED - 0.3%
Dole Food Co., Inc. 8.625% 05/01/09 1,436,000 1,514,980
Pinnacle Foods Holding Corp. 8.250% 12/01/13 2,080,000 1,768,000
Reddy Ice Holdings, Inc. (c) 11/01/12
(10.500% 11/01/08) (a) 1,120,000 767,200
4,050,180
FOOD - RETAIL - 0.2%
Stater Brothers Holdings, Inc. 8.125% 06/15/12 2,715,000 2,633,550
2,633,550
Food Total 9,190,905
</Table>
See Accompanying Notes to Financial Statements.
19
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
HEALTHCARE SERVICES - 1.4%
DIALYSIS CENTERS - 0.1%
DaVita, Inc. 7.250% 03/15/15 (a) 1,725,000 1,733,625
1,733,625
MEDICAL - HMO - 0.2%
Coventry Health Care, Inc. 8.125% 02/15/12 1,690,000 1,812,525
1,812,525
MEDICAL - HOSPITALS - 0.3%
Tenet Healthcare Corp. 9.875% 07/01/14 3,945,000 4,221,150
4,221,150
MEDICAL - OUTPATIENT/HOME MEDICAL - 0.1%
Select Medical Corp. 7.625% 02/01/15 (a) 1,020,000 1,002,150
1,002,150
MRI/MEDICAL DIAGNOSTIC IMAGING - 0.5%
InSight Health Services Corp. 9.875% 11/01/11 2,400,000 2,052,000
MedQuest, Inc. 11.875% 08/15/12 2,460,000 2,460,000
MQ Associates, Inc. (c) 08/15/12
(12.250% 08/15/08) 3,945,000 2,248,650
6,760,650
PHYSICIAN PRACTICE MANAGEMENT - 0.2%
US Oncology Holdings, Inc. 8.620% 03/15/15 (a)(b) 870,000 826,500
US Oncology, Inc. 9.000% 08/15/12 1,955,000 2,072,300
2,898,800
Healthcare Services Total 18,428,900
HOUSEHOLD PRODUCTS/WARES - 0.5%
CONSUMER PRODUCTS - MISCELLANEOUS - 0.5%
Amscan Holdings, Inc. 8.750% 05/01/14 2,255,000 2,097,150
Jostens IH Corp. 7.625% 10/01/12 1,155,000 1,114,575
Playtex Products, Inc. 9.375% 06/01/11 2,570,000 2,698,500
5,910,225
Household Products/Wares Total 5,910,225
</Table>
See Accompanying Notes to Financial Statements.
20
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
PHARMACEUTICALS - 0.4%
MEDICAL - DRUGS - 0.3%
Elan Finance PLC 7.750% 11/15/11 (a) 2,565,000 2,205,900
Warner Chilcott Corp. 8.750% 02/01/15 (a) 1,035,000 972,900
3,178,800
MEDICAL - WHOLESALE DRUG DISTRIBUTION - 0.1%
Nycomed A/S PIK,
11.750% 09/15/13 (a) EUR 1,415,000 1,566,145
1,566,145
Pharmaceuticals Total 4,744,945
------------
CONSUMER NON-CYCLICAL TOTAL 66,499,112
ENERGY - 3.5%
OIL & GAS - 1.6%
OIL & GAS DRILLING - 0.2%
Ocean Rig Norway AS 10.250% 06/01/08 USD 1,585,000 1,600,850
Pride International, Inc. 7.375% 07/15/14 865,000 936,362
2,537,212
OIL COMPANIES - EXPLORATION &
PRODUCTION - 1.3%
Chesapeake Energy Corp. 6.375% 06/15/15 (a) 440,000 442,200
7.500% 06/15/14 1,525,000 1,639,375
Compton Petroleum Corp. 9.900% 05/15/09 2,200,000 2,348,500
Delta Petroleum Corp. 7.000% 04/01/15 (a) 875,000 811,562
Energy Partners Ltd. 8.750% 08/01/10 1,150,000 1,190,250
Magnum Hunter Resources, Inc. 9.600% 03/15/12 1,472,000 1,633,920
PEMEX Finance Ltd. 9.150% 11/15/18 2,485,000 3,148,396
10.610% 08/15/17 1,650,000 2,240,964
Petroquest Energy, Inc. 10.375% 05/15/12 (a) 1,040,000 1,019,200
Whiting Petroleum Corp. 7.250% 05/01/12 2,230,000 2,224,425
16,698,792
OIL REFINING & MARKETING - 0.1%
Premcor Refining Group, Inc. 7.500% 06/15/15 1,430,000 1,551,550
1,551,550
Oil & Gas Total 20,787,554
</Table>
See Accompanying Notes to Financial Statements.
21
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
ENERGY - (CONTINUED)
OIL & GAS SERVICES - 0.7%
OIL - FIELD SERVICES - 0.7%
Gazprom 9.625% 03/01/13 5,760,000 6,915,456
Newpark Resources, Inc. 8.625% 12/15/07 1,560,000 1,552,200
8,467,656
Oil & Gas Services Total 8,467,656
PIPELINES - 1.2%
PIPELINES - 1.2%
Coastal Corp. 7.625% 09/01/08 1,000,000 987,500
7.750% 06/15/10 3,080,000 3,064,600
Dynegy Holdings, Inc. 6.875% 04/01/11 1,895,000 1,800,250
9.875% 07/15/10 (a) 960,000 1,039,200
Northwest Pipeline Corp. 8.125% 03/01/10 760,000 824,600
Sonat, Inc. 7.625% 07/15/11 4,230,000 4,166,550
Southern Natural Gas Co. 8.875% 03/15/10 1,335,000 1,450,144
Williams Companies, Inc. 8.125% 03/15/12 1,780,000 2,015,850
15,348,694
Pipelines Total 15,348,694
------------
ENERGY TOTAL 44,603,904
FINANCIALS - 0.7%
DIVERSIFIED FINANCIAL SERVICES - 0.5%
FINANCE - AUTO LOANS - 0.0%
General Motors Acceptance Corp. 6.875% 09/15/11 415,000 364,287
364,287
FINANCE - INVESTMENT BANKER/BROKER - 0.5%
E*Trade Financial Corp. 8.000% 06/15/11 1,370,000 1,431,650
LaBranche & Co., Inc. 11.000% 05/15/12 3,745,000 4,044,600
5,476,250
Diversified Financial Services Total 5,840,537
REAL ESTATE INVESTMENT TRUSTS - 0.1%
REITS - HOTELS - 0.0%
La Quinta Properties, Inc. 7.000% 08/15/12 500,000 516,250
516,250
</Table>
See Accompanying Notes to Financial Statements.
22
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
FINANCIALS -(CONTINUED)
REAL ESTATE INVESTMENT TRUSTS - (CONTINUED)
REITS - MORTGAGE - 0.1%
Thornburg Mortgage, Inc. 8.000% 05/15/13 1,395,000 1,395,000
1,395,000
Real Estate Investment Trusts Total 1,911,250
SAVINGS & LOANS - 0.1%
SAVINGS & LOANS/THRIFTS - WESTERN US - 0.1%
Western Financial Bank 9.625% 05/15/12 1,225,000 1,316,875
1,316,875
Savings & Loans Total 1,316,875
------------
FINANCIALS TOTAL 9,068,662
INDUSTRIALS - 6.2%
AEROSPACE & DEFENSE - 0.6%
AEROSPACE/DEFENSE-EQUIPMENT - 0.6%
Argo-Tech Corp. 9.250% 06/01/11 1,330,000 1,426,425
BE Aerospace, Inc. 8.875% 05/01/11 2,095,000 2,136,900
Sequa Corp. 8.875% 04/01/08 955,000 1,012,300
9.000% 08/01/09 770,000 823,900
Standard Aero Holdings, Inc. 8.250% 09/01/14 (a) 1,370,000 1,411,100
TransDigm, Inc. 8.375% 07/15/11 1,175,000 1,222,000
8,032,625
ELECTRONICS - MILITARY - 0.0%
Condor Systems, Inc. 11.875% 05/01/09 (d)(g) 4,000,000 40,000
40,000
Aerospace & Defense Total 8,072,625
BUILDING MATERIALS - 0.5%
BUILDING & CONSTRUCTION PRODUCTS -
MISCELLANEOUS - 0.1%
Associated Materials, Inc. (c) 03/01/14
(11.250% 03/01/09) 1,430,000 850,850
Nortek, Inc. 8.500% 09/01/14 990,000 886,050
1,736,900
BUILDING PRODUCTS - CEMENT/AGGREGATION - 0.3%
RMCC Acquisition Co. 9.500% 11/01/12 (a) 1,810,000 1,755,700
US Concrete, Inc. 8.375% 04/01/14 1,620,000 1,498,500
3,254,200
</Table>
See Accompanying Notes to Financial Statements.
23
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
BUILDING MATERIALS - (CONTINUED)
BUILDING PRODUCTS - DOORS & WINDOWS - 0.1%
ACIH, Inc. (c) 12/15/12
(11.500% 12/15/07) (a) 2,105,000 1,326,150
1,326,150
Building Materials Total 6,317,250
ELECTRICAL COMPONENTS & EQUIPMENT - 0.2%
WIRE & CABLE PRODUCTS - 0.2%
Coleman Cable, Inc. 9.875% 10/01/12 (a) 2,065,000 1,910,125
1,910,125
Electrical Components & Equipment Total 1,910,125
ELECTRONICS - 0.2%
ELECTRONIC COMPONENTS - MISCELLANEOUS - 0.2%
Flextronics International Ltd. 6.250% 11/15/14 670,000 670,000
Sanmina-SCI Corp. 6.750% 03/01/13 (a) 1,655,000 1,563,975
2,233,975
Electronics Total 2,233,975
ENGINEERING & CONSTRUCTION - 0.2%
BUILDING & CONSTRUCTION - MISCELLANEOUS - 0.2%
J. Ray McDermott SA 11.000% 12/15/13 (a) 2,160,000 2,376,000
2,376,000
Engineering & Construction Total 2,376,000
ENVIRONMENTAL CONTROL - 0.6%
NON-HAZARDOUS WASTE DISPOSAL - 0.6%
Allied Waste North America, Inc. 7.250% 03/15/15 (a) 660,000 623,700
7.875% 04/15/13 1,820,000 1,829,100
8.500% 12/01/08 2,330,000 2,411,550
Waste Services, Inc. 9.500% 04/15/14 (a) 2,685,000 2,644,725
7,509,075
RECYCLING - 0.0%
IMCO Recycling Escrow, Inc. 9.000% 11/15/14 (a) 575,000 593,688
593,688
Environmental Control Total 8,102,763
</Table>
See Accompanying Notes to Financial Statements.
24
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
HAND/MACHINE TOOLS - 0.1%
MACHINE TOOLS & RELATED PRODUCTS - 0.1%
Newcor, Inc. 6.000% 01/31/13
(7.500% 01/31/08) (g)(h) 847,510 516,981
516,981
Hand/Machine Tools Total 516,981
MACHINERY - DIVERSIFIED - 0.1%
MACHINERY - GENERAL INDUSTRY - 0.1%
Douglas Dynamics LLC 7.750% 01/15/12 (a) 1,805,000 1,741,825
1,741,825
Machinery - Diversified Total 1,741,825
METAL FABRICATE/HARDWARE - 0.6%
METAL PROCESSORS & FABRICATION - 0.4%
Altra Industrial Motion, Inc. 9.000% 12/01/11 (a) 1,195,000 1,147,200
Mueller Holdings, Inc. (c) 04/15/14
(14.750% 04/15/09) 1,408,000 1,006,720
10.000% 05/01/12 1,700,000 1,785,000
TriMas Corp. 9.875% 06/15/12 2,195,000 1,766,975
5,705,895
METAL PRODUCTS - FASTENERS - 0.2%
FastenTech, Inc. 11.500% 05/01/11 2,285,000 2,410,675
2,410,675
Metal Fabricate/Hardware Total 8,116,570
MISCELLANEOUS MANUFACTURING - 0.8%
DIVERSIFIED MANUFACTURING OPERATORS - 0.6%
Bombardier, Inc. 6.300% 05/01/14 (a) 2,715,000 2,389,200
J.B. Poindexter & Co. 8.750% 03/15/14 1,835,000 1,734,075
Koppers Industries, Inc. 9.875% 10/15/13 1,960,000 2,087,400
Trinity Industries, Inc. 6.500% 03/15/14 740,000 714,100
6,924,775
FILTRATION/SEPARATE PRODUCTS - 0.1%
Polypore International, Inc. (c) 10/01/12
(10.500% 10/01/08) (a) 2,365,000 1,188,413
1,188,413
</Table>
See Accompanying Notes to Financial Statements.
25
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
MISCELLANEOUS MANUFACTURING - (CONTINUED)
MISCELLANEOUS MANUFACTURING - 0.1%
Samsonite Corp. 8.875% 06/01/11 1,440,000 1,504,800
1,504,800
------------
Miscellaneous Manufacturing Total 9,617,988
PACKAGING & CONTAINERS - 1.0%
CONTAINERS - METAL/GLASS - 0.4%
Crown European Holdings SA 10.875% 03/01/13 1,800,000 2,074,500
Owens-Brockway Glass Container 6.750% 12/01/14 1,950,000 1,969,500
8.250% 05/15/13 340,000 367,200
Owens-Illinois, Inc. 7.500% 05/15/10 440,000 464,200
4,875,400
CONTAINERS - PAPER/PLASTIC - 0.6%
Consolidated Container Co. LLC (c) 06/15/09
(10.750% 06/15/07) 1,500,000 1,155,000
Jefferson Smurfit Corp. 8.250% 10/01/12 1,600,000 1,584,000
PIK,
11.500% 10/01/15 (a) EUR 2,161,310 2,048,719
MDP Acquisitions PLC 9.625% 10/01/12 USD 1,775,000 1,766,125
Portola Packaging, Inc. 8.250% 02/01/12 1,460,000 912,500
Tekni-Plex, Inc. 8.750% 11/15/13 (a) 215,000 187,050
7,653,394
Packaging & Containers Total 12,528,794
TRANSPORTATION - 1.3%
TRANSPORTATION - MARINE - 0.5%
Ship Finance International Ltd. 8.500% 12/15/13 3,795,000 3,633,712
Stena AB 7.500% 11/01/13 1,995,000 1,920,187
9.625% 12/01/12 1,425,000 1,528,313
7,082,212
TRANSPORTATION - RAIL - 0.2%
TFM SA de CV 9.375% 05/01/12 (a) 1,760,000 1,821,600
12.500% 06/15/12 575,000 667,000
2,488,600
TRANSPORTATION - SERVICES - 0.4%
CHC Helicopter Corp. 7.375% 05/01/14 1,450,000 1,399,250
7.375% 05/01/14 (a) 1,085,000 1,047,025
</Table>
See Accompanying Notes to Financial Statements.
26
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
TRANSPORTATION - (CONTINUED)
Petroleum Helicopters, Inc. 9.375% 05/01/09 2,710,000 2,804,850
5,251,125
TRANSPORTATION - TRUCK - 0.2%
Allied Holdings, Inc. 8.625% 10/01/07 560,000 207,200
QDI LLC 9.000% 11/15/10 2,060,000 1,874,600
2,081,800
Transportation Total 16,903,737
------------
INDUSTRIALS TOTAL 78,438,633
TECHNOLOGY - 0.1%
SEMICONDUCTORS - 0.1%
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.1%
Amkor Technology, Inc. 9.250% 02/15/08 1,805,000 1,588,400
1,588,400
Semiconductors Total 1,588,400
------------
TECHNOLOGY TOTAL 1,588,400
UTILITIES - 2.3%
ELECTRIC - 2.3%
ELECTRIC - GENERATION - 0.5%
AES Corp. 9.000% 05/15/15 (a) 585,000 653,737
9.500% 06/01/09 2,046,000 2,271,060
Edison Mission Energy 9.875% 04/15/11 2,290,000 2,656,400
Texas Genco LLC 6.875% 12/15/14 (a) 1,205,000 1,239,644
6,820,841
ELECTRIC - INTEGRATED - 0.8%
CMS Energy Corp. 8.900% 07/15/08 1,810,000 1,936,700
Nevada Power Co. 9.000% 08/15/13 1,060,000 1,187,200
10.875% 10/15/09 2,025,000 2,257,875
PSE&G Energy Holdings LLC 8.625% 02/15/08 2,495,000 2,632,225
TNP Enterprises, Inc. 10.250% 04/01/10 1,630,000 1,715,575
9,729,575
INDEPENDENT POWER PRODUCER - 1.0%
Caithness Coso Funding Corp. 9.050% 12/15/09 2,384,181 2,551,073
Calpine Corp. 8.500% 07/15/10 (a) 1,845,000 1,346,850
</Table>
See Accompanying Notes to Financial Statements.
27
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
UTILITIES - (CONTINUED)
ELECTRIC - (CONTINUED)
Calpine Generating Co. LLC 11.500% 04/01/11 1,370,000 1,178,200
12.390% 04/01/11 (b) 2,950,000 2,596,000
MSW Energy Holdings LLC 7.375% 09/01/10 800,000 806,000
8.500% 09/01/10 2,130,000 2,204,550
Orion Power Holdings, Inc. 12.000% 05/01/10 1,825,000 2,185,438
12,868,111
Electric Total 29,418,527
------------
UTILITIES TOTAL 29,418,527
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(COST OF $478,539,069) 439,808,982
MORTGAGE-BACKED SECURITIES - 5.3%
MORTGAGE-BACKED SECURITIES - 5.3%
Federal Home Loan Mortgage Corp. 7.500% 03/01/16 6,050 6,141
8.000% 04/01/06 - 05/01/16 50,751 51,845
8.500% 02/01/07 - 07/01/10 39,821 41,160
8.750% 06/01/08 1,397 1,427
9.000% 06/01/08 - 01/01/22 64,244 68,763
9.250% 08/01/08 - 05/01/16 84,065 91,065
9.500% 11/01/08 - 08/01/16 34,343 36,318
9.750% 12/01/08 - 09/01/16 8,449 9,057
10.000% 07/01/09 - 11/01/19 112,171 120,334
10.500% 01/01/20 - 10/01/24 92,894 106,200
10.750% 05/01/10 - 09/01/13 118,845 129,789
11.250% 10/01/10 - 11/01/15 104,253 114,928
Federal National Mortgage Association 7.500% 11/01/11 16,820 16,909
8.000% 07/01/08 - 07/01/09 37,355 38,617
8.250% 11/01/07 19,123 19,270
8.500% 05/01/08 - 09/01/21 105,324 109,206
9.000% 11/01/08 - 08/01/21 342,494 362,854
9.250% 05/01/16 92,508 101,455
10.000% 11/01/13 - 03/01/16 214,828 239,354
10.500% 03/01/14 - 03/01/16 224,884 252,201
TBA
6.500% 12/01/35 (i) 60,590,000 62,937,863
</Table>
See Accompanying Notes to Financial Statements.
28
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES - (CONTINUED)
MORTGAGE-BACKED SECURITIES - (CONTINUED)
Government National Mortgage Association 8.500% 02/15/06 612 627
9.000% 08/15/08 - 12/15/17 1,138,153 1,234,577
9.500% 06/15/09 - 11/15/17 507,997 544,136
10.000% 11/15/09 - 09/15/21 161,747 180,721
10.500% 12/15/10 - 04/15/21 49,627 56,119
11.000% 12/15/09 - 10/15/15 248,315 275,960
11.750% 08/15/13 8,448 9,662
12.000% 05/15/14 428 497
MORTGAGE-BACKED SECURITIES TOTAL 67,157,055
TOTAL MORTGAGE-BACKED SECURITIES
(COST OF $67,231,574) 67,157,055
ASSET-BACKED SECURITIES - 0.7%
Equity One ABS, Inc. 4.205% 04/25/34 5,050,000 5,018,387
GMAC Mortgage Corp. Loan Trust 4.865% 09/25/34 4,130,000 4,139,499
TOTAL ASSET-BACKED SECURITIES
(COST OF $9,143,703) 9,157,886
CONVERTIBLE BONDS - 0.3%
COMMUNICATIONS - 0.2%
TELECOMMUNICATION SERVICES - 0.2%
TELECOMMUNICATIONS EQUIPMENT - 0.2%
Nortel Networks Corp. 4.250% 09/01/08 2,265,000 2,080,403
2,080,403
Telecommunication Services Total 2,080,403
-----------
COMMUNICATIONS TOTAL 2,080,403
UTILITIES - 0.1%
ELECTRIC - 0.1%
INDEPENDENT POWER PRODUCER - 0.1%
Mirant Corp. 2.500% 06/15/21 (d) 1,565,000 1,236,334
1,236,334
Electric Total 1,236,334
-----------
UTILITIES TOTAL 1,236,334
TOTAL CONVERTIBLE BONDS
(COST OF $3,115,519) 3,316,737
</Table>
See Accompanying Notes to Financial Statements.
29
<Page>
<Table>
<Caption>
PAR ($) VALUE ($)
- --------------------------------------------- ------------------------------------------------------------------------------
MUNICIPAL BOND (TAXABLE) - 0.2%
CALIFORNIA - 0.2%
CA Cabazon Band Mission Indians 13.000% 10/01/11 (e) 2,820,000 2,931,305
-------------
CALIFORNIA TOTAL 2,931,305
TOTAL MUNICIPAL BOND (TAXABLE)
(COST OF $2,820,000) 2,931,305
SHORT-TERM OBLIGATION - 5.3%
Repurchase agreement with State Street Bank &
Trust Co., dated 05/31/05, due 06/01/05 at
2.900%, collateralized by U.S. Government
Agencies with various maturities to 11/15/16,
market value of $69,160,242 (repurchase
proceeds $67,808,462) 67,803,000 67,803,000
TOTAL SHORT-TERM OBLIGATION
(COST OF $67,803,000) 67,803,000
TOTAL INVESTMENTS - 103.2%
(COST OF $1,280,268,159)(j) 1,316,832,262
OTHER ASSETS & LIABILITIES, NET - (3.2)% (40,768,912)
NET ASSETS - 100.0% 1,276,063,350
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) 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. At
May 31, 2005, these securities) which did not include any illiquid
securities except for the following, amounted to $109,678,743, which
represents 8.6% of net assets.
<Table>
<Caption>
ACQUISTION
SECURITY DATE PAR COST VALUE
----------------------------------------------------------------------------
Hollingar, Inc. 9/30/04 $ 734,000 $ 734,000 $ 756,020
</Table>
(b) The interest rate shown on floating rate or variable rate securities
reflects the rate at May 31, 2005.
(c) 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.
(d) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. At May 31,
2005, the value of these securities amounted to $5,393,084, which
represents 0.4% of net assets.
(e) Illiquid security.
(f) The issuer is in default of certain debt covenants. Income is not being
accrued. At May 31, 2005, the value of this security represents 0.3% of net
assets.
(g) Represents fair value as determined in good faith under procedures approved
by the Board of Trustees.
(h) Step bond. Shown parenthetically is the next interest rate to be paid.
(i) Security purchased on a delayed delivery basis.
(j) Cost for federal income tax purposes is $1,298,408,725.
See Accompanying Notes to Financial Statements.
30
<Page>
At May 31, 2005, the Fund had entered into the following forward currency
exchange contracts:
<Table>
<Caption>
FORWARD CURRENCY AGGREGATE SETTLEMENT UNREALIZED
CONTRACTS TO SELL VALUE FACE VALUE DATE APPRECIATION
- ------------------------------------------------------------------------------
EUR $ 8,152,297 $ 8,568,708 06/10/2005 $ 416,411
EUR 4,618,701 4,858,408 06/10/2005 239,707
EUR 10,159,984 10,719,390 06/15/2005 559,406
EUR 5,495,012 5,797,476 06/15/2005 302,464
EUR 17,241,712 17,795,680 06/16/2005 553,968
EUR 24,959,603 25,517,470 06/27/2005 557,867
GBP 6,416,805 6,594,040 06/10/2005 177,235
GBP 12,757,071 13,057,200 06/16/2005 300,129
NOK 6,146,349 6,259,082 06/10/2005 112,733
SEK 9,460,891 9,950,495 06/15/2005 489,604
SEK 9,460,891 9,901,617 06/15/2005 440,726
-----------
$ 4,150,250
-----------
</Table>
At May 31, 2005, the asset allocation of the Fund is as follows:
<Table>
<Caption>
% OF NET
ASSET ALLOCATION (UNAUDITED) ASSETS
- -------------------------------------------------------------------------
Government Agencies & Obligations 53.4%
Corporate Fixed-Income Bonds & Notes 38.0
Mortgage-Backed Securities 5.3
Asset-Backed Securities 0.7
Convertible Bonds 0.3
Municipal Bond (Taxable) 0.2
Short-Term Obligation 5.3
Other Assets & Liabilities, Net (3.2)
-----
100.0%
-----
</Table>
<Table>
<Caption>
ACRONYM NAME
- ------- ----
AUD Australian Dollar
CAD Canadian Dollar
EUR Euro
GBP British Pound
NOK Norwegian Krone
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
</Table>
See Accompanying Notes to Financial Statements.
31
<Page>
STATEMENT OF ASSETS AND LIABILITIES
<Table>
<Caption>
($)
- -------------------------------------------------- ------------------------------------------------------------------------
ASSETS Investments, at cost 1,280,268,159
-------------
Investments, at value 1,316,832,262
Cash 9,728,203
Foreign currency (cost of $784,953) 782,705
Net unrealized appreciation on foreign forward currency
contracts 4,150,250
Receivable for:
Investments sold 2,446,549
Fund shares sold 2,657,745
Dollar roll fee income 259,204
Interest 24,376,653
Foreign tax reclaims 148,870
Deferred Trustees' compensation plan 55,628
-------------
Total Assets 1,361,438,069
LIABILITIES Payable for:
Investments purchased 18,135,910
Investments purchased on a delayed delivery basis 63,253,751
Fund shares repurchased 2,417,076
Investment advisory fee 606,705
Transfer agent fee 202,779
Pricing and bookkeeping fees 35,107
Merger costs 12,432
Trustees' fees 6,341
Custody fee 17,781
Distribution and service fees 556,366
Deferred dollar roll fee income 29,979
Deferred Trustees' fees 55,628
Other liabilities 44,864
-------------
Total Liabilities 85,374,719
NET ASSETS 1,276,063,350
COMPOSITION OF NET ASSETS Paid-in capital 1,586,581,727
Overdistributed net investment income (6,799,350)
Accumulated net realized loss (344,211,764)
Net unrealized appreciation on:
Investments 36,564,103
Foreign currency translations 3,928,634
-------------
NET ASSETS 1,276,063,350
CLASS A Net assets 615,771,621
Shares outstanding 100,108,742
Net asset value per share 6.15(a)
Maximum offering price per share ($6.15/0.9525) 6.46(b)
CLASS B Net assets 349,974,531
Shares outstanding 56,937,753
Net asset value and offering price per share 6.15(a)
CLASS C Net assets 51,487,816
Shares outstanding 8,369,726
Net asset value and offering price per share 6.15(a)
CLASS J Net assets 212,131,376
Shares outstanding 34,564,026
Net asset value per share 6.14(a)
Maximum offering price per share ($6.14/0.9700) 6.33(b)
CLASS Z Net assets 46,698,006
Shares outstanding 7,651,776
Net asset value, offering and redemption price per share 6.10
</Table>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See Accompanying Notes to Financial Statements.
32
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 2005 COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
($)
- -------------------------------------------------- ------------------------------------------------------------------------
INVESTMENT INCOME Interest 85,666,794
Dollar roll fee income 1,522,203
-------------
Total Investment Income (net of foreign taxes
withheld of $4,522) 87,188,997
EXPENSES Investment advisory fee 7,515,216
Distribution fee:
Class B 2,874,174
Class C 325,121
Class J 788,300
Service fee:
Class A 1,431,285
Class B 921,689
Class C 103,901
Class J 541,752
Transfer agent fee 2,058,922
Pricing and bookkeeping fees 397,242
Trustees' fees 47,837
Custody fee 209,071
Merger costs 12,432
Non-recurring costs (See Note 8) 40,235
Other expenses 481,041
-------------
Total Expenses 17,748,218
Fees waived by Distributor - Class C (65,257)
Non-recurring costs assumed by Investment Advisor
(See Note 8) (40,235)
Custody earnings credit (18,195)
-------------
Net Expenses 17,624,531
-------------
Net Investment Income 69,564,466
NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain (loss) on:
INVESTMENTS AND FOREIGN CURRENCY Investments 22,127,956
Foreign currency transactions (4,290,782)
-------------
Net realized gain 17,837,174
Net change in unrealized appreciation (depreciation) on:
Investments 27,055,879
Foreign currency translations 5,226,382
-------------
Net change in unrealized appreciation (depreciation) 32,282,261
-------------
Net Gain 50,119,435
-------------
Net Increase in Net Assets from Operations 119,683,901
</Table>
See Accompanying Notes to Financial Statements.
33
<Page>
STATEMENT OF CHANGES IN NET ASSETS
COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
YEAR ENDED MAY 31,
2005 ($) 2004 ($)
- -------------------------------------------------- ----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS Net investment income 69,564,466 74,531,176
Net realized gain on investments and foreign
currency transactions 17,837,174 43,311,979
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations 32,282,261 (39,526,227)
-----------------------------
Net Increase from Operations 119,683,901 78,316,928
DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income:
Class A (46,245,319) (42,467,084)
Class B (26,670,567) (29,338,162)
Class C (3,110,631) (2,896,843)
Class J (16,716,434) (16,932,962)
Class Z (1,333,633) (64,839)
-----------------------------
Total Distributions Declared to Shareholders (94,076,584) (91,699,890)
SHARE TRANSACTIONS Class A:
Subscriptions 112,949,787 68,039,895
Distributions reinvested 26,643,837 22,542,999
Redemptions (101,234,635) (113,152,672)
-----------------------------
Net Increase (Decrease) 38,358,989 (22,569,778)
Class B:
Subscriptions 31,189,953 40,064,707
Distributions reinvested 15,375,032 16,158,239
Redemptions (114,341,740) (128,322,218)
-----------------------------
Net Decrease (67,776,755) (72,099,272)
Class C:
Subscriptions 18,283,803 8,693,636
Distributions reinvested 1,832,963 1,571,832
Redemptions (10,901,213) (13,809,960)
-----------------------------
Net Increase (Decrease) 9,215,553 (3,544,492)
Class J:
Subscriptions 4,292,898 5,771,627
Redemptions (26,429,927) (32,286,028)
-----------------------------
Net Decrease (22,137,029) (26,514,401)
Class Z:
Subscriptions 49,407,426 1,051,458
Distributions reinvested 153,680 55,898
Redemptions (3,229,230) (1,113,389)
-----------------------------
Net Increase (Decrease) 46,331,876 (6,033)
Net Increase (Decrease) from Share
Transactions 3,992,634 (124,733,976)
-----------------------------
Total Increase (Decrease) in Net Assets 29,599,951 (138,116,938)
NET ASSETS Beginning of period 1,246,463,399 1,384,580,337
End of period 1,276,063,350 1,246,463,399
Undistributed (overdistributed) net investment
income at end of period (6,799,350) 852,349
</Table>
See Accompanying Notes to Financial Statements.
34
<Page>
<Table>
<Caption>
YEAR ENDED MAY 31,
2005 2004
- -------------------------------------------------- ----------------------------------------------------------------------------
CHANGES IN SHARES Class A:
Subscriptions 18,079,113 11,072,096
Issued for distributions reinvested 4,268,478 3,674,542
Redemptions (16,268,593) (18,468,207)
----------------------------
Net Increase (Decrease) 6,078,998 (3,721,569)
Class B:
Subscriptions 5,004,940 6,545,770
Issued for distributions reinvested 2,464,933 2,635,178
Redemptions (18,379,866) (20,955,613)
----------------------------
Net Decrease (10,909,993) (11,774,665)
Class C:
Subscriptions 2,940,461 1,417,309
Issued for distributions reinvested 293,565 256,111
Redemptions (1,758,067) (2,263,480)
----------------------------
Net Increase (Decrease) 1,475,959 (590,060)
Class J:
Subscriptions 685,030 931,651
Redemptions (4,251,415) (5,247,368)
----------------------------
Net Decrease (3,566,385) (4,315,717)
Class Z:
Subscriptions 7,959,417 171,694
Issued for distributions reinvested 24,800 9,156
Redemptions (524,884) (184,806)
----------------------------
Net Increase (Decrease) 7,459,333 (3,956)
</Table>
See Accompanying Notes to Financial Statements.
35
<Page>
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2005 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. 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
36
<Page>
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.
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 investments from its portfolio
with an agreement by the Fund to repurchase similar, but not identical,
securities at an agreed upon price and date. During the period between the sale
and repurchase, the Fund will not be entitled to accrue interest and receive
principal payment 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 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 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 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 monthly and paid monthly. Net
realized capital gains, if any, are distributed at least annually.
NOTE 3. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended May 31, 2005, permanent book and tax basis differences
resulting primarily from differing treatments for discount accretion/premium
amortization on debt securities, market discount reclassifications, paydown
reclassifications Section 988 reclassifications of foreign currency and
non-deductible excise tax paid were identified and reclassified among the
components of the Fund's net assets as follows:
<Table>
<Caption>
OVERDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME LOSS CAPITAL
- ---------------------------------------------------------
$ 16,860,419 $ (16,849,635) $ (10,784)
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the years ended May 31, 2005 and
May 31, 2004 was as follows:
<Table>
<Caption>
MAY 31, 2005 MAY 31, 2004
- -----------------------------------------------------------
Distributions paid from:
Ordinary income $ 94,076,584 $ 91,699,890
Long-term capital gains -- --
</Table>
38
<Page>
As of May 31, 2005 the components of distributable earnings on a tax basis were
as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
- ------------------------------------------------------------
$ 15,831,468 $ -- $ 18,201,922
</Table>
* The difference between book-basis and tax-basis net unrealized appreciation
are primarily due to deferral of losses on wash sales and discount
accretion/premium amortization on debt securities.
Unrealized appreciation and depreciation at May 31, 2005, based on cost of
investments for federal income tax purposes, was:
<Table>
Unrealized appreciation $ 64,148,758
Unrealized depreciation (45,725,221)
- -----------------------------------------------------------
Net unrealized appreciation $ 18,423,537
</Table>
The following capital loss carryforwards may be available to reduce taxable
income arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
- -----------------------------------------------------------
2007 $ 1,499,774
2008 63,518,542
2009 136,912,288
2010 135,415,014
2011 318,608
$ 337,664,226
</Table>
Capital loss carryforwards of $7,352,976 were utilized during the year ended May
31, 2005 for the Fund.
Under current tax rules, certain capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
As of May 31, 2005, post-October capital losses of $6,533,589 attributed to
security transactions were deferred to June 1, 2005.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES
INVESTMENT ADVISORY FEE
Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned
subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to
the Fund and provides administrative and other services to the Fund. Effective
November 1, 2004, Columbia receives a monthly investment advisory fee based on
the Fund's average daily net assets at the following annual rates:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
- -----------------------------------------------------------
First $500 million 0.60%
$500 million to $1 billion 0.55%
$1 billion to $1.5 billion 0.52%
Over $1.5 billion 0.49%
</Table>
Prior to November 1, 2004, Columbia received a monthly investment advisory fee
based on the Fund's average daily net assets at the following annual rates:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
- -----------------------------------------------------------
First $1 billion 0.65%
$1 billion to $2 billion 0.60%
Over $2 billion 0.55%
</Table>
For the year ended May 31, 2005, the Fund's effective investment advisory fee
rate was 0.59%.
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 year ended May 31, 2005, the Fund's 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 subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. For such
services, the Transfer
39
<Page>
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 year ended May 31, 2005, the Fund's effective
transfer agent fee rate, inclusive of out-of-pocket fees, was 0.16%.
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 year ended May 31, 2005, the
Distributor has retained net underwriting discounts of $132,086 on sales of the
Fund's Class A shares and received net CDSC fees of $583, $899,725 and $6,086 on
Class A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan") which allows 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 a service fee between
the 0.15% and 0.25% annual rates. For the year ended May 31, 2005, the 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.
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. 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 for the Office of the Chief Compliance
Officer 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 year ended May 31, 2005, the Fund paid $2,774 to Columbia
for such services. This amount is included in "Other expenses" on the Statement
of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the year ended May 31, 2005, the cost of purchases and proceeds from sales
of securities, excluding short-term obligations, were $682,796,807 and
$712,246,880, respectively, of which $120,301,401 and $104,142,240,
respectively, were U.S. Government securities.
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.
40
<Page>
For the year ended May 31, 2005, the Fund did not borrow under this arrangement.
NOTE 7. SHARES OF BENEFICIAL INTEREST
As of May 31, 2005, the Fund had shareholders whose shares were beneficially
owned by participant accounts over which Bank of America and/or its affiliates
had either sole or joint investment discretion. Subscription and redemption
activity of these accounts may have a significant effect on the operations of
the Fund. The number of such accounts and the percentage of shares of beneficial
interest outstanding held therein are as follows:
<Table>
<Caption>
NUMBER OF SHAREHOLDERS % OF SHARES OUTSTANDING HELD
- -----------------------------------------------------------
1 3.4%
</Table>
NOTE 8. 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 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
On February 9, 2005, Columbia and the Distributor (collectively, the "Columbia
Group") entered into an Assurance of Discontinuance with the New York Attorney
General ("NYAG") (the "NYAG Settlement") and consented to the entry of a
cease-and-desist order by the Securities and Exchange Commission ("SEC") (the
"SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively
as the "Settlements". The Settlements contain substantially the same terms and
conditions as outlined in the agreements in principle which Columbia Group
entered into with the SEC and NYAG in March 2004.
Under the terms of the SEC Order, the Columbia Group has agreed among other
things, to: pay $70 million in disgorgement and $70 million in civil money
penalties; cease and desist from violations of the antifraud provisions and
certain other provisions of the federal securities laws; maintain certain
compliance and ethics oversight structures; retain an independent consultant to
review the Columbia Group's applicable supervisory, compliance, control and
other policies and procedures; and retain an independent distribution consultant
(see below). The Columbia Funds have also undertaken to implement certain
governance measures designed to maintain the independence of their boards of
trustees. The NYAG Settlement also, among other things, requires Columbia and
its affiliates, Banc of America Capital Management, LLC and BACAP Distributors,
LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds
management fees collectively by $32 million per year for five years, for a
projected total of $160 million in management fee reductions.
Pursuant to the procedures set forth in the SEC order, the $140 million in
settlement amounts described above will be distributed in accordance with a
distribution plan to be developed by an independent distribution consultant, who
is acceptable to the SEC staff and the Columbia Funds' independent trustees. The
distribution plan must be based on a methodology developed in consultation with
the Columbia Group and the Fund's independent trustees and not unacceptable to
the staff of the SEC. At this time, the
41
<Page>
distribution plan is still under development. As such, any gain to the fund or
its shareholders can not currently be determined.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A
copy of the NYAG Settlement is available as part of the Bank of America
Corporation Form 8-K filing on February 10, 2005.
In connection with events described in detail above, various parties have filed
suit against certain funds, the Trustees of the Columbia Funds, FleetBoston
Financial Corporation and its affiliated entities and/or Bank of America
Corporation and its affiliated entities. More than 300 cases including those
filed against entities unaffiliated with the funds, their Boards, FleetBoston
Financial Corporation and its affiliated entities and/or Bank of America
Corporation and its affiliated entities have been transferred to the Federal
District Court in Maryland and consolidated in a multi-district proceeding (the
"MDL").
The derivative cases purportedly brought on behalf of the Columbia Funds in the
MDL have been consolidated under the lead case. The fund derivative plaintiffs
allege that the funds were harmed by market timing and late trading activity and
seek, among other things, removal of the trustees of the Columbia Funds, removal
of the Columbia Group, disgorgement of all management fees and monetary damages.
On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts
state court alleging that the conduct, including market timing, entitles Class B
shareholders in certain Columbia funds to an exemption from contingent deferred
sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has
been removed to federal court in Massachusetts and the federal Judicial Panel
has conditionally ordered its transfer to the MDL.
The MDL is ongoing. Accordingly, an estimate of the financial impact of this
litigation on any fund, if any, can not currently be made.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the
Columbia Funds and Columbia. The lawsuit alleges that defendants violated common
law duties to fund shareholders as well as sections of the Investment Company
Act of 1940, by failing to ensure that the Fund and other affiliated funds
participated in securities class action settlements for which the funds were
eligible. Specifically, plaintiffs allege that defendants failed to submit proof
of claims in connection with settlements of securities class action lawsuits
filed against companies in which the funds held positions.
In 2004, certain Columbia funds, advisers and affiliated entities were named as
defendants in certain purported shareholder class and derivative actions making
claims, including claims under the Investment Company and the Investment
Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees
and expenses paid by the funds are excessive and that the advisers and their
affiliates inappropriately used fund assets to distribute the funds and for
other improper purpose. On March 2, 2005, the actions were consolidated in the
Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The
plaintiffs filed a consolidated amended complaint on June 9, 2005.
The Fund 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 proceedings 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 Fund.
For the year ended May 31, 2005, Columbia has assumed $40,235 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
42
<Page>
FINANCIAL HIGHLIGHTS
COLUMBIA STRATEGIC INCOME FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS A SHARES 2005 2004 2003(a) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.63 $ 5.64 $ 6.00 $ 6.62
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.36(b) 0.36(b) 0.16(b) 0.38(b) 0.48(b)(c) 0.58(d)
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.25 0.01 0.46 0.05 (0.30)(c) (0.62)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.61 0.37 0.62 0.43 0.18 (0.04)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.48) (0.44) (0.16) (0.42) (0.50) (0.53)
Return of capital -- -- -- (0.02) (0.04) (0.05)
--------- --------- --------- --------- --------- ---------
Total Distributions Declared
to Shareholders (0.48) (0.44) (0.16) (0.44) (0.54) (0.58)
NET ASSET VALUE, END OF PERIOD $ 6.15 $ 6.02 $ 6.09 $ 5.63 $ 5.64 $ 6.00
Total return (e) 10.37% 6.21% 11.10%(f) 7.97% 3.07% (0.68)%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g) 1.09% 1.17% 1.27%(h) 1.23% 1.21% 1.17%
Net investment income (g) 5.81% 5.90% 6.52%(h) 6.75% 8.22%(c) 9.12%
Portfolio turnover rate 57% 68% 59%(f) 62% 106% 35%
Net assets, end of period (000's) $ 615,772 $ 566,269 $ 595,223 $ 552,737 $ 575,791 $ 536,481
</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) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
43
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS B SHARES 2005 2004 2003(a) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.62 $ 5.63 $ 6.00 $ 6.62
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.32(b) 0.32(b) 0.14(b) 0.34(b) 0.44(b)(c) 0.53(d)
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.25 0.01 0.47 0.04 (0.32)(c) (0.62)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.57 0.33 0.61 0.38 0.12 (0.09)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.44) (0.40) (0.14) (0.37) (0.45) (0.48)
Return of capital -- -- -- (0.02) (0.04) (0.05)
--------- --------- --------- --------- --------- ---------
Total Distributions Declared
to Shareholders (0.44) (0.40) (0.14) (0.39) (0.49) (0.53)
NET ASSET VALUE, END OF PERIOD $ 6.15 $ 6.02 $ 6.09 $ 5.62 $ 5.63 $ 6.00
Total return (e) 9.55% 5.42% 10.95%(f) 7.17% 2.12% (1.41)%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g) 1.84% 1.92% 2.02%(h) 1.98% 1.96% 1.92%
Net investment income (g) 5.06% 5.15% 5.77%(h) 6.00% 7.47%(c) 8.37%
Portfolio turnover rate 57% 68% 59%(f) 62% 106% 35%
Net assets, end of period (000's) $ 349,975 $ 408,345 $ 484,540 $ 456,563 $ 533,406 $ 693,733
</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) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
44
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS C SHARES 2005 2004 2003(a) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.63 $ 5.64 $ 6.00 $ 6.62
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.32(b) 0.33(b) 0.14(b) 0.35(b) 0.45(b)(c) 0.54(d)(e)
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.26 0.01 0.46 0.04 (0.31)(c) (0.62)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.58 0.34 0.60 0.39 0.14 (0.08)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.45) (0.41) (0.14) (0.38) (0.46) (0.49)
Return of capital -- -- -- (0.02) (0.04) (0.05)
--------- --------- --------- --------- --------- ---------
Total Distributions Declared
to Shareholders (0.45) (0.41) (0.14) (0.40) (0.50) (0.54)
NET ASSET VALUE, END OF PERIOD $ 6.15 $ 6.02 $ 6.09 $ 5.63 $ 5.64 $ 6.00
Total return (f) 9.71%(g) 5.57%(g) 10.82%(g)(h 7.32%(g) 2.45% (1.26)%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (i) 1.69% 1.77% 1.87%(j) 1.83% 1.81% 1.77%(d)
Net investment income (i) 5.21% 5.31% 5.92%(j) 6.15% 7.62%(c) 8.52%(d)
Waiver/reimbursement 0.15% 0.15% 0.15%(j) 0.15% -- 0.15%
Portfolio turnover rate 57% 68% 59%(h) 62% 106% 35%
Net assets, end of period (000's) $ 51,488 $ 41,520 $ 45,572 $ 38,923 $ 42,906 $ 43,538
</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 per share and
0.15% for the year ended December 31, 2000.
(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 and
no contingent deferred sales charge.
(g) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
45
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS J SHARES 2005 2004 2003(a) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.01 $ 6.08 $ 5.62 $ 5.63 $ 6.00 $ 6.62
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.34(b) 0.34(b) 0.15(b) 0.36(b) 0.46(b)(c) 0.55(d)
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.25 0.01 0.46 0.05 (0.31)(c) (0.62)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.59 0.35 0.61 0.41 0.15 (0.07)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.46) (0.42) (0.15) (0.40) (0.48) (0.50)
Return of capital -- -- -- (0.02) (0.04) (0.05)
--------- --------- --------- --------- --------- ---------
Total Distributions Declared
to Shareholders (0.46) (0.42) (0.15) (0.42) (0.52) (0.55)
NET ASSET VALUE, END OF PERIOD $ 6.14 $ 6.01 $ 6.08 $ 5.62 $ 5.63 $ 6.00
Total return (e) 10.01% 5.88% 10.97%(f) 7.61% 2.56% (1.02)%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g) 1.44% 1.52% 1.62%(h) 1.58% 1.56% 1.52%
Net investment income (g) 5.46% 5.55% 6.17%(h) 6.40% 7.87%(c) 8.77%
Portfolio turnover rate 57% 68% 59%(f) 62% 106% 35%
Net assets, end of period (000's) $ 212,131 $ 229,179 $ 258,057 $ 271,733 $ 323,866 $ 508,079
</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) Total return at net asset value assuming all distributions reinvested and
no initial sales charge.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
46
<Page>
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<Table>
<Caption>
PERIOD
ENDED
YEAR ENDED MAY 31, MAY 31, YEAR ENDED DECEMBER 31,
CLASS Z SHARES 2005 2004 2003(a) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.98 $ 6.05 $ 5.59 $ 5.62 $ 5.99 $ 6.62
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.37(b) 0.38(b) 0.17(b) 0.39(b) 0.49(b)(c) 0.59(d)
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.25 0.01 0.45 0.03 (0.31)(c) (0.63)
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 0.62 0.39 0.62 0.42 0.18 (0.04)
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.50) (0.46) (0.16) (0.43) (0.51) (0.54)
Return of capital -- -- -- (0.02) (0.04) (0.05)
--------- --------- --------- --------- --------- ---------
Total Distributions Declared
to Shareholders (0.50) (0.46) (0.16) (0.45) (0.55) (0.59)
NET ASSET VALUE, END OF PERIOD $ 6.10 $ 5.98 $ 6.05 $ 5.59 $ 5.62 $ 5.99
Total return (e) 10.53% 6.52% 11.29%(f) 7.87% 3.14% (0.59)%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g) 0.85% 0.93% 1.03%(h) 0.99% 0.98% 0.93%
Net investment income (g) 6.05% 6.15% 6.76%(h) 6.99% 8.45%(c) 9.36%
Portfolio turnover rate 57% 68% 59%(f) 62% 106% 35%
Net assets, end of period (000) $ 46,698 $ 1,150 $ 1,188 $ 3 $ 1,860 $ 1
</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 8.84% 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.
(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.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
47
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
COLUMBIA STRATEGIC INCOME FUND
TO THE TRUSTEES OF THE COLUMBIA FUNDS TRUST I AND THE SHAREHOLDERS OF COLUMBIA
STRATEGIC INCOME FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Columbia Strategic Income Fund (the
"Fund") (a series of Columbia Funds Trust I) at May 31, 2005, the results of its
operations, the changes in its net assets and its financial highlights for the
periods indicated in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 2005 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 27, 2005
48
<Page>
TRUSTEES
COLUMBIA STRATEGIC INCOME FUND
The Trustrees/Directors serve terms of indefinite duration. The names, addresses
and ages of the Trustees/Directors and officers of the Funds in the Columbia
Funds Complex, the year each was first elected or appointed to office, their
principal business occupations during at least the last five years, the number
of portfolios overseen by each Trustee/Director and other directorships they
hold are shown below. Each officer listed below serves as an officer of each
Fund in the Columbia Funds Complex.
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
DOUGLAS A. HACKER (age 49) Executive Vice President-Strategy of United Airlines (airline) since December,
P.O. Box 66100 2002 (formerly President of UAL Loyalty Services (airline) from September,
Chicago, IL 60666 2001 to December, 2002; Executive Vice President and Chief Financial Officer
Trustee (since 1996) of United Airlines from July, 1999 to September, 2001; Senior Vice
President-Finance from March, 1993 to July, 1999). Oversees 104, Nash Finch
Company (food distributor)
JANET LANGFORD KELLY (age 47) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm); Adjunct
9534 W. Gull Lake Drive Professor of Law, Northwestern University, since September, 2004 (formerly
Richland, MI 49083-8530 Chief Administrative Officer and Senior Vice President, Kmart Holding
Trustee (since 1996) Corporation (consumer goods), from September, 2003 to March, 2004; Executive
Vice President-Corporate Development and Administration, General Counsel and
Secretary, Kellogg Company (food manufacturer), from September, 1999 to
August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee
Corporation (branded, packaged, consumer-products manufacturer) from January,
1995 to September, 1999). Oversees 104, None
RICHARD W. LOWRY (age 69) Private Investor since August, 1987 (formerly Chairman and Chief Executive
10701 Charleston Drive Officer, U.S. Plywood Corporation (building products manufacturer)). Oversees
Vero Beach, FL 32963 106(3), None
Trustee (since 1995)
CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January, 1976; Ford
Department of Economics and Louisa Van Voorhis Professor of Political Economy, University of
University of Washington Washington, since September, 1993 (formerly Director, Institute for Economic
Seattle, WA 98195 Research, University of Washington from September, 2001 to June, 2003) Adjunct
Trustee (since 1981) Professor of Statistics, University of Washington, since September, 1980;
Associate Editor, Journal of Money Credit and Banking, since September, 1993;
consultant on econometric and statistical matters. Oversees 104, None
JOHN J. NEUHAUSER (age 62) Academic Vice President and Dean of Faculties since August, 1999, Boston
84 College Road College (formerly Dean, Boston College School of Management from September,
Chestnut Hill, MA 02467-3838 1977 to August, 1999). Oversees 106(3), Saucony, Inc. (athletic footwear)
Trustee (since 1985)
PATRICK J. SIMPSON (age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 104, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
</Table>
49
<Page>
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD
DISINTERESTED TRUSTEES
THOMAS E. STITZEL (age 69) Business Consultant since 1999 (formerly Professor of Finance from 1975 to
2208 Tawny Woods Place 1999, College of Business, Boise State University); Chartered Financial
Boise, ID 83706 Analyst. Oversees 104, None
Trustee (since 1998)
THOMAS C. THEOBALD (age 68) Partner and Senior Advisor, Chicago Growth Partners (private equity investing)
8 Sound Shore Drive, since September, 2004 (formerly Managing Director, William Blair Capital
Suite 285 Partners (private equity investing) from September, 1994 to September, 2004).
Greenwich, CT 06830 Oversees 104, Anixter International (network support equipment distributor);
Trustee and Chairman of the Board(4) Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate
(since 1996) management services) and Ambac Financial Group (financial guaranty insurance)
ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM
359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 104,
Hopkinton, NH 03229 Chairman of the Board of Directors, Enesco Group, Inc. (designer, importer and
Trustee (since 1998) distributor of giftware and collectibles)
RICHARD L. WOOLWORTH (age 64) Retired since December 2003 (formerly Chairman and Chief Executive Officer,
100 S.W. Market Street The Regence Group (regional health insurer); Chairman and Chief Executive
#1500 Officer, BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur
Portland, OR 97207 Young & Company). Oversees 104, Northwest Natural Gas Co. (natural gas service
Trustee (since 1991) provider)
INTERESTED TRUSTEE
WILLIAM E. MAYER(2) (age 65) Partner, Park Avenue Equity Partners (private equity) since February, 1999
399 Park Avenue (formerly Partner, Development Capital LLC from November 1996 to February,
Suite 3204 1999). Oversees 106(3), Lee Enterprises (print media), WR Hambrecht + Co.
New York, NY 10022 (financial service provider); Reader's Digest (publishing); OPENFIELD
Trustee (since 1994) Solutions (retail industry technology provider)
</Table>
(1) In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds Complex.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the
Liberty All-Star Funds, currently consisting of 2 funds, which are advised
by an affiliate of the Advisor.
(4) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
The Statement of Additional Information Includes additional information
about the Trustees of the Funds and is available, without charge, upon
request by calling 800-426-3750.
50
<Page>
OFFICER
COLUMBIA STRATEGIC INCOME FUND
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA
FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
CHRISTOPHER L. WILSON (age 47) Head of Mutual Funds since August, 2004 and Senior Vice President of the
One Financial Center Advisor since January, 2005; President of the Columbia Funds, Liberty Funds
Boston, MA 02111 and Stein Roe Funds since October, 2004; President and Chief Executive Officer
President (since 2004) of the Nations Funds since January, 2005; President of the Galaxy Funds since
April 2005; Director of Bank of America Global Liquidity Funds, plc since May
2005; Director of Banc of America Capital Management (Ireland), Limited since
May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005;
Director of FIM Funding, Inc. since January, 2005; Senior Vice President of
Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia
Funds Services, Inc. since January, 2005 (formerly President and Chief
Executive Officer, CDC IXIS Asset Management Services, Inc. from September,
1998 to August, 2004).
J. KEVIN CONNAUGHTON (age 40) Treasurer of the Columbia Funds since October, 2003 and of the Liberty Funds,
One Financial Center Stein Roe Funds and All-Star Funds since December, 2000; Vice President of the
Boston, MA 02111 Advisor since April, 2003 (formerly President of the Columbia Funds, Liberty
Treasurer (since 2000) Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief
Accounting Officer and Controller of the Liberty Funds and All-Star Funds from
February, 1998 to October, 2000); Treasurer of the Galaxy Funds since
September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and
President from February, 2004 to December, 2004 of the Columbia Management
Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management
Associates, Inc. from February, 1998 to October, 2000).
MARY JOAN HOENE (age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds,
40 West 57th Street Liberty Funds, Stein Roe Funds and All-Star Funds since August, 2004 (formerly
New York, NY 10005 Partner, Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004;
Senior Vice President and Chief Compliance Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000;
Officer (since 2004) Vice President and Counsel, Equitable Life Assurance Society of the United
States from April, 1998 to November, 1999).
MICHAEL G. CLARKE (age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein Roe Funds
One Financial Center and All-Star Funds since October, 2004 (formerly Controller of the Columbia
Boston, MA 02111 Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to
Chief Accounting Officer (since 2004) October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice
President, Product Strategy & Development of the Liberty Funds and Stein Roe
Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty
Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February,
2001; Audit Manager, Deloitte & Touche LLP from May, 1997 to August, 1999).
JEFFREY R. COLEMAN (age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star
One Financial Center Funds since October, 2004 (formerly Vice President of CDC IXIS Asset
Boston, MA 02111 Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and
Controller (since 2004) Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice
President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer
of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of
PFPC, Inc. from November, 1996 to August, 2000).
R. SCOTT HENDERSON (age 45) Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds since
One Financial Center December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to
Boston, MA 02111 September, 2004; Executive Director and General Counsel, Massachusetts Pension
Secretary (since 2004) Reserves Investment Management Board from September, 1997 to March, 2001).
</Table>
51
<Page>
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT
COLUMBIA STRATEGIC INCOME FUND
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") requires
that the Board of Trustees/Directors (the "Board") of the Columbia Funds (the
"Funds"), including a majority of the Trustees and Directors (collectively, the
"Trustees") who are not "interested persons" of the Trusts, as defined in the
1940 Act (the "Independent Trustees"), annually review and approve the terms of
the Funds' investment advisory agreements. At a meeting held on October 13,
2004, the Board reviewed and approved the management contracts ("Advisory
Agreement") with Columbia Management Advisors, Inc. ("CMA") for the Fund.
At meetings held on September 23, 2004 and October 12, 2004, the Advisory Fees
and Expenses Committee (the "Committee") of the Board considered the factors
described below relating to the selection of CMA and the approval of the
Advisory Agreement. At a meeting held on October 13, 2004, the Board, including
the Independent Trustees (who were advised by their independent legal counsel),
considered these factors and reached the conclusions described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered information regarding the nature, extent and quality of
services that CMA provides to the Fund under the Advisory Agreement. CMA
provided the most recent investment adviser registration form ("Form ADV") and
code of ethics for CMA to the Board. The Board reviewed information on the
status of Securities and Exchange Commission ("SEC") and New York Attorney
General ("NYAG") proceedings against CMA and certain of its affiliates,
including the agreement in principle entered into with the SEC and the NYAG on
March 15, 2004 to settle civil complaints filed by the SEC and the NYAG relating
to trading activity in mutual fund shares.(1)
The Board evaluated the ability of CMA, including its resources, reputation and
other attributes, to attract and retain highly qualified research, advisory and
supervisory investment professionals. The Board considered information regarding
CMA's compensation program for its personnel involved in the management of the
Fund.
Based on these considerations and other factors, including those referenced
below, the Board concluded that they were generally satisfied with the nature,
extent and quality of the investment advisory services provided to the Fund by
CMA.
FUND PERFORMANCE AND EXPENSES
CMA provided the Board with relative performance and expense information for the
Fund in a report prepared by Lipper Inc. ("Lipper") an independent provider of
investment company data. The Board considered the total return performance
information, which included the ranking of the Fund within a performance
universe made up of funds with the same Lipper investment classification and
objective (the "Performance Universe") by total return for one-year, three-year,
five-year, ten-year or life of fund periods, as applicable. They also considered
the Fund's performance in comparison to the performance results of a group (the
"Performance Peer Group") of funds selected by Lipper based on similarities in
fund type (e.g. open-end), investment classification and objective, asset size,
load type and 12b-1/service fees and other expense features, and to the
performance results of the Fund's benchmark index. The Board reviewed a
description of Lipper's methodology for selecting the mutual funds in the Fund's
Performance Peer Group and Performance Universe.
The Board considered statistical information regarding the Fund's total expenses
and certain components thereof, including management fees (both actual
management fees based on expenses for advisory and administrative fees including
any reductions for fee waivers and expense reimbursements as well as contractual
management fees that are computed for a hypothetical level of assets), actual
non-management expenses, and fee waivers/caps and expense reimbursements. They
also considered comparisons of these expenses to the expense information for
funds within a group (the "Expense Peer Group") selected by Lipper based on
similarities in fund type (e.g. open-end), investment classification and
objective, asset size, load type and 12b-1/service fees and other expense
features (but which, unlike the Performance Peer Group, may include funds with
several different investment classifications and objectives) and an expense
universe ("Expense Universe") selected by Lipper based on the criteria for
determining the Expense Peer Group other than asset size. The expense
(1) On February 9, 2005, CMA and its affiliate, Columbia Funds Distributor,
Inc., entered into settlement agreements with the SEC and the NYAG that
contain substantially the terms outlined in the agreements in principle.
52
<Page>
information in the Lipper report took into account all existing fee waivers and
expense reimbursements as well as all voluntary advisory fee reductions
applicable to certain Funds that were being proposed by management in order to
reduce the aggregate advisory fees received from mutual funds advised by CMA and
Banc of America Capital Management, LLC ("BACAP") by $32 million per year for
five years as contemplated by the agreement in principle with the NYAG.
The Committee also considered the projected impact on expenses of these Funds
resulting from the overall cost reductions that management anticipated would
result from the proposed shift to a common group of service providers for
transfer agency, fund accounting and custody services for mutual funds advised
by Bank of America affiliates.
The Board also considered information in the Lipper report that ranked each Fund
based on (i) each Fund's one-year performance and actual management fees, (ii)
each Fund's one-year performance and total expenses and (iii) each Fund's 3-year
performance and total expenses. Based on these comparisons and expense and
performance rankings of the Fund in the Lipper Report, CMA determined an overall
score for the Fund. The Committee and the Board also considered projected
savings to the Fund that would result from certain modifications in soft dollar
arrangements.
The Committee also considered more detailed information relating to certain
Funds that were highlighted for additional review based upon the fact that they
ranked poorly in terms of overall expense or management fees, maintained poor
performance or demonstrated a combination of below average to poor performance
while maintaining below average or poor expense rankings. At its September 23,
2004 meeting, the Committee discussed these Funds with management and in
executive session. The Committee requested additional information from
management regarding the cause(s) of the below-average relative performance of
these Funds, any remedial actions management recommended to improve performance
and the general standards for review of portfolio manager performance. At its
October 12, 2004 meeting, the Committee considered additional information
provided by management regarding these Funds. The Board also considered
management's proposal to merge or liquidate some of these Funds.
Based on these considerations and other factors, the Board concluded that the
overall performance and expense results supported by the approval of the
Advisory Agreements for each Fund.
INVESTMENT ADVISORY FEE RATES
The Board reviewed and considered the proposed contractual investment advisory
fee rates (the "Advisory Agreement Rates") payable by the Funds to CMA for
investment advisory services. In addition, the Board reviewed and considered the
existing and proposed fee waiver and reimbursement arrangements applicable to
the Advisory Agreement Rates and considered the Advisory Agreement Rates after
taking the fee waivers and reimbursements into account (the "Net Advisory
Rates"). At previous meetings, the Committee had separately considered
management's proposal to reduce annual investment advisory fees for certain
Funds under the NYAG agreement in principle and the impact of these reductions
on each affected Fund. Additionally, the Board considered information comparing
the Advisory Agreement Rates and Net Advisory Rates (both on a stand-alone basis
and on a combined basis with the Funds' administration fee rates) with those of
the other funds in the Expense Peer Group. The Board concluded that the Advisory
Agreement Rates and Net Advisory Rates represented reasonable compensation to
CMA, in light of the nature, extent and quality of the services provided to the
Funds, the fees paid and expenses borne by comparable funds and the costs that
CMA incurs in providing these services to the Funds.
PROFITABILITY
The Board considered a detailed profitability analysis of CMA based on 2003
financial statements, adjusted to take into account advisory fee reductions
implemented in November 2003 and proposed reductions under the NYAG proposed
settlement. The Board concluded that, in light of the costs of providing
investment management and other services to the Funds, the profits and other
ancillary benefits that CMA and its affiliates received for providing these
services to the Funds were not unreasonable.
ECONOMIES OF SCALE
In evaluating potential economies of scale, the Board considered CMA's proposal
to implement a standardized breakpoint schedule for combined
53
<Page>
advisory and administrative fees for the majority of the funds of the same
general asset type within the Columbia Funds complex (other than index and
closed-end funds). The Board noted that the standardization of the breakpoints
would not result in a fee increase for any Fund. The Board concluded that any
actual or potential economies of scale are, or will be, shared fairly with Fund
shareholders, including most particularly through Advisory Agreement Rate
breakpoints at current and reasonably foreseeable asset levels.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
In evaluating the proposed fee reductions under the NYAG agreement in principle,
the Board considered information regarding the advisory fee rates charged by
BACAP for the Nations Funds. Members of the Committee and the Board had also
separately reviewed advisory fee rates for variable insurance product funds
advised by CMA. This information assisted the Board in assessing the
reasonableness of fees paid under the Advisory Agreements in light of the
nature, extent and quality of services provided under those agreements.
OTHER BENEFITS TO CMA
The Board considered information regarding potential "fall-out" or ancillary
benefits received by CMA and its affiliates as a result of their relationship
with the Funds. These benefits could include benefits directly attributable to
the relationship of CMA with the Funds (such as soft dollar credits) and
benefits potentially derived from an increase in the business of CMA as a result
of their relationship with the Funds (such as the ability to market to
shareholders other financial products offered by CMA and its affiliates).
OTHER FACTORS AND BROADER REVIEW
The Board reviews detailed materials provided by CMA annually as part of the
approval process under Section 15(c) of the 1940 Act. The Board also regularly
reviews and assesses the quality of the services that the Funds receive
throughout the year. In this regard, the Board reviews information provided by
CMA at their regular meetings, including, among other things, a detailed
portfolio review, and detailed fund performance reports. In addition, the Board
interviews the heads of each investment area at each regular meeting of the
Board and selected portfolio managers of the Funds at various times throughout
the year. After considering the above-described factors and based on the
deliberations and their evaluation of the information provided to them, the
Board concluded that re-approval of the Advisory Agreements for each of the
Funds was in the best interest of the Funds and their shareholders. Accordingly,
the Board unanimously approved the Advisory Agreements.
54
<Page>
COLUMBIA FUNDS
COLUMBIA STRATEGIC INCOME FUND
<Table>
LARGE 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 Value*
Columbia Strategic Investor
SMALL GROWTH Columbia Acorn
Columbia Acorn USA
Columbia Small Company Equity
SMALL VALUE Columbia Small Cap Value
BALANCED Columbia Asset Allocation
Columbia Balanced
Columbia Liberty Fund
Columbia Thermostat
SPECIALTY Columbia Real Estate Equity
Columbia Technology
Columbia Utilities
TAXABLE FIXED-INCOME 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 Tax-Exempt
Columbia Tax-Exempt Insured
</Table>
55
<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 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's trustees have approved the merger of this fund, which is
scheduled to occur before the end of 2005.
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. Columbia
Management Advisors, Inc. (CMA) is a SEC registered investment advisor and
wholly owned subsidiary of Bank of America, N.A. CMA is part of Columbia
Management.
56
<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 policies and procedures that the fund uses to determine how
to vote proxies and a copy of the fund's voting record are available (i) at
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. Columbia
Management Advisors, Inc. (CMA) is a SEC registered investment advisor and
wholly owned subsidiary of Bank of America, N.A. CMA is part of Columbia
Management.
57
<Page>
[GRAPHIC]
Help your fund reduce printing and postage costs! Elect to get your shareholder
reports by eletronic 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 STRATEGIC INCOME FUND ANNUAL REPORT, MAY 31, 2005 PRSRT STD
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
[COLUMBIA MANAGEMENT(R) LOGO]
(C) 2005 COLUMBIA FUNDS DISTRIBUTOR, INC.
ONE FINANCIAL CENTER, BOSTON, MA 02111-2621
800.345.6611 www.columbiafunds.com
SHC-42/87266-0605 (07/05) 05/6604
<Page>
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this
report, adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party.
(b) During the period covered by this report, there were not any
amendments to a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers
or implicit waivers to a provision of the code of ethics adopted in
2(a) above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas
E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members
of the registrant's Board of Trustees and Audit Committee, each qualify as an
audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr.
Woolworth are each independent trustees, as defined in paragraph (a)(2) of this
item's instructions and collectively constitute the entire Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fee information below is disclosed in aggregate for the two series of the
registrant whose reports to stockholders are included in this annual filing.
(a) Aggregate Audit Fees billed by the principal accountant for professional
services rendered during the fiscal years ended May 31, 2005 and May 31, 2004
are approximately as follows:
<Table>
<Caption>
2005 2004
$ 84,900 $ 77,100
</Table>
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years ended May 31, 2005 and
May 31, 2004 are approximately as follows:
<Page>
<Table>
<Caption>
2005 2004
$ 7,400 $ 8,000
</Table>
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported in Audit Fees
above. In both fiscal years 2005 and 2004, Audit-Related Fees include certain
agreed-upon procedures performed for semi-annual shareholder reports.
(c) Aggregate Tax Fees billed by the principal accountant for professional
services rendered during the fiscal years ended May 31, 2005 and May 31, 2004
are approximately as follows:
<Table>
<Caption>
2005 2004
$ 5,300 $ 7,200
</Table>
Tax Fees in both fiscal years 2005 and 2004 consist primarily of the review of
annual tax returns and include amounts for professional services by the
principal accountant for tax compliance, tax advice and tax planning.
(d) Aggregate All Other Fees billed by the principal accountant for professional
services rendered during the fiscal years ended May 31, 2005 and May 31, 2004
are approximately as follows:
<Table>
<Caption>
2005 2004
$ 0 $ 0
</Table>
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) above.
None of the amounts described in paragraphs (a) through (d) above were approved
pursuant to the "de minimus" exception under paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the "Policy")
which sets forth the procedures and the conditions pursuant to which the Audit
Committee will pre-approve (i) all audit and non-audit (including audit related,
tax and all other) services provided by the registrant's independent auditor to
the registrant and individual funds (collectively "Fund Services"), and (ii) all
non-audit services provided by the registrant's independent auditor to the
funds' adviser or a control affiliate of the adviser, that relate directly to
the funds' operations and financial reporting (collectively "Fund-related
<Page>
Adviser Services"). A "control affiliate" is an entity controlling, controlled
by, or under common control with the adviser that provides ongoing services to
the funds, and the term "adviser" is deemed to exclude any unaffiliated
sub-adviser whose role is primarily portfolio management and is sub-contracted
or overseen by another investment adviser. The adviser and control affiliates
are collectively referred to as "Adviser Entities."
The Audit Committee uses a combination of specific (on a case-by-case basis as
potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received general
pre-approval, it will require specific pre-approval by the Audit Committee if it
is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
On an annual basis, the Fund Treasurer and/or Director of Trustee Administration
shall submit to the Audit Committee a schedule of the types of Fund Services and
Fund-related Adviser Services that are subject to general pre-approval.
These schedules will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide estimated fees
for each instance of providing each service. This general pre-approval and
related fees (where provided) will generally cover a one-year period (for
example, from June 1 through May 31 of the following year). The Audit Committee
will review and approve the types of services and review the projected fees for
the next one-year period and may add to, or subtract from, the list of general
pre-approved services from time to time, based on subsequent determinations.
This approval acknowledges that the Audit Committee is in agreement with the
specific types of services that the independent auditor will be permitted to
perform. The fee amounts will be updated to the extent necessary at other
regularly scheduled meetings of the Audit Committee.
In addition to the fees for each individual service, the Audit Committee has the
authority to implement a fee cap on the aggregate amount of non-audit services
provided to an individual fund.
If, subsequent to general pre-approval, a fund, its investment adviser or a
control affiliate determines that it would like to engage the independent
auditor to perform a service that requires pre-approval and that is not included
in the general pre-approval list, the specific pre-approval procedure shall be
as follows:
- A brief written request shall be prepared by management detailing the
proposed engagement with explanation as to why the work is proposed to be
performed by the independent auditor;
<Page>
- The request should be addressed to the Audit Committee with copies to the
Fund Treasurer and/or Director of Trustee Administration;
- The Fund Treasurer and/or Director of Trustee Administration will arrange
for a discussion of the service to be included on the agenda for the next
regularly scheduled Audit Committee meeting, when the Committee will
discuss the proposed engagement and approve or deny the request.
- If the timing of the project is critical and the project needs to commence
before the next regularly scheduled meeting, the Chairperson of the Audit
Committee may approve or deny the request on behalf of the Audit
Committee, or, in the Chairperson's discretion, determine to call a
special meeting of the Audit Committee for the purpose of considering the
proposal. Should the Chairperson of the Audit Committee be unavailable,
any other member of the Audit Committee may serve as an alternate for the
purpose of approving or denying the request. Discussion with the
Chairperson (or alternate, if necessary) will be arranged by the Fund
Treasurer and/or Director of Trustee Administration. The independent
auditor will not commence any such project unless and until specific
approval has been given.
III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES
The Audit Committee recognizes that there are cases where services proposed to
be provided by the independent auditor to the adviser or control affiliates are
not Fund-related Adviser Services within the meaning of the Policy, but
nonetheless may be relevant to the Audit Committee's ongoing evaluation of the
auditor's independence and objectivity with respect to its audit services to the
funds. As a result, in all cases where an Adviser Entity engages the independent
auditor to provide audit or non-audit services that are not Fund Services or
Fund-related Adviser Services, were not subject to pre-approval by the Audit
Committee, and the projected fees for any such engagement (or the aggregate of
all such engagements during the period covered by the Policy) exceeds a
pre-determined threshold established by the Audit Committee; the independent
auditor, Fund Treasurer and/or Director of Trustee Administration will notify
the Audit Committee not later than its next meeting. Such notification shall
include a general description of the services provided, the entity that is to be
the recipient of such services, the timing of the engagement, the entity's
reasons for selecting the independent auditor, and the projected fees. Such
information will allow the Audit Committee to consider whether non-audit
services provided to the adviser and Adviser Entities, which were not subject to
Audit Committee pre-approval, are compatible with maintaining the auditor's
independence with respect to the Funds.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services or
Fund-related Adviser Services initiated since the last such report was rendered,
including:
- A general description of the services, and
<Page>
- Actual billed and projected fees, and
- The means by which such Fund Services or Fund-related Adviser Services
were pre-approved by the Audit Committee.
In addition, the independent auditor shall report to the Audit Committee
annually, and no more than 90 days prior to the filing of audit reports with the
SEC, all non-audit services provided to entities in the funds' "investment
company complex," as defined by SEC rules, that did not require pre-approval
under the Policy.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be reviewed
and approved at least annually by the Audit Committee.
*****
(e)(2) The percentage of services described in paragraphs (b) through (d) of
this Item approved pursuant to the "de minimis" exception under paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended May
31, 2005 and May 31, 2004 was zero.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years ended May 31, 2005 and May 31,
2004 are disclosed in (b) through (d) of this Item.
During the fiscal years ended May 31, 2005 and May 31, 2004, there were no
Audit-Related Fees or Tax Fees that were approved for services to the investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser)
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X. During the fiscal years ended May 31,
2005 and May 31, 2004, All Other Fees that were approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $95,500 and
$95,000, respectively. For both fiscal years, All Other Fees consist primarily
of internal controls reviews of the registrant's transfer agent.
The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be
approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were
approved under the "de minimis" exception during both fiscal years ended May 31,
2005 and May 31, 2004 was zero.
<Page>
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, is compatible with maintaining the principal accountant's
independence. The Audit Committee determined that the provision of such services
is compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
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 applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
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 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, has concluded that such controls
<Page>
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
attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Columbia Funds Trust I
------------------------------------------------------------
By (Signature and Title) /S/ Christopher L. Wilson
------------------------------------------------
Christopher L. Wilson, President
Date July 28, 2005
--------------------------------------------------------------------
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
------------------------------------------------
Christopher L. Wilson, President
Date July 28, 2005
--------------------------------------------------------------------
By (Signature and Title) /S/ J. Kevin Connaughton
------------------------------------------------
J. Kevin Connaughton, Treasurer
Date July 28, 2005
--------------------------------------------------------------------