UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4552
Columbia Funds Trust VIII
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
Date of fiscal year end: 03/31/05
Date of reporting period: 03/31/05
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.
Item 1. Reports to Stockholders.
[GRAPHIC]
COLUMBIA INCOME FUND
Annual Report March 31, 2005
PRESIDENT'S MESSAGE
--------------------------
Columbia Income Fund
Table of Contents
Fund Profile...................................... 1
Performance Information........................... 2
Understanding Your Expenses....................... 3
Economic Update................................... 4
Portfolio Managers' Report........................ 5
Investment Portfolio............................ 8
Statement of Assets and Liabilities............. 20
Statement of Operations......................... 21
Statement of Changes in Net Assets.............. 22
Notes to Financial Statements................... 24
Financial Highlights............................ 30
Report of Independent
Registered Public Accounting Firm................. 34
Trustees.......................................... 35
Officers.......................................... 37
Board Consideration and Approval of Investment
Advisory Agreement................................ 38
Important Information About This Report........... 41
Economic and market conditions change frequently. There is no assurance that
the trends described in this report will continue or commence.
--------------------------
Not FDIC May Lose Value
Insured -----------------
No Bank Guarantee
- -----------------
[PHOTO]
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 7 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 Wilson
Head of Mutual Funds, Columbia Management
Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible
for the day-to-day delivery of mutual fund services to the firm's investors.
With the exception of distribution, Chris oversees all aspects of the mutual
fund services operation, including treasury, investment accounting and
shareholder and broker services. Chris serves as Columbia Management's liaison
to the mutual fund boards of trustees.
Chris joined Bank of America in August 2004.
FUND PROFILE
-----------------------
Columbia Income Fund
The information below gives you a snapshot of your fund at the end of the
reporting period. Your fund is actively managed and the composition of its
portfolio will change over time.
Portfolio structure as of 03/31/05 (%)
Corporate fixed-income
bonds & notes 83.2
----------------------------------------
Government agencies & obligations 6.3
----------------------------------------
Mortgage-backed securities 3.7
----------------------------------------
Asset-backed securities 1.9
----------------------------------------
Collateralized mortgage obligations 1.5
----------------------------------------
Cash equivalents, net other
assets & liabilities 3.4
----------------------------------------
Quality breakdown as of 03/31/05 (%)
Aaa 6.9
-------------
Aa 4.3
-------------
A 20.4
-------------
Baa 32.9
-------------
Other 27.3
-------------
Treasury 4.8
-------------
Agency 3.4
-------------
Maturity breakdown as of 03/31/05 (%)
[CHART]
0-1 year 9.1
1-5 years 38.8
5-10 years 34.8
10-20 years 6.8
Over 20 years 10.5
Portfolio structure is calculated as a percentage of net assets. Quality and
maturity breakdowns are calculated as a percentage of total investments.
Ratings shown in the quality breakdown represent the rating assigned to a
particular bond by one of the following nationally recognized rating agencies:
Standard & Poor's Corporation, Moody's Investors Service, Inc. or Fitch Ratings
Ltd.
Management Style is determined by Columbia Management and is based on the
investment strategy and process as outlined in the fund's prospectus.
Summary
.. For the 12-month period ended March 31, 2005, the fund's class A shares
returned 2.00% without sales charge.
.. The fund outperformed both of its benchmarks, the Lehman Brothers
Intermediate Credit Bond Index and the Lehman Brothers Intermediate
Government/Credit Bond Index. Its return was also higher than the average
for its peer group, the Lipper Corporate Debt Funds BBB Rated Category.
.. We believe the fund's strong showing relative to its benchmarks and its
peers was primarily due to its substantial exposure to corporate bonds,
which outpaced Treasuries and other fixed income instruments during the
period.
[FLOW CHART]
Class A Shares 2.00%
Lehman Brothers Intermediate
Government/Credit
Bond Index -0.32%
Objective
Seeks its total return by investing for a high level of current income and, to
a lesser extent, capital appreciation.
Total net assets
$666.8 million
Management style
LOGO
1
PERFORMANCE INFORMATION
----------------------------
Columbia Income Fund
Performance of a $10,000 investment 04/01/95 - 03/31/05 ($)
sales charge: without with
----------------------------
Class A 20,482 19,502
----------------------------
Class B 20,065 20,065
----------------------------
Class C 20,146 20,146
----------------------------
Class Z 20,797 n/a
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.
Value of a $10,000 investment 04/01/95 - 03/31/05
[CHART]
Columbia
Columbia Lehman Lehman
Income Fund Income Fund Brother Brother
- Class A - Class A Government Intermediate
Without With /Credit Bond Credit Bond
Sales Charge Index Index
----- ------ ----- -----
10000 9525 10000 10000
04/30/1995 10158 9675 10123 10154
05/31/1995 10556 10055 10429 10542
06/30/1995 10652 10146 10499 10627
07/31/1995 10655 10149 10500 10615
08/31/1995 10779 10267 10595 10746
09/30/1995 10898 10380 10671 10846
10/31/1995 11031 10507 10790 10974
11/30/1995 11207 10675 10931 11157
12/31/1995 11376 10836 11046 11299
01/31/1996 11490 10944 11141 11404
02/29/1996 11314 10777 11011 11222
03/31/1996 11211 10679 10955 11141
04/30/1996 11152 10622 10916 11077
05/31/1996 11140 10610 10907 11060
06/30/1996 11265 10730 11023 11196
07/31/1996 11289 10753 11056 11224
08/31/1996 11303 10766 11065 11218
09/30/1996 11513 10966 11219 11413
10/31/1996 11763 11204 11417 11665
11/30/1996 12010 11439 11568 11864
12/31/1996 11928 11362 11494 11748
01/31/1997 11989 11419 11539 11796
02/28/1997 12080 11506 11561 11829
03/31/1997 11922 11356 11481 11700
04/30/1997 12057 11484 11615 11855
05/31/1997 12243 11662 11712 11975
06/30/1997 12428 11838 11818 12107
07/31/1997 12816 12207 12058 12428
08/31/1997 12664 12062 11998 12318
09/30/1997 12848 12238 12137 12491
10/31/1997 12884 12272 12272 12607
11/30/1997 12944 12329 12299 12636
12/31/1997 13072 12451 12397 12732
01/31/1998 13217 12589 12560 12901
02/28/1998 13249 12619 12550 12903
03/31/1998 13325 12692 12590 12948
04/30/1998 13399 12762 12653 13022
05/31/1998 13476 12836 12745 13134
06/30/1998 13511 12870 12827 13206
07/31/1998 13564 12920 12872 13240
08/31/1998 13274 12643 13074 13334
09/30/1998 13554 12910 13402 13733
10/31/1998 13273 12643 13388 13623
11/30/1998 13514 12872 13387 13729
12/31/1998 13593 12948 13441 13788
01/31/1999 13708 13056 13515 13899
02/28/1999 13501 12859 13316 13662
03/31/1999 13653 13005 13416 13789
04/30/1999 13775 13120 13457 13843
05/31/1999 13631 12984 13354 13689
06/30/1999 13581 12936 13363 13677
07/31/1999 13538 12894 13351 13633
08/31/1999 13509 12867 13362 13624
09/30/1999 13646 12997 13486 13774
10/31/1999 13684 13034 13521 13826
11/30/1999 13766 13112 13537 13859
12/31/1999 13762 13108 13493 13811
01/31/2000 13795 13139 13443 13751
02/29/2000 13946 13284 13553 13864
03/31/2000 14104 13434 13694 13982
04/30/2000 13952 13289 13662 13901
05/31/2000 13885 13225 13684 13894
06/30/2000 14253 13576 13925 14183
07/31/2000 14441 13755 14031 14313
08/31/2000 14662 13965 14196 14497
09/30/2000 14720 14021 14326 14637
10/31/2000 14653 13957 14391 14650
11/30/2000 14789 14087 14587 14825
12/31/2000 15107 14389 14856 15115
01/31/2001 15456 14722 15099 15434
02/28/2001 15668 14923 15241 15585
03/31/2001 15740 14992 15359 15715
04/30/2001 15726 14979 15319 15685
05/31/2001 15897 15142 15404 15804
06/30/2001 15943 15186 15461 15874
07/31/2001 16291 15517 15783 16245
08/31/2001 16489 15706 15941 16430
09/30/2001 16186 15417 16174 16532
10/31/2001 16442 15661 16442 16826
11/30/2001 16460 15678 16278 16697
12/31/2001 16371 15593 16188 16590
01/31/2002 16497 15713 16272 16695
02/28/2002 16555 15768 16401 16821
03/31/2002 16472 15690 16152 16562
04/30/2002 16806 16008 16418 16793
05/31/2002 16909 16106 16582 17021
06/30/2002 16826 16027 16725 17087
07/31/2002 16725 15931 16922 17144
08/31/2002 16966 16160 17174 17475
09/30/2002 17154 16339 17482 17803
10/31/2002 16801 16003 17414 17661
11/30/2002 17164 16348 17398 17807
12/31/2002 17547 16713 17777 18272
01/31/2003 17655 16817 17777 18323
02/28/2003 17963 17109 18028 18646
03/31/2003 17971 17118 18046 18685
04/30/2003 18423 17548 18183 18941
05/31/2003 18913 18014 18548 19424
06/30/2003 19047 18142 18535 19434
07/31/2003 18466 17589 18031 18837
08/31/2003 18527 17647 18075 18893
09/30/2003 19105 18197 18532 19456
10/31/2003 19160 18250 18358 19283
11/30/2003 19308 18391 18383 19341
12/31/2003 19572 18643 18543 19533
01/31/2004 19799 18859 18666 19689
02/29/2004 19930 18983 18856 19907
03/31/2004 20096 19141 19003 20083
04/30/2004 19690 18754 18553 19571
05/31/2004 19475 18550 18469 19447
06/30/2004 19598 18667 18525 19517
07/31/2004 19821 18880 18680 19716
08/31/2004 20186 19227 18992 20099
09/30/2004 20309 19344 19025 20173
10/31/2004 20540 19565 19152 20326
11/30/2004 20467 19494 18978 20148
12/31/2004 20679 19697 19107 20327
01/31/2005 20789 19801 19143 20386
02/28/2005 20779 19792 19038 20276
03/31/2005 20482 19502 18954 20091
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 Intermediate Government/Credit Bond Index is an unmanaged index that
tracks the performance of intermediate term US government and corporate bonds.
The Lehman Brothers Intermediate Credit Bond Index is the intermediate
component of the U.S. Credit Index. The U.S. Credit Index includes publicly
issued US corporate and foreign debentures and secured notes that meet
specified maturity, liquidity, and quality requirements. Unlike the fund,
indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
Average annual total return as of 03/31/05 (%)
Share class A B C Z
--------------------------------------------------------------
Inception 07/31/00 07/15/02 07/15/02 03/05/86
--------------------------------------------------------------
Sales charge without with without with without with without
--------------------------------------------------------------
1-year 2.00 -2.85 1.25 -3.60 1.40 0.43 2.33
--------------------------------------------------------------
5-year 7.76 6.72 7.32 7.01 7.40 7.40 8.09
--------------------------------------------------------------
10-year 7.43 6.91 7.21 7.21 7.26 7.26 7.60
--------------------------------------------------------------
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 A, class B and class C are newer classes of shares. Class A performance
information includes returns of the fund's class Z shares (the oldest existing
fund class) for periods prior to its inception. Class B and class C performance
information includes returns of the fund's class A shares for the period from
July 31, 2000 through July 15, 2002 and for periods prior thereto, the fund's
class Z shares (the oldest existing fund class). These returns have not been
restated to reflect any differences in expenses (such as Rule 12b-1 fees)
between class Z shares and the newer classes of shares. If differences in
expenses had been reflected, the returns shown for periods prior to the
inception of the newer classes of shares would have been lower, since the newer
classes of shares are subject to a Rule 12b-1 fee. Class A shares were
initially offered on July 31, 2000, class B and class C shares were initially
offered on July 15, 2002, and class Z shares were initially offered on March 5,
1986.
2
UNDERSTANDING YOUR EXPENSES
----------------------------------
Columbia Income Fund
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
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also continuing costs, which generally
include investment advisory 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 these costs with the ongoing 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
$1,000, which is invested at the beginning of the reporting period and held for
the entire period. Expense information is calculated two ways and each method
provides you with different information. The amount listed in the "actual"
column is calculated using the fund's actual operating expenses and total
return for the period. The amount listed in the "hypothetical" column for each
share class assumes that the return each year is 5% before expenses and
includes the fund's actual expense ratio. You should not use the hypothetical
account values and expenses to estimate either your actual account balance at
the end of the period or the expenses you paid during this reporting period.
10/01/04 - 03/31/05
Account value at the Account value at the Expenses paid Fund's annualized
beginning of the period ($) end of the period ($) during the period ($) expense ratio (%)
- -------------------------------------------------------------------------------------------------
Actual Hypothetical Actual Hypothetical Actual Hypothetical
- -------------------------------------------------------------------------------------------------
Class A 1,000.00 1,000.00 1,009.27 1,020.19 4.76 4.78 0.95
- -------------------------------------------------------------------------------------------------
Class B 1,000.00 1,000.00 1,005.53 1,016.45 8.50 8.55 1.70
- -------------------------------------------------------------------------------------------------
Class C 1,000.00 1,000.00 1,006.23 1,017.20 7.75 7.80 1.55
- -------------------------------------------------------------------------------------------------
Class Z 1,000.00 1,000.00 1,010.52 1,021.44 3.51 3.53 0.70
- -------------------------------------------------------------------------------------------------
Expenses paid during the period are equal to the annualized expense ratio for
the share class, 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 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 ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these
transactional costs were included, your costs would have been higher.
Compare with other funds
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this
information to compare the ongoing cost of investing in the fund with other
funds. To do so, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of other funds. As you compare
hypothetical examples of other funds, 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.
3
ECONOMIC UPDATE
-----------------------------
Columbia Income Fund
The US economy moved ahead at a healthy pace during the 12-month period that
began April 1, 2004 and ended March 31, 2005. Gross domestic product (GDP)
expanded at an estimated annualized rate of 3.5% as job growth helped buoy
consumer spending and rising profits boosted business spending. Higher energy
prices put something of a damper on growth as the period wore on -- enough to
slow the pace of growth to 3.1% in the first quarter of 2005.
Job growth dominated the economic news and drove consumer confidence ratings
which moved up and down, depending on the number of new jobs reported. Overall,
consumers remained significantly more optimistic about the prospects for the
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, business spending was not as robust as expected, given a
maturing economic cycle, two straight years of double-digit profit growth and a
significant build-up of cash on corporate balance sheets.
Bonds deliver modest gains
The US bond market delivered a positive return despite rising interest rates in
the final six weeks of the period. The yield on the 10-year Treasury note, a
bellwether for the bond market, rose above 4.5%, and sent bond prices down.
However, it settled just below 4.5% at the end of the period.
In this environment, the Lehman Brothers Aggregate Bond Index returned 1.15%
for the 12-month period. Municipal bonds did even better than investment-grade
taxable bonds as state revenues strengthened and fiscal constraints helped many
states balance their budgets. The Lehman Municipal Bond Index returned 2.67%.
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 6.79%. However, the riskiest bonds were the hardest hit when the
bond market pulled back, and high-yield bonds gave back some of their gains in
the final months of the period.
After a year of the lowest short-term interest rates in recent history, the
Federal Reserve (the Fed) raised the federal funds rate, a key short-term rate,
from 1.00% to 2.75% in seven one-quarter percentage point steps during the
period./1/ The Fed indicated early on that it would continue to raise
short-term interest rates at a "measured pace," in an attempt to balance
economic growth against inflationary pressures. So far, it has kept its word.
However, the Fed left the door open for more aggressive action in remarks made
on the economy and inflation when it met in March.
Stocks outperformed bonds
Buoyed by strong gains in the fourth quarter of 2004, the S&P 500 Index
returned 6.69% 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. However, 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,
and value stocks led growth stocks by a significant margin. Energy and
utilities were the best performing sectors.
/1/On May 3, 2005, the federal funds rate was raised to 3.00%
Summary
For the 12-month period ended March 31, 2005
.. Bonds chalked up modest 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.
[GRAPHIC]
Lehman Index 1.15
Merrill Lynch Index 6.79
.. Stocks outperformed bonds, as measured by the S&P 500 Index. Most of the
period's gains were generated during a fourth-quarter rally in 2004.
[GRAPHIC]
S&P 500 Index 6.69%
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks the daily price, coupon, pay-downs and total return performance of
fixed-rate, publicly placed, dollar-denominated, non-convertible investment
grade debt issues with at least $250 million par amount outstanding and with at
least one year to final maturity.
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.
4
PORTFOLIO MANAGERS' REPORT
--------------------------
Columbia Income Fund
For the 12-month period ended March 31, 2005, Columbia Income Fund's class A
shares returned 2.00% without sales charge. The fund performed better than its
benchmarks, the Lehman Brothers Intermediate Government/Credit Bond Index and
the Lehman Brothers Intermediate Credit Bond Index, which returned -0.32% and
0.04%, respectively, for the same period. The fund also bested the Lipper
Corporate BBB Rated Debt Fund Category average, which was 1.57% for the
12-month period./1/ The fund's performance was aided by its substantial
position in corporate bonds. Approximately 25% of the fund's assets were
invested in high-yield bonds, and the strong performance of this sector also
helped the fund's return.
In March 2005, the fund's management team changed. Marie Schofield and Carl
Pappo joined Thomas LaPointe and Kevin Cronk as co-managers of the fund.
Corporate issues outperformed
Solid economic trends provided a positive backdrop for corporate securities
over the 12-month period. Despite pressure on the bond market from the Federal
Reserve's current cycle of short-term interest-rate increases, returns on
investment-grade corporate debt and high-yield bonds outpaced other
fixed-income alternatives. Generally low rates drove bond investors seeking
income toward lower quality issues, including emerging market and international
securities. Because of this trend, the fund's light exposure to high quality
foreign debt was a benefit, as was its limited exposure to higher quality
sectors of the domestic corporate market, including financials.
Utility, energy bonds enhanced returns
As the business environment improved, utility bonds were strong performers.
This benefited the fund, as its significant holdings in this area, particularly
in electric utilities, turned in strong results. Sustained high oil prices
drove the performance of energy bonds during the period, and the fund's
investments in oil refining bonds also contributed to its strong performance.
Despite recent poor performance, we continue to hold bonds in the airline
sector. Historically airlines have held up well when interest rates have risen
because the stakeholders' ultimate credit is the value of the airplanes.
/1/Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
Net asset value per share as of 03/31/05 ($)
Class A 9.89
------------
Class B 9.89
------------
Class C 9.89
------------
Class Z 9.89
Distributions declared per share 04/01/04 - 03/31/05 ($)
Class A 0.52
------------
Class B 0.44
------------
Class C 0.46
------------
Class Z 0.55
SEC yields as of 03/31/05 (%)
Class A 3.85
------------
Class B 3.33
------------
Class C 3.48
------------
Class Z 4.34
The 30-day SEC yields reflect the portfolio's earning power net of expenses,
expressed as an annualized percentage of the public offering price at the end
of the period.
Holdings discussed
in this report as of 03/31/05 (%)
Federal National Mortgage Assn. 4.9
------------------------------------
Federal Home Loan Mortgage Corp. 1.8
------------------------------------
Sanmina-SCI 0.2
------------------------------------
Abitibi-Consolidated 0.1
Your fund is actively managed and the composition of its portfolio will change
over time. Information provided is calculated as a percentage of net assets.
5
- --------------------------------------------------------------------------------
Columbia Income Fund
Trimmed corporate holdings, added to agencies
We trimmed the fund's exposure to investment-grade corporate issues in some of
the best-performing areas of the corporate sector, including utilities and
industrials. We used the proceeds to increase holdings in government agency
debt and agency mortgage-backed issues. The government agency mortgage market
has been largely unaffected by regulatory scrutiny of the Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation, and we believe
these areas offer some of the best relative values. This strategy began to
produce results towards the end of the period, with strong performance relative
to other investment-grade sectors.
Among the fund's high-yield holdings, we reduced exposure to auto parts
manufacturers and realized profits from sales of these securities, including
Dana Corp. and SPX. During the period, we also sold several of the fund's
holdings in the leisure sector. We eliminated Six Flags because the company's
credit quality deteriorated, and we sold Host Marriott because we believed the
bonds had reached fair value. We used proceeds of these sales to add exposure
to cyclical sectors, such as information technology and forest products, which
we believe have the potential to benefit from continued economic strength.
Sanmina-SCI, an electronics manufacturer, and Abitibi-Consolidated, a newsprint
producer, are two of the fund's new holdings in these areas.
Rising rates could dampen economy
While inflation remains in check, rising interest rates and escalating costs of
doing business are not favorable developments for corporate bonds. A slowing of
economic growth is the inevitable result of rising interest rates, which is
likely to be a major factor influencing corporate performance. As a result, we
have scaled back the fund's exposure to corporate bonds, particularly to
investment-grade issues. We also limited the fund's Treasury holdings, because
real interest rates are at unattractive levels. We continue to seek areas that
offer compelling valuations and that are less vulnerable to rising interest
rates.
Kevin L. Cronk has co-managed the Columbia Income Fund since March 2003 and has
been with the advisor or its predecessors or affiliate organizations since 1999.
/s/
Thomas A. LaPointe has co-managed the fund since March 2003 and has been with
the advisor or its predecessors or affiliate organizations since 1999.
/s/
We have scaled back the fund's exposure to corporate bonds, particularly
investment grade issues, and continue to seek areas that offer compelling
valuations and that are less vulnerable to rising interest rates.
6
- --------------------------------------------------------------------------------
Columbia Income Fund
Marie M. Schofield has co-managed the fund since March 2005 and has been with
the advisor or its predecessors or affiliate organizations since 1990.
/s/ Marie M. Schofield
Carl W. Pappo has co-managed the fund since March 2005 and has been with the
advisor or its predecessors or affiliate organizations since 1993.
/s/ Carl Pappo
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.
High-yield bonds issued by foreign entities have greater potential risks,
including less regulation, currency fluctuations, economic instability and
political developments.
7
INVESTMENT PORTFOLIO
-----------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - 83.2%
BASIC MATERIALS - 3.9%
Chemicals - 2.3% Par ($) Value ($)
- -------------------------------------- ------------------- --------- ----------
Dow Chemical Co. 5.750% 11/15/09 4,500,000 4,693,725
------------------- --------- ----------
Eastman Chemical Co. 3.250% 06/15/08 1,150,000 1,103,678
6.300% 11/15/18 4,500,000 4,802,400
------------------- --------- ----------
EquiStar Chemicals LP 10.625% 05/01/11 2,000,000 2,255,000
------------------- --------- ----------
NOVA Chemicals Corp. 6.500% 01/15/12 2,000,000 2,050,000
------------------- --------- ----------
Chemicals Total 14,904,803
Forest Products & Paper - 1.6%
------------------- --------- ----------
Abitibi-Consolidated, Inc. 8.375% 04/01/15 500,000 485,000
------------------- --------- ----------
Cascades, Inc. 7.250% 02/15/13 3,500,000 3,570,000
------------------- --------- ----------
Norske Skog Canada Ltd. 7.375% 03/01/14 2,000,000 1,920,000
------------------- --------- ----------
Westvaco Corp. 8.200% 01/15/30 3,820,000 4,754,296
------------------- --------- ----------
Forest Products & Paper Total 10,729,296
----------
BASIC MATERIALS TOTAL 25,634,099
COMMUNICATIONS - 9.3%
Media - 5.9%
------------------- --------- ----------
Charter Communications Holdings II LLC 10.250% 09/15/10 1,000,000 1,027,500
------------------- --------- ----------
Comcast Corp. 5.850% 01/15/10 4,000,000 4,151,280
6.500% 01/15/15 2,000,000 2,145,160
------------------- --------- ----------
CSC Holdings, Inc. 6.750% 04/15/12 (a) 500,000 497,500
7.625% 04/01/11 1,500,000 1,556,250
------------------- --------- ----------
Dex Media West LLC 9.875% 08/15/13 1,953,000 2,182,477
------------------- --------- ----------
DirecTV Holdings LLC 8.375% 03/15/13 500,000 538,750
------------------- --------- ----------
Echostar DBS Corp. 6.375% 10/01/11 1,500,000 1,473,750
------------------- --------- ----------
Insight Midwest LP 9.750% 10/01/09 3,000,000 3,120,000
------------------- --------- ----------
Liberty Media Corp. 4.510% 09/17/06 (b) 4,000,000 4,053,400
------------------- --------- ----------
News America Holdings, Inc. 9.250% 02/01/13 2,000,000 2,497,700
------------------- --------- ----------
Sinclair Broadcast Group, Inc. 8.750% 12/15/11 2,000,000 2,112,500
------------------- --------- ----------
Viacom, Inc. 7.750% 06/01/05 6,500,000 6,543,745
------------------- --------- ----------
Videotron Ltee 6.875% 01/15/14 220,000 222,200
------------------- --------- ----------
Walt Disney Co. 5.500% 12/29/06 7,000,000 7,147,000
------------------- --------- ----------
Media Total 39,269,212
See Accompanying Notes to Financial Statements.
8
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
COMMUNICATIONS - (continued)
Telecommunication Services - 3.4% Par ($) Value ($)
---------------------------------- --------------------- ---------- ----------
Nextel Communications, Inc. 7.375% 08/01/15 3,095,000 3,265,225
--------------------- ---------- ----------
Qwest Corp. 9.125% 03/15/12 (a) 500,000 545,000
--------------------- ---------- ----------
Qwest Services Corp. 13.500% 12/15/10 (a) 1,500,000 1,732,500
--------------------- ---------- ----------
Rogers Cantel, Inc. 9.750% 06/01/16 2,000,000 2,380,000
--------------------- ---------- ----------
Sprint Capital Corp. 6.125% 11/15/08 4,500,000 4,712,490
--------------------- ---------- ----------
Telefonos de Mexico SA de CV 4.500% 11/19/08 5,250,000 5,156,288
4.750% 01/27/10 (a) 975,000 949,835
--------------------- ---------- ----------
Verizon Global Funding Corp. 7.750% 12/01/30 3,000,000 3,608,160
--------------------- ---------- ----------
Telecommunication Services Total 22,349,498
----------
COMMUNICATIONS TOTAL 61,618,710
CONSUMER CYCLICAL - 9.9%
Airlines - 1.5%
--------------------- ---------- ----------
American Airlines, Inc. 7.024% 10/15/09 3,029,000 3,059,290
9.710% 01/02/07 996,660 928,140
--------------------- ---------- ----------
Continental Airlines, Inc. 7.461% 04/01/15 2,997,066 2,787,271
--------------------- ---------- ----------
Southwest Airlines Co. 5.496% 11/01/06 3,000,000 3,059,700
--------------------- ---------- ----------
Airlines Total 9,834,401
Apparel - 0.5%
--------------------- ---------- ----------
Jones Apparel Group, Inc. 6.125% 11/15/34 (a) 1,730,000 1,620,232
--------------------- ---------- ----------
Phillips-Van Heusen Corp. 7.250% 02/15/11 2,000,000 2,010,000
--------------------- ---------- ----------
Apparel Total 3,630,232
Auto Manufacturers - 0.8%
--------------------- ---------- ----------
DaimlerChrysler NA Holding Corp. 6.400% 05/15/06 4,000,000 4,100,240
--------------------- ---------- ----------
Navistar International Corp. 7.500% 06/15/11 1,500,000 1,515,000
--------------------- ---------- ----------
Auto Manufacturers Total 5,615,240
Entertainment - 0.2%
--------------------- ---------- ----------
Steinway Musical Instruments, Inc. 8.750% 04/15/11 1,000,000 1,065,000
--------------------- ---------- ----------
Entertainment Total 1,065,000
Home Builders - 1.0%
--------------------- ---------- ----------
D.R. Horton, Inc. 9.750% 09/15/10 1,500,000 1,732,500
--------------------- ---------- ----------
K. Hovnanian Enterprises, Inc. 7.750% 05/15/13 2,000,000 2,060,000
--------------------- ---------- ----------
Standard-Pacific Corp. 9.250% 04/15/12 2,500,000 2,850,000
--------------------- ---------- ----------
Home Builders Total 6,642,500
See Accompanying Notes to Financial Statements.
9
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
CONSUMER CYCLICAL - (continued)
Leisure Time - 0.2% Par ($) Value ($)
------------------------------- ------------------- --------- ----------
K2, Inc. 7.375% 07/01/14 1,250,000 1,293,750
------------------- --------- ----------
Leisure Time Total 1,293,750
Lodging - 3.9%
------------------- --------- ----------
Hard Rock Hotel, Inc. 8.875% 06/01/13 1,200,000 1,290,000
------------------- --------- ----------
Harrah's Operating Co., Inc. 7.125% 06/01/07 3,750,000 3,946,875
7.875% 12/15/05 500,000 511,875
------------------- --------- ----------
Hyatt Equities LLC 6.875% 06/15/07 (a) 2,525,000 2,632,313
------------------- --------- ----------
La Quinta Corp. 7.620% 09/13/05 2,200,000 2,211,000
------------------- --------- ----------
Marriott International, Inc. 6.875% 11/15/05 5,000,000 5,088,400
------------------- --------- ----------
MGM Mirage 6.750% 09/01/12 1,000,000 1,010,000
------------------- --------- ----------
Mohegan Tribal Gaming Authority 6.125% 02/15/13 (a) 2,250,000 2,216,250
------------------- --------- ----------
Park Place Entertainment Corp. 9.375% 02/15/07 2,500,000 2,668,750
------------------- --------- ----------
Seneca Gaming Corp. 7.250% 05/01/12 830,000 830,000
------------------- --------- ----------
Station Casinos, Inc. 6.000% 04/01/12 1,000,000 992,500
6.875% 03/01/16 1,500,000 1,496,250
------------------- --------- ----------
Wynn Las Vegas LLC 6.625% 12/01/14 (a) 1,000,000 950,000
------------------- --------- ----------
Lodging Total 25,844,213
Retail - 1.8%
------------------- --------- ----------
CVS Corp. 5.298% 01/11/27 (a) 1,859,131 1,859,800
------------------- --------- ----------
Ferrellgas Partners LP 8.750% 06/15/12 1,160,000 1,206,400
------------------- --------- ----------
Finlay Fine Jewelry Corp. 8.375% 06/01/12 1,000,000 925,000
------------------- --------- ----------
Kohl's Corp. 6.700% 02/01/06 4,355,000 4,450,462
------------------- --------- ----------
Office Depot, Inc. 6.250% 08/15/13 1,655,000 1,732,917
------------------- --------- ----------
Rite Aid Corp. 7.500% 01/15/15 (a) 160,000 153,600
------------------- --------- ----------
Saks, Inc. 7.000% 12/01/13 1,500,000 1,380,000
------------------- --------- ----------
Tempur-Pedic, Inc. 10.250% 08/15/10 426,000 473,925
------------------- --------- ----------
Retail Total 12,182,104
----------
CONSUMER CYCLICAL TOTAL 66,107,440
CONSUMER NON-CYCLICAL - 9.9%
Beverages - 1.4%
------------------- --------- ----------
Bottling Group LLC 2.450% 10/16/06 7,000,000 6,839,700
See Accompanying Notes to Financial Statements.
10
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
CONSUMER NON-CYCLICAL - (continued)
Beverages - (continued) Par ($) Value ($)
----------------------------------- ------------------- --------- ----------
Constellation Brands, Inc. 8.125% 01/15/12 2,183,000 2,324,895
------------------- --------- ----------
Beverages Total 9,164,595
Biotechnology - 0.3%
------------------- --------- ----------
Bio-Rad Laboratories, Inc. 7.500% 08/15/13 2,000,000 2,100,000
------------------- --------- ----------
Biotechnology Total 2,100,000
Commercial Services - 1.6%
------------------- --------- ----------
Erac USA Finance Co. 6.750% 05/15/07 (a) 3,000,000 3,145,020
8.000% 01/15/11 (a) 3,000,000 3,411,510
------------------- --------- ----------
NationsRent, Inc. 9.500% 10/15/10 2,000,000 2,180,000
------------------- --------- ----------
Service Corp. International 7.700% 04/15/09 2,005,000 2,080,188
------------------- --------- ----------
Commercial Services Total 10,816,718
Cosmetics/Personal Care - 0.1%
------------------- --------- ----------
Procter & Gamble Co. 5.500% 02/01/34 1,000,000 1,001,980
------------------- --------- ----------
Cosmetics/Personal Care Total 1,001,980
Food - 0.9%
------------------- --------- ----------
Cadbury-Schweppes PLC 5.125% 10/01/13 (a) 1,750,000 1,735,440
------------------- --------- ----------
Delhaize America, Inc. 8.125% 04/15/11 1,000,000 1,115,920
------------------- --------- ----------
Dole Food Co., Inc. 8.625% 05/01/09 2,000,000 2,100,000
------------------- --------- ----------
Stater Brothers Holdings, Inc. 8.125% 06/15/12 1,150,000 1,115,500
------------------- --------- ----------
Food Total 6,066,860
Healthcare Services - 2.7%
------------------- --------- ----------
Coventry Health Care, Inc. 8.125% 02/15/12 800,000 870,000
------------------- --------- ----------
HCA, Inc. 6.950% 05/01/12 1,500,000 1,556,790
7.125% 06/01/06 3,250,000 3,348,573
7.875% 02/01/11 2,167,000 2,364,262
------------------- --------- ----------
MedQuest, Inc. 11.875% 08/15/12 2,000,000 1,980,000
------------------- --------- ----------
Tenet Healthcare Corp. 9.875% 07/01/14 3,050,000 3,164,375
------------------- --------- ----------
UnitedHealth Group, Inc. 3.300% 01/30/08 4,750,000 4,604,555
------------------- --------- ----------
Healthcare Services Total 17,888,555
Pharmaceuticals - 2.9%
------------------- --------- ----------
AmerisourceBergen Corp. 8.125% 09/01/08 3,000,000 3,217,500
------------------- --------- ----------
Bristol-Myers Squibb Co. 4.750% 10/01/06 6,000,000 6,079,140
------------------- --------- ----------
GlaxoSmithKline Capital PLC 2.375% 04/16/07 5,000,000 4,845,200
------------------- --------- ----------
Medco Health Solutions, Inc. 7.250% 08/15/13 1,000,000 1,106,930
See Accompanying Notes to Financial Statements.
11
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
CONSUMER NON-CYCLICAL - (continued)
Pharmaceuticals - (continued) Par ($) Value ($)
- ------------------------------------------ ------------------- --------- ----------
Wyeth 6.450% 02/01/24 1,075,000 1,173,018
6.500% 02/01/34 2,500,000 2,748,750
------------------- --------- ----------
Pharmaceuticals Total 19,170,538
----------
CONSUMER NON-CYCLICAL TOTAL 66,209,246
DIVERSIFIED - 0.9%
Holding Companies - 0.9%
------------------- --------- ----------
Hutchison Whampoa International Ltd. 6.250% 01/24/14 (a) 6,000,000 6,247,380
------------------- --------- ----------
Holding Companies Total 6,247,380
----------
DIVERSIFIED TOTAL 6,247,380
ENERGY - 6.9%
Oil & Gas - 6.4%
------------------- --------- ----------
Amerada Hess Corp. 7.300% 08/15/31 4,250,000 4,777,340
------------------- --------- ----------
Chesapeake Energy Corp. 6.375% 06/15/15 (a) 500,000 500,000
7.500% 06/15/14 1,210,000 1,285,625
------------------- --------- ----------
ConocoPhillips 9.375% 02/15/11 2,000,000 2,447,920
------------------- --------- ----------
Devon Financing Corp. 7.875% 09/30/31 2,600,000 3,269,006
------------------- --------- ----------
Gazprom International SA 7.201% 02/01/20 (a) 4,700,000 4,794,000
------------------- --------- ----------
Murphy Oil Corp. 6.375% 05/01/12 2,250,000 2,432,610
------------------- --------- ----------
Nexen, Inc. 7.875% 03/15/32 3,500,000 4,308,010
------------------- --------- ----------
Noble Drilling Corp. 7.500% 03/15/19 3,500,000 3,991,960
------------------- --------- ----------
Pemex Project Funding Master Trust 7.875% 02/01/09 2,000,000 2,155,000
9.125% 10/13/10 750,000 865,313
------------------- --------- ----------
Petrobras International Finance Co. 9.750% 07/06/11 1,500,000 1,725,000
------------------- --------- ----------
Premcor Refining Group, Inc. 7.500% 06/15/15 4,000,000 4,180,000
------------------- --------- ----------
Pride International, Inc. 7.375% 07/15/14 2,000,000 2,140,000
------------------- --------- ----------
Ras Laffan Liquefied Natural Gas Co., Ltd. 3.437% 09/15/09 (a) 3,739,500 3,528,031
------------------- --------- ----------
Oil & Gas Total 42,399,815
Pipelines - 0.5%
------------------- --------- ----------
Coastal Corp. 7.750% 06/15/10 2,000,000 2,000,000
------------------- --------- ----------
Williams Companies, Inc. 8.125% 03/15/12 1,500,000 1,635,000
------------------- --------- ----------
Pipelines Total 3,635,000
----------
ENERGY TOTAL 46,034,815
See Accompanying Notes to Financial Statements.
12
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
FINANCIALS - 24.3%
Banks - 5.8% Par ($) Value ($)
- -------------------------------------- ---------------------- --------- ----------
Bank One Corp. 6.500% 02/01/06 7,060,000 7,209,813
---------------------- --------- ----------
Barclays Bank PLC 7.375% 06/15/49 (a)(c) 4,000,000 4,441,280
---------------------- --------- ----------
Chinatrust Commercial Bank 5.625% 12/29/49 (a)(c) 1,325,000 1,295,280
---------------------- --------- ----------
Credit Suisse First Boston USA, Inc. 7.900% 05/01/07 (a)(c) 3,500,000 3,730,755
---------------------- --------- ----------
HSBC Capital Funding LP 9.547% 12/31/49 (a)(c) 4,500,000 5,410,665
---------------------- --------- ----------
North Fork Bancorporation, Inc. 5.875% 08/15/12 4,000,000 4,216,160
---------------------- --------- ----------
Popular North America, Inc. 6.125% 10/15/06 6,000,000 6,162,480
---------------------- --------- ----------
Rabobank Capital Funding II 5.260% 12/31/49 (a)(c) 6,100,000 6,276,778
---------------------- --------- ----------
Banks Total 38,743,211
Diversified Financial Services - 12.2%
---------------------- --------- ----------
Air 2 US 8.027% 10/01/19 (a) 1,507,094 1,311,172
---------------------- --------- ----------
Bear Stearns Companies, Inc. 4.000% 01/31/08 6,000,000 5,924,040
---------------------- --------- ----------
Capital One Bank 5.125% 02/15/14 3,350,000 3,297,673
---------------------- --------- ----------
Citigroup, Inc. 5.750% 05/10/06 7,000,000 7,127,400
---------------------- --------- ----------
Countrywide Home Loans, Inc. 5.500% 08/01/06 4,000,000 4,070,240
---------------------- --------- ----------
E*Trade Financial Corp. 8.000% 06/15/11 2,025,000 2,106,000
---------------------- --------- ----------
Ford Motor Credit Co. 5.700% 01/15/10 1,000,000 943,510
5.800% 01/12/09 2,350,000 2,259,220
7.375% 10/28/09 4,000,000 4,032,800
7.375% 02/01/11 2,650,000 2,639,400
---------------------- --------- ----------
Fund American Companies, Inc. 5.875% 05/15/13 2,657,000 2,688,804
---------------------- --------- ----------
General Motors Acceptance Corp. 6.125% 01/22/08 2,500,000 2,406,075
7.250% 03/02/11 2,000,000 1,859,480
---------------------- --------- ----------
Household Finance Corp. 4.625% 01/15/08 3,000,000 3,010,560
---------------------- --------- ----------
International Lease Finance Corp. 6.375% 03/15/09 5,000,000 5,278,050
---------------------- --------- ----------
Jefferies Group, Inc. 7.750% 03/15/12 2,750,000 3,123,807
---------------------- --------- ----------
LaBranche & Co., Inc. 11.000% 05/15/12 2,000,000 2,110,000
---------------------- --------- ----------
Merrill Lynch & Co., Inc. 3.700% 04/21/08 4,000,000 3,915,800
4.250% 02/08/10 6,700,000 6,551,997
See Accompanying Notes to Financial Statements.
13
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
FINANCIALS - (continued)
Diversified Financial Services - (continued) Par ($) Value ($)
- -------------------------------------------- ----------------------- ------------ -----------
Morgan Stanley 4.750% 04/01/14 1,000,000 955,030
----------------------- ------------ -----------
PF Export Receivables Master Trust 3.748% 06/01/13 (a) 1,629,250 1,538,452
----------------------- ------------ -----------
Spear Leeds & Kellogg LP 8.250% 08/15/05 (a) 4,000,000 4,071,200
----------------------- ------------ -----------
Textron Financial Corp. 2.750% 06/01/06 5,000,000 4,935,350
5.875% 06/01/07 1,990,000 2,054,297
----------------------- ------------ -----------
UFJ Finance Aruba AEC 6.750% 07/15/13 2,985,000 3,230,606
----------------------- ------------ -----------
Diversified Financial Services Total 81,440,963
Insurance - 3.1%
----------------------- ------------ -----------
Allstate Corp. 7.875% 05/01/05 6,000,000 6,020,100
----------------------- ------------ -----------
Florida Windstorm Underwriting Association 7.125% 02/25/19 (a) 2,000,000 2,240,500
----------------------- ------------ -----------
Hartford Financial Services Group, Inc. 4.700% 09/01/07 3,800,000 3,819,000
----------------------- ------------ -----------
Prudential Insurance Co. of America 7.650% 07/01/07 (a) 6,100,000 6,503,393
----------------------- ------------ -----------
Travelers Property Casualty Corp. 3.750% 03/15/08 2,250,000 2,192,625
----------------------- ------------ -----------
Insurance Total 20,775,618
Real Estate - 1.3%
----------------------- ------------ -----------
Forest City Enterprises, Inc. 7.625% 06/01/15 1,000,000 1,070,000
----------------------- ------------ -----------
Prudential Property 6.625% 04/01/09 (a) 3,000,000 3,179,940
7.125% 07/01/07 (a) 4,000,000 4,209,840
----------------------- ------------ -----------
Real Estate Total 8,459,780
Real Estate Investment Trusts - 1.6%
----------------------- ------------ -----------
Archstone-Smith Trust 6.875% 02/15/08 750,000 782,130
----------------------- ------------ -----------
iStar Financial, Inc. 5.125% 04/01/11 1,350,000 1,325,849
8.750% 08/15/08 3,209,000 3,569,788
----------------------- ------------ -----------
La Quinta Properties, Inc. 7.000% 08/15/12 500,000 506,250
----------------------- ------------ -----------
Thornburg Mortgage, Inc. 8.000% 05/15/13 2,000,000 2,050,000
----------------------- ------------ -----------
Ventas Realty LP 9.000% 05/01/12 2,000,000 2,280,000
----------------------- ------------ -----------
Real Estate Investment Trusts Total 10,514,017
Savings & Loans - 0.3%
----------------------- ------------ -----------
Western Financial Bank 9.625% 05/15/12 2,000,000 2,175,000
----------------------- ------------ -----------
Savings & Loans Total 2,175,000
-----------
FINANCIALS TOTAL 162,108,589
See Accompanying Notes to Financial Statements.
14
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
INDUSTRIALS - 5.7%
Aerospace & Defense - 1.3% Par ($) Value ($)
- ------------------------------------ -------------------- ------------- ---------
Raytheon Co. 4.850% 01/15/11 1,000,000 997,970
5.500% 11/15/12 5,000,000 5,147,550
-------------------- ------------- ---------
Sequa Corp. 8.875% 04/01/08 715,000 757,900
9.000% 08/01/09 285,000 306,375
-------------------- ------------- ---------
Systems 2001 Asset Trust 6.664% 09/15/13 (a) 1,138,213 1,224,854
-------------------- ------------- ---------
Aerospace & Defense Total 8,434,649
Electronics - 0.7%
-------------------- ------------- ---------
Flextronics International Ltd. 6.250% 11/15/14 1,475,000 1,404,937
-------------------- ------------- ---------
Sanmina-SCI Corp. 6.750% 03/01/13 (a) 1,500,000 1,406,250
-------------------- ------------- ---------
Thomas & Betts Corp. 7.250% 06/01/13 2,000,000 2,137,500
-------------------- ------------- ---------
Electronics Total 4,948,687
Environmental Control - 0.2%
-------------------- ------------- ---------
Allied Waste North America, Inc. 7.875% 04/15/13 400,000 396,500
8.500% 12/01/08 250,000 258,750
8.875% 04/01/08 500,000 518,750
-------------------- ------------- ---------
Environmental Control Total 1,174,000
Machinery Diversified - 0.2%
-------------------- ------------- ---------
Briggs & Stratton Corp. 8.875% 03/15/11 1,400,000 1,620,500
-------------------- ------------- ---------
Machinery Diversified Total 1,620,500
Metal Fabricate/Hardware - 0.2%
-------------------- ------------- ---------
FastenTech, Inc. 12.500% 05/01/11 (a) 250,000 268,750
-------------------- ------------- ---------
Valmont Industries, Inc. 6.875% 05/01/14 1,000,000 971,250
-------------------- ------------- ---------
Metal Fabricate/Hardware Total 1,240,000
Miscellaneous Manufacturing - 0.4%
-------------------- ------------- ---------
Bombardier, Inc. 6.300% 05/01/14 (a) 1,500,000 1,267,500
-------------------- ------------- ---------
Trinity Industries, Inc. 6.500% 03/15/14 1,550,000 1,488,000
-------------------- ------------- ---------
Miscellaneous Manufacturing Total 2,755,500
Packaging & Containers - 0.8%
-------------------- ------------- ---------
Crown European Holdings SA 10.875% 03/01/13 1,000,000 1,152,500
-------------------- ------------- ---------
Jefferson Smurfit Corp. 11.500% 10/01/15 EUR 1,000,000 1,205,791
-------------------- ------------- ---------
Owens-Brockway Glass Container, Inc. 8.875% 02/15/09 USD 3,000,000 3,195,000
-------------------- ------------- ---------
Packaging & Containers Total 5,553,291
Transportation - 1.9%
-------------------- ------------- ---------
Burlington Northern Railroad Co. 9.250% 10/01/06 2,035,000 2,181,296
-------------------- ------------- ---------
CHC Helicopter Corp. 7.375% 05/01/14 1,000,000 973,750
See Accompanying Notes to Financial Statements.
15
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
INDUSTRIALS - (continued)
Transportation - (continued) Par ($) Value ($)
- --------------------------------------- ------------------- --------- ----------
FedEx Corp. 2.650% 04/01/07 5,000,000 4,842,800
9.650% 06/15/12 1,000,000 1,278,130
------------------- --------- ----------
Ship Finance International Ltd. 8.500% 12/15/13 2,000,000 1,982,500
------------------- --------- ----------
Stena AB 7.500% 11/01/13 1,200,000 1,224,000
------------------- --------- ----------
Transportation Total 12,482,476
----------
INDUSTRIALS TOTAL 38,209,103
TECHNOLOGY - 0.9%
Computers - 0.9%
------------------- --------- ----------
Hewlett-Packard Co. 3.625% 03/15/08 2,000,000 1,953,460
------------------- --------- ----------
IBM Canada Credit Services Co. 3.750% 11/30/07 (a) 4,000,000 3,923,000
------------------- --------- ----------
Computers Total 5,876,460
----------
TECHNOLOGY TOTAL 5,876,460
UTILITIES - 11.5%
Electric - 10.7%
------------------- --------- ----------
AES Corp. 8.750% 06/15/08 986,000 1,040,230
------------------- --------- ----------
Alabama Power Co. 5.490% 11/01/05 1,000,000 1,009,800
------------------- --------- ----------
Calpine Corp. 8.500% 07/15/10 (a) 2,500,000 1,937,500
------------------- --------- ----------
CenterPoint Energy Houston Electric LLC 6.950% 03/15/33 1,750,000 2,063,355
------------------- --------- ----------
Consumers Energy Co. 6.000% 02/15/14 2,000,000 2,115,560
------------------- --------- ----------
Dominion Resources, Inc. 8.125% 06/15/10 4,000,000 4,569,240
------------------- --------- ----------
Edison Mission Energy 9.875% 04/15/11 2,500,000 2,875,000
------------------- --------- ----------
FirstEnergy Corp. 5.500% 11/15/06 2,000,000 2,037,920
6.450% 11/15/11 2,250,000 2,373,638
------------------- --------- ----------
FPL Energy American Wind LLC 6.639% 06/20/23 (a) 2,422,500 2,516,905
------------------- --------- ----------
FPL Energy National Wind 5.608% 03/10/24 (a) 395,000 390,462
------------------- --------- ----------
Kiowa Power Partners LLC 5.737% 03/30/21 (a) 1,990,000 1,962,140
------------------- --------- ----------
MidAmerican Energy Holdings Co. 5.875% 10/01/12 8,000,000 8,281,040
------------------- --------- ----------
MSW Energy Holdings LLC 8.500% 09/01/10 2,000,000 2,110,000
------------------- --------- ----------
Nevada Power Co. 9.000% 08/15/13 2,000,000 2,245,000
------------------- --------- ----------
Northern States Power Co. 8.000% 08/28/12 1,750,000 2,077,005
------------------- --------- ----------
Oncor Electric Delivery Co. 7.250% 01/15/33 3,000,000 3,636,630
See Accompanying Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Corporate Fixed-Income Bonds & Notes - (continued)
UTILITIES - (continued)
Electric - (continued) Par ($) Value ($)
- ---------------------------------- --------------------------------------- ---------- -----------
Orion Power Holdings, Inc. 12.000% 05/01/10 1,000,000 1,212,500
--------------------------------------- ---------- -----------
Pacific Gas & Electric Co. 6.050% 03/01/34 3,125,000 3,204,531
--------------------------------------- ---------- -----------
PSEG Energy Holdings LLC 8.625% 02/15/08 2,000,000 2,100,000
--------------------------------------- ---------- -----------
PSEG Power LLC 5.500% 12/01/15 3,560,000 3,609,128
7.750% 04/15/11 2,000,000 2,294,620
--------------------------------------- ---------- -----------
South Point Energy Center LLC 8.400% 05/30/12 (a) 618,042 573,234
--------------------------------------- ---------- -----------
Southern Power Co. 6.250% 07/15/12 3,870,000 4,174,530
--------------------------------------- ---------- -----------
Tenaska Alabama II Partners LP 6.125% 03/30/23 (a) 1,902,954 1,936,008
--------------------------------------- ---------- -----------
Texas Genco LLC 6.875% 12/15/14 (a) 1,290,000 1,290,000
--------------------------------------- ---------- -----------
TXU Corp. 5.550% 11/15/14 (a) 2,950,000 2,833,623
6.550% 11/15/34 (a) 5,100,000 5,023,806
--------------------------------------- ---------- -----------
Electric Total 71,493,405
Water - 0.8%
--------------------------------------- ---------- -----------
United Utilities PLC 6.250% 08/15/05 4,988,000 5,034,937
--------------------------------------- ---------- -----------
Water Total 5,034,937
-----------
UTILITIES TOTAL 76,528,342
Total Corporate Fixed-Income Bonds & Notes
(cost of $544,733,692) 554,574,184
Government Agencies & Obligations - 6.3%
FOREIGN GOVERNMENT BONDS - 1.6%
- ---------------------------------- --------------------------------------- ---------- -----------
Export-Import Bank of Korea 4.625% 03/16/10 2,650,000 2,624,056
--------------------------------------- ---------- -----------
State of Qatar 9.750% 06/15/30 (a) 2,750,000 4,001,992
--------------------------------------- ---------- -----------
United Mexican States 6.750% 09/27/34 4,000,000 3,896,000
--------------------------------------- ---------- -----------
FOREIGN GOVERNMENT BONDS TOTAL 10,522,048
U.S. GOVERNMENT OBLIGATIONS - 4.7%
- ---------------------------------- --------------------------------------- ---------- -----------
U.S. Treasury Bond 5.375% 02/15/31 13,535,000 14,751,567
--------------------------------------- ---------- -----------
U.S. Treasury Note 2.875% 11/30/06 6,000,000 5,918,436
3.375% 11/15/08 2,000,000 1,955,156
4.250% 08/15/14 - 11/15/14 9,015,000 8,833,889
--------------------------------------- ---------- -----------
U.S. GOVERNMENT OBLIGATIONS TOTAL 31,459,048
Total Government Agencies & Obligations
(cost of $40,644,629) 41,981,096
See Accompanying Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Mortgage-Backed Securities - 3.7% Par ($) Value ($)
- ----------------------------------------------------------------------------------- ---------- ----------
Federal National Mortgage Association 9.000% 07/01/19 - 06/01/20 75,336 81,299
TBA
6.000% 04/13/35 (d) 6,000,000 6,131,250
6.500% 04/13/35 (d) 16,000,000 16,600,000
----------------------------------------- ---------- ----------
Government National Mortgage Association 4.954% 05/16/31 2,265,000 2,211,442
10.000% 10/15/17 - 01/15/19 5,674 6,366
10.500% 01/15/16 - 05/15/20 25,478 28,859
11.500% 05/15/13 - 05/15/13 9,770 10,896
12.500% 11/15/10 - 12/15/13 29,255 32,728
13.000% 04/15/11 130 147
14.000% 08/15/11 2,538 2,894
----------------------------------------- ---------- ----------
Total Mortgage-Backed Securities
(cost of $25,219,000) 25,105,881
Asset-Backed Securities - 1.9%
- ----------------------------------------- ----------------------------------------- ---------- ----------
AmeriCredit Automobile Receivables Trust 3.930% 10/06/11 4,500,000 4,392,090
----------------------------------------- ---------- ----------
Green Tree Financial Corp. 6.870% 01/15/29 1,615,538 1,696,138
----------------------------------------- ---------- ----------
PG&E Energy Recovery Funding LLC 3.870% 06/25/11 5,580,000 5,514,546
----------------------------------------- ---------- ----------
Providian Gateway Master Trust 3.350% 09/15/11 (a) 1,000,000 976,120
----------------------------------------- ---------- ----------
Total Asset-Backed Securities
(cost of $12,813,539) 12,578,894
Collateralized Mortgage Obligations -1.5%
- ----------------------------------------- ----------------------------------------- ---------- ----------
Countrywide Alternative Loan Trust 5.000% 03/25/20 9,850,286 9,779,659
----------------------------------------- ---------- ----------
Total Collateralized Mortgage Obligations
(cost of $9,874,912) 9,779,659
Short-Term Obligations - 6.1%
U.S. GOVERNMENT AGENCIES - 3.3%
- ----------------------------------------- ----------------------------------------- ---------- ----------
Federal Home Loan Mortgage Corp. 2.680% 04/12/05 (e) 12,000,000 11,990,174
----------------------------------------- ---------- ----------
Federal National Mortgage Association 2.600% 04/13/05 (e) 10,000,000 9,991,333
----------------------------------------- ---------- ----------
U.S. GOVERNMENT AGENCIES TOTAL 21,981,507
See Accompanying Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Short-Term Obligations (continued)
Repurchase Agreement - 2.8% Par ($) Value ($)
- ---------------------------------------------------------------------------------------------- ---------- -----------
Repurchase agreement with State Street Bank & Trust Co.,
dated 03/31/05, due 04/01/05 at 2.450%, collateralized by a
U.S. Treasury Bond maturing 05/15/17, market value of
$19,023,700 (repurchase proceeds $18,651,269) 18,650,000 18,650,000
Total Short-Term Obligations
(cost of $40,631,507) 40,631,507
Total Investments - 102.7%
(cost of $673,917,279) (f) 684,651,221
Other Assets & Liabilities, Net - (2.7)% (17,847,772)
Net Assets - 100.0% 666,803,449
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 March 31, 2005, these securities amounted
to $112,259,810, which represents 16.8% of
net assets.
(b)Floating rate note. The interest rate shown
reflects the rate as of March 31, 2005.
(c)Variable rate security. The interest rate
shown reflects the rate as of March 31, 2005.
(d)Security purchased on a delayed delivery
basis.
(e)The rate shown represents the annualized
yield at the date of purchase.
(f)Cost for federal income tax purposes is
$678,801,441.
At March 31, 2005, the Fund held investments
in the following sectors:
SECTOR % OF NET ASSETS
----------------------------------------------------
Corporate Fixed-Income Bonds & Notes 83.2%
Government Agencies & Obligations 6.3
Mortgage-Backed Securities 3.7
Asset-Backed Securities 1.9
Collateralized Mortgage Obligations 1.5
Short-Term Obligations 6.1
Other Assets & Liabilities, Net (2.7)
-----
100.0%
-----
As of March 31, 2005, the Fund had entered
into the following forward currency exchange
contracts:
Forward Currency Aggregate Settlement Unrealized
Contracts to Sell Value Face Value Date Appreciation
---------------------------------------------------------------
EUR $1,284,064 $1,309,810 04/18/05 $25,746
ACRONYM NAME
------- ----
EUR Euro
TBA To Be Announced
USD United States Dollar
See Accompanying Notes to Financial Statements.
19
STATEMENT OF ASSETS AND LIABILITIES
-----------------------
March 31, 2005 Columbia Income Fund
($)
- ------------------------- ----------------------------------------------------------------- -----------
Assets Investments, at cost 673,917,279
-----------
Investments, at value 684,651,221
Cash 40,929
Net unrealized appreciation on foreign forward currency contracts 25,746
Receivable for:
Investments sold 106,703
Fund shares sold 2,986,655
Interest 9,902,980
Deferred Trustees' compensation plan 16,369
-----------
Total Assets 697,730,603
----------------------------------------------------------------- -----------
Liabilities Payable for:
Investments purchased 5,978,852
Investments purchased on a delayed delivery basis 22,800,000
Fund shares repurchased 1,185,005
Distributions 437,796
Investment advisory fee 230,078
Administration fee 71,823
Transfer agent fee 79,380
Pricing and bookkeeping fees 19,245
Trustees' fees 584
Custody fee 2,524
Distribution and service fees 51,160
Deferred Trustees' fees 16,369
Other liabilities 54,338
-----------
Total Liabilities 30,927,154
Net Assets 666,803,449
----------------------------------------------------------------- -----------
Composition of Net Assets Paid-in capital 681,595,182
Overdistributed net investment income (4,538,371)
Accumulated net realized loss (21,012,547)
Net unrealized appreciation on:
Investments 10,733,942
Foreign currency translations 25,243
-----------
Net Assets 666,803,449
----------------------------------------------------------------- -----------
Class A Net assets 96,567,726
Shares outstanding 9,759,784
Net asset value per share 9.89(a)
Maximum offering price per share ($9.89/0.9525) 10.38(b)
----------------------------------------------------------------- -----------
Class B Net assets 25,374,937
Shares outstanding 2,564,565
Net asset value and offering price per share 9.89(a)
----------------------------------------------------------------- -----------
Class C Net assets 10,895,349
Shares outstanding 1,101,163
Net asset value and offering price per share 9.89(a)
----------------------------------------------------------------- -----------
Class Z Net assets 533,965,437
Shares outstanding 53,966,809
Net asset value, offering and redemption price per share 9.89
(a)Redemption price per share is equal to net
asset value less any applicable contingent
deferred sales charge.
(b)On sales of $50,000 or more the offering
price is reduced.
See Accompanying Notes to Financial Statements.
20
STATEMENT OF OPERATIONS
-----------------------
For the Year Ended March 31, 2005 Columbia Income Fund
($)
- --------------------------------------- -------------------------------------------------------------- -----------
Investment Income Interest (net of foreign taxes withheld of $1,313) 32,751,938
-----------
-------------------------------------------------------------- -----------
Expenses Investment advisory fee 2,609,611
Administration fee 750,870
Distribution fee:
Class B 201,642
Class C 74,687
Service fee:
Class A 233,525
Class B 67,214
Class C 24,878
Transfer agent fee 374,834
Pricing and bookkeeping fees 183,183
Trustees' fees 18,522
Custody fee 23,640
Non-recurring costs (See Note 7) 28,581
Other expenses 246,306
-----------
Total Expenses 4,837,493
Fees waived by Distributor - Class C (14,979)
Non-recurring costs assumed by Investment Advisor (See Note 7) (28,581)
Custody earnings credit (4,380)
-----------
Net Expenses 4,789,553
-----------
Net Investment Income 27,962,385
-------------------------------------------------------------- -----------
Net Realized and Unrealized Gain (Loss) Net realized gain on:
on Investments and Foreign Currency Investments 3,839,140
Foreign currency transactions 14
-----------
Net realized gain 3,839,154
Net change in unrealized appreciation (depreciation) on:
Investments (20,009,868)
Foreign currency translations 25,243
-----------
Net change in unrealized appreciation (depreciation) (19,984,625)
-----------
Net Loss (16,145,471)
-----------
Net Increase in Net Assets from Operations 11,816,914
See Accompanying Notes to Financial Statements.
21
STATEMENT OF CHANGES IN NET ASSETS
-----------------------
Columbia Income Fund
Year Period Year
Ended Ended Ended
March 31, March 31, June 30,
Increase (Decrease) in Net Assets: 2005 ($) 2004 (a)(b)($) 2003 (c)(d)($)
- --------------------------------------- ------------------------------------- ----------- -------------- --------------
Operations Net investment income 27,962,385 20,854,179 25,995,513
Net realized gain on investments and
foreign currency transactions 3,839,154 9,142,243 3,427,610
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency transactions (19,984,625) (2,136,105) 33,226,182
----------- -------------- --------------
Net Increase from Operations 11,816,914 27,860,317 62,649,305
------------------------------------- ----------- -------------- --------------
Distributions Declared to Shareholders: From net investment income:
Class A (4,837,026) (3,767,366) (4,851,795)
Class B (1,190,350) (1,104,196) (1,525,173)
Class C (455,166) (260,133) (220,682)
Class Z (24,783,638) (18,030,708) (21,848,537)
----------- -------------- --------------
Total Distributions Declared to
Shareholders (31,266,180) (23,162,403) (28,446,187)
------------------------------------- ----------- -------------- --------------
Share Transactions Class A:
Subscriptions 22,118,982 11,896,879 13,307,884
Proceeds received in connection
with merger -- -- 92,697,100
Distributions reinvested 3,052,637 2,226,081 2,836,832
Redemptions (17,715,241) (12,719,120) (24,933,740)
----------- -------------- --------------
Net Increase 7,456,378 1,403,840 83,908,076
Class B:
Subscriptions 5,175,588 5,143,365 7,355,762
Proceeds received in connection
with merger -- -- 32,521,573
Distributions reinvested 758,498 676,743 951,704
Redemptions (9,171,814) (8,955,692) (10,486,433)
----------- -------------- --------------
Net Increase (Decrease) (3,237,728) (3,135,584) 30,342,606
Class C:
Subscriptions 4,394,155 4,978,358 2,990,400
Proceeds received in connection
with merger -- -- 3,795,846
Distributions reinvested 259,231 145,525 132,549
Redemptions (2,630,256) (1,569,954) (1,717,380)
----------- -------------- --------------
Net Increase 2,023,130 3,553,929 5,201,415
Class Z:
Subscriptions 196,815,905 87,808,248 140,602,354
Distributions reinvested 23,192,465 17,198,335 20,689,189
Redemptions (96,171,954) (111,003,329) (86,620,640)
----------- -------------- --------------
Net Increase (Decrease) 123,836,416 (5,996,746) 74,670,903
Net Increase (Decrease) from Share
Transactions 130,078,196 (4,174,561) 194,123,000
----------- -------------- --------------
Total Increase in Net Assets 110,628,930 523,353 228,326,118
------------------------------------- ----------- -------------- --------------
Net Assets Beginning of period 556,174,519 555,651,166 327,325,048
End of period 666,803,449 556,174,519 555,651,166
Overdistributed net investment
income at end of period (4,538,371) (2,468,472) (1,216,871)
(a)On October 13, 2003, the Liberty Income Fund
was renamed Columbia Income Fund.
(b)The Fund changed its fiscal year end from
June 30 to March 31, effective March 31,
2004.
(c)Class B and Class C shares commenced
operations on July 15, 2002.
(d)Effective July 15, 2002, Stein Roe Income
Fund Class S shares were redesignated
Liberty Income Fund Class Z shares.
See Accompanying Notes to Financial Statements.
22
- --------------------------------------------------------------------------------
Columbia Income Fund
Year Period Year
Ended Ended Ended
March 31, March 31, June 30,
2005 2004 (a)(b) 2003 (c)(d)
- ----------------- ------------------------------------- ---------- ----------- -----------
Changes in Shares Class A:
Subscriptions 2,210,083 1,180,862 1,404,563
Issued in connection with merger -- -- 9,788,501
Issued for distributions reinvested 305,231 222,302 295,360
Redemptions (1,771,345) (1,274,508) (2,622,883)
---------- ----------- -----------
Net Increase 743,969 128,656 8,865,541
Class B:
Subscriptions 516,497 511,389 772,472
Issued in connection with merger -- -- 3,434,168
Issued for distributions reinvested 75,869 67,614 99,099
Redemptions (920,346) (896,625) (1,095,572)
---------- ----------- -----------
Net Increase (Decrease) (327,980) (317,622) 3,210,167
Class C:
Subscriptions 438,903 495,828 311,006
Issued in connection with merger -- -- 400,829
Issued for distributions reinvested 25,925 14,500 13,770
Redemptions (263,219) (157,399) (178,980)
---------- ----------- -----------
Net Increase 201,609 352,929 546,625
Class Z:
Subscriptions 19,613,104 8,734,872 14,613,670
Issued for distributions reinvested 2,319,241 1,717,623 2,140,928
Redemptions (9,632,261) (11,147,023) (9,059,989)
---------- ----------- -----------
Net Increase (Decrease) 12,300,084 (694,528) 7,694,609
(a)On October 13, 2003, the Liberty Income Fund
was renamed Columbia Income Fund.
(b)The Fund changed its fiscal year end from
June 30 to March 31, effective March 31,
2004.
(c)Class B and Class C shares commenced
operations on July 15, 2002.
(d)Effective July 15, 2002, Stein Roe Income
Fund Class S shares were redesignated
Liberty Income Fund Class Z shares.
See Accompanying Notes to Financial Statements.
23
NOTES TO FINANCIAL STATEMENTS
-----------------------
March 31, 2005 Columbia Income Fund
Note 1. Organization
Columbia Income Fund (the "Fund"), a series of Columbia Funds Trust VIII (the
"Trust"), is a diversified portfolio. The Trust is a Massachusetts business
trust registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
Investment Goal
The Fund seeks its total return by investing for a high level of current income
and, to a lesser extent, capital appreciation.
Fund Shares
The Fund may issue an unlimited number of shares and offers four classes of
shares: Class A, Class B, Class C and Class Z. Each share class has its own
sales charge and expense structure.
Class A shares are subject to a maximum front-end sales charge of 4.75% based
on the amount of initial investment. Class A shares purchased without an
initial sales charge are subject to a 1.00% contingent deferred sales charge
("CDSC") on shares sold within eighteen months on an original purchase of $1
million to $25 million. Class B shares are subject to a maximum CDSC of 5.00%
based upon the holding period after purchase. Class B shares will convert to
Class A shares in a certain number of years after purchase, depending on the
program under which shares were purchased. Class C shares are subject to a
1.00% CDSC on shares sold within one year after purchase. Class Z shares are
offered continuously at net asset value. There are certain restrictions on the
purchase of Class Z shares, as described in the Fund's prospectus.
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.
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 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.
24
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Security Transactions
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
Repurchase Agreements
The Fund may engage in repurchase agreement transactions with institutions that
the Fund's investment advisor has determined are creditworthy. The Fund,
through its custodian, receives delivery of underlying securities
collateralizing a repurchase agreement. Collateral is at least equal, at all
times, to the value of the repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty. These risks include possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities
and a possible decline in the value of the underlying securities during the
period while the Fund seeks to assert its rights.
Delayed Delivery Securities
The Fund may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
to subsequently invest at less advantageous prices. The Fund identifies cash or
liquid portfolio securities in an amount equal to the delayed delivery
commitment.
Income Recognition
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities.
Foreign Currency Transactions
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates. Net realized and
unrealized gains (losses) on foreign currency transactions include gains
(losses) arising from the fluctuation in exchange rates between trade and
settlement dates on securities transactions, gains (losses) arising from the
disposition of foreign currency and currency gains (losses) between the accrual
and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes, the Fund does not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains (losses)
on investments.
Determination of Class Net Asset Values
All income, expenses (other than class-specific expenses, as shown on the
Statement of Operations) and realized and unrealized gains (losses) are
allocated to each class of the Fund on a daily basis for purposes of
determining the net asset value of each class. Income and expenses are
allocated to each class based on the settled shares method, while realized and
unrealized gains (losses) are allocated based on the relative net assets of
each class.
Federal Income Tax Status
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable income, if any, for its tax year, and as such
will not be subject to federal income taxes. In addition, 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 March 31, 2005, permanent book and tax basis differences
resulting primarily from
25
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
differing treatments for discount accretion/premium amortization on debt
securities, paydown reclassifications, market discount reclassifications and
foreign currency transactions were identified and reclassified among the
components of the Fund's net assets as follows:
Overdistributed Accumulated
Net Investment Net Realized Paid-In
Income Loss Capital
------------------------------------
$1,233,896 $(1,233,896) $--
------------------------------------
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 year ended March 31, 2005,
the period ended March 31, 2004 and the year ended June 30, 2003 was as follows:
March 31, March 31, June 30,
2005 2004 2003
------------------------------------------------------------
Distributions paid from:
------------------------------------------------------------
Ordinary Income $31,266,180 $23,162,403 $28,446,187
------------------------------------------------------------
Long-Term Capital
Gains -- -- --
------------------------------------------------------------
As of March 31, 2005, the components of distributable earnings on a tax basis
were as follows:
Undistributed Undistributed
Ordinary Long-Term Net Unrealized
Income Capital Gains Appreciation*
------------------------------------------
$745,193 $-- $5,824,034
------------------------------------------
*The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to discount accretion/premium amortization on debt
securities and deferral of losses from wash sales.
