-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UWUvoVq8g+qLUZaXZmpGktOagetxFYRWBQsIZTg4oEBjiEI5jVlpq7eVJUKag9Qw 2Qycka+MtYjB6qa9F+HPpg== 0001047469-05-002473.txt : 20050204 0001047469-05-002473.hdr.sgml : 20050204 20050204161915 ACCESSION NUMBER: 0001047469-05-002473 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041130 FILED AS OF DATE: 20050204 DATE AS OF CHANGE: 20050204 EFFECTIVENESS DATE: 20050204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA FUNDS TRUST I CENTRAL INDEX KEY: 0000021832 IRS NUMBER: 046143403 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02214 FILM NUMBER: 05577430 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY FUNDS TRUST I DATE OF NAME CHANGE: 19990430 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL TRUST I DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL HIGH YIELD SECURITIES TRUST DATE OF NAME CHANGE: 19910917 N-CSRS 1 a2149608zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-2214 ---------------- Columbia Funds Trust I --------------------------------------------------- (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: 05/31/2005 ------------------ Date of reporting period: 11/30/2004 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [GRAPHIC] COLUMBIA HIGH YIELD OPPORTUNITY FUND SEMIANNUAL REPORT NOVEMBER 30, 2004 [COLUMBIAFUNDS(R) LOGO] A MEMBER OF COLUMBIA MANAGEMENT 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 34 Statement of Operations 35 Statement of Changes in Net Assets 36 Notes to Financial Statements 37 Financial Highlights 43 Columbia Funds 47 Important Information About This Report 49
Economic and market conditions change frequently. There is no assurance that trends described in this report will continue or commence. NOT FDIC MAY LOSE VALUE INSURED ------------------- NO BANK GUARANTEE PRESIDENT'S MESSAGE COLUMBIA HIGH YIELD OPPORTUNITY FUND DEAR SHAREHOLDER: In 2004, Columbia Funds became part of the Bank of America family, one of the largest, most respected financial institutions in the United States. As a direct result of this merger, a number of changes are in the works that we believe offer significant potential benefits for our shareholders. Plans are underway to bring Nations Funds and Columbia Funds together in a single fund family that covers a wide range of markets, sectors, and asset classes under the management of talented, seasoned investment professionals. As a result, some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that affect you and your account. In this matter, your timely response will enable us to implement the changes in 2005. The increased efficiencies we expect from a more stream-lined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, negotiations are currently underway to consolidate the transfer agency of all of our funds and to consolidate custodial services, each under a single vendor. We will also be reducing management fees for many funds as part of our agreement in principle with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Columbia Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ Christopher L. Wilson Christopher L. Wilson HEAD OF MUTUAL FUNDS, COLUMBIA MANAGEMENT Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. FUND PROFILE COLUMBIA HIGH YIELD OPPORTUNITY FUND The information below gives you a snapshot of your fund at the end of the reporting period. Your fund is actively managed and the composition of its portfolio will change over time. TOP 10 ISSUERS AS OF 11/30/04 (%) El Paso Corp. 2.2 Charter Communications Holdings LLC 1.6 Qwest Capital Funding, Inc. 1.4 Qwest Services Corp. 1.3 Calpine 1.2 Spanish Broadcasting System, Inc. 1.1 Tenet Healthcare Corp. 1.0 Hollywood Casino Shreveport 1.0 Dex Media 1.0 Pinnacle Entertainment 0.9
MATURITY BREAKDOWN AS OF 11/30/04 (%) 0 - 3 years 4.7 3 - 5 years 12.8 5 - 7 years 30.0 7 - 10 years 44.2 10 - 15 years 1.4 15 - 20 years 0.4 20 - 30 years 0.6 Common and preferred stock 5.1 Cash equivalents 0.8
QUALITY BREAKDOWN AS OF 11/30/04 (%) AAA 0.1 BB 11.1 B 48.9 CCC 30.4 CC 5.0 D 0.8 Non-rated 3.7
PORTFOLIO STRUCTURE AS OF 11/30/04 (%) Corporate fixed-income bonds & notes 91.9 Preferred stocks 3.1 Common stocks 2.6 Convertible bonds 0.7 Municipal bond (taxable) 0.5 Cash equivalents, net other assets & liabilities 1.2
Maturity and quality breakdowns are calculated as a percentage of investments. Ratings shown in the quality breakdown represent the highest rating assigned to a particular bond by one of the following nationally-recognized rating agencies: Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. or Fitch Ratings Ltd. Portfolio structure and top 10 issuers are calculated as a percentage of net assets. Management Style is determined by Columbia Management and is based on the investment strategy and process as outlined in the fund's prospectus. [SIDENOTE] SUMMARY - - FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004, THE FUND'S CLASS A SHARES RETURNED 10.25% WITHOUT SALES CHARGE. - - SOLID ECONOMIC GROWTH HELPED THE FUND, ITS BENCHMARKS AND PEER GROUP TO STRONG RETURNS FOR THE PERIOD. THE FUND OUTPERFORMED ITS BENCHMARKS, THE CSFB HIGH YIELD INDEX AND THE JP MORGAN GLOBAL HIGH YIELD INDEX, AS WELL AS ITS PEER GROUP, THE LIPPER HIGH CURRENT YIELD FUNDS CATEGORY. - - THE FUND BENEFITED FROM ITS EMPHASIS ON ISSUES IN THE SINGLE B AND CCC RATINGS CATEGORIES AT A TIME WHEN INVESTORS FAVORED LOWER QUALITY, HIGHER YIELDING BONDS. [CHART] CLASS A SHARES 10.25% CSFB HIGH YIELD INDEX 9.31%