Unrealized appreciation and depreciation at March 31, 2005, based on cost of
investments for federal income tax purposes and excluding any unrealized
appreciation and depreciation from changes in the value of other assets and
liabilities resulting from changes in exchange rates, was:
Unrealized appreciation $ 18,051,239
Unrealized depreciation (12,201,459)
------------
Net unrealized appreciation $ 5,849,780
------------------------------------------
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:
Year of Capital Loss
Expiration Carryforward
-----------------------
2008 $ 7,932,135
2009 8,620,038
2010 1,393,345
2011 2,985,140
------------
$20,930,658
-----------------------
Of the capital loss carryforwards attributable to the Fund, $10,086,973
($4,838,296 will expire March 31, 2008, $3,855,332 will expire March 31, 2009
and $1,393,345 will expire March 31, 2010) was obtained in the merger with the
Liberty Income Fund.
Capital loss carryforwards of $2,573,103 were utilized during the year ended
March 31, 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 receives a monthly investment advisory fee based on the Fund's
average daily net assets at the following annual rates:
Average Daily Net Assets Annual Fee Rate
------------------------------------------
First $500 million 0.420%
------------------------------------------
$500 million to $1 billion 0.375%
------------------------------------------
$1 billion to $1.5 billion 0.370%
------------------------------------------
$1.5 billion to $3 billion 0.340%
------------------------------------------
$3 billion to $6 billion 0.330%
------------------------------------------
Over $6 billion 0.320%
------------------------------------------
Prior to November 1, 2004, Columbia received a monthly investment advisory fee
based on the Fund's average daily net assets as follows:
Average Daily Net Assets Annual Fee Rate
------------------------------------------
First $100 million 0.500%
------------------------------------------
$100 million to $1 billion 0.475%
------------------------------------------
Over $1 billion 0.450%
------------------------------------------
For the year ended March 31, 2005, the Fund's effective investment advisory fee
rate was 0.45%.
26
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
Administration Fee
Columbia provides administrative and other services to the Fund for a monthly
administration fee based on the Fund's average daily net assets at the
following annual rates:
Average Daily Net Assets Annual Fee Rate
------------------------------------------
First $100 million 0.150%
------------------------------------------
$100 million to $1 billion 0.125%
------------------------------------------
Over $1 billion 0.100%
------------------------------------------
For the year ended March 31, 2005, the Fund's effective administration fee rate
was 0.13%.
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
collected to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000 paid monthly, and in any month that
the Fund's average daily net assets exceed $50 million, an additional monthly
fee. The additional fee rate is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. This rate is applied
to the average daily net assets of the Fund for that month. The Fund also pays
additional fees for pricing services based on the number of securities held by
the Fund.
For the year ended March 31, 2005, the effective pricing and bookkeeping fee
rate for the Fund, inclusive of out-of-pocket expenses, was 0.032%.
Transfer Agent Fee
Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia,
provides shareholder services to the Fund and has subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. For such
services, the Transfer Agent receives a fee, paid monthly, at the annual rate
of $34.00 per open account. The Transfer Agent also receives reimbursement for
certain out-of-pocket expenses.
Columbia has voluntarily agreed to reimburse the Fund for a portion of the
transfer agent expenses so that transfer agent fees (exclusive of out-of-pocket
expenses) would not exceed 0.23% annually of the Fund's average daily net
assets. Columbia, at its discretion, may revise or discontinue this arrangement
any time.
For the year ended March 31, 2005, the Fund's effective transfer agent fee
rate, inclusive of out-of-pocket expenses, was 0.06%.
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 March 31, 2005,
the Distributor has retained net underwriting discounts of $15,660 on sales of
the Fund's Class A shares and net CDSC fees of $124, $78,301 and $6,264 on
Class A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a
monthly service fee to the Distributor at the annual rate of 0.25% of the
average daily net assets attributable to Class A, Class B and Class C shares of
the Fund. The Plan also requires the payment of a monthly distribution fee to
the Distributor at the annual rate of 0.75% of the average daily net assets
attributable to Class B and Class C shares only. The Distributor has
voluntarily agreed to waive a portion of the Class C share distribution fee so
that it will not exceed 0.60% annually of Class C average daily net assets.
The CDSC and the fees received from the Plan are used principally as repayment
to the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
Custody Credits
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. 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.
27
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
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 March 31, 2005, the Fund paid $2,103 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 March 31, 2005, the cost of purchases and proceeds from
sales of securities, excluding short-term obligations, were $337,759,492 and
$201,903,114, respectively, of which $100,869,959 and $46,804,544,
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.
For the year ended March 31, 2005, the Fund did not borrow under this
arrangement.
Note 7. Disclosure of Significant Risks and Contingencies
High-Yield Securities
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns may disrupt the high yield market and impair the ability of issuers
to repay principal and interest. Also, an increase in interest rates would
likely have an adverse impact on the value of such obligations. Moreover,
high-yield securities may be less liquid to the extent that 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
28
- --------------------------------------------------------------------------------
March 31, 2005 Columbia Income Fund
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.
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.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the Fund
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 are expected to file a consolidated amended complaint in June 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.
In connection with events described in detail above, various parties have filed
suit against certain funds, their Boards, 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"). 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.
For the year ended March 31, 2005, Columbia has assumed $28,581 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
29
FINANCIAL HIGHLIGHTS
-----------------------
Columbia Income Fund
Selected data for a share outstanding throughout each period is as follows:
Year Period Period
Ended Ended Ended
March 31, March 31, Year Ended June 30, June 30,
Class A Shares 2005 2004(a)(b) 2003(c) 2002(c) 2001(c)(d)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.21 $ 10.10 $ 9.44 $ 9.54 $ 9.21
- ----------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income (e) 0.47 0.39 0.45 0.60(f) 0.61
Net realized and unrealized gain (loss) on
investments and foreign currency (0.27) 0.15 0.75 (0.08)(f) 0.32
--------- ---------- ------- ------- ----------
Total from Investment Operations 0.20 0.54 1.20 0.52 0.93
- ----------------------------------------------------------------------------------------------------------------------
Less Distributions Declared to Shareholders:
From net investment income (0.52) (0.43) (0.54) (0.62) (0.60)
Return of capital -- -- -- -- (g) --
--------- ---------- ------- ------- ----------
Total Distributions Declared to Shareholders (0.52) (0.43) (0.54) (0.62) (0.60)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.89 $ 10.21 $ 10.10 $ 9.44 $ 9.54
Total return (h) 2.00% 5.50%(i)(j) 13.18%(j) 5.53% 10.41%(i)
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/Supplemental Data:
Operating expenses (k) 0.97% 1.14%(l) 1.23% 1.10% 1.12%(l)
Interest expense -- --%(l)(m) -- -- --
Expenses (k) 0.97% 1.14%(l) 1.23% 1.10% 1.12%(l)
Net investment income (k) 4.66% 5.20%(l) 5.12% 6.32%(f) 7.08%(l)
Waiver/reimbursement -- 0.03%(l) 0.05% -- --
Portfolio turnover rate 36% 93%(i) 96% 136%(n) 128%(n)
Net assets, end of period (000's) $96,568 $92,053 $89,740 $ 204 $ 1
- ----------------------------------------------------------------------------------------------------------------------
(a)On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b)The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c)Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(d)Class A shares were initially offered on July 31, 2000. Per share data and
total return reflect activity from that date.
(e)Per share data was calculated using average shares outstanding during the
period.
(f)Effective July 1, 2001, the SR&F Income Portfolio adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting discount on all debt securities. The effect
of this change for the year ended June 30, 2002, was to decrease net
investment income per share by $0.01, decrease net realized and unrealized
loss per share by $0.01 and decrease the ratio of net investment income to
average net assets from 6.40% to 6.32%. Per share data and ratios for the
period prior to June 30, 2002 have not been restated to reflect this change
in presentation.
(g)Rounds to less than $0.01 per share.
(h)Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(i)Not annualized.
(j)Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(k)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l)Annualized.
(m)Rounds to less than 0.01%.
(n)Portfolio turnover disclosed is for the SR&F Income Portfolio.
30
- --------------------------------------------------------------------------------
Columbia Income Fund
Selected data for a share outstanding throughout each period is as follows:
Period Period
Year Ended Ended Ended
March 31, March 31, June 30,
Class B Shares 2005 2004(a)(b) 2003(c)(d)
- ----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.21 $ 10.10 $ 9.47
- ----------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income (e) 0.39 0.33 0.40
Net realized and unrealized gain (loss) on
investments and foreign currency (0.27) 0.15 0.68
---------- ---------- ----------
Total from Investment Operations 0.12 0.48 1.08
- ----------------------------------------------------------------------------------------------
Less Distributions Declared to Shareholders:
From net investment income (0.44) (0.37) (0.45)
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.89 $ 10.21 $ 10.10
Total return (f) 1.25% 4.91%(g)(h) 11.78%(g)(h)
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets/Supplemental Data:
Operating expenses (i) 1.72% 1.89%/(j)/ 1.99%(j)
Interest expense -- --%(j)(k) --
Expenses (i) 1.72% 1.89%(j) 1.99%(j)
Net investment income (i) 3.91% 4.46%(j) 4.39%(j)
Waiver/reimbursement -- 0.03%(j) 0.11%(j)
Portfolio turnover rate 36% 93%(g) 96%
Net assets, end of period (000's) $25,375 $29,534 $32,430
- ----------------------------------------------------------------------------------------------
(a)On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b)The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c)Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(d)Class B shares were initially offered on July 15, 2002. Per share data and
total return reflect activity from that date.
(e)Per share data was calculated using average shares outstanding during the
period.
(f)Total return at net asset value assuming all distributions reinvested and no
contingent deferred sales charge.
(g)Not annualized.
(h)Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(i)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j)Annualized.
(k)Rounds to less than 0.01%.
31
- --------------------------------------------------------------------------------
Columbia Income Fund
Selected data for a share outstanding throughout each period is as follows:
Year Period Period
Ended Ended Ended
March 31, March 31, June 30,
Class C Shares 2005 2004(a)(b) 2003(c)(d)
- ------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.21 $ 10.10 $ 9.47
- ------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income (e) 0.41 0.34 0.42
Net realized and unrealized gain (loss) on
investments and foreign currency (0.27) 0.15 0.68
--------- ---------- ----------
Total from Investment Operations 0.14 0.49 1.10
- ------------------------------------------------------------------------------------------
Less Distributions Declared to Shareholders:
From net investment income (0.46) (0.38) (0.47)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.89 $ 10.21 $ 10.10
Total return (f)(g) 1.40% 5.03%(h) 11.94%(h)
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets/Supplemental Data:
Operating expenses (i) 1.57% 1.74%(j) 1.84%(j)
Interest expense -- --%(j)(k) --
Expenses (i) 1.57% 1.74%(j) 1.84%(j)
Net investment income (i) 4.06% 4.52%(j) 4.51%(j)
Waiver/reimbursement 0.15% 0.18%(j) 0.23%(j)
Portfolio turnover rate 36% 93%(h) 96%
Net assets, end of period (000's) $10,895 $ 9,185 $ 5,522
- ------------------------------------------------------------------------------------------
(a)On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b)The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c)Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(d)Class C shares were initially offered on July 15, 2002. Per share data and
total return reflect activity from that date.
(e)Per share data was calculated using average shares outstanding during the
period.
(f)Total return at net asset value assuming all distributions reinvested and no
contingent deferred sales charge.
(g)Had the Investment Advisor/Distributor not reimbursed a portion of expenses,
total return would have been reduced.
(h)Not annualized.
(i)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j)Annualized.
(k)Rounds to less than 0.01%.
32
- --------------------------------------------------------------------------------
Columbia Income Fund
Selected data for a share outstanding throughout each period is as follows:
Year Period
Ended Ended
March 31, March 31, Year Ended June 30,
Class Z Shares 2005 2004(a)(b) 2003(c)(d) 2002(d) 2001(d)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.21 $ 10.10 $ 9.44 $ 9.54 $ 9.15
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income (e) 0.49 0.41 0.53 0.63(f) 0.69
Net realized and unrealized gain (loss) on
investments and foreign currency (0.26) 0.16 0.71 (0.09)(f) 0.39
--------- ---------- ---------- -------- --------
Total from Investment Operations 0.23 0.57 1.24 0.54 1.08
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions Declared to Shareholders:
From net investment income (0.55) (0.46) (0.58) (0.64) (0.69)
Return of capital -- -- -- --(g) --
--------- ---------- ---------- -------- --------
Total Distributions Declared to
Shareholders (0.55) (0.46) (0.58) (0.64) (0.69)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.89 $ 10.21 $ 10.10 $ 9.44 $ 9.54
Total return (h) 2.33% 5.80%(i)(j) 13.61% 5.80% 12.20%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/Supplemental Data:
Operating expenses (k) 0.72% 0.82%(l) 0.84% 0.85% 0.86%
Interest expense -- --%(l)(m) -- -- --
Expenses (k) 0.72% 0.82%(l) 0.84% 0.85% 0.86%
Net investment income (k) 4.91% 5.46%(l) 5.51% 6.57%(f) 7.32%
Waiver/reimbursement -- 0.02%(l) -- -- --
Portfolio turnover rate 36% 93%(i) 96% 136%(n) 128%(n)
Net assets, end of period (000's) $533,965 $425,402 $427,959 $327,121 $266,091
- ---------------------------------------------------------------------------------------------------------------------------
Class Z Shares 2000(d)
- ------------------------------------------------------------
Net Asset Value, Beginning of Period $ 9.41
- ------------------------------------------------------------
Income from Investment Operations:
Net investment income (e) 0.70
Net realized and unrealized gain (loss) on
investments and foreign currency (0.26)
--------
Total from Investment Operations 0.44
- ------------------------------------------------------------
Less Distributions Declared to Shareholders:
From net investment income (0.70)
Return of capital --
--------
Total Distributions Declared to
Shareholders (0.70)
- ------------------------------------------------------------
Net Asset Value, End of Period $ 9.15
Total return (h) 4.92%
- ------------------------------------------------------------
Ratios to Average Net Assets/Supplemental Data:
Operating expenses (k) 0.86%
Interest expense --
Expenses (k) 0.86%
Net investment income (k) 7.58%
Waiver/reimbursement --
Portfolio turnover rate 205%(n)
Net assets, end of period (000's) $227,090
- ------------------------------------------------------------
(a)On October 13, 2003, the Liberty Income Fund was renamed Columbia Income
Fund.
(b)The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c)Effective July 15, 2002, the Stein Roe Income Fund's Class S shares were
redesignated Liberty Income Fund Class Z shares.
(d)Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F Income
Portfolio, prior to the portfolio liquidation.
(e)Per share data was calculated using average shares outstanding during the
period.
(f)Effective July 1, 2001, the SR&F Income Portfolio adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting discount on all debt securities. The effect
of this change for the year ended June 30, 2002, was to decrease net
investment income per share by $0.01, decrease net realized and unrealized
loss per share by $0.01 and decrease the ratio of net investment income to
average net assets from 6.65% to 6.57%. Per share data and ratios for
periods prior to June 30, 2002 have not been restated to reflect this change
in presentation.
(g)Rounds to less than $0.01 per share.
(h)Total return at net asset value assuming all distributions reinvested.
(i)Not annualized.
(j)Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(k)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l)Annualized.
(m)Rounds to less than 0.01%.
(n)Portfolio turnover disclosed is for the SR&F Income Portfolio.
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-----------------------
Columbia Income Fund
To the Trustees of Columbia Funds Trust VIII and the Shareholders of Columbia
Income Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Columbia Income Fund (the "Fund")
(a series of Columbia Funds Trust VIII) at March 31, 2005, and the results of
its operations, the changes in its net assets and the 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 audit. We conducted our
audit of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States), which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at March 31, 2005 by correspondence with the custodian and
brokers, provides a reasonable basis for our opinion. The financial statements
and financial highlights of the Fund for periods prior to July 1, 2003 were
audited by another independent registered public accounting firm whose report
dated August 19, 2003 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 20, 2005
34
TRUSTEES
-----------------------
Columbia 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.
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
P.O. Box 66100 December, 2002 (formerly President of UAL Loyalty Services (airline) from
Chicago, IL 60666 September, 2001 to December, 2002; Executive Vice President and Chief
Trustee (since 1996) Financial Officer of United Airlines from July, 1999 to September, 2001;
Senior Vice President-Finance from March, 1993 to July, 1999). Oversees
104, None
---------------------------------------------------------------------------
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)).
Vero Beach, FL 32963 Oversees 1063, None
Trustee (since 1995)
---------------------------------------------------------------------------
CHARLES R. NELSON (Age 62) Professor of Economics, University of Washington, since January, 1976;
Department of Economics Ford and Louisa Van Voorhis Professor of Political Economy, University of
University of Washington Washington, since September, 1993 (formerly Director, Institute for
Seattle, WA 98195 Economic Research, University of Washington from September, 2001 to June,
Trustee (since 1981) 2003) Adjunct Professor of Statistics, University of Washington, since
September, 1980; Associate Editor, Journal of Money Credit and Banking,
since September, 1993; consultant on econometric and statistical matters.
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
Chestnut Hill, MA 02467-3838 September, 1977 to August, 1999). Oversees 1063, Saucony, Inc. (athletic
Trustee (since 1985) footwear)
---------------------------------------------------------------------------
/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.
35
- --------------------------------------------------------------------------------
Columbia Income Fund
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
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)
---------------------------------------------------------------------------
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
8 Sound Shore Drive, investing) since September, 2004 (formerly Managing Director, William
Suite 285 Blair Capital Partners (private equity investing) from September, 1994 to
Greenwich, CT 06830 September, 2004). Oversees 104, Anixter International (network support
Trustee and Chairman of the Board/4/ (since 1996) equipment distributor); Ventas, Inc. (real estate investment trust); Jones
Lang LaSalle (real estate management services) and Ambac Financial Group
(financial guaranty insurance)
---------------------------------------------------------------------------
ANNE-LEE VERVILLE (Age 59) Retired since 1997 (formerly General Manager, Global Education Industry,
359 Stickney Hill Road IBM Corporation (computer and technology) from 1994 to 1997). Oversees
Hopkinton, NH 03229 104, Chairman of the Board of Directors, Enesco Group, Inc. (designer,
Trustee (since 1998) importer and distributor of giftware and collectibles)
---------------------------------------------------------------------------
RICHARD L. WOOLWORTH (Age 64) Retired since December 2003 (formerly Chairman and Chief Executive
100 S.W. Market Street Officer, The Regence Group (regional health insurer); Chairman and Chief
#1500 Executive Officer, BlueCross BlueShield of Oregon; Certified Public
Portland, OR 97207 Accountant, Arthur Young & Company). Oversees 104, Northwest Natural Gas
Trustee (since 1991) Co. (natural gas service 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)
---------------------------------------------------------------------------
/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.
TheStatement of Additional Information Includes
additional information about the Trustees of
the
Fundsand is available, without charge, upon
request by calling 800-426-3750.
36
OFFICERS
-----------------------
Columbia Income Fund
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
Boston, MA 02111 Funds and Stein Roe Funds since October, 2004; President and Chief
President (since 2004) Executive Officer of the Nations Funds since January, 2005; President of
the Galaxy Funds since April 2005; Director of Bank of America Global
Liquidity Funds, plc since May 2005; Director of 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
One Financial Center Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice
Boston, MA 02111 President of the Advisor since April, 2003 (formerly President of the
Treasurer (since 2000) Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to
October, 2004; Chief Accounting Officer and Controller of the Liberty
Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer
of the Galaxy Funds since September, 2002 (formerly Treasurer from
December, 2002 to December, 2004 and President from February, 2004 to
December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC;
Vice President of Colonial Management Associates, Inc. from February, 1998
to October, 2000).
---------------------------------------------------------------------------
MARY JOAN HOENE (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
New York, NY 10005 (formerly Partner, Carter, Ledyard & Milburn LLP from January, 2001 to
Senior Vice President and August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999
Chief Compliance Officer (since 2004) to December, 2000; 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
One Financial Center Funds and All-Star Funds since October, 2004 (formerly Controller of the
Boston, MA 02111 Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from
Chief Accounting Officer (since 2004) May, 2004 to 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
One Financial Center All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS
Boston, MA 02111 Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest
Controller (since 2004) Funds and Loomis Sayles Funds from February, 2003 to September, 2004;
Assistant Vice President of CDC IXIS Asset Management Services, Inc. and
Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February,
2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000).
---------------------------------------------------------------------------
R. SCOTT HENDERSON (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
Secretary (since 2004) Pension Reserves Investment Management Board from September, 1997 to
March, 2001).
---------------------------------------------------------------------------
37
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT
-----------------------
Columbia 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. During the most recent six months
covered by this report, the Board reviewed and approved the management
contracts ("Advisory Agreements") 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 information in the Lipper report took into
account all
/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.
38
- --------------------------------------------------------------------------------
Columbia Income Fund
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 Boards also considered information is the Lipper report that ranked each
Fund based on (i) each Fund's one-year performance and actual advisory 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 Board 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 advisory and
administrative fees for the majority of the funds of the same general asset
type within the
39
- --------------------------------------------------------------------------------
Columbia Income Fund
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.
40
IMPORTANT INFORMATION ABOUT THIS REPORT
-----------------------
Columbia Income Fund
Transfer Agent
Columbia Funds Services, Inc.
P.O. Box 8081
Boston MA 02266-8081
800-345-6611
Distributor
Columbia Funds Distributor, Inc.
One Financial Center
Boston MA 02111
Investment Advisor
Columbia Management Advisors, Inc.
100 Federal Street
Boston MA 02110
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
The fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call shareholder services at 800-345-6611 and
additional reports will be sent to you.
This report has been prepared for shareholders of Columbia Income Fund. This
report may also be used as sales literature when preceded or accompanied by the
current prospectus which provides details of sales charges, investment
objectives and operating policies of the fund and with the most recent copy of
the Columbia Funds Performance Update.
A description of the policies and procedures that the fund uses to determine
how to vote proxies 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.
41
[GRAPHIC APPEARS HERE] Help your fund reduce printing and postage
costs! Elect to get your shareholder reports by
electronic delivery. With Columbia's eDelivery
program, you receive an e-mail message when your
shareholder report becomes available online. If
your fund accounts 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
eDelivery available to you.
Columbia Income Fund Annual Report, March 31, 2005 PRSRT STD
U.S. Postage
PAID
Holliston, MA
Permit NO. 20
Columbia Management(R)
(C)2005 Columbia Funds Distributor, Inc.
One Financial Center, Boston, MA 02111-2621
800.345.6611 www.columbiafunds.com
[GRAPHIC APPEARS HERE]
COLUMBIA INTERMEDIATE BOND FUND
ANNUAL REPORT
MARCH 31, 2005
TABLE OF CONTENTS
Fund Profile .............................................................1
Performance Information ..................................................2
Understanding Your Expenses ..............................................3
Economic Update ..........................................................4
Portfolio Managers' Report ...............................................5
Financial Statements .....................................................7
Investment Portfolio ..................................................8
Statement of Assets and Liabilities ..................................20
Statement of Operations ..............................................21
Statement of Changes in Net Assets ...................................22
Notes to Financial Statements ........................................24
Financial Highlights .................................................30
Report of Independent Registered Public Accounting Firm .................34
Trustees ................................................................35
Officers ................................................................37
Board Consideration and Approval of Investment Advisory Agreement .......38
Important Information About This Report .................................41
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
NOT FDIC MAY LOSE VALUE
INSURED -------------------
NO BANK GUARANTEE
PRESIDENT'S MESSAGE
COLUMBIA INTERMEDIATE BOND FUND
[PHOTO OF CHRISTOPHER 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 7 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 Wilson
Christopher Wilson
HEAD OF MUTUAL FUNDS, COLUMBIA MANAGEMENT
Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible
for the day-to-day delivery of mutual fund services to the firm's investors.
With the exception of distribution, Chris oversees all aspects of the mutual
fund services operation, including treasury, investment accounting and
shareholder and broker services. Chris serves as Columbia Management's liaison
to the mutual fund boards of trustees. Chris joined Bank of America in August
2004.
FUND PROFILE
-------------------------------------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
The information below gives you a snapshot of your fund at the end of the
reporting period. Your fund is actively managed and the composition of its
portfolio will change over time.
PORTFOLIO STRUCTURE AS OF 03/31/05 (%)
Corporate fixed-income bonds & notes 57.8
Mortgage-backed securities 19.8
Asset-backed securities 8.1
Collateralized mortgage obligations 5.0
Government agencies & obligations 4.3
Cash equivalents, net other assets & liabilities 5.0
QUALITY BREAKDOWN AS OF 03/31/05 (%)
Aaa 19.8
Aa 2.3
A 17.4
Baa 23.7
Other 13.8
Treasury 2.8
Agency 20.2
[CHART]
MATURITY BREAKDOWN AS OF 03/31/05 (%)
0-1 year 8.2
1-5 years 48.8
5-10 years 28.9
10-20 years 6.6
Over 20 years 7.5
Portfolio structure is calculated as a percentage of net assets. Quality and
maturity breakdowns are calculated as a percentage of total investments. Ratings
shown in the quality breakdown represent the rating assigned to a particular
bond by one of the following nationally-recognized rating agencies: Standard &
Poor's Corporation, Moody's Investors Service, Inc. or Fitch Ratings Ltd.
Management style is determined by Columbia Management and is based on the
investment strategy and process as outlined in the fund's prospectus.
[SIDENOTE]
SUMMARY
- - FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, THE FUND'S CLASS A SHARES
RETURNED 1.55% WITHOUT SALES CHARGE.
- - THE FUND OUTPERFORMED BOTH ITS BENCHMARK, THE LEHMAN BROTHERS AGGREGATE BOND
INDEX, AND ITS PEER GROUP, THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT
CATEGORY AVERAGE.
- - THE FUND HAD A MORE SUBSTANTIAL POSITION IN INVESTMENT-GRADE CORPORATE BONDS
THAN ITS BENCHMARK, AND ALSO, WE BELIEVE, THAN ITS PEER GROUP, WHICH
ACCOUNTED FOR ITS STRONG RELATIVE PERFORMANCE. INVESTMENTS IN HIGH-YIELD
BONDS, ASSET-BACKED SECURITIES AND MORTGAGES ALSO AIDED PERFORMANCE, AS DID
AN UNDERWEIGHT POSITION IN TREASURIES, WHICH WERE AMONG THE PERIOD'S WEAKEST
PERFORMERS.
CLASS A SHARES 1.55%
LEHMAN BROTHERS AGGREGATE BOND INDEX 1.15%
OBJECTIVE
Seeks total return by investing for a high level of current income and
opportunities for capital appreciation
TOTAL NET ASSETS
$1,181.7 million
MANAGEMENT STYLE
[GRAPHIC APPEARS HERE]
1
PERFORMANCE INFORMATION
--------------------------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
[CHART]
VALUE OF A $10,000 INVESTMENT 04/01/95 - 03/31/05
CLASS A SHARES CLASS A SHARES LEHMAN BROTHERS AGGREGATE
WITHOUT SALES CHARGE WITH SALES CHARGE BOND INDEX
04/1/1995 $ 10,000 $ 9,525 $ 10,000
5/1/1995 $ 10,143 $ 9,661 $ 10,140
6/1/1995 $ 10,444 $ 9,948 $ 10,532
7/1/1995 $ 10,525 $ 10,025 $ 10,609
8/1/1995 $ 10,523 $ 10,023 $ 10,586
9/1/1995 $ 10,668 $ 10,161 $ 10,714
10/1/1995 $ 10,763 $ 10,251 $ 10,818
11/1/1995 $ 10,884 $ 10,367 $ 10,959
12/1/1995 $ 11,056 $ 10,531 $ 11,123
1/1/1996 $ 11,218 $ 10,685 $ 11,279
2/1/1996 $ 11,330 $ 10,792 $ 11,353
3/1/1996 $ 11,151 $ 10,621 $ 11,156
4/1/1996 $ 11,074 $ 10,548 $ 11,078
5/1/1996 $ 11,008 $ 10,485 $ 11,015
6/1/1996 $ 11,008 $ 10,485 $ 10,993
7/1/1996 $ 11,135 $ 10,606 $ 11,141
8/1/1996 $ 11,186 $ 10,655 $ 11,171
9/1/1996 $ 11,183 $ 10,652 $ 11,152
10/1/1996 $ 11,365 $ 10,825 $ 11,346
11/1/1996 $ 11,592 $ 11,041 $ 11,598
12/1/1996 $ 11,815 $ 11,254 $ 11,796
1/1/1997 $ 11,725 $ 11,168 $ 11,686
2/1/1997 $ 11,796 $ 11,235 $ 11,723
3/1/1997 $ 11,834 $ 11,271 $ 11,752
4/1/1997 $ 11,699 $ 11,143 $ 11,621
5/1/1997 $ 11,878 $ 11,313 $ 11,796
6/1/1997 $ 12,005 $ 11,434 $ 11,908
7/1/1997 $ 12,173 $ 11,595 $ 12,050
8/1/1997 $ 12,518 $ 11,924 $ 12,375
9/1/1997 $ 12,388 $ 11,800 $ 12,270
10/1/1997 $ 12,563 $ 11,966 $ 12,450
11/1/1997 $ 12,686 $ 12,083 $ 12,631
12/1/1997 $ 12,736 $ 12,131 $ 12,689
1/1/1998 $ 12,818 $ 12,209 $ 12,817
2/1/1998 $ 12,986 $ 12,369 $ 12,981
3/1/1998 $ 13,011 $ 12,393 $ 12,971
4/1/1998 $ 13,081 $ 12,460 $ 13,015
5/1/1998 $ 13,149 $ 12,525 $ 13,082
6/1/1998 $ 13,264 $ 12,634 $ 13,207
7/1/1998 $ 13,333 $ 12,699 $ 13,319
8/1/1998 $ 13,363 $ 12,728 $ 13,347
9/1/1998 $ 13,299 $ 12,667 $ 13,564
10/1/1998 $ 13,578 $ 12,933 $ 13,882
11/1/1998 $ 13,362 $ 12,728 $ 13,808
12/1/1998 $ 13,568 $ 12,924 $ 13,887
1/1/1999 $ 13,642 $ 12,994 $ 13,929
2/1/1999 $ 13,783 $ 13,129 $ 14,027
3/1/1999 $ 13,606 $ 12,959 $ 13,782
4/1/1999 $ 13,759 $ 13,106 $ 13,858
5/1/1999 $ 13,819 $ 13,162 $ 13,902
6/1/1999 $ 13,725 $ 13,073 $ 13,780
7/1/1999 $ 13,679 $ 13,029 $ 13,736
8/1/1999 $ 13,681 $ 13,031 $ 13,677
9/1/1999 $ 13,677 $ 13,027 $ 13,670
10/1/1999 $ 13,815 $ 13,158 $ 13,828
11/1/1999 $ 13,831 $ 13,174 $ 13,880
12/1/1999 $ 13,862 $ 13,203 $ 13,878
1/1/2000 $ 13,815 $ 13,158 $ 13,812
2/1/2000 $ 13,844 $ 13,186 $ 13,766
3/1/2000 $ 13,986 $ 13,322 $ 13,933
4/1/2000 $ 14,127 $ 13,456 $ 14,116
5/1/2000 $ 14,041 $ 13,374 $ 14,075
6/1/2000 $ 13,963 $ 13,299 $ 14,068
7/1/2000 $ 14,312 $ 13,632 $ 14,361
8/1/2000 $ 14,468 $ 13,780 $ 14,492
9/1/2000 $ 14,695 $ 13,997 $ 14,702
10/1/2000 $ 14,834 $ 14,130 $ 14,795
11/1/2000 $ 14,855 $ 14,150 $ 14,892
12/1/2000 $ 15,011 $ 14,298 $ 15,136
1/1/2001 $ 15,280 $ 14,554 $ 15,418
2/1/2001 $ 15,648 $ 14,905 $ 15,671
3/1/2001 $ 15,836 $ 15,084 $ 15,807
4/1/2001 $ 15,942 $ 15,185 $ 15,886
5/1/2001 $ 15,901 $ 15,145 $ 15,819
6/1/2001 $ 16,096 $ 15,332 $ 15,914
7/1/2001 $ 16,106 $ 15,341 $ 15,975
8/1/2001 $ 16,481 $ 15,698 $ 16,333
9/1/2001 $ 16,694 $ 15,901 $ 16,520
10/1/2001 $ 16,520 $ 15,735 $ 16,714
11/1/2001 $ 16,753 $ 15,957 $ 17,063
12/1/2001 $ 16,745 $ 15,949 $ 16,828
1/1/2002 $ 16,661 $ 15,869 $ 16,720
2/1/2002 $ 16,789 $ 15,992 $ 16,855
3/1/2002 $ 16,880 $ 16,078 $ 17,019
4/1/2002 $ 16,762 $ 15,965 $ 16,736
5/1/2002 $ 16,911 $ 16,108 $ 17,061
6/1/2002 $ 17,075 $ 16,264 $ 17,206
7/1/2002 $ 16,926 $ 16,122 $ 17,354
8/1/2002 $ 16,796 $ 15,998 $ 17,564
9/1/2002 $ 17,056 $ 16,246 $ 17,861
10/1/2002 $ 17,136 $ 16,322 $ 18,150
11/1/2002 $ 16,922 $ 16,118 $ 18,067
12/1/2002 $ 17,181 $ 16,365 $ 18,061
1/1/2003 $ 17,559 $ 16,725 $ 18,435
2/1/2003 $ 17,640 $ 16,802 $ 18,452
3/1/2003 $ 17,897 $ 17,047 $ 18,706
4/1/2003 $ 17,955 $ 17,102 $ 18,691
5/1/2003 $ 18,274 $ 17,406 $ 18,847
6/1/2003 $ 18,717 $ 17,828 $ 19,197
7/1/2003 $ 18,795 $ 17,902 $ 19,159
8/1/2003 $ 18,337 $ 17,466 $ 18,515
9/1/2003 $ 18,390 $ 17,516 $ 18,637
10/1/2003 $ 18,918 $ 18,019 $ 19,131
11/1/2003 $ 18,887 $ 17,990 $ 18,953
12/1/2003 $ 18,982 $ 18,080 $ 18,999
1/1/2004 $ 19,181 $ 18,270 $ 19,192
2/1/2004 $ 19,380 $ 18,460 $ 19,346
3/1/2004 $ 19,518 $ 18,591 $ 19,555
4/1/2004 $ 19,657 $ 18,723 $ 19,702
5/1/2004 $ 19,244 $ 18,330 $ 19,189
6/1/2004 $ 19,086 $ 18,179 $ 19,113
7/1/2004 $ 19,183 $ 18,272 $ 19,221
8/1/2004 $ 19,368 $ 18,448 $ 19,412
9/1/2004 $ 19,724 $ 18,787 $ 19,783
10/1/2004 $ 19,795 $ 18,855 $ 19,836
11/1/2004 $ 19,981 $ 19,032 $ 20,003
12/1/2004 $ 19,885 $ 18,941 $ 19,843
1/1/2005 $ 20,066 $ 19,113 $ 20,025
2/1/2005 $ 20,164 $ 19,207 $ 20,151
3/1/2005 $ 20,132 $ 19,176 $ 20,032
03/31/2005 $ 19,932 $ 18,997 $ 19,949
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 Aggregate Bond Index is a market value-weighted index that tracks the
daily price, coupon, pay-downs, and total return performance of fixed-rate,
publicly placed, dollar-denominated, non-convertible investment grade debt
issues with at least $250 million par amount outstanding and with at least one
year to final maturity. Unlike the fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. Securities in the fund may not match those in an
index.
AVERAGE ANNUAL TOTAL RETURN AS OF 03/31/05 (%)
SHARE CLASS A B C Z
- --------------------------------------------------------------------------------------
INCEPTION 07/31/00 02/01/02 02/01/02 12/05/78
- --------------------------------------------------------------------------------------
SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
- --------------------------------------------------------------------------------------
1-YEAR 1.55 -3.25 0.80 -4.04 0.95 -0.02 1.80
5-YEAR 7.16 6.12 6.65 6.34 6.75 6.75 7.42
10-YEAR 7.15 6.63 6.90 6.90 6.95 6.95 7.28
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 A, class B and class C are newer classes of shares. Class A performance
information includes returns of the fund's class Z shares (the oldest existing
fund class) for periods prior to its inception. Class B and class C performance
information includes returns of the fund's class A shares for the period from
July 31, 2000 through February 1, 2002 and for periods prior thereto, the fund's
class Z shares (the oldest existing fund class). These returns have not been
restated to reflect any differences in expenses (such as Rule 12b-1 fees)
between class Z shares and the newer classes of shares. If differences in
expenses had been reflected, the returns shown for periods prior to the
inception of the newer classes of shares would have been lower, since the newer
classes of shares are subject to a Rule 12b-1 fee. Class A shares were initially
offered on July 31, 2000, class B and class C shares were initially offered on
February 1, 2002, and class Z shares were initially offered on December 5, 1978.
[SIDENOTE]
PERFORMANCE OF A $10,000 INVESTMENT 04/01/95 - 03/31/05 ($)
SALES CHARGE: WITHOUT WITH
-------------------------------------------
Class A 19,949 18,997
Class B 19,484 19,484
Class C 19,577 19,577
Class Z 20,196 n/a
Performance data quoted represents past performance and current performance may
be lower or higher. Past performance is no guarantee of future results. The
investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. Please visit
www.columbiafunds.com for daily and most recent month-end performance
updates.
2
UNDERSTANDING YOUR EXPENSES
----------------------------------------------------
COLUMBIA INTERMEDIATE BOND 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, 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 these costs with the ongoing 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
$1,000, which is invested at the beginning of the reporting period and held for
the entire period. Expense information is calculated two ways and each method
provides you with different information. The amount listed in the "actual"
column is calculated using the fund's actual operating expenses and total return
for the period. The amount listed in the "hypothetical" column for each share
class assumes that the return each year is 5% before expenses and includes the
fund's actual expense ratio. You should not use the hypothetical account values
and expenses to estimate either your actual account balance at the end of the
period or the expenses you paid during this reporting period.
10/01/04 - 03/31/05
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
CLASS A 1,000.00 1,000.00 1,008.33 1,020.14 4.81 4.84 0.96
CLASS B 1,000.00 1,000.00 1,004.64 1,016.40 8.55 8.60 1.71
CLASS C 1,000.00 1,000.00 1,005.39 1,017.15 7.80 7.85 1.56
CLASS Z 1,000.00 1,000.00 1,009.57 1,021.39 3.56 3.58 0.71
Expenses paid during the period are equal to the annualized expense ratio for
the share class, 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 a portion of class A and class C shares'
expenses, class A and 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 ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided will not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other fund companies, it is important to note that hypothetical
examples are meant to highlight the continuing cost of investing in a fund and
do not reflect any transactional costs, such as sales charges or redemption or
exchange fees.
[SIDENOTE]
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
- - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM COLUMBIA FUNDS
SERVICES, INC., YOUR ACCOUNT BALANCE IS AVAILABLE ONLINE AT
www.columbiafunds.com OR BY CALLING SHAREHOLDER SERVICES AT 800-345-6611
- - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE
FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE
1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT
BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6
2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD,"
LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE
COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1. YOUR
ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING THE
PERIOD
3
ECONOMIC UPDATE
----------------------------------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
The US economy moved ahead at a healthy pace during the 12-month period that
began April 1, 2004 and ended March 31, 2005. Gross domestic product (GDP)
expanded at an estimated annualized rate of 3.5% as job growth helped buoy
consumer spending and rising profits boosted business spending. Higher energy
prices put something of a damper on growth as the period wore on-enough to slow
the pace of growth to 3.1% in the first quarter of 2005.
Job growth dominated the economic news and drove consumer confidence ratings
that moved up and down, depending on the number of new jobs reported. Overall,
consumers remained significantly more optimistic about the prospects for the
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, business spending was not as robust as expected, given a maturing
economic cycle, two straight years of double-digit profit growth and a
significant build-up of cash on corporate balance sheets.
BONDS DELIVER MODEST GAINS
The US bond market delivered a positive return despite rising interest rates in
the final six weeks of the period. The yield on the 10-year Treasury note, a
bellwether for the bond market, rose above 4.5%, and sent bond prices down.
However, it settled just below 4.5% at the end of the period.
In this environment, the Lehman Brothers Aggregate Bond Index returned 1.15% for
the 12-month period. Municipal bonds did even better than investment-grade
taxable bonds as state revenues strengthened and fiscal constraints helped many
states balance their budgets. The Lehman Municipal Bond Index returned 2.67%.
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 6.79%. However, the riskiest bonds were the hardest hit when the
bond market pulled back, and high-yield bonds gave back some of their gains in
the final months of the period.
After a year of the lowest short-term interest rates in recent history, the
Federal Reserve (the Fed) raised the federal funds rate, a key short-term rate,
from 1.00% to 2.75% in seven one-quarter percentage point steps during the
period.(1) The Fed indicated early on that it would continue to raise short-term
interest rates at a "measured pace," in an attempt to balance economic growth
against inflationary pressures. So far, it has kept its word. However, the Fed
left the door open for more aggressive action in remarks made on the economy and
inflation when it met in March.
STOCKS OUTPERFORMED BONDS
Buoyed by strong gains in the fourth quarter of 2004, the S&P 500 Index returned
6.69% 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, and value stocks led
growth stocks by a significant margin. Energy and utilities were the best
performing sectors.
(1) On May 3, 2005, the federal funds rate was raised to 3.00%.
[SIDENOTE]
SUMMARY
FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005
- - BONDS CHALKED UP MODEST 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.
LEHMAN INDEX 1.15%
MERRILL LYNCH INDEX 6.79%
- - STOCKS OUTPERFORMED BONDS, AS MEASURED BY THE S&P 500 INDEX AND THE RUSSELL
3000 INDEX. MOST OF THE PERIOD'S GAINS WERE GENERATED DURING A FOURTH-QUARTER
RALLY IN 2004.
S&P 500 INDEX 6.69%
RUSSELL 3000 INDEX 7.09%
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks the daily price, coupon, pay-downs, and total return performance of
fixed-rate, publicly placed, dollar-denominated, non-convertible
investment-grade debt issues with at least $250 million par amount outstanding
and with at least one year to final maturity.
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 3000 Index is an unmanaged index that tracks the performance of 3000
of the largest US companies, based on market capitalization.
4
PORTFOLIO MANAGERS' REPORT
-----------------------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
For the 12-month period ended March 31, 2005, class A shares of Columbia
Intermediate Bond Fund returned 1.55% without sales charge. The fund
outperformed its benchmark, the Lehman Brothers Aggregate Bond Index, which
posted a total return of 1.15% for the same period. The fund also topped its
peer group, the Lipper Intermediate Investment Grade Bond Category, which
averaged 0.81% for the period.(1) In March 2005, the fund's management team
changed. Ann Peterson, Marie Schofield and Carl Pappo joined Thomas LaPointe as
co-managers of the fund.
We believe the fund's substantial position in corporate bonds, relative to its
peer group and the benchmark, was the main reason it outperformed. Good returns
from the high yield, mortgage- and asset-backed sectors of the bond market also
helped performance.
ECONOMIC GROWTH ENHANCED CORPORATE RETURNS
An environment of solid economic growth bolstered the performance of corporate
securities over the past 12 months. The mid-2004 decision by the Federal Reserve
to begin increasing a key short-term interest rate dampened returns across the
bond market. Against this backdrop, corporate bonds, including investment grade
and high yield issues, beat out most other debt alternatives. Lower quality
issues, including emerging market and non-sovereign international debt,
benefited as investors sought to preserve value in an environment of rising
interest rates. In light of this trend, the fund's exposure to sovereign debt,
although small, helped performance, as did its limited allocation to some of the
higher-quality domestic sectors, such as financials.
UTILITY AND ENERGY BONDS BOOSTED RESULTS
Within the corporate sector, utility bonds exhibited strong performance during
the 12-month period. Business conditions improved for utility companies, and the
fund's holdings, particularly in electric utilities, benefited from this trend.
Exposure to oil refining companies also helped the fund as high oil prices drove
the performance of the energy sector. While the airline sector detracted from
performance over the period, we remain confident about the fund's airline
holdings because, historically, airline bonds have benefited during periods of
rising interest rates.
SCALED BACK CORPORATE HOLDINGS, ADDED TO AGENCY ISSUES
We scaled back the fund's exposure to investment-grade corporate bonds in some
of the areas that performed best over an extended period, including utility and
industrial companies. Taking profits from these areas allowed us to add to the
fund's holdings in government agency and mortgage-backed debt. Regulatory
scrutiny of the Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation has not affected the government agency mortgage market, and
we believe these areas offer some of the best relative values at this time.
Toward the end of the period, strong performance in mortgages relative to other
investment-grade sectors confirmed our view.
We also trimmed the fund's holdings in high-yield debt issued by auto parts
manufacturers including Dana Corp. and SPX. Sales of these securities realized
profits for the fund. We also sold gaming and leisure
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
[SIDENOTE]
NET ASSET VALUE PER SHARE AS OF 03/31/05 ($)
Class A 8.96
Class B 8.96
Class C 8.96
Class Z 8.96
DISTRIBUTIONS DECLARED PER SHARE 04/01/04 - 03/31/05 ($)
Class A 0.45
Class B 0.38
Class C 0.39
Class Z 0.47
SEC YIELDS AS OF 03/31/05 (%)
Class A 3.84
Class B 3.30
Class C 3.47
Class Z 4.28
The 30-day SEC yields reflect the portfolio's earning power net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period.
HOLDINGS DISCUSSED IN THIS REPORT AS OF 03/31/05 (%)
Federal National Mortgage Assn. 11.5
Federal Home Loan Mortgage Corp. 10.4
Bombardier 0.0*
Abitibi-Consolidated 0.0*
* Bombardier and Abitibi each accounted for 0.04% of net assets.
Your fund is actively managed and the composition of its portfolio will change
over time. Information provided is calculated as a percentage of net assets.
5
issues as this sector became fully valued. We used the proceeds from these sales
to increase the fund's exposure to cyclical sectors, which we believed were
attractively valued. We believe that continued economic strength has the
potential to bolster issues in these sectors. In this regard, we bought bonds of
transportation equipment-maker Bombardier and Abitibi-Consolidated, a newsprint
producer.
PREPARING FOR SLOWER ECONOMIC GROWTH
With the economy exhibiting slower growth, the inevitable result of a
combination of higher short-term interest rates and rising business costs, we
have chosen to reduce the fund's corporate holdings, chiefly among
investment-grade bonds. With real interest rates at unappealing low levels, we
also plan to continue to de-emphasize Treasuries in the fund. Going forward, we
plan to seek out areas of the fixed income markets that we believe offer lower
vulnerability to rising interest rates as well as compelling value.
Ann T. Peterson is the lead manager for the fund. She has co-managed the fund
since March 2005 and has been with the advisor or its predecessors or affiliate
organizations since 1993.
/s/ Ann T. Peterson
Thomas LaPointe has co-managed the fund since March 2003 and has been with the
advisor or its predecessors or affiliate organizations since 1999.
/s/ Thomas LaPointe
Marie M. Schofield has co-managed the fund since March 2005 and has been with
the advisor or its predecessors or affiliate organizations since 1990.
/s/ Marie M. Schofield
Carl W. Pappo has co-managed the fund since March 2005 and has been with the
advisor or its predecessors or affiliate organizations since 1993.
/s/ Carl W. Pappo
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. High yield
bonds issued by foreign entities have greater potential risks, including less
regulation, currency fluctuations, economic instability and political
developments.
[SIDENOTE]
WE HAVE REDUCED THE FUND'S INVESTMENT GRADE CORPORATE HOLDINGS AND PLAN TO SEEK
AREAS OF THE FIXED INCOME MARKET THAT OFFER LOWER VULNERABILITY TO RISING
INTEREST RATES AS WELL AS COMPELLING VALUE.
6
FINANCIAL STATEMENTS
-----------------------------------------------------------
MARCH 31, 2005 COLUMBIA INTERMEDIATE BOND FUND
A GUIDE TO UNDERSTANDING YOUR FUND'S FINANCIAL STATEMENTS
INVESTMENT PORTFOLIO
The investment portfolio details all of the fund's holdings and their market
value as of the last day of the reporting period. Portfolio holdings are
organized by type of asset, industry, country or geographic region (if
applicable) to demonstrate areas of concentration and diversification.
STATEMENT OF ASSETS AND LIABILITIES
This statement details the fund's assets, liabilities, net assets and share
price for each share class as of the last day of the reporting period. Net
assets are calculated by subtracting all the fund's liabilities (including any
unpaid expenses) from the total of the fund's investment and non-investment
assets. The share price for each class is calculated by dividing net assets for
that class by the number of shares outstanding in that class as of the last day
of the reporting period.
STATEMENT OF OPERATIONS
This statement details income earned by the fund and the expenses accrued by the
fund during the reporting period. The Statement of Operations also shows any net
gain or loss the fund realized on the sales of its holdings during the period,
as well as any unrealized gains or losses recognized over the period. The total
of these results represents the fund's net increase or decrease in net assets
from operations.
STATEMENT OF CHANGES IN NET ASSETS
This statement demonstrates how the fund's net assets were affected by its
operating results, distributions to shareholders and shareholder transactions
(e.g., subscriptions, redemptions and dividend reinvestments) during the
reporting period. The Statement of Changes in Net Assets also details changes in
the number of shares outstanding.
NOTES TO FINANCIAL STATEMENTS
These notes disclose the organizational background of the fund, its significant
accounting policies (including those surrounding security valuation, income
recognition and distributions to shareholders), federal tax information, fees
and compensation paid to affiliates and significant risks and contingencies.
FINANCIAL HIGHLIGHTS
The financial highlights demonstrate how the fund's net asset value per share
was affected by the fund's operating results. The financial highlights table
also discloses the classes' performance and certain key ratios (e.g., class
expenses and net investment income as a percentage of average net assets).
7
INVESTMENT PORTFOLIO
-----------------------------------------------------------
MARCH 31, 2005 COLUMBIA INTERMEDIATE BOND FUND
CORPORATE FIXED-INCOME BONDS & NOTES - 57.8%
BASIC MATERIALS - 2.8%
CHEMICALS - 1.5% PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Dow Chemical Co. 5.750% 11/15/09 6,000,000 6,258,300
-------------------------------------------------------------------------------------
Eastman Chemical Co. 3.250% 06/15/08 2,750,000 2,639,230
6.300% 11/15/18 6,000,000 6,403,200
-------------------------------------------------------------------------------------
NOVA Chemicals Corp. 6.500% 01/15/12 2,000,000 2,050,000
-------------------------------------------------------------------------------------
Chemicals Total 17,350,730
FOREST PRODUCTS & PAPER - 0.9%
- ------------------------------------------- -------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc. 8.375% 04/01/15 500,000 485,000
-------------------------------------------------------------------------------------
Cascades, Inc. 7.250% 02/15/13 6,000,000 6,120,000
-------------------------------------------------------------------------------------
Georgia-Pacific Corp. 7.500% 05/15/06 3,000,000 3,075,000
-------------------------------------------------------------------------------------
Norske Skog Canada Ltd. 7.375% 03/01/14 1,000,000 960,000
-------------------------------------------------------------------------------------
Forest Products & Paper Total 10,640,000
METALS & MINING - 0.4%
- ------------------------------------------- -------------------------------------------------------------------------------------
Alcoa, Inc. 6.000% 01/15/12 5,000,000 5,290,600
-------------------------------------------------------------------------------------
Metals & Mining Total 5,290,600
---------------
BASIC MATERIALS TOTAL 33,281,330
COMMUNICATIONS - 4.5%
MEDIA - 2.8%
- ------------------------------------------- -------------------------------------------------------------------------------------
Comcast Cable Communications Holdings, Inc. 8.375% 03/15/13 8,500,000 10,092,900
-------------------------------------------------------------------------------------
CSC Holdings, Inc. 6.750% 04/15/12 (a) 500,000 497,500
7.625% 04/01/11 1,500,000 1,556,250
7.875% 02/15/18 1,250,000 1,328,125
-------------------------------------------------------------------------------------
Echostar DBS Corp. 6.375% 10/01/11 1,500,000 1,473,750
-------------------------------------------------------------------------------------
Liberty Media Corp. 4.510% 09/17/06 (b) 11,000,000 11,146,850
-------------------------------------------------------------------------------------
Viacom, Inc. 7.700% 07/30/10 6,500,000 7,220,720
-------------------------------------------------------------------------------------
Media Total 33,316,095
TELECOMMUNICATION SERVICES - 1.7%
- ------------------------------------------- -------------------------------------------------------------------------------------
Nextel Communications, Inc. 7.375% 08/01/15 1,545,000 1,629,975
-------------------------------------------------------------------------------------
Qwest Corp. 9.125% 03/15/12 (a) 2,500,000 2,725,000
-------------------------------------------------------------------------------------
Rogers Cantel, Inc. 9.750% 06/01/16 2,000,000 2,380,000
-------------------------------------------------------------------------------------
Sprint Capital Corp. 6.125% 11/15/08 3,800,000 3,979,436
8.750% 03/15/32 1,500,000 1,941,435
-------------------------------------------------------------------------------------
See Accompanying Notes to Financials Statements.
8
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
COMMUNICATIONS - (CONTINUED)
TELECOMMUNICATION SERVICES - (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Telefonos de Mexico SA de CV 4.500% 11/19/08 6,000,000 5,892,900
4.750% 01/27/10 (a) 1,800,000 1,753,542
-------------------------------------------------------------------------------------
Telecommunication Services Total 20,302,288
---------------
COMMUNICATIONS TOTAL 53,618,383
CONSUMER CYCLICAL - 6.5%
AIRLINES - 2.2%
- ------------------------------------------- -------------------------------------------------------------------------------------
American Airlines, Inc. 7.024% 10/15/09 7,000,000 7,070,000
-------------------------------------------------------------------------------------
Continental Airlines, Inc. 6.940% 10/15/13 1,276,618 1,174,488
7.461% 04/01/15 3,973,138 3,695,018
-------------------------------------------------------------------------------------
Southwest Airlines Co. 5.496% 11/01/06 7,000,000 7,139,300
-------------------------------------------------------------------------------------
United Airlines, Inc. 7.186% 04/01/11 (c) 3,926,307 3,661,281
7.783% 01/01/14 (c) 2,843,628 2,623,247
9.200% 03/22/08 (d) 2,399,897 1,103,953
-------------------------------------------------------------------------------------
Airlines Total 26,467,287
APPAREL - 0.4%
- ------------------------------------------- -------------------------------------------------------------------------------------
Jones Apparel Group, Inc. 6.125% 11/15/34 (a) 3,520,000 3,296,656
-------------------------------------------------------------------------------------
Phillips-Van Heusen Corp. 7.250% 02/15/11 1,000,000 1,005,000
-------------------------------------------------------------------------------------
Apparel Total 4,301,656
AUTO MANUFACTURERS - 0.9%
- ------------------------------------------- -------------------------------------------------------------------------------------
DaimlerChrysler NA Holding Corp. 6.400% 05/15/06 8,000,000 8,200,480
-------------------------------------------------------------------------------------
Navistar International Corp. 7.500% 06/15/11 2,000,000 2,020,000
-------------------------------------------------------------------------------------
Auto Manufacturers Total 10,220,480
ENTERTAINMENT - 0.1%
- ------------------------------------------- -------------------------------------------------------------------------------------
Steinway Musical Instruments, Inc. 8.750% 04/15/11 1,000,000 1,065,000
-------------------------------------------------------------------------------------
Entertainment Total 1,065,000
HOME BUILDERS - 0.3%
- ------------------------------------------- -------------------------------------------------------------------------------------
D.R. Horton, Inc. 9.750% 09/15/10 1,000,000 1,155,000
-------------------------------------------------------------------------------------
Standard-Pacific Corp. 9.250% 04/15/12 2,000,000 2,280,000
-------------------------------------------------------------------------------------
Home Builders Total 3,435,000
LEISURE TIME - 0.1%
- ------------------------------------------- -------------------------------------------------------------------------------------
K2, Inc. 7.375% 07/01/14 1,250,000 1,293,750
-------------------------------------------------------------------------------------
Leisure Time Total 1,293,750
See Accompanying Notes to Financials Statements.
9
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER CYCLICAL - (CONTINUED)
LODGING - 0.9% PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Hyatt Equities LLC 6.875% 06/15/07 (a) 5,000,000 5,212,500
-------------------------------------------------------------------------------------
MGM Mirage 6.750% 09/01/12 1,500,000 1,515,000
-------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority 6.125% 02/15/13 (a) 1,125,000 1,108,125
-------------------------------------------------------------------------------------
Seneca Gaming Corp. 7.250% 05/01/12 830,000 830,000
-------------------------------------------------------------------------------------
Station Casinos, Inc. 6.000% 04/01/12 1,000,000 992,500
6.875% 03/01/16 1,500,000 1,496,250
-------------------------------------------------------------------------------------
Lodging Total 11,154,375
RETAIL - 0.8%
- ------------------------------------------- -------------------------------------------------------------------------------------
CVS Corp. 5.298% 01/11/27 (a) 3,410,064 3,411,291
-------------------------------------------------------------------------------------
Ferrellgas LP 6.750% 05/01/14 1,500,000 1,462,500
-------------------------------------------------------------------------------------
Kohl's Corp. 6.700% 02/01/06 2,462,000 2,515,967
-------------------------------------------------------------------------------------
Rite Aid Corp. 7.500% 01/15/15 (a) 130,000 124,800
-------------------------------------------------------------------------------------
Saks, Inc. 7.000% 12/01/13 1,594,000 1,466,480
-------------------------------------------------------------------------------------
Tempur-Pedic, Inc. 10.250% 08/15/10 317,000 352,663
-------------------------------------------------------------------------------------
Retail Total 9,333,701
TEXTILES - 0.8%
- ------------------------------------------- -------------------------------------------------------------------------------------
Cintas Corp. 5.125% 06/01/07 5,315,000 5,410,989
6.000% 06/01/12 3,250,000 3,443,700
-------------------------------------------------------------------------------------
Textiles Total 8,854,689
---------------
CONSUMER CYCLICAL TOTAL 76,125,938
CONSUMER NON-CYCLICAL - 3.9%
BEVERAGES - 0.1%
- ------------------------------------------- -------------------------------------------------------------------------------------
Constellation Brands, Inc. 8.125% 01/15/12 1,545,000 1,645,425
-------------------------------------------------------------------------------------
Beverages Total 1,645,425
BIOTECHNOLOGY - 0.2%
- ------------------------------------------- -------------------------------------------------------------------------------------
Bio-Rad Laboratories, Inc. 7.500% 08/15/13 2,000,000 2,100,000
-------------------------------------------------------------------------------------
Biotechnology Total 2,100,000
COMMERCIAL SERVICES - 0.2%
- ------------------------------------------- -------------------------------------------------------------------------------------
Service Corp. International 7.700% 04/15/09 2,000,000 2,075,000
-------------------------------------------------------------------------------------
Commercial Services Total 2,075,000
See Accompanying Notes to Financials Statements.
10
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
CONSUMER NON-CYCLICAL - (CONTINUED)
FOOD - 0.8% PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Cadbury-Schweppes PLC 3.875% 10/01/08 (a) 7,000,000 6,825,070
-------------------------------------------------------------------------------------
Delhaize America, Inc. 8.125% 04/15/11 1,000,000 1,115,920
-------------------------------------------------------------------------------------
Stater Brothers Holdings, Inc. 8.125% 06/15/12 1,000,000 970,000
-------------------------------------------------------------------------------------
Food Total 8,910,990
HEALTHCARE SERVICES - 1.9%
- ------------------------------------------- -------------------------------------------------------------------------------------
HCA, Inc. 6.950% 05/01/12 3,000,000 3,113,580
7.125% 06/01/06 2,500,000 2,575,825
7.875% 02/01/11 5,015,000 5,471,515
-------------------------------------------------------------------------------------
Tenet Healthcare Corp. 9.875% 07/01/14 3,250,000 3,371,875
-------------------------------------------------------------------------------------
UnitedHealth Group, Inc. 3.300% 01/30/08 8,250,000 7,997,385
-------------------------------------------------------------------------------------
Healthcare Services Total 22,530,180
PHARMACEUTICALS - 0.7%
- ------------------------------------------- -------------------------------------------------------------------------------------
Wyeth 6.450% 02/01/24 2,400,000 2,618,832
6.500% 02/01/34 5,000,000 5,497,500
-------------------------------------------------------------------------------------
Pharmaceuticals Total 8,116,332
---------------
CONSUMER NON-CYCLICAL TOTAL 45,377,927
DIVERSIFIED - 0.9%
HOLDING COMPANIES - 0.9%
- ------------------------------------------- -------------------------------------------------------------------------------------
Hutchison Whampoa International Ltd. 6.250% 01/24/14 (a) 10,500,000 10,932,915
-------------------------------------------------------------------------------------
Holding Companies Total 10,932,915
---------------
DIVERSIFIED TOTAL 10,932,915
ENERGY - 4.6%
OIL & GAS - 4.3%
- ------------------------------------------- -------------------------------------------------------------------------------------
Amerada Hess Corp. 7.300% 08/15/31 7,500,000 8,430,600
-------------------------------------------------------------------------------------
Chesapeake Energy Corp. 6.375% 06/15/15 (a) 500,000 500,000
7.500% 06/15/14 1,160,000 1,232,500
-------------------------------------------------------------------------------------
Gazprom International SA 7.201% 02/01/20 (a) 9,000,000 9,180,000
-------------------------------------------------------------------------------------
Nexen, Inc. 7.875% 03/15/32 5,250,000 6,462,015
-------------------------------------------------------------------------------------
Noble Drilling Corp. 7.500% 03/15/19 4,813,000 5,489,515
-------------------------------------------------------------------------------------
Pemex Project Funding Master Trust 7.875% 02/01/09 6,000,000 6,465,000
-------------------------------------------------------------------------------------
Petrobras International Finance Co. 9.750% 07/06/11 3,500,000 4,025,000
-------------------------------------------------------------------------------------
Pride International, Inc. 7.375% 07/15/14 1,500,000 1,605,000
-------------------------------------------------------------------------------------
See Accompanying Notes to Financials Statements.
11
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
ENERGY - (CONTINUED)
OIL & GAS - (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Ras Laffan Liquefied Natural Gas Co., Ltd. 3.437% 09/15/09 (a) 7,479,000 7,056,063
-------------------------------------------------------------------------------------
Oil & Gas Total 50,445,693
PIPELINES - 0.3%
- ------------------------------------------- -------------------------------------------------------------------------------------
Southern Natural Gas Co. 8.875% 03/15/10 2,000,000 2,157,500
-------------------------------------------------------------------------------------
Williams Companies, Inc. 8.125% 03/15/12 1,500,000 1,635,000
-------------------------------------------------------------------------------------
Pipelines Total 3,792,500
---------------
ENERGY TOTAL 54,238,193
FINANCIALS - 23.5%
BANKS - 4.5%
- ------------------------------------------- -------------------------------------------------------------------------------------
Bank One Corp. 6.000% 08/01/08 (e) 11,888,000 12,454,820
-------------------------------------------------------------------------------------
Barclays Bank PLC 7.375% 06/15/49 (a)(f) 5,000,000 5,551,600
-------------------------------------------------------------------------------------
Chinatrust Commercial Bank 5.625% 12/29/49 (a)(f) 2,350,000 2,297,290
-------------------------------------------------------------------------------------
HSBC Capital Funding LP 9.547% 12/31/49 (a)(f) 10,500,000 12,624,885
-------------------------------------------------------------------------------------
Popular North America, Inc. 6.125% 10/15/06 8,250,000 8,473,410
-------------------------------------------------------------------------------------
Rabobank Capital Funding II 5.260% 12/31/49 (a)(f) 11,500,000 11,833,270
-------------------------------------------------------------------------------------
Banks Total 53,235,275
DIVERSIFIED FINANCIAL SERVICES - 12.6%
- ------------------------------------------- -------------------------------------------------------------------------------------
Air 2 US 8.027% 10/01/19 (a) 4,198,334 3,652,551
-------------------------------------------------------------------------------------
Bear Stearns Companies, Inc. 4.000% 01/31/08 10,000,000 9,873,400
-------------------------------------------------------------------------------------
Capital One Bank 5.125% 02/15/14 6,650,000 6,546,127
-------------------------------------------------------------------------------------
Citicorp 8.040% 12/15/19 (a) 12,075,000 14,879,660
-------------------------------------------------------------------------------------
Countrywide Home Loans, Inc. 5.500% 08/01/06 7,500,000 7,631,700
-------------------------------------------------------------------------------------
Ford Motor Credit Co. 5.700% 01/15/10 2,000,000 1,887,020
5.800% 01/12/09 4,650,000 4,470,371
7.375% 02/01/11 8,850,000 8,814,600
-------------------------------------------------------------------------------------
Fund American Companies, Inc. 5.875% 05/15/13 4,535,000 4,589,284
-------------------------------------------------------------------------------------
General Electric Capital Corp. 5.375% 03/15/07 10,000,000 10,219,400
-------------------------------------------------------------------------------------
General Motors Acceptance Corp. 6.125% 01/22/08 3,500,000 3,368,505
6.150% 04/05/07 5,000,000 4,913,150
-------------------------------------------------------------------------------------
Household Finance Corp. 5.875% 02/01/09 8,200,000 8,518,570
-------------------------------------------------------------------------------------
International Lease Finance Corp. 6.375% 03/15/09 9,000,000 9,500,490
-------------------------------------------------------------------------------------
See Accompanying Notes to Financials Statements.
12
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
FINANCIALS - (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES - (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Jefferies Group, Inc. 7.750% 03/15/12 7,250,000 8,235,492
-------------------------------------------------------------------------------------
John Deere Capital Corp. 7.000% 03/15/12 9,000,000 10,085,310
-------------------------------------------------------------------------------------
LaBranche & Co., Inc. 11.000% 05/15/12 2,000,000 2,110,000
-------------------------------------------------------------------------------------
Merrill Lynch & Co. 4.250% 02/08/10 11,400,000 11,148,174
-------------------------------------------------------------------------------------
Morgan Stanley 6.100% 04/15/06 10,000,000 10,221,900
-------------------------------------------------------------------------------------
PF Export Receivables Master Trust 3.748% 06/01/13 (a) 3,025,750 2,857,125
-------------------------------------------------------------------------------------
UFJ Finance Aruba AEC 6.750% 07/15/13 5,150,000 5,573,742
-------------------------------------------------------------------------------------
Diversified Financial Services Total 149,096,571
INSURANCE - 2.5%
- ------------------------------------------- -------------------------------------------------------------------------------------
Berkshire Hathaway Finance Corp. 4.850% 01/15/15 (a) 5,000,000 4,863,900
-------------------------------------------------------------------------------------
Florida Windstorm Underwriting Association 7.125% 02/25/19 (a) 4,425,000 4,957,106
-------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 4.700% 09/01/07 4,000,000 4,020,000
-------------------------------------------------------------------------------------
Prudential Insurance Co. of America 7.650% 07/01/07 (a) 10,105,000 10,773,244
-------------------------------------------------------------------------------------
Travelers Property Casualty Corp. 3.750% 03/15/08 4,750,000 4,628,875
-------------------------------------------------------------------------------------
Insurance Total 29,243,125
INVESTMENT COMPANIES - 0.8%
- ------------------------------------------- -------------------------------------------------------------------------------------
Credit Suisse First Boston USA, Inc. 4.625% 01/15/08 9,750,000 9,801,967
-------------------------------------------------------------------------------------
Investment Companies Total 9,801,967
REAL ESTATE - 1.5%
- ------------------------------------------- -------------------------------------------------------------------------------------
EOP Operating LP 8.375% 03/15/06 11,000,000 11,432,410
-------------------------------------------------------------------------------------
Forest City Enterprises, Inc. 7.625% 06/01/15 1,000,000 1,070,000
-------------------------------------------------------------------------------------
Prudential Property 7.125% 07/01/07 (a) 5,300,000 5,578,038
-------------------------------------------------------------------------------------
Real Estate Total 18,080,448
REAL ESTATE INVESTMENT TRUSTS - 0.9%
- ------------------------------------------- -------------------------------------------------------------------------------------
iStar Financial, Inc. 5.125% 04/01/11 2,400,000 2,357,064
8.750% 08/15/08 4,800,000 5,339,664
-------------------------------------------------------------------------------------
La Quinta Properties, Inc. 7.000% 08/15/12 500,000 506,250
-------------------------------------------------------------------------------------
Thornburg Mortgage, Inc. 8.000% 05/15/13 2,500,000 2,562,500
-------------------------------------------------------------------------------------
Real Estate Investment Trusts Total 10,765,478
-------------------------------------------------------------------------------------
See Accompanying Notes to Financials Statements.
13
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
FINANCIALS - (CONTINUED)
SAVINGS & LOANS - 0.7% PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Washington Mutual Bank 6.875% 06/15/11 5,200,000 5,736,848
-------------------------------------------------------------------------------------
Western Financial Bank 9.625% 05/15/12 2,000,000 2,175,000
-------------------------------------------------------------------------------------
Savings & Loans Total 7,911,848
---------------
FINANCIALS TOTAL 278,134,712
INDUSTRIALS - 2.2%
AEROSPACE & DEFENSE - 0.9%
- ------------------------------------------- -------------------------------------------------------------------------------------
Raytheon Co. 8.300% 03/01/10 7,000,000 8,023,120
-------------------------------------------------------------------------------------
Systems 2001 Asset Trust 6.664% 09/15/13 (a) 2,113,824 2,274,729
-------------------------------------------------------------------------------------
Aerospace & Defense Total 10,297,849
ELECTRONICS - 0.3%
- ------------------------------------------- -------------------------------------------------------------------------------------
Flextronics International Ltd. 6.250% 11/15/14 1,000,000 952,500
-------------------------------------------------------------------------------------
Thomas & Betts Corp. 7.250% 06/01/13 2,000,000 2,137,500
-------------------------------------------------------------------------------------
Electronics Total 3,090,000
ENVIRONMENTAL CONTROL - 0.5%
- ------------------------------------------- -------------------------------------------------------------------------------------
Allied Waste North America, Inc. 8.875% 04/01/08 5,500,000 5,706,250
-------------------------------------------------------------------------------------
Environmental Control Total 5,706,250
MACHINERY DIVERSIFIED - 0.1%
- ------------------------------------------- -------------------------------------------------------------------------------------
Briggs & Stratton Corp. 8.875% 03/15/11 1,375,000 1,591,562
-------------------------------------------------------------------------------------
Machinery Diversified Total 1,591,562
METAL FABRICATE/HARDWARE - 0.0%
- ------------------------------------------- -------------------------------------------------------------------------------------
Valmont Industries, Inc. 6.875% 05/01/14 500,000 485,625
-------------------------------------------------------------------------------------
Metal Fabricate/Hardware Total 485,625
MISCELLANEOUS MANUFACTURING - 0.2%
- ------------------------------------------- -------------------------------------------------------------------------------------
Bombardier, Inc. 6.300% 05/01/14 (a) 500,000 422,500
-------------------------------------------------------------------------------------
Trinity Industries, Inc. 6.500% 03/15/14 1,550,000 1,488,000
-------------------------------------------------------------------------------------
Miscellaneous Manufacturing Total 1,910,500
PACKAGING & CONTAINERS - 0.1%
- ------------------------------------------- -------------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc. 8.875% 02/15/09 1,000,000 1,065,000
-------------------------------------------------------------------------------------
Packaging & Containers Total 1,065,000
See Accompanying Notes to Financials Statements.
14
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
INDUSTRIALS - (CONTINUED)
TRANSPORTATION - 0.1% PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
FedEx Corp. 7.530% 09/23/06 487,799 504,462
-------------------------------------------------------------------------------------
Stena AB 7.500% 11/01/13 1,200,000 1,224,000
-------------------------------------------------------------------------------------
Transportation Total 1,728,462
---------------
INDUSTRIALS TOTAL 25,875,248
TECHNOLOGY - 0.5%
COMPUTERS - 0.5%
- ------------------------------------------- -------------------------------------------------------------------------------------
IBM Canada Credit Services Co. 3.750% 11/30/07 (a) 6,000,000 5,884,500
-------------------------------------------------------------------------------------
Computers Total 5,884,500
---------------
TECHNOLOGY TOTAL 5,884,500
UTILITIES - 8.4%
ELECTRIC - 8.4%
- ------------------------------------------- -------------------------------------------------------------------------------------
Edison Mission Energy 9.875% 04/15/11 1,100,000 1,265,000
-------------------------------------------------------------------------------------
FirstEnergy Corp. 5.500% 11/15/06 5,000,000 5,094,800
6.450% 11/15/11 4,500,000 4,747,275
-------------------------------------------------------------------------------------
FPL Energy American Wind LLC 6.639% 06/20/23 (a) 4,436,500 4,609,390
-------------------------------------------------------------------------------------
FPL Energy National Wind 5.608% 03/10/24 (a) 800,000 790,808
-------------------------------------------------------------------------------------
Kansas City Power & Light Co. 6.000% 03/15/07 10,000,000 10,242,900
-------------------------------------------------------------------------------------
Kiowa Power Partners LLC 5.737% 03/30/21 (a) 3,550,000 3,500,300
-------------------------------------------------------------------------------------
MidAmerican Energy Co. 6.375% 06/15/06 409,000 420,256
-------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co. 3.500% 05/15/08 5,310,000 5,121,920
4.625% 10/01/07 5,000,000 5,017,800
5.875% 10/01/12 7,000,000 7,245,910
-------------------------------------------------------------------------------------
MSW Energy Holdings LLC 8.500% 09/01/10 2,000,000 2,110,000
-------------------------------------------------------------------------------------
Nevada Power Co. 9.000% 08/15/13 2,000,000 2,245,000
-------------------------------------------------------------------------------------
Niagara Mohawk Power Corp. 8.875% 05/15/07 6,200,000 6,783,668
-------------------------------------------------------------------------------------
Northern States Power Co. 8.000% 08/28/12 3,750,000 4,450,725
-------------------------------------------------------------------------------------
Oglethorpe Power Corp. 6.974% 06/30/11 2,418,000 2,530,219
-------------------------------------------------------------------------------------
Pacific Gas & Electric Co. 6.050% 03/01/34 6,250,000 6,409,063
-------------------------------------------------------------------------------------
PSE&G Energy Holdings LLC 8.625% 02/15/08 2,000,000 2,100,000
-------------------------------------------------------------------------------------
South Point Energy Center LLC 8.400% 05/30/12 (a) 1,545,105 1,433,084
-------------------------------------------------------------------------------------
Southern Power Co. 6.250% 07/15/12 4,790,000 5,166,925
-------------------------------------------------------------------------------------
See Accompanying Notes to Financials Statements.
15
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED)
UTILITIES - (CONTINUED)
ELECTRIC - (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Tenaska Alabama II Partners LP 6.125% 03/30/23 (a) 3,330,169 3,388,015
-------------------------------------------------------------------------------------
TXU Corp. 5.550% 11/15/14 (a) 5,300,000 5,090,915
6.550% 11/15/34 (a) 9,400,000 9,259,564
-------------------------------------------------------------------------------------
Electric Total 99,023,537
---------------
UTILITIES TOTAL 99,023,537
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(COST OF $665,666,075) 682,492,683
MORTGAGE-BACKED SECURITIES - 19.8%
- ------------------------------------------- -------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 4.000% 03/15/19 7,075,000 6,406,539
4.500% 09/01/18 - 05/01/34 38,468,548 37,345,531
4.750% 07/15/24 15,000,000 15,045,936
5.000% 03/15/28 - 01/01/35 34,410,562 33,999,463
12.000% 07/01/20 293,672 324,303
-------------------------------------------------------------------------------------
Federal National Mortgage Association 4.500% 07/01/18 - 02/01/19 51,824,835 50,764,670
5.000% 07/25/15 - 06/01/18 50,075,056 50,179,914
5.500% 12/01/17 6,271,837 6,397,785
6.000% 04/01/09 - 03/01/24 2,999,704 3,085,820
6.500% 10/01/28 - 12/01/31 3,041,134 3,165,146
9.250% 03/25/18 232,250 250,101
TBA
6.000% 04/13/35 (g) 22,000,000 22,481,250
-------------------------------------------------------------------------------------
Government National Mortgage Association 3.750% 07/20/25 (b) 155,588 157,737
4.954% 05/16/31 4,300,000 4,198,324
8.000% 01/15/08 - 07/15/08 246,098 257,299
9.000% 06/15/16 - 10/15/16 23,031 25,103
-------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(COST OF $237,741,545) 234,084,921
ASSET-BACKED SECURITIES - 8.1%
- ------------------------------------------- -------------------------------------------------------------------------------------
AmeriCredit Automobile Receivables Trust 3.930% 10/06/11 6,000,000 5,856,120
-------------------------------------------------------------------------------------
Bank One Issuance Trust 3.590% 05/17/10 5,000,000 4,929,850
4.160% 01/15/08 10,000,000 10,015,000
-------------------------------------------------------------------------------------
California Infrastructure 6.420% 12/26/09 10,000,000 10,458,300
-------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust 2.000% 11/15/07 5,600,000 5,501,243
-------------------------------------------------------------------------------------
See Accompanying Notes to Financials Statements.
16
ASSET-BACKED SECURITIES - (CONTINUED) PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Capital One Multi-Asset Execution Trust 3.650% 07/15/11 16,000,000 15,616,960
-------------------------------------------------------------------------------------
Cigno CBO Ltd. 6.460% 11/15/08 (a) 3,411,264 3,513,602
-------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust 2.500% 04/07/08 11,290,000 11,126,634
-------------------------------------------------------------------------------------
Diversified REIT Trust 6.780% 03/18/11 (a)(f) 5,000,000 5,263,761
-------------------------------------------------------------------------------------
Green Tree Financial Corp. 6.870% 01/15/29 2,692,564 2,826,896
-------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust 1.680% 11/21/06 7,074,906 7,045,403
-------------------------------------------------------------------------------------
Origen Manufactured Housing 3.790% 12/15/17 2,700,000 2,633,634
-------------------------------------------------------------------------------------
PG&E Energy Recovery Funding LLC 3.870% 06/25/11 10,060,000 9,941,996
-------------------------------------------------------------------------------------
Providian Gateway Master Trust 3.350% 09/15/11 (a) 1,500,000 1,464,180
TOTAL ASSET-BACKED SECURITIES
(COST OF $98,457,599) 96,193,579
COLLATERALIZED MORTGAGE OBLIGATIONS - 5.0%
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.8%
- ------------------------------------------- -------------------------------------------------------------------------------------
American Mortgage Trust 8.445% 09/27/22 32,685 29,417
-------------------------------------------------------------------------------------
Countrywide Alternative Loan Trust 5.000% 03/25/20 19,700,572 19,559,319
-------------------------------------------------------------------------------------
GSMPS Mortgage Loan Trust 7.750% 09/19/27 (a) 1,599,748 1,701,074
---------------
COLLATERALIZED MORTGAGE OBLIGATIONS TOTAL 21,289,810
COMMERICAL MORTGAGE-BACKED SECURITIES - 3.2%
- ------------------------------------------- -------------------------------------------------------------------------------------
First Union National Bank Commercial 5.585% 02/12/34 5,055,305 5,154,642
Mortgage Trust 6.141% 02/12/34 8,000,000 8,466,400
-------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust 6.510% 12/15/26 5,000,000 5,365,600
-------------------------------------------------------------------------------------
Nomura Asset Securities Corp. 7.120% 04/13/39 6,255,000 6,419,194
-------------------------------------------------------------------------------------
Structured Asset Securities Corp. 2.065% 02/25/28 (f)(h) 6,758,253 597,700
-------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust 3.989% 06/15/35 11,930,000 11,112,198
---------------
COMMERCIAL MORTGAGE-BACKED SECURITIES TOTAL 37,115,734
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST OF $58,501,325) 58,405,544
See Accompanying Notes to Financials Statements.
17
GOVERNMENT AGENCIES & OBLIGATIONS - 4.3%
FOREIGN GOVERNMENT BONDS - 1.7% PAR ($) VALUE ($)
- ------------------------------------------- -------------------------------------------------------------------------------------
Export-Import Bank of Korea 4.625% 03/16/10 4,700,000 4,653,987
-------------------------------------------------------------------------------------
State of Qatar 9.750% 06/15/30 (a) 5,000,000 7,276,350
-------------------------------------------------------------------------------------
United Mexican States 6.750% 09/27/34 8,000,000 7,792,000
---------------
FOREIGN GOVERNMENT BONDS TOTAL 19,722,337
U.S. GOVERNMENT AGENCY & OBLIGATION - 2.6%
- ------------------------------------------- -------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 4.625% 10/15/14 8,391,000 8,214,596
-------------------------------------------------------------------------------------
U.S. Treasury Bond 5.375% 02/15/31 21,225,000 23,132,767
---------------
U.S. GOVERNMENT AGENCY & OBLIGATION TOTAL 31,347,363
TOTAL GOVERNMENT AGENCIES & OBLIGATIONS
(COST OF $47,197,512) 51,069,700
SHORT-TERM OBLIGATIONS - 6.0%
U.S. GOVERNMENT AGENCY - 1.8%
- ------------------------------------------- -------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 2.680% 04/12/05 (i) 22,000,000 21,981,984
REPURCHASE AGREEMENT - 4.2%
- ------------------------------------------- -------------------------------------------------------------------------------------
Repurchase agreement with State Street Bank &
Trust Co., dated 03/31/05, due 04/01/05 at 2.450%,
collateralized by a U.S. Treasury Bill maturing
05/19/05, market value of $50,407,560
(repurchase proceeds $49,422,363) 49,419,000 49,419,000
TOTAL SHORT-TERM OBLIGATIONS
(COST OF $71,400,984) 71,400,984
TOTAL INVESTMENTS - 101.0%
(COST OF $1,178,965,040) (j) 1,193,647,411
OTHER ASSETS & LIABILITIES, NET - (1.0)% (11,983,546)
NET ASSETS - 100.0% 1,181,663,865
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
March 31, 2005, these securities amounted to $188,364,903, which represents
15.9% of net assets.
(b) Floating rate note. The interest rate shown reflects the rate as of March
31, 2005.
See Accompanying Notes to Financials Statements.
18
(c) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is being accrued. As of March 31,
2005, the value of these securities amounted to $6,284,528, which
represents 0.5% of net assets.
(d) The issuer has filed for bankruptcy protection under Chapter 11, and is in
default of certain debt covenants. Income is not being accrued. As of March
31, 2005, the value of this security represents 0.1% of net assets.
(e) A portion of the security with a market value of $1,882,681 is pledged as
collateral for open futures contracts.
(f) Variable rate security. The interest rate shown reflects the rate as of
March 31, 2005.
(g) Security purchased on a delayed delivery basis.
(h) Accrued interest accumulates in the value of this security and is payable
at redemption.
(i) The rate shown represents the annualized yield at the date of purchase.
(j) Cost for federal income tax purposes is $1,183,948,639.
At March 31, 2005, the Fund held investments in the following sectors:
SECTOR % OF NET ASSETS
--------------------------------------------------------------------------
Corporate Fixed-Income Bonds & Notes 57.8%
Mortgage-Backed Securities 19.8
Asset-Backed Securities 8.1
Collateralized Mortgage Obligations 5.0
Government Agencies & Obligations 4.3
Short-Term Obligations 6.0
Other Assets & Liabilities, Net (1.0)
-----
100.0%
=====
ACRONYM NAME
TBA To Be Announced
At March 31, 2005, the Fund held the following open short futures contracts:
NUMBER OF AGGREGATE EXPIRATION UNREALIZED
TYPE CONTRACTS VALUE FACE VALUE DATE APPRECIATION
-------------------------------------------------------------------------------------------------
5-Year U.S. Treasury Notes 210 $ 22,489,688 $ 22,567,283 Jun-2005 $ 77,595
10-Year U.S. Treasury Notes 132 14,423,063 14,480,087 Jun-2005 57,024
------------
$ 134,619
------------
See Accompanying Notes to Financials Statements.
19
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------
MARCH 31, 2005 COLUMBIA INTERMEDIATE BOND FUND
($)
- ------------------------------------------ ----------------------------------------------------------------------------
ASSETS Investments, at cost 1,178,965,040
-------------
Investments, at value 1,193,647,411
Cash 70,349
Receivable for:
Fund shares sold 2,088,100
Interest 11,853,874
Deferred Trustees' compensation plan 15,387
-------------
Total Assets 1,207,675,121
----------------------------------------------------------------------------
LIABILITIES Payable for:
Investments purchased on a delayed delivery basis 22,594,000
Fund shares repurchased 1,533,803
Futures variation margin 153,375
Distributions 753,970
Investment advisory fee 341,021
Administration fee 149,283
Transfer agent fee 177,392
Pricing and bookkeeping fees 25,860
Trustees' fees 314
Custody fee 3,073
Distribution and service fees 169,345
Deferred Trustees' fees 15,387
Other liabilities 94,433
-------------
Total Liabilities 26,011,256
-------------
NET ASSETS 1,181,663,865
----------------------------------------------------------------------------
COMPOSITION OF NET ASSETS Paid-in capital 1,184,029,119
Overdistributed net investment income (4,458,991)
Accumulated net realized loss (12,723,253)
Net unrealized appreciation on:
Investments 14,682,371
Futures contracts 134,619
-------------
NET ASSETS 1,181,663,865
----------------------------------------------------------------------------
CLASS A Net assets 168,213,320
Shares outstanding 18,783,371
Net asset value per share 8.96(a)
Maximum offering price per share ($8.96/0.9525) 9.41(b)
----------------------------------------------------------------------------
CLASS B Net assets 89,563,998
Shares outstanding 10,001,004
Net asset value and offering price per share 8.96(a)
----------------------------------------------------------------------------
CLASS C Net assets 46,693,444
Shares outstanding 5,213,934
Net asset value and offering price per share 8.96(a)
----------------------------------------------------------------------------
CLASS Z Net assets 877,193,103
Shares outstanding 97,950,583
Net asset value, offering and redemption price per share 8.96
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See Accompanying Notes to Financial Statements.
20
STATEMENT OF OPERATIONS
--------------------------------------------------------
FOR THE YEAR ENDED MARCH 31, 2005 COLUMBIA INTERMEDIATE BOND FUND
($)
- ------------------------------------------ ----------------------------------------------------------------------------
INVESTMENT INCOME Interest (net of foreign taxes withheld of $3,281) 57,425,348
----------------------------------------------------------------------------
EXPENSES Investment advisory fee 3,779,947
Administration fee 1,640,974
Distribution fee:
Class A 155,944
Class B 723,208
Class C 379,541
Service fee:
Class A 389,683
Class B 240,403
Class C 126,124
Transfer agent fee 1,293,178
Pricing and bookkeeping fees 311,382
Trustees' fees 29,368
Custody fee 42,673
Non-recurring costs (See Note 7) 55,774
Other expenses 502,542
-----------
Total Expenses 9,670,741
Fees waived by Distributor:
Class A (155,944)
Class C (76,643)
Non-recurring costs assumed by Investment Advisor (See Note 7) (55,774)
Custody earnings credit (3,443)
-----------
Net Expenses 9,378,937
-----------
Net Investment Income 48,046,411
----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain on:
INVESTMENTS AND FUTURES CONTRACTS Investments 234,626
Futures contracts 1,438,278
-----------
Net realized gain 1,672,904
Net change in unrealized appreciation (depreciation) on:
Investments (36,119,819)
Futures contracts 1,138,426
-----------
Net change in unrealized appreciation (depreciation) (34,981,393)
-----------
Net Loss (33,308,489)
-----------
Net Increase in Net Assets from Operations 14,737,922
See Accompanying Notes to Financial Statements.
21
STATEMENT OF CHANGES IN NET ASSETS
---------------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
YEAR ENDED PERIOD ENDED YEAR ENDED
MARCH 31, MARCH 31, JUNE 30,
INCREASE (DECREASE) IN NET ASSETS: 2005 ($) 2004 (a)(b)($) 2003 (c)($)
- ------------------------------------------ ---------------------------------------------------------------------------------
OPERATIONS Net investment income 48,046,411 33,070,574 47,471,086
Net realized gain (loss) on
investments and futures contracts 1,672,904 12,432,924 (1,842,521)
Net change in unrealized
appreciation (depreciation) on
investments and futures contracts (34,981,393) 951,538 50,393,482
---------------------------------------------
Net Increase from Operations 14,737,922 46,455,036 96,022,047
---------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income:
Class A (7,237,510) (4,074,020) (3,487,025)
Class B (3,766,396) (3,054,628) (3,467,410)
Class C (2,052,627) (1,672,747) (1,549,430)
Class Z (38,682,066) (26,871,410) (40,839,542)
From net realized gains:
Class A (470,098) -- --
Class B (284,878) -- --
Class C (146,761) -- --
Class Z (2,354,812) -- --
---------------------------------------------
Total Distributions
Declared to Shareholders (54,995,148) (35,672,805) (49,343,407)
---------------------------------------------------------------------------------
SHARE TRANSACTIONS Class A:
Subscriptions 81,826,437 82,402,961 93,406,890
Distributions reinvested 7,001,846 3,517,373 2,883,981
Redemptions (61,931,472) (33,954,472) (40,046,836)
---------------------------------------------
Net Increase 26,896,811 51,965,862 56,244,035
Class B:
Subscriptions 8,692,611 18,062,576 83,003,613
Distributions reinvested 2,962,492 2,126,834 2,442,195
Redemptions (23,338,504) (20,373,050) (15,335,796)
---------------------------------------------
Net Increase (Decrease) (11,683,401) (183,640) 70,110,012
Class C:
Subscriptions 8,760,722 20,227,688 48,689,817
Distributions reinvested 1,460,047 1,011,442 974,767
Redemptions (20,556,079) (14,503,875) (11,862,809)
---------------------------------------------
Net Increase (Decrease) (10,335,310) 6,735,255 37,801,775
Class Z:
Subscriptions 347,273,902 234,474,636 269,095,613
Distributions reinvested 35,087,203 23,876,353 35,988,674
Redemptions (269,217,391) (190,223,570) (351,929,592)
---------------------------------------------
Net Increase (Decrease) 113,143,714 68,127,419 (46,845,305)
Net Increase from Share
Transactions 118,021,814 126,644,896 117,310,517
---------------------------------------------
Total Increase in
Net Assets 77,764,588 137,427,127 163,989,157
---------------------------------------------------------------------------------
NET ASSETS Beginning of period 1,103,899,277 966,472,150 802,482,993
End of period 1,181,663,865 1,103,899,277 966,472,150
Overdistributed net investment
income at end of period (4,458,991) (2,995,178) (2,007,917)
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c) Effective July 29, 2002, Stein Roe Intermediate Bond Fund Class S shares
were redesignated Liberty Intermediate Bond Fund Class Z shares.
See Accompanying Notes to Financial Statements.
22
YEAR ENDED PERIOD ENDED YEAR ENDED
MARCH 31, MARCH 31, JUNE 30,
2005 2004 (a)(b) 2003 (c)
- ------------------------------------------ ---------------------------------------------------------------------------------
CHANGES IN SHARES Class A:
Subscriptions 9,019,523 9,023,912 10,637,329
Issued for distributions
reinvested 772,793 385,364 325,300
Redemptions (6,831,800) (3,713,540) (4,558,154)
---------------------------------------------
Net Increase 2,960,516 5,695,736 6,404,475
Class B:
Subscriptions 960,378 1,985,472 9,478,046
Issued for distributions
reinvested 326,979 233,459 275,656
Redemptions (2,578,902) (2,239,392) (1,735,505)
---------------------------------------------
Net Increase (Decrease) (1,291,545) (20,461) 8,018,197
Class C:
Subscriptions 965,944 2,219,854 5,533,514
Issued for distributions
reinvested 161,152 110,951 109,962
Redemptions (2,277,415) (1,594,157) (1,350,773)
---------------------------------------------
Net Increase (Decrease) (1,150,319) 736,648 4,292,703
Class Z:
Subscriptions 38,284,212 25,666,393 30,633,958
Issued for distributions
reinvested 3,873,719 2,620,156 4,081,323
Redemptions (29,785,348) (20,891,749) (40,109,913)
---------------------------------------------
Net Increase (Decrease) 12,372,583 7,394,800 (5,394,632)
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c) Effective July 29, 2002, Stein Roe Intermediate Bond Fund Class S shares
were redesignated Liberty Intermediate Bond Fund Class Z shares.
See Accompanying Notes to Financial Statements.
23
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------
MARCH 31, 2005 COLUMBIA INTERMEDIATE BOND FUND
NOTE 1. ORGANIZATION
Columbia Intermediate Bond Fund (the "Fund"), a series of Columbia Funds Trust
VIII (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts
business trust registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company.
INVESTMENT GOAL
The Fund seeks total return by investing for a high level of current income and
opportunities for capital appreciation.
FUND SHARES
The Fund may issue an unlimited number of shares and offers four classes of
shares: Class A, Class B, Class C and Class Z. Each share class has its own
sales charge and expense structure.
Class A shares are subject to a maximum front-end sales charge of 4.75% based on
the amount of initial investment. Class A shares purchased without an initial
sales charge are subject to a 1.00% contingent deferred sales charge ("CDSC") on
shares sold within eighteen months on an original purchase of $1 million to $25
million. Class B shares are subject to a maximum CDSC of 5.00% based upon the
holding period after purchase. Class B shares will convert to Class A shares in
a certain number of years after purchase, depending on the program under which
shares were purchased. Class C shares are subject to a 1.00% CDSC on shares sold
within one year after purchase. Class Z shares are offered continuously at net
asset value. There are certain restrictions on the purchase of Class Z shares,
as described in the Fund's prospectus.
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.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date. Cost is determined
and gains (losses) are based upon the specific identification method for both
financial statement and federal income tax purposes.
FUTURES CONTRACTS
The Fund may invest in municipal and U.S. Treasury futures contracts. The Fund
will invest in these instruments to hedge against the effects of changes in the
value of portfolio securities due to anticipated changes in interest rates
and/or market conditions, for
24
duration management, or when the transactions are economically appropriate to
the reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts involves certain risks, which include:
(1) imperfect correlation between the price movement of the instruments and the
underlying securities, (2) inability to close out positions due to differing
trading hours, or the temporary absence of a liquid market, for either the
instrument or the underlying securities, or (3) an inaccurate prediction by
Columbia Management Advisors, Inc. of the future direction of interest rates.
Any of these risks may involve amounts exceeding the variation margin recorded
in the Fund's Statement of Assets and Liabilities at any given time.
Upon entering into a futures contract, the Fund deposits cash or securities with
the broker in an amount sufficient to meet the initial margin requirement.
Subsequent payments are made or received by the Fund equal to the daily change
in the contract value and are recorded as variation margin receivable or payable
and offset in unrealized gains or losses. The Fund also identifies portfolio
securities as segregated with the custodian in a separate account in an amount
equal to the futures contract. The Fund recognizes a realized gain or loss when
the contract is closed or expires.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions with institutions that
the Fund's investment advisor has determined are creditworthy. The Fund, through
its custodian, receives delivery of underlying securities collateralizing a
repurchase agreement. Collateral is at least equal, at all times, to the value
of the repurchase obligation including interest. A repurchase agreement
transaction involves certain risks in the event of default or insolvency of the
counterparty. These risks include possible delays or restrictions upon the
Fund's ability to dispose of the underlying securities and a possible decline in
the value of the underlying securities during the period while the Fund seeks to
assert its rights.
DELAYED DELIVERY SECURITIES
The Fund may trade securities on other than normal settlement terms, including
securities purchased or sold on a "when-issued" basis. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
to subsequently invest at less advantageous prices. The Fund identifies cash or
liquid portfolio securities in an amount equal to the delayed delivery
commitment.
INCOME RECOGNITION
Interest income is recorded on the accrual basis. Premium and discount are
amortized and accreted, respectively, on all debt securities.
DETERMINATION OF CLASS NET ASSET VALUES
All income, expenses (other than class-specific expenses, as shown on the
Statement of Operations) and realized and unrealized gains (losses) are
allocated to each class of the Fund on a daily basis for purposes of determining
the net asset value of each class. Income and expenses are allocated to each
class based on the settled shares method, while realized and unrealized gains
(losses) are allocated based on the relative net assets of each class.
FEDERAL INCOME TAX STATUS
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, as amended, and will distribute
substantially all of its taxable income, if any, for its tax year, and as such
will not be subject to federal income taxes. In addition, 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.
25
For the year ended March 31, 2005, permanent book and tax basis differences
resulting primarily from differing treatments for discount accretion/premium
amortization on debt securities, paydown reclassifications and distribution
reclassifications were identified and reclassified among the components of the
Fund's net assets as follows:
OVERDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME LOSS CAPITAL
-----------------------------------------------------
$ 2,228,375 $ (2,228,376) $ 1
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 year ended March 31, 2005,
the period ended March 31, 2004 and the year ended June 30, 2003 was as follows:
MARCH 31, MARCH 31, JUNE 30,
2005 2004 2003
- ---------------------------------------------------------------------
Distributions paid from:
Ordinary Income* $ 53,846,911 $ 35,672,804 $ 49,343,407
Long-Term Capital Gains 1,148,237 -- --
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
As of March 31, 2005, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
---------------------------------------------------------
$ 1,020,779 $ -- $ 9,698,772
* The differences between book-basis and tax-basis net unrealized
appreciation are primarily due to discount accretion/premium amortization
on debt securities and deferral of losses from wash sales.
Unrealized appreciation and depreciation at March 31, 2005, based on cost of
investments for federal income tax purposes and excluding any unrealized
appreciation and depreciation from changes in the value of other assets and
liabilities resulting from changes in exchange rates, was:
Unrealized appreciation $ 30,683,634
Unrealized depreciation (20,984,862)
-------------
Net unrealized appreciation $ 9,698,772
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:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
--------------------------------------
2013 $ 6,075,470
Under current tax rules, certain capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
As of March 31, 2005, post-October capital losses of $1,674,498 attributed to
security transactions were deferred to April 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 receives a monthly investment advisory fee based on the Fund's
average daily net assets at the following annual rates:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
------------------------------------------------
First $500 million 0.35%
$500 million to $1 billion 0.35%
$1 billion to $1.5 billion 0.30%
$1.5 billion to $3 billion 0.29%
$3 billion to $6 billion 0.28%
Over $6 billion 0.27%
Prior to November 1, 2004, Columbia received a monthly investment advisory fee
based on the Fund's average daily net assets as follows:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
-----------------------------------------------
First $1 billion 0.35%
Over $1 billion 0.30%
For the year ended March 31, 2005, the Fund's effective investment advisory fee
rate was 0.35%.
ADMINISTRATION FEE
Columbia provides administrative and other services to the Fund for a monthly
administration fee at the annual rate of 0.15% of the Fund's average daily net
assets.
26
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
collected to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000 paid monthly, and in any month that
the Fund's average daily net assets exceed $50 million, an additional monthly
fee. The additional fee rate is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. This rate is applied to
the average daily net assets of the Fund for that month. The Fund also pays
additional fees for pricing services based on the number of securities held by
the Fund.
For the year ended March 31, 2005, the effective pricing and bookkeeping fee
rate for the Fund, inclusive of out-of-pocket expenses, was 0.028%.
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.
For the year ended March 31, 2005, the Fund's effective transfer agent fee rate,
inclusive of out-of-pocket expenses, was 0.12%.
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 March 31, 2005, the
Distributor has retained net underwriting discounts of $38,847 on sales of the
Fund's Class A shares and net CDSC fees of $5,283, $362,338 and $10,713 on Class
A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a
monthly service fee to the Distributor at the annual rate of 0.25% of the
average daily net assets attributable to Class A, Class B and Class C shares of
the Fund. The Plan also requires the payment of a monthly distribution fee to
the Distributor at the annual rates of 0.10%, 0.75% and 0.75% of the average
daily net assets attributable to Class A, Class B and Class C shares,
respectively. The Distributor has voluntarily agreed to waive the Class A share
distribution fee. The Distributor has also voluntarily agreed to waive a portion
of the Class C share distribution fee so that it will not exceed 0.60% annually
of Class C average daily net assets.
The CDSC and the fees received from the Plan are used principally as repayment
to the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
CUSTODY CREDITS
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. 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 March 31, 2005, the Fund paid $2,602 to Columbia
for
27
such services. This amount is included in "Other expenses" on the Statement
of Operations.
NOTE 5. PORTFOLIO INFORMATION
For the year ended March 31, 2005, the cost of purchases and proceeds from sales
of securities, excluding short-term obligations, were $524,341,524 and
$422,745,986 respectively, of which $211,225,118 and $160,459,143, 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.
For the year ended March 31, 2005, the Fund did not borrow under this
arrangement.
NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES
HIGH-YIELD SECURITIES
Investing in high-yield securities may involve greater credit risk and
considerations not typically associated with investing in U.S. government bonds
and other higher quality fixed income securities. These securities are
non-investment grade securities, often referred to as "junk bonds." Economic
downturns may disrupt the high yield market and impair the ability of issuers to
repay principal and interest. Also, an increase in interest rates would likely
have an adverse impact on the value of such obligations. Moreover, high-yield
securities may be less liquid to the extent that 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
28
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.
On January 11, 2005, a putative class action lawsuit was filed in federal
district court in Massachusetts against, among others, the Trustees of the Fund
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 are expected to file a consolidated amended complaint in June 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.
In connection with events described in detail above, various parties have filed
suit against certain funds, their Boards, 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"). 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.
For the year ended March 31, 2005, Columbia has assumed $55,774 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
29
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
PERIOD PERIOD
YEAR ENDED ENDED ENDED
MARCH 31, MARCH 31, YEAR ENDED JUNE 30, JUNE 30,
CLASS A SHARES 2005 2004(a)(b) 2003(c) 2002(c) 2001(c)(d)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.27 $ 9.18 $ 8.73 $ 8.84 $ 8.46
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.39 0.30 0.45 0.53(f) 0.56
Net realized and unrealized gain (loss)
on investments and futures contracts (0.25) 0.11 0.48 (0.08)(f) 0.36
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.14 0.41 0.93 0.45 0.92
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.42) (0.32) (0.48) (0.56) (0.54)
From net realized gains (0.03) -- -- -- --
Return of capital -- -- -- --(g) --
----------- ----------- ----------- ----------- -----------
Total Distributions Declared
to Shareholders (0.45) (0.32) (0.48) (0.56) (0.54)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.96 $ 9.27 $ 9.18 $ 8.73 $ 8.84
Total return (h) 1.55%(i) 4.59%(i)(j) 11.03%(i) 5.10%(i) 11.19%(j)
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (k) 0.94% 0.99%(l) 1.05% 1.04% 0.96%(l)
Interest expense -- -- --%(m) -- --
Expenses (k) 0.94% 0.99%(l) 1.05% 1.04% 0.96%(l)
Net investment income (k) 4.31% 4.31%(l) 5.13% 5.94%(f) 6.90%(l)
Waiver/reimbursement 0.10% 0.10%(l) 0.10% 0.10% --
Portfolio turnover rate 40% 96%(j) 114% 179%(n) 254%(n)
Net assets, end of period (000's) $ 168,213 $ 146,709 $ 92,993 $ 32,493 $ 12,279
- -------------------------------------------------------------------------------------------------------------------------------
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(d) Class A shares were initially offered on July 31, 2000. Per share data and
total return reflect activity from that date.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.01, decrease net realized and
unrealized loss per share by $0.01 and decrease the ratio of net investment
income to average net assets from 6.10% to 5.94%. Per share data and ratios
for the period prior to June 30, 2002 have not been restated to reflect
this change in presentation.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(i) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(j) Not annualized.
(k) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l) Annualized.
(m) Rounds to less than 0.01%.
(n) Portfolio turnover disclosed is for the SR&F Intermediate Bond Portfolio.
30
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, JUNE 30, JUNE 30,
CLASS B SHARES 2005 2004(a)(b) 2003(c) 2002(c)(d)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.27 $ 9.18 $ 8.73 $ 8.89
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.32 0.25 0.39 0.18(f)
Net realized and unrealized gain (loss) on
investments and futures contracts (0.25) 0.11 0.47 (0.13)(f)
------------- ------------- ------------- -------------
Total from Investment Operations 0.07 0.36 0.86 0.05
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.35) (0.27) (0.41) (0.21)
From net realized gains (0.03) -- -- --
Return of capital -- -- -- --(g)
------------- ------------- ------------- -------------
Total Distributions Declared to Shareholders (0.38) (0.27) (0.41) (0.21)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.96 $ 9.27 $ 9.18 $ 8.73
Total return (h) 0.80% 4.00%(i) 10.21% 0.51%(i)
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (j) 1.69% 1.74%(k) 1.80% 1.83%(k)
Interest expense -- -- --%(l) --
Expenses (j) 1.69% 1.74%(k) 1.80% 1.83%(k)
Net investment income (j) 3.56% 3.58%(k) 4.38% 5.04%(f)(k)
Portfolio turnover rate 40% 96%(i) 114% 179%(m)
Net assets, end of period (000's) $ 89,564 $ 104,700 $ 103,880 $ 28,758
- ---------------------------------------------------------------------------------------------------------------------------
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(d) Class B shares were initially offered on February 1, 2002. Per share data
and total return reflect activity from that date.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.01, decrease net realized and
unrealized loss per share by $0.01 and decrease the ratio of net investment
income to average net assets from 5.19% to 5.04%.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(i) Not annualized.
(j) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(k) Annualized.
(l) Rounds to less than 0.01%.
(m) Portfolio turnover disclosed is for the SR&F Intermediate Bond Portfolio.
31
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, JUNE 30, JUNE 30,
CLASS C SHARES 2005 2004(a)(b) 2003(c) 2002(c)(d)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.27 $ 9.18 $ 8.73 $ 8.89
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.34 0.26 0.40 0.19(f)
Net realized and unrealized gain (loss) on
investments and futures contracts (0.26) 0.11 0.48 (0.14)(f)
------------- ------------- ------------- -------------
Total from Investment Operations 0.08 0.37 0.88 0.05
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.36) (0.28) (0.43) (0.21)
From net realized gains (0.03) -- -- --
Return of capital -- -- -- --(g)
------------- ------------- ------------- -------------
Total Distributions Declared to Shareholders (0.39) (0.28) (0.43) (0.21)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.96 $ 9.27 $ 9.18 $ 8.73
Total return (h)(i) 0.95% 4.12%(j) 10.37% 0.58%(j)
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (k) 1.54% 1.59%(l) 1.65% 1.68%(l)
Interest expense -- -- --%(m) --
Expenses (k) 1.54% 1.59%(l) 1.65% 1.68%(l)
Net investment income (k) 3.71% 3.72%(l) 4.50% 5.19%(f)(l)
Waiver/reimbursement 0.15% 0.15%(l) 0.15% 0.15%(l)
Portfolio turnover rate 40% 96%(j) 114% 179%(n)
Net assets, end of period (000's) $ 46,693 $ 59,009 $ 51,676 $ 11,651
- ---------------------------------------------------------------------------------------------------------------------------
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(d) Class C shares were initially offered on February 1, 2002. Per share data
and total return reflect activity from that date.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.01, decrease net realized and
unrealized loss per share by $0.01 and decrease the ratio of net investment
income to average net assets from 5.34% to 5.19%.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(i) Had the Distributor not reimbursed a portion of expenses, total return
would have been reduced.
(j) Not annualized.
(k) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(l) Annualized.
(m) Rounds to less than 0.01%.
(n) Portfolio turnover disclosed is for the SR&F Intermediate Bond Portfolio.
32
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD
ENDED ENDED
MARCH 31, MARCH 31, YEAR ENDED JUNE 30,
CLASS Z SHARES 2005 2004(a)(b) 2003(c)(d) 2002(d) 2001(d) 2000(d)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.27 $ 9.18 $ 8.73 $ 8.84 $ 8.41 $ 8.63
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (e) 0.41 0.31 0.49 0.55(f) 0.62 0.60
Net realized and unrealized gain
(loss) on investments and futures
contracts (0.25) 0.12 0.46 (0.08)(f) 0.43 (0.22)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations 0.16 0.43 0.95 0.47 1.05 0.38
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.44) (0.34) (0.50) (0.58) (0.62) (0.60)
From net realized gains (0.03) -- -- -- -- --
Return of capital -- -- -- --(g) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions Declared to
Shareholders (0.47) (0.34) (0.50) (0.58) (0.62) (0.60)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.96 $ 9.27 $ 9.18 $ 8.73 $ 8.84 $ 8.41
Total return (h) 1.80% 4.78%(i) 11.30% 5.36% 12.86% 4.62%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (j) 0.69% 0.74%(k) 0.80% 0.79% 0.72% 0.72%
Interest expense -- -- --%(l) -- -- --
Expenses (j) 0.69% 0.74%(k) 0.80% 0.79% 0.72% 0.72%
Net investment income (j) 4.56% 4.58%(k) 5.51% 6.22%(f) 7.14% 7.16%
Portfolio turnover rate 40% 96%(i) 114% 179%(m) 254%(m) 356%(m)
Net assets, end of period (000's) $ 877,193 $ 793,477 $ 717,923 $ 729,580 $ 514,068 $ 406,216
- ------------------------------------------------------------------------------------------------------------------------------
(a) On October 13, 2003, the Liberty Intermediate Bond Fund was renamed
Columbia Intermediate Bond Fund.
(b) The Fund changed its fiscal year end from June 30 to March 31, effective
March 31, 2004.
(c) Effective July 29, 2002, the Stein Roe Intermediate Bond Fund's Class S
shares were redesignated Liberty Intermediate Bond Fund Class Z shares.
(d) Per share data and ratios reflect income and expenses assuming inclusion of
the Fund's proportionate share of income and expenses of the SR&F
Intermediate Bond Portfolio, prior to the portfolio liquidation.
(e) Per share data was calculated using average shares outstanding during the
period.
(f) Effective July 1, 2001, the SR&F Intermediate Bond Portfolio adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium and accreting discount on all debt securities.
The effect of this change for the year ended June 30, 2002, was to decrease
net investment income per share by $0.02, decrease net realized and
unrealized loss per share by $0.02 and decrease the ratio of net investment
income to average net assets from 6.38% to 6.22%. Per share data and ratios
for periods prior to June 30, 2002 have not been restated to reflect this
change in presentation.
(g) Rounds to less than $0.01 per share.
(h) Total return at net asset value assuming all distributions reinvested.
(i) Not annualized.
(j) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(k) Annualized.
(l) Rounds to less than 0.01%.
(m) Portfolio turnover disclosed is for the SR&F Intermediate Bond Portfolio.
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
------------------------
COLUMBIA INTERMEDIATE BOND FUND
TO THE TRUSTEES OF COLUMBIA FUNDS TRUST VIII AND THE SHAREHOLDERS OF COLUMBIA
INTERMEDIATE BOND FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Columbia Intermediate Bond Fund
(the "Fund") (a series of Columbia Funds Trust VIII) at March 31, 2005, and the
results of its operations, the changes in its net assets and the 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 audit.We conducted our audit
of these financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States), which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.We believe that our audit, which included confirmation of
securities at March 31, 2005 by correspondence with the custodian and brokers,
provides a reasonable basis for our opinion. The financial statements and
financial highlights of the Fund for the periods prior to July 1, 2003 were
audited by another independent registered public accounting firm whose report
dated August 19, 2003 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston,Massachusetts
May 20, 2005
34
TRUSTEES
-----------------------------------------------------------------------
COLUMBIA INTERMEDIATE BOND 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.
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,
P.O. Box 66100 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001
Chicago, IL 60666 to December, 2002; Executive Vice President and Chief Financial Officer of
Trustee (since 1996) United Airlines from July, 1999 to September, 2001; Senior Vice
President-Finance from March, 1993 to July, 1999). Oversees 104, None
---------------------------------------------------------------------------------
JANET LANGFORD KELLY (age 47) Partner, Zelle, Hofmann,Voelbel,Mason & Gette LLP (law firm); Adjunct Professor
9534 W. Gull Lake Drive of Law, Northwestern University, since September, 2004 (formerly Chief
Richland, MI 49083-8530 Administrative Officer and Senior Vice President, Kmart Holding Corporation
Trustee (since 1996) (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 and
Department of Economics Louisa Van Voorhis Professor of Political Economy, University of Washington,
University of Washington since September, 1993 (formerly Director, Institute for Economic Research,
Seattle,WA 98195 University of Washington from September, 2001 to June, 2003) Adjunct Professor
Trustee (since 1981) 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 College
84 College Road (formerly Dean, Boston College School of Management from September, 1977 to
Chestnut Hill, MA 02467-3838 August, 1999). Oversees 1063, 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)
35
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.
Boise, ID 83706 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 Partners
Suite 285 (private equity investing) from September, 1994 to September, 2004). Oversees
Greenwich, CT 06830 104, Anixter International (network support equipment distributor); Ventas, Inc.
Trustee and Chairman of the Board4 (since 1996) (real estate investment trust); Jones Lang LaSalle (real estate 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, Chairman
Hopkinton, NH 03229 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, 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 &
Portland, OR 97207 Company). 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
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 Solutions
Trustee (since 1994) (retail industry technology provider)
---------------------------------------------------------------------------------
(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.
36
OFFICERS
-----------------------------------------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
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 Advisor
One Financial Center since January, 2005; President of the Columbia Funds, Liberty Funds and Stein
Boston, MA 02111 Roe Funds since October, 2004; President and Chief Executive Officer of the
President (since 2004) 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 Management
Boston, MA 02111 Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles
Controller (since 2004) 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).
---------------------------------------------------------------------------------
37
BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT
--------------
COLUMBIA INTERMEDIATE BOND 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. During the most recent six months
covered by this report, the Board reviewed and approved the management contracts
("Advisory Agreements") 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.
38
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 Boards also considered information is the Lipper report that ranked each
Fund based on (i) each Fund's one-year performance and actual advisory 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.
39
ECONOMIES OF SCALE
In evaluating potential economies of scale, the Board considered CMA's proposal
to implement a standardized breakpoint schedule for combined 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.
40
IMPORTANT INFORMATION ABOUT THIS REPORT
----------------------------------------
COLUMBIA INTERMEDIATE BOND FUND
TRANSFER AGENT 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
Columbia Funds Services, Inc. additional reports will be sent to you.
P.O. Box 8081
Boston MA 02266-8081 This report has been prepared for shareholders of Columbia Intermediate Bond
800-345-6611 Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
DISTRIBUTOR investment objectives and operating policies of the fund and with the most
recent copy of the Columbia Funds Performance Update.
Columbia Funds Distributor, Inc.
One Financial Center A description of the policies and procedures that the fund uses to determine how
Boston MA 02111 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
INVESTMENT ADVISOR 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
Columbia Management Advisors, Inc. portfolio securities during the 12-month period ended June 30, 2004 is available
100 Federal Street from the SEC's website. Information regarding how the fund voted proxies
Boston MA 02110 relating to portfolio securities is also available from the fund's website.
INDEPENDENT REGISTERED PUBLIC The fund files a complete schedule of portfolio holdings with the SEC for the
ACCOUNTING FIRM 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
PricewaterhouseCoopers LLP the SEC's Public Reference Room in Washington, DC. Information on the operation
125 High Street of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Boston, MA 02110
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.
41
[GRAPHIC APPEARS HERE]
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 INTERMEDIATE BOND FUND ANNUAL REPORT, MARCH 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
713-02/039V-0405 (05/05) 05/5541
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 March 31, 2005 and March 31,
2004 are approximately as follows:
2005 2004
- ------- -------
$54,300 $51,700
Audit Fees include amounts related to the audit of the registrant's annual
financial statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years ended March 31, 2005 and
March 31, 2004 are approximately as follows:
2005 2004
- ------ ------
$7,400 $8,000
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 March 31, 2005 and March 31,
2004 are approximately as follows:
2005 2004
- ------ ------
$7,100 $5,000
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 March 31, 2005 and March 31,
2004 are approximately as follows:
2005 2004
- ---- ----
$0 $0
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 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;
. 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
. 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 March
31, 2005 and March 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 March 31, 2005 and March
31, 2004 are disclosed in (b) through (d) of this Item.
During the fiscal years ended March 31, 2005 and March 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 March
31, 2005 and March 31, 2004, All Other Fees that were approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $93,500
and $95,000, respectively. For both fiscal years, All Other Fees relate to
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 March
31, 2005 and March 31, 2004 was zero.
(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 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Columbia Funds Trust VIII
By (Signature and Title) /S/ Christopher L. Wilson
---------------------------------------
Christopher L. Wilson, President
Date May 27, 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 May 27, 2005
By (Signature and Title) /S/ J. Kevin Connaughton
---------------------------------------
J. Kevin Connaughton, Treasurer
Date May 27, 2005