OBJECTIVE Seeks high current income and total return TOTAL NET ASSETS $619.4 million MANAGEMENT STYLE [GRAPHIC] 1 PERFORMANCE INFORMATION COLUMBIA HIGH YIELD OPPORTUNITY FUND [CHART] VALUE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04
CLASS A SHARES WITHOUT CLASS A SHARES WITH CSFB JP MORGAN GLOBAL SALES CHARGE SALES CHARGE HIGH YIELD INDEX HIGH YIELD INDEX 12/1/94 $ 10,000 $ 9,525 $ 10,000 $ 10,000 12/31/94 $ 10,083 $ 9,604 $ 10,106 $ 10,300 1/31/95 $ 10,182 $ 9,698 $ 10,212 $ 10,432 2/28/95 $ 10,443 $ 9,947 $ 10,463 $ 10,803 3/31/95 $ 10,511 $ 10,012 $ 10,582 $ 10,912 4/30/95 $ 10,760 $ 10,249 $ 10,816 $ 11,194 5/31/95 $ 10,995 $ 10,473 $ 11,122 $ 11,513 6/30/95 $ 11,048 $ 10,523 $ 11,195 $ 11,559 7/31/95 $ 11,235 $ 10,701 $ 11,368 $ 11,739 8/31/95 $ 11,254 $ 10,719 $ 11,400 $ 11,785 9/30/95 $ 11,426 $ 10,883 $ 11,531 $ 11,925 10/31/95 $ 11,565 $ 11,016 $ 11,659 $ 12,036 11/30/95 $ 11,636 $ 11,083 $ 11,714 $ 12,114 12/31/95 $ 11,863 $ 11,299 $ 11,863 $ 12,311 1/31/96 $ 12,074 $ 11,500 $ 12,088 $ 12,545 2/29/96 $ 12,180 $ 11,602 $ 12,152 $ 12,620 3/31/96 $ 12,073 $ 11,499 $ 12,120 $ 12,578 4/30/96 $ 12,145 $ 11,568 $ 12,185 $ 12,656 5/31/96 $ 12,236 $ 11,655 $ 12,284 $ 12,752 6/30/96 $ 12,236 $ 11,655 $ 12,311 $ 12,807 7/31/96 $ 12,310 $ 11,725 $ 12,422 $ 12,893 8/31/96 $ 12,531 $ 11,936 $ 12,557 $ 13,084 9/30/96 $ 12,867 $ 12,256 $ 12,773 $ 13,394 10/31/96 $ 12,867 $ 12,256 $ 12,880 $ 13,517 11/30/96 $ 13,113 $ 12,490 $ 13,081 $ 13,766 12/31/96 $ 13,314 $ 12,681 $ 13,336 $ 13,913 1/31/97 $ 13,429 $ 12,792 $ 13,434 $ 14,023 2/28/97 $ 13,720 $ 13,068 $ 13,686 $ 14,264 3/31/97 $ 13,447 $ 12,808 $ 13,533 $ 14,032 4/30/97 $ 13,584 $ 12,938 $ 13,653 $ 14,164 5/31/97 $ 13,921 $ 13,259 $ 13,928 $ 14,491 6/30/97 $ 14,141 $ 13,469 $ 14,117 $ 14,682 7/31/97 $ 14,481 $ 13,793 $ 14,416 $ 15,073 8/31/97 $ 14,522 $ 13,832 $ 14,494 $ 15,082 9/30/97 $ 14,867 $ 14,161 $ 14,781 $ 15,382 10/31/97 $ 14,867 $ 14,161 $ 14,780 $ 15,360 11/30/97 $ 14,991 $ 14,279 $ 14,885 $ 15,499 12/31/97 $ 15,160 $ 14,440 $ 15,020 $ 15,638 1/31/98 $ 15,474 $ 14,739 $ 15,276 $ 15,880 2/28/98 $ 15,559 $ 14,820 $ 15,395 $ 16,003 3/31/98 $ 15,751 $ 15,002 $ 15,472 $ 16,164 4/30/98 $ 15,793 $ 15,043 $ 15,588 $ 16,245 5/31/98 $ 15,815 $ 15,064 $ 15,634 $ 16,268 6/30/98 $ 15,880 $ 15,126 $ 15,667 $ 16,302 7/31/98 $ 16,072 $ 15,309 $ 15,777 $ 16,439 8/31/98 $ 15,013 $ 14,300 $ 14,706 $ 15,374 9/30/98 $ 14,884 $ 14,177 $ 14,704 $ 15,358 10/31/98 $ 14,625 $ 13,930 $ 14,412 $ 15,028 11/30/98 $ 15,586 $ 14,845 $ 15,142 $ 15,856 12/31/98 $ 15,488 $ 14,752 $ 15,107 $ 15,791 1/31/99 $ 15,745 $ 14,997 $ 15,249 $ 15,981 2/28/99 $ 15,764 $ 15,015 $ 15,217 $ 15,899 3/31/99 $ 16,076 $ 15,312 $ 15,356 $ 16,095 4/30/99 $ 16,355 $ 15,579 $ 15,695 $ 16,504 5/31/99 $ 16,050 $ 15,287 $ 15,526 $ 13,599 6/30/99 $ 16,143 $ 15,376 $ 15,534 $ 16,268 7/31/99 $ 16,193 $ 15,424 $ 15,541 $ 16,273 8/31/99 $ 16,120 $ 15,354 $ 15,403 $ 16,111 9/30/99 $ 16,044 $ 15,282 $ 15,284 $ 15,995 10/31/99 $ 16,071 $ 15,308 $ 15,209 $ 15,907 11/30/99 $ 16,341 $ 15,565 $ 15,416 $ 16,166 12/31/99 $ 16,444 $ 15,663 $ 15,603 $ 16,324 1/31/2000 $ 16,262 $ 15,489 $ 15,540 $ 16,262 2/29/2000 $ 16,509 $ 15,725 $ 15,637 $ 16,327 3/31/2000 $ 16,258 $ 15,486 $ 15,402 $ 16,050 4/30/2000 $ 16,152 $ 15,385 $ 15,379 $ 16,047 5/31/2000 $ 15,844 $ 15,091 $ 15,133 $ 15,819 6/30/2000 $ 15,972 $ 15,213 $ 15,472 $ 16,130 7/31/2000 $ 16,133 $ 15,367 $ 15,617 $ 16,272 8/31/2000 $ 16,293 $ 15,519 $ 15,722 $ 16,398 9/30/2000 $ 16,021 $ 15,260 $ 15,577 $ 16,183 10/31/2000 $ 15,321 $ 14,593 $ 15,093 $ 15,709 11/30/2000 $ 14,442 $ 13,756 $ 14,498 $ 15,109 12/31/2000 $ 14,749 $ 14,049 $ 14,790 $ 15,374 1/31/2001 $ 15,913 $ 15,157 $ 15,677 $ 16,306 2/28/2001 $ 15,959 $ 15,201 $ 15,836 $ 16,495 3/31/2001 $ 15,345 $ 14,616 $ 15,520 $ 16,172 4/30/2001 $ 14,986 $ 14,274 $ 15,359 $ 16,002 5/31/2001 $ 15,123 $ 14,405 $ 15,666 $ 16,316 6/30/2001 $ 14,470 $ 13,783 $ 15,423 $ 16,034 7/31/2001 $ 14,459 $ 13,772 $ 15,588 $ 16,195 8/31/2001 $ 14,565 $ 13,874 $ 15,807 $ 16,406 9/30/2001 $ 13,397 $ 12,761 $ 14,811 $ 15,323 10/31/2001 $ 13,881 $ 13,222 $ 15,148 $ 15,705 11/30/2001 $ 14,370 $ 13,687 $ 15,638 $ 16,239 12/31/2001 $ 14,339 $ 13,658 $ 15,647 $ 16,218 1/31/2002 $ 14,489 $ 13,800 $ 15,793 $ 16,336 2/28/2002 $ 14,232 $ 13,556 $ 15,681 $ 16,213 3/31/2002 $ 14,478 $ 13,791 $ 16,040 $ 16,580 4/30/2002 $ 14,600 $ 13,906 $ 16,295 $ 16,832 5/31/2002 $ 14,401 $ 13,717 $ 16,238 $ 16,775 6/30/2002 $ 13,683 $ 13,033 $ 15,673 $ 16,171 7/31/2002 $ 13,304 $ 12,672 $ 15,224 $ 15,721 8/31/2002 $ 13,350 $ 12,716 $ 15,422 $ 15,866 9/30/2002 $ 13,230 $ 12,602 $ 15,233 $ 15,680 10/31/2002 $ 13,093 $ 12,471 $ 15,140 $ 15,567 11/30/2002 $ 13,629 $ 12,982 $ 15,940 $ 16,374 12/31/2002 $ 13,727 $ 13,075 $ 16,135 $ 16,564 1/31/2003 $ 13,998 $ 13,333 $ 16,574 $ 16,994 2/28/2003 $ 14,167 $ 13,494 $ 16,819 $ 17,242 3/31/2003 $ 14,442 $ 13,756 $ 17,250 $ 17,658 4/30/2003 $ 15,173 $ 14,452 $ 18,131 $ 18,534 5/31/2003 $ 15,240 $ 14,516 $ 18,394 $ 18,791 6/30/2003 $ 15,662 $ 14,918 $ 18,931 $ 19,340 7/31/2003 $ 15,551 $ 14,812 $ 18,778 $ 19,218 8/31/2003 $ 15,691 $ 14,945 $ 18,988 $ 19,409 9/30/2003 $ 16,157 $ 15,389 $ 19,507 $ 19,946 10/31/2003 $ 16,480 $ 15,697 $ 19,904 $ 20,317 11/30/2003 $ 16,827 $ 16,028 $ 20,177 $ 20,602 12/31/2003 $ 17,251 $ 16,432 $ 20,643 $ 21,123 1/31/2004 $ 17,565 $ 16,731 $ 21,044 $ 21,509 2/29/2004 $ 17,472 $ 16,642 $ 21,054 $ 21,527 3/31/2004 $ 17,492 $ 16,661 $ 21,195 $ 21,695 4/30/2004 $ 17,511 $ 16,679 $ 21,166 $ 21,614 5/31/2004 $ 17,266 $ 16,446 $ 20,831 $ 21,279 6/30/2004 $ 17,528 $ 16,696 $ 21,154 $ 21,603 7/31/2004 $ 17,716 $ 16,874 $ 21,425 $ 21,875 8/31/2004 $ 17,990 $ 17,136 $ 21,774 $ 22,242 9/30/2004 $ 18,345 $ 17,473 $ 22,105 $ 22,563 10/31/2004 $ 18,666 $ 17,779 $ 22,485 $ 22,942 11/30/2004 $ 19,026 $ 18,122 $ 22,768 $ 23,188
The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Credit Suisse First Boston (CSFB) High Yield Index is a broad-based, unmanaged index that tracks the performance of high-yield bonds. The JP Morgan Global High Yield Index is designed to mirror the investable universe of the US dollar global high-yield corporate debt market, including domestic and international issues. Unlike the fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/04 (%)
SHARE CLASS A B C Z - ------------------------------------------------------------------------------------------- INCEPTION 10/21/71 06/08/92 01/15/96 01/08/99 - ------------------------------------------------------------------------------------------- SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT 6-MONTH (CUMULATIVE) 10.25 5.01 9.84 4.84 9.92 8.92 10.39 1-YEAR 13.11 7.74 12.27 7.27 12.44 11.44 13.40 5-YEAR 3.10 2.10 2.34 2.07 2.49 2.49 3.36 10-YEAR 6.64 6.13 5.85 5.85 5.97 5.97 6.80
AVERAGE ANNUAL TOTAL RETURN AS OF 09/30/04 (%)
SHARE CLASS A B C Z - ------------------------------------------------------------------------------------------- SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT 6-MONTH (CUMULATIVE) 4.88 -0.11 4.49 -0.51 4.57 3.57 5.01 1-YEAR 13.55 8.15 12.71 7.71 12.88 11.88 13.83 5-YEAR 2.72 1.72 1.96 1.69 2.11 2.11 2.97 10-YEAR 6.14 5.63 5.35 5.35 5.46 5.46 6.29
THE "WITH SALES CHARGE" RETURNS INCLUDE THE MAXIMUM INITIAL SALES CHARGE OF 4.75% FOR CLASS A SHARES, MAXIMUM CONTINGENT DEFERRED SALES CHARGE OF 5.00% FOR CLASS B SHARES AND 1.00% FOR CLASS C SHARES FOR THE FIRST YEAR ONLY. THE "WITHOUT SALES CHARGE" RETURNS DO NOT INCLUDE THE EFFECT OF SALES CHARGES. IF THEY HAD, RETURNS WOULD BE LOWER. ALL RESULTS SHOWN ASSUME REINVESTMENT OF DISTRIBUTIONS. CLASS Z SHARES ARE SOLD AT NET ASSET VALUE WITH NO RULE 12b-1 FEES. PERFORMANCE FOR DIFFERENT SHARE CLASSES WILL VARY BASED ON DIFFERENCES IN SALES CHARGES AND FEES ASSOCIATED WITH EACH CLASS. PERFORMANCE RESULTS REFLECT ANY VOLUNTARY WAIVERS OR REIMBURSEMENT OF FUND EXPENSES BY THE ADVISOR OR ITS AFFILIATES. ABSENT THESE WAIVERS OR REIMBURSEMENT ARRANGEMENTS, PERFORMANCE RESULTS WOULD HAVE BEEN LOWER. Class C is a newer class of shares. Its performance information includes returns of the fund's class B shares for periods prior to the inception of class C shares. Class B shares would have substantially similar annual returns because class B and class C shares generally have similar expense structures. Class A shares were initially offered on October 21, 1971, class B shares were initially offered on June 8, 1992, and class C shares were initially offered on January 15, 1996. Class Z is a newer class of shares. Its performance information includes returns of the fund's class A shares (the oldest existing fund class) for periods prior to its inception. The returns have not been restated to reflect any differences in expenses (such as Rule 12b-1 fees) between class A shares and the newer class of shares. If differences in expenses had been reflected, the returns shown for periods prior to the inception of the newer class of shares would have been higher. Class Z shares were initially offered on January 8, 1999. [SIDENOTE] PERFORMANCE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04 ($)
SALES CHARGE: WITHOUT WITH - --------------------------------------------------- Class A 19,026 18,122 Class B 17,651 17,651 Class C 17,852 17,852 Class Z 19,308 n/a
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 HIGH YIELD OPPORTUNITY FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory and/or Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. 06/01/04 - 11/30/04
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL Class A 1,000.00 1,000.00 1,107.74 1,019.25 6.13 5.87 1.16 Class B 1,000.00 1,000.00 1,103.23 1,015.49 10.07 9.65 1.91 Class C 1,000.00 1,000.00 1,104.13 1,016.24 9.28 8.90 1.76 Class Z 1,000.00 1,000.00 1,109.25 1,020.51 4.81 4.61 0.91
Expenses paid during the period are equal to the fund's respective class annualized expense ratio, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the distributor not waived or reimbursed a portion of Class C expenses, Class C total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only continuing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other fund companies, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. [SIDENOTE] ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM COLUMBIA FUNDS SERVICES, INC., YOUR ACCOUNT BALANCE IS AVAILABLE ONLINE AT www.columbiafunds.com OR BY CALLING SHAREHOLDER SERVICES AT 800.345.6611 - - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE 1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6 2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD," LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1. YOUR ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING THE PERIOD 3 ECONOMIC UPDATE COLUMBIA HIGH YIELD OPPORTUNITY FUND During the six-month period that began June 1, 2004, and ended November 30, 2004, the US economy grew at a healthy pace, despite uncertainty about new job growth and rising energy prices. The economy encountered a soft patch in the spring, as the rate of growth slowed from 4.5% to 3.3%. However, the pace picked up again heading into the final month of the year. For the third quarter, gross domestic product (GDP) increased by 4.0%. Job growth dominated the economic news. More than one million jobs were created in the spring of 2004, and consumer confidence soared to its highest level in two years. However, job growth fell below expectations in July and August. Consumer confidence fell--and continued to fall as consumers grew increasingly cautious about employment prospects. Consumer spending held up during the period, despite a slowdown in growth during the summer. Within the business sector, industrial production rose; factories utilized more of their capacity; and spending on technology, capital equipment and construction picked up. However, business spending fell short of forecasts given the level of profit growth and the maturity of the economic cycle. BONDS DELIVER SOLID RETURNS Despite a weak start--and a weak finish--all sectors of the US bond market delivered solid returns for the six-month period. Yields rose and bond prices fell when job growth picked up in the spring and investors began to anticipate higher short-term interest rates. However, a shaky stock market, higher energy prices and some mixed economic data gave the bond market a significant boost during the summer and into the fall. In November, the 10-year Treasury yield rose sharply, and bonds gave back some of their earlier gains. In this environment, the Lehman Brothers Aggregate Bond Index returned 3.82%. High-yield bonds, which can be less sensitive to changing interest rates, gained 9.31%, as measured by the CSFB High Yield Index. A relatively strong economy improved credit quality and the sector's high yields attracted investors seeking income. Municipal and mortgage bonds outperformed Treasury bonds. STOCKS PICK UP MOMENTUM Although stock market performance was lackluster, it picked up as economic news improved and uncertainty surrounding the presidential election was resolved. The S&P 500 Index returned 5.68% for the six-month period. More than half of that return was generated in November. Small-and mid-cap stocks led the market and value stocks outperformed growth stocks. Energy and utilities stocks were the best-performing sectors for the six-month period. Information technology rebounded strongly in the second half. HIGHER SHORT-TERM INTEREST RATES After a year of the lowest short-term interest rates in recent history, the Federal Reserve Board (the Fed) raised the federal funds rate, a key short-term rate, from 1.0% to 2.0% in four equal steps during the period.(1) The Fed indicated that it would continue to raise short-term interest rates at a "measured pace," in an attempt to balance economic growth against inflationary pressures. Because the Fed's moves were widely anticipated, these rate increases have had little impact on the financial markets since they commenced. (1) The federal funds rate was raised to 2.25% on December 14, 2004. [SIDENOTE] SUMMARY FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004 - - INVESTMENT-GRADE BONDS DELIVERED SOLID GAINS. THE LEHMAN BROTHERS AGGREGATE BOND INDEX RETURNED 3.82%. HIGH-YIELD BONDS, WHICH CAN BE LESS SENSITIVE TO CHANGING INTEREST RATES, LED THE FIXED INCOME MARKETS. THE CSFB HIGH YIELD INDEX RETURNED 9.31% [CHART] LEHMAN INDEX 3.82% CSFB HIGH YIELD INDEX 9.31%
- - AFTER A WEAK START, STOCK PRICES BOUNCED BACK IN NOVEMBER, HELPING THE S&P 500 INDEX TO A 5.68% GAIN FOR THE SIX MONTH PERIOD. VALUE STOCKS OUTPERFORMED GROWTH STOCKS, AS MEASURED BY THE RUSSELL 1000 GROWTH AND VALUE INDICES. [CHART] S&P 500 INDEX 5.68% RUSSELL 1000 VALUE INDEX 11.01%
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that tracks the performance of fixed-rate, publicly placed, dollar-denominated non-convertible investment-grade debt issues. The CSFB High Yield Index is a broad-based, unmanaged index that tracks the performance of high-yield bonds. The S&P 500 Index is an unmanaged index that tracks the performance of 500 widely held, large capitalization US stocks. The Russell 1000 Value Index is an unmanaged index that tracks the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. 4 PORTFOLIO MANAGERS' REPORT COLUMBIA HIGH YIELD OPPORTUNITY FUND For the six-month period ended November 30, 2004, class A shares of Columbia High Yield Opportunity Fund returned 10.25% without sales charge. It outperformed its benchmarks, the CSFB High Yield Index and the JP Morgan Global High Yield Index, which returned 9.31% and 9.02%, respectively. The fund also performed better than the Lipper High Current Yield Funds Category, which averaged a return of 8.56% for the same period.(1) ECONOMIC EXPANSION LED TO FURTHER GAINS High-yield issues continued to deliver strong performance as the US and global economies expanded and interest rates remained relatively low. Bank lenders proved accommodating in extending credit. Both equity and bond investors continued to exhibit a healthy appetite for risk. These factors helped provide ample liquidity for most high-yield issuers, which was reflected in declining default rates. Defaults hovered around 2.4% at the end of the period, compared to a historical average of more than twice that amount. INVESTORS WERE COMFORTABLE WITH RISK Just as in the equity markets, where investors bid up returns on riskier, small-cap stocks, bond investors took on greater risk in pursuit of higher yields. Lower quality single-B and CCC-rated bonds, which are more leveraged to economic growth, were stronger performers than BB and higher-rated issues, which are more sensitive to rising interest rates. UTILITIES, CHEMICAL AND CONSUMER ISSUES STOOD OUT Investments in utilities, chemical and consumer sectors bolstered the fund's return. Bonds of Coastal Corp., Sonat, Inc. and Southern Natural Gas Co., all subsidiaries of El Paso Corporation, moved higher as El Paso stabilized its operations. El Paso also allayed earlier concerns about the size of its oil and gas reserves. A refinancing program at US Unwired, Inc. aided results when our holdings were called away at favorable prices. New US Unwired bonds, purchased as part of the refinancing, also rose. Within the generally strong wireless sector, Dobson Communications Corp. was an exception as revenues for "roaming" calls shrank and Dobson's bonds declined. In chemicals, Huntsman ICI Holdings LLC rose on improved earning and on news that they will be called away at premium prices with proceeds from an equity initial public offering. Lyondell Chemical Co. and its subsidiary Equistar Chemicals LP, which manufacture commodity chemicals, both benefited from strong business conditions within the industry. CONSUMER, HEALTHCARE ISSUES AND STOCKS CONTRIBUTED Within the consumer sector, jeans and apparel maker Levi Strauss & Co. continued its turnaround. Its fundamental operations improved so much that the company abandoned plans to sell its Dockers line to raise cash. Bonds of Tenet Healthcare Corp., which we had purchased at attractive valuations, moved higher as investors shrugged off negative headlines and focused on underlying asset value and liquidity. The fund's modest commitment to common stocks also contributed to its return. (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. [SIDENOTE] NET ASSET VALUE PER SHARE AS OF 11/30/04 ($) Class A 4.81 Class B 4.81 Class C 4.81 Class Z 4.81
DISTRIBUTIONS DECLARED PER SHARE 06/01/04 - 11/30/04 ($) Class A 0.19 Class B 0.17 Class C 0.17 Class Z 0.19
SEC YIELDS AS OF 11/30/04 (%) Class A 6.68 Class B 6.26 Class C 6.41 Class Z 7.28
The 30-day SEC yields reflect the portfolio's earning power net of expenses, expressed as an annualized percentage of the public offering price per share at the end of the period. HOLDINGS DISCUSSED IN THIS REPORT AS OF 11/30/04 (%) Coastal Corp. 0.8 Sonat, Inc. 1.1 Southern Natural Gas Co. 0.3 US Unwired, Inc. 0.5 Dobson Communications Corp. 0.4 Huntsman ICI Holdings LLC 0.9 Lyondell Chemical Co. 0.7 Equistar Chemicals LP 0.6 Levi Strauss & Co. 0.5 Tenet Healthcare Corp. 1.0 Delta Air Lines, Inc. 0.1 Northwest Airlines, Inc. 0.5 Continental Airlines, Inc. 0.4 Merisant Co. 0.3
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 LIGHT ENERGY EXPOSURE, AIRLINE WOES AND COMPANY-SPECIFIC PROBLEMS LIMITED RETURN Because we expected oil and gas prices to decline sooner than they did, we maintained an underweight position in energy, a decision that held back returns for most of the period. Skyrocketing fuel outlays, along with high labor costs, were problems for Delta and other airlines; we reduced our exposure to Delta Air Lines, Inc. when prices recovered modestly in November but continued to hold Northwest Airlines, Inc. and Continental Airlines, Inc. bonds. Company-specific problems hurt Merisant Co., the maker of Equal sugar substitute, as it lost market share to Johnson and Johnson's Splenda. Because we believe that Merisant has the potential to stabilize its operation and regain market share, we continue to hold its bonds. DESPITE SOME CAUTION, A GENERALLY FAVORABLE ENVIRONMENT FOR HIGH-YIELD If the US economy continues to expand and short-term interest rates rise gradually, we believe that lower-quality issues have the potential to continue to deliver strong performance. Historically they have been helped by just such economic conditions. As a result, we have maintained the fund's exposure to lower-rated issues, emphasizing companies where our rigorous credit analysis shows the likelihood of improved credit, earnings and cash flows. However, our enthusiasm for the sector is balanced by an element of caution: High-yield spreads, a measure of the yield difference between high-yield bonds and US Treasury bonds, are below historical averages, limiting future return potential. In addition, the high-yield market has absorbed a record volume of new issues in 2004. Continued heavy issuance of new bonds could eventually put pressure on prices. [PHOTO OF THOMAS A. LaPOINTE] Thomas A. LaPointe, CFA, has co-managed Columbia High Yield Opportunity Fund since February 2003 and has been with the advisor or its predecessors or affiliate organizations since February 1999. /s/ Thomas A. LaPointe [PHOTO OF KEVIN L. CRONK] Kevin L. Cronk, CFA has co-managed the fund since February 2003 and has been with the advisor or its predecessors or affiliate organizations since August 1999. /s/ Kevin L. Cronk The values of fixed-income securities generally move inversely with changes in interest rates such that when interest rates rise, bond values fall and vice versa. Investing in high-yield bonds involves greater credit risk and other risks not associated with investing in higher-quality bonds. Bond investing also involves interest rate risk, which means that bond prices may change as interest rates increase or decrease. Foreign investments involve market, political, accounting and currency risks not associated with domestic investments. [SIDENOTE] WE HAVE MAINTAINED THE FUND'S EXPOSURE TO LOWER-RATED ISSUES, EMPHASIZING COMPANIES WHERE OUR RIGOROUS CREDIT ANALYSIS SHOWS THE LIKELIHOOD OF IMPROVED CREDIT, EARNINGS AND CASH FLOWS. 6 FINANCIAL STATEMENTS NOVEMBER 30, 2004 COLUMBIA HIGH YIELD OPPORTUNITY FUND A GUIDE TO UNDERSTANDING YOUR FUND'S FINANCIAL STATEMENTS INVESTMENT PORTFOLIO The investment portfolio details all of the fund's holdings and their market value as of the last day of the reporting period. Portfolio holdings are organized by type of asset, industry, country or geographic region (if applicable) to demonstrate areas of concentration and diversification. STATEMENT OF ASSETS AND LIABILITIES This statement details the fund's assets, liabilities, net assets and share price for each share class as of the last day of the reporting period. Net assets are calculated by subtracting all the fund's liabilities (including any unpaid expenses) from the total of the fund's investment and non-investment assets. The share price for each class is calculated by dividing net assets for that class by the number of shares outstanding in that class as of the last day of the reporting period. STATEMENT OF OPERATIONS This statement details income earned by the fund and the expenses accrued by the fund during the reporting period. The Statement of Operations also shows any net gain or loss the fund realized on the sales of its holdings during the period, as well as any unrealized gains or losses recognized over the period. The total of these results represents the fund's net increase or decrease in net assets from operations. STATEMENT OF CHANGES IN NET ASSETS This statement demonstrates how the fund's net assets were affected by its operating results, distributions to shareholders and shareholder transactions (e.g., subscriptions, redemptions and dividend reinvestments) during the reporting period. The Statement of Changes in Net Assets also details changes in the number of shares outstanding. NOTES TO FINANCIAL STATEMENTS These notes disclose the organizational background of the fund, its significant accounting policies (including those surrounding security valuation, income recognition and distributions to shareholders), federal tax information, fees and compensation paid to affiliates and significant risks and contingencies. FINANCIAL HIGHLIGHTS The financial highlights demonstrate how the fund's net asset value per share was affected by the fund's operating results. The financial highlights table also discloses the classes' performance and certain key ratios (e.g., class expenses and net investment income as a percentage of average net assets). 7 INVESTMENT PORTFOLIO NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA HIGH YIELD OPPORTUNITY FUND
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - 91.9% BASIC MATERIALS - 9.6% CHEMICALS - 5.2% AGRICULTURAL CHEMICALS - 1.7% IMC GLOBAL, INC. 10.875% 08/01/13 2,150,000 2,730,500 TERRA CAPITAL, INC. 12.875% 10/15/08 3,220,000 3,976,700 UAP HOLDING CORP. (a) 07/15/12 (10.750% 01/15/08) (b) 2,190,000 1,664,400 UNITED AGRI PRODUCTS 8.250% 12/15/11 (8.750% 12/15/04) (b)(c) 1,900,000 2,023,500 10,395,100 CHEMICALS - DIVERSIFIED - 3.3% BCP CAYLUX HOLDING LUXEMBOURG SCA 9.625% 06/15/14 (b) 1,410,000 1,586,250 EQUISTAR CHEMICALS LP 10.625% 05/01/11 3,125,000 3,617,188 HMP EQUITY HOLDINGS CORP. (d) 05/15/08 5,330,000 3,504,475 HUNTSMAN ICI HOLDINGS LLC (d) 12/31/09 9,920,000 5,530,400 LYONDELL CHEMICAL CO. 9.625% 05/01/07 3,715,000 4,077,212 NOVA CHEMICALS CORP. 6.500% 01/15/12 780,000 809,398 WESTLAKE CHEMICAL CORP. 8.750% 07/15/11 1,112,000 1,253,780 20,378,703 CHEMICALS - SPECIALTY - 0.2% CROMPTON CORP. 7.670% 08/01/10 (b)(e) 1,090,000 1,177,200 1,177,200 Chemicals Total 31,951,003 FOREST PRODUCTS & PAPER - 2.5% FORESTRY - 0.4% MILLAR WESTERN FOREST PRODUCTS LTD. 7.750% 11/15/13 1,695,000 1,813,650 TEMBEC INDUSTRIES, INC. 8.500% 02/01/11 1,040,000 1,040,000 2,853,650 PAPER & RELATED PRODUCTS - 2.1% BOISE CASCADE LLC 5.005% 10/15/12 (b)(e) 1,110,000 1,132,200 7.125% 10/15/14 (b) 1,250,000 1,312,500 BUCKEYE TECHNOLOGIES, INC. 8.500% 10/01/13 480,000 528,000 9.250% 09/15/08 1,980,000 1,980,000 CARAUSTAR INDUSTRIES, INC. 9.875% 04/01/11 2,015,000 2,166,125 GEORGIA-PACIFIC CORP. 8.000% 01/15/24 1,150,000 1,334,000
See accompanying notes to financial statements. 8
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) BASIC MATERIALS - (CONTINUED) FOREST PRODUCTS & PAPER - (CONTINUED) NEENAH PAPER, INC. 7.375% 11/15/14 (b) 790,000 797,900 NEWARK GROUP, INC. 9.750% 03/15/14 (b) 1,550,000 1,623,625 NORSKE SKOG CANADA LTD. 7.375% 03/01/14 695,000 729,750 8.625% 06/15/11 1,200,000 1,296,000 12,900,100 Forest Products & Paper Total 15,753,750 IRON/STEEL - 1.2% METAL - IRON - 0.5% WISE METALS GROUP LLC 10.250% 05/15/12 (b) 2,785,000 2,805,888 2,805,888 STEEL - PRODUCERS - 0.2% STEEL DYNAMICS, INC. 9.500% 03/15/09 1,080,000 1,196,100 1,196,100 STEEL - SPECIALTY - 0.5% OREGON STEEL MILLS, INC. 10.000% 07/15/09 985,000 1,103,200 UCAR FINANCE, INC. 10.250% 02/15/12 1,890,000 2,173,500 3,276,700 Iron/Steel Total 7,278,688 MINING - 0.7% METAL - ALUMINUM - 0.3% KAISER ALUMINUM & CHEMICAL CORP. 10.875% 10/15/06 (f) 2,385,000 2,051,100 2,051,100 METAL - DIVERSIFIED - 0.4% EARLE M. JORGENSEN CO. 9.750% 06/01/12 2,140,000 2,407,500 2,407,500 Mining Total 4,458,600 ---------- BASIC MATERIALS TOTAL 59,442,041 COMMUNICATIONS - 20.4% ADVERTISING - 0.3% ADVERTISING SERVICES - 0.3% WDAC SUBSIDIARY CORP. 8.375% 12/01/14 (b)(g) 1,685,000 1,701,850 1,701,850 Advertising Total 1,701,850
See accompanying notes to financial statements. 9
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) COMMUNICATIONS - (CONTINUED) MEDIA - 9.0% BROADCAST SERVICES/PROGRAMS - 0.5% FISHER COMMUNICATIONS, INC. 8.625% 09/15/14 (b) 1,060,000 1,144,800 XM SATELLITE RADIO HOLDINGS, INC. 7.660% 05/01/09 (e) 1,675,000 1,708,500 2,853,300 CABLE TV - 4.3% ATLANTIC BROADBAND FINANCE LLC 9.375% 01/15/14 (b) 2,605,000 2,526,850 CABLEVISION SYSTEM CORP. 6.669% 04/01/09 (b)(e) 1,945,000 2,032,525 CHARTER COMMUNICATIONS HOLDINGS LLC 9.920% 04/01/11 9,895,000 8,138,637 10.250% 09/15/10 1,500,000 1,575,000 CSC HOLDINGS, INC. 6.750% 04/15/12 (b) 1,230,000 1,260,750 7.625% 04/01/11 95,000 101,888 DIRECTV HOLDINGS LLC 8.375% 03/15/13 495,000 558,112 ECHOSTAR DBS CORP. 6.375% 10/01/11 685,000 705,550 INSIGHT COMMUNICATIONS (a) 02/15/11 (12.250% 02/15/06) 870,000 839,550 INSIGHT MIDWEST LP 9.750% 10/01/09 1,255,000 1,322,456 NORTHLAND CABLE TELEVISION, INC. 10.250% 11/15/07 3,650,000 3,650,000 PEGASUS SATELLITE COMMUNICATIONS, INC. 11.250% 01/15/10 (b)(f) 2,825,000 1,800,938 TELENET GROUP HOLDING NV (a) 06/15/14 (11.500% 12/15/08) (b) 3,045,000 2,352,263 26,864,519 MULTIMEDIA - 1.5% ADVANSTAR COMMUNICATIONS, INC. (a) 10/15/11 (15.000% 10/15/05) 1,825,000 1,542,125 12.000% 02/15/11 2,220,000 2,419,800 HAIGHTS CROSS COMMUNICATIONS (a) 08/15/11 (12.500% 02/01/09) 2,325,000 1,499,625 HAIGHTS CROSS OPERATING CO. 11.750% 08/15/11 1,250,000 1,425,000 QUEBECOR MEDIA, INC. 11.125% 07/15/11 2,005,000 2,300,738 9,187,288 PUBLISHING - NEWSPAPERS - 0.4% HOLLINGER, INC. 11.875% 03/01/11 (b)(h) 1,009,000 1,092,021 12.875% 03/01/11 (b) 1,589,000 1,732,010 2,824,031
See accompanying notes to financial statements. 10
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) COMMUNICATIONS - (CONTINUED) MEDIA - (CONTINUED) PUBLISHING - PERIODICALS - 1.4% CBD MEDIA HOLDINGS & FINANCE, INC. 9.250% 07/15/12 (b) 1,335,000 1,368,375 DEX MEDIA, INC. (a) 11/15/13 (9.000% 11/15/08) 1,850,000 1,419,875 8.000% 11/15/13 450,000 481,500 DEX MEDIA EAST LLC 12.125% 11/15/12 1,518,000 1,859,550 DEX MEDIA WEST LLC 9.875% 08/15/13 2,027,000 2,341,185 YELL FINANCE BV 10.750% 08/01/11 1,034,000 1,204,610 8,675,095 TELEVISION - 0.9% GRANITE BROADCASTING CORP. 9.750% 12/01/10 3,180,000 2,989,200 PAXSON COMMUNICATIONS 10.750% 07/15/08 1,440,000 1,483,200 SINCLAIR BROADCAST GROUP, INC. 8.750% 12/15/11 800,000 860,000 5,332,400 Media Total 55,736,633 TELECOMMUNICATIONS - 11.1% CELLULAR TELECOMMUNICATIONS - 4.7% AMERICAN CELLULAR CORP. Series B, 10.000% 08/01/11 1,955,000 1,647,088 DOBSON CELLULAR SYSTEMS 8.375% 11/01/11 (b) 525,000 538,125 DOBSON COMMUNICATIONS CORP. 8.875% 10/01/13 3,640,000 2,457,000 HORIZON PCS, INC. 11.375% 07/15/12 (b) 1,325,000 1,450,875 iPCS ESCROW CO. 11.500% 05/01/12 (b) 910,000 1,014,650 NEXTEL COMMUNICATIONS, INC. 7.375% 08/01/15 2,000,000 2,200,000 NEXTEL PARTNERS, INC. 8.125% 07/01/11 3,250,000 3,575,000 ROGERS CANTEL, INC. 9.750% 06/01/16 4,130,000 4,863,075 ROGERS WIRELESS, INC. 8.000% 12/15/12 (b) 1,295,000 1,350,037 RURAL CELLULAR CORP. 8.250% 03/15/12 1,355,000 1,412,588 UBIQUITEL OPERATING CO. 9.875% 03/01/11 1,490,000 1,635,275 9.875% 03/01/11 (b) 1,055,000 1,157,862 US UNWIRED, INC. 10.000% 06/15/12 2,845,000 3,157,950 WESTERN WIRELESS CORP. 9.250% 07/15/13 2,660,000 2,872,800 29,332,325
See accompanying notes to financial statements. 11
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) COMMUNICATIONS - (CONTINUED) TELECOMMUNICATIONS - (CONTINUED) SATELLITE TELECOMMUNICATIONS - 0.7% INMARSAT FINANCE II PLC (a) 11/15/12 (10.375% 11/15/08) (b) 790,000 547,075 NEW SKIES SATELLITES NV 9.125% 11/01/12 (b) 1,195,000 1,218,900 PANAMSAT CORP. (a) 11/01/14 (10.375% 11/01/09) (b) 2,560,000 1,536,000 9.000% 08/15/14 (b) 1,070,000 1,150,250 4,452,225 TELECOMMUNICATION EQUIPMENT - 0.2% LUCENT TECHNOLOGIES, INC. 6.450% 03/15/29 1,890,000 1,620,675 1,620,675 TELECOMMUNICATION SERVICES - 1.6% AXTEL SA 11.000% 12/15/13 2,580,000 2,741,250 CARRIER1 INTERNATIONAL SA 13.250% 02/15/09 (f) 6,000,000 540,000 FAIRPOINT COMMUNICATIONS, INC. 11.875% 03/01/10 1,150,000 1,308,125 SECURUS TECHNOLOGY, INC. 11.000% 09/01/11 (b) 2,205,000 2,205,000 TIME WARNER TELECOM LLC 9.750% 07/15/08 1,460,000 1,456,350 10.125% 02/01/11 1,760,000 1,689,600 9,940,325 TELEPHONE - INTEGRATED - 3.3% CINCINNATI BELL, INC. 8.375% 01/15/14 2,645,000 2,658,225 QWEST CAPITAL FUNDING, INC. 7.250% 02/15/11 7,025,000 6,673,750 7.750% 02/15/31 2,385,000 2,039,175 QWEST SERVICES CORP. 13.500% 12/15/10 (b) 6,545,000 7,788,550 US LEC CORP. 10.670% 10/01/09 (b)(e) 1,070,000 1,067,689 20,227,389 WIRELESS EQUIPMENT - 0.6% AMERICAN TOWERS, INC. 7.250% 12/01/11 1,060,000 1,120,950 SBA COMMUNICATIONS CORP. (a) 12/15/11 (9.750% 12/15/07) 800,000 674,000 SPECTRASITE, INC. 8.250% 05/15/10 1,690,000 1,829,425 3,624,375 Telecommunications Total 69,197,314 ----------- COMMUNICATIONS TOTAL 126,635,797
See accompanying notes to financial statements. 12
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER, CYCLICAL - 19.1% AIRLINES - 1.3% AIRLINES - 1.3% CONTINENTAL AIRLINES, INC. 7.568% 12/01/06 2,980,000 2,294,600 DELTA AIR LINES, INC. 7.900% 12/15/09 1,315,000 736,400 NORTHWEST AIRLINES, INC. 9.875% 03/15/07 3,750,000 3,262,500 UNITED AIR LINES, INC. 2.020% 03/02/04 (e)(i) 2,161,873 1,729,498 8,022,998 Airlines Total 8,022,998 APPAREL - 1.2% APPAREL MANUFACTURERS - 1.2% BRODER BROTHERS CO. 11.250% 10/15/10 1,320,000 1,372,800 11.250% 10/15/10 (b) 785,000 816,400 LEVI STRAUSS & CO. 12.250% 12/15/12 2,735,000 2,885,425 PHILLIPS VAN-HEUSEN CORP. 7.250% 02/15/11 1,010,000 1,065,550 8.125% 05/01/13 1,000,000 1,095,000 7,235,175 Apparel Total 7,235,175 AUTO MANUFACTURERS - 0.3% AUTO - MEDIUM & HEAVY DUTY TRUCKS - 0.3% NAVISTAR INTERNATIONAL CORP. 7.500% 06/15/11 1,970,000 2,127,600 2,127,600 Auto Manufacturers Total 2,127,600 AUTO PARTS & EQUIPMENT - 1.6% AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 0.9% ACCURIDE CORP. Series 1998 B, 9.250% 02/01/08 1,225,000 1,246,437 AFFINIA GROUP, INC. 9.000% 11/30/14 (b) 260,000 267,800 DELCO REMY INTERNATIONAL, INC. 11.000% 05/01/09 2,095,000 2,210,225 DURA OPERATING CORP. 8.625% 04/15/12 1,775,000 1,810,500 5,534,962 AUTO/TRUCKS PARTS & EQUIPMENT - REPLACEMENT - 0.2% REXNORD CORP. 10.125% 12/15/12 1,360,000 1,536,800 1,536,800
See accompanying notes to financial statements. 13
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER, CYCLICAL - (CONTINUED) AUTO PARTS & EQUIPMENT - (CONTINUED) RUBBER - TIRES - 0.5% GOODYEAR TIRE & RUBBER CO. 7.857% 08/15/11 2,960,000 2,937,800 2,937,800 Auto Parts & Equipment Total 10,009,562 ENTERTAINMENT - 2.4% GAMBLING (NON-HOTEL) - 0.4% GLOBAL CASH ACCESS LLC/GLOBAL CASH FINANCE CORP. 8.750% 03/15/12 2,245,000 2,424,600 2,424,600 MUSIC - 0.5% STEINWAY MUSICAL INSTRUMENTS, INC. 8.750% 04/15/11 1,485,000 1,611,225 WARNER MUSIC GROUP 7.375% 04/15/14 (b) 1,270,000 1,298,575 2,909,800 RESORTS/THEME PARKS - 0.5% SIX FLAGS, INC. 8.875% 02/01/10 2,360,000 2,371,800 9.625% 06/01/14 1,040,000 1,027,000 3,398,800 THEATERS - 1.0% LCE ACQUISITION CORP. 9.000% 08/01/14 (b) 2,280,000 2,451,000 MARQUEE HOLDINGS, INC. (a) 08/15/14 (12.000% 08/15/09) (b) 5,745,000 3,705,525 6,156,525 Entertainment Total 14,889,725 HOME BUILDERS - 1.2% BUILDING - RESIDENTIAL/COMMERCIAL - 1.2% D.R. HORTON, INC. 9.750% 09/15/10 2,400,000 2,874,000 K. HOVNANIAN ENTERPRISES, INC. 8.875% 04/01/12 1,435,000 1,578,500 10.500% 10/01/07 1,930,000 2,224,325 STANDARD PACIFIC CORP. 9.250% 04/15/12 625,000 729,687 7,406,512 Home Builders Total 7,406,512 HOME FURNISHINGS - 0.7% HOME FURNISHINGS - 0.7% NORCRAFT COMPANIES 9.000% 11/01/11 1,095,000 1,188,075
See accompanying notes to financial statements. 14
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER, CYCLICAL - (CONTINUED) HOME FURNISHINGS - (CONTINUED) WII COMPONENTS, INC. 10.000% 02/15/12 2,940,000 2,881,200 4,069,275 Home Furnishings Total 4,069,275 LEISURE TIME - 1.7% CRUISE LINES - 0.1% NCL CORP. 10.625% 07/15/14 (b) 840,000 865,200 865,200 LEISURE & RECREATIONAL PRODUCTS - 0.6% BOMBARDIER RECREATIONAL PRODUCTS, INC. 8.375% 12/15/13 2,355,000 2,543,400 K2, INC. 7.375% 07/01/14 (b) 920,000 1,009,700 3,553,100 RECREATIONAL CENTERS - 1.0% AMF BOWLING WORLDWIDE, INC. 10.000% 03/01/10 1,655,000 1,770,850 EQUINOX HOLDINGS, INC. 9.000% 12/15/09 2,570,000 2,711,350 TOWN SPORTS INTERNATIONAL, INC. (a) 02/01/14 (11.000% 02/01/09) 3,115,000 1,736,613 6,218,813 Leisure Time Total 10,637,113 LODGING - 5.7% CASINO HOTELS - 5.7% CIRCUS & ELDORADO/SILVER LEGACY CAPITAL CORP. 10.125% 03/01/12 1,990,000 2,179,050 HARD ROCK HOTEL, INC. 8.875% 06/01/13 2,405,000 2,645,500 HOLLYWOOD CASINO SHREVEPORT 13.000% 08/01/06 (j) 7,050,000 6,204,000 INN OF THE MOUNTAIN GODS RESORT & CASINO 12.000% 11/15/10 2,045,000 2,382,425 MGM MIRAGE 8.375% 02/01/11 2,515,000 2,841,950 MOHEGAN TRIBAL GAMING AUTHORITY 7.125% 08/15/14 (b) 410,000 437,675 PINNACLE ENTERTAINMENT 8.250% 03/15/12 2,190,000 2,277,600 8.750% 10/01/13 3,245,000 3,488,375 PREMIER ENTERTAINMENT BILOXI FINANCIAL LLC 10.750% 02/01/12 1,505,000 1,625,400 RIVER ROCK ENTERTAINMENT 9.750% 11/01/11 2,620,000 2,901,650 SENECA GAMING CORP. 7.250% 05/01/12 2,265,000 2,395,238
See accompanying notes to financial statements. 15
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER, CYCLICAL - (CONTINUED) LODGING - (CONTINUED) STATION CASINOS, INC. 6.875% 03/01/16 270,000 283,500 TRUMP HOLDINGS & FUNDING PIK, 17.625% 09/15/10 (i) 2,555,875 2,658,110 WYNN LAS VEGAS LLC 6.625% 12/01/14 (b)(g) 1,550,000 1,526,750 12.000% 11/01/10 1,004,000 1,265,040 35,112,263 Lodging Total 35,112,263 RETAIL - 2.5% RETAIL - AUTOMOBILE - 0.3% ASBURY AUTOMOTIVE GROUP, INC. 8.000% 03/15/14 1,990,000 1,970,100 1,970,100 RETAIL - DRUG STORES - 0.7% JEAN COUTU GROUP (PJC), INC. 8.500% 08/01/14 (b) 1,425,000 1,446,375 RITE AID CORP. 9.250% 06/01/13 2,830,000 2,921,975 4,368,350 RETAIL - HOME FURNISHINGS - 0.5% LEVITZ HOME FURNISHINGS 12.000% 11/01/11 (b) 1,310,000 1,336,200 TEMPUR-PEDIC, INC. 10.250% 08/15/10 1,631,000 1,867,495 3,203,695 RETAIL - JEWELRY - 0.3% FINLAY FINE JEWELRY CORP. 8.375% 06/01/12 1,700,000 1,853,000 1,853,000 RETAIL - MAJOR DEPARTMENT STORES - 0.1% SAKS, INC. 7.000% 12/01/13 693,000 705,128 705,128 RETAIL - PROPANE DISTRIBUTORS - 0.3% FERRELLGAS PARTNERS LP 8.750% 06/15/12 1,830,000 1,994,700 1,994,700 RETAIL - RESTAURANTS - 0.3% DENNY'S HOLDINGS, INC. 10.000% 10/01/12 (b) 1,590,000 1,673,475 1,673,475 Retail Total 15,768,448
See accompanying notes to financial statements. 16
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER, CYCLICAL - (CONTINUED) TEXTILES - 0.5% TEXTILE - PRODUCTS - 0.5% COLLINS & AIKMAN PRODUCTS CO. 9.750% 02/15/10 1,600,000 1,720,000 INVISTA 9.250% 05/01/12 (b) 1,390,000 1,542,900 3,262,900 Textiles Total 3,262,900 ----------- CONSUMER, CYCLICAL TOTAL 118,541,571 CONSUMER, NON-CYCLICAL - 12.6% AGRICULTURE - 0.6% AGRICULTURAL OPERATIONS - 0.4% SEMINIS VEGETABLE SEEDS, INC. 10.250% 10/01/13 2,307,000 2,595,375 2,595,375 TOBACCO - 0.2% NORTH ATLANTIC TRADING CO., INC. 9.250% 03/01/12 1,545,000 1,236,000 1,236,000 Agriculture Total 3,831,375 BEVERAGES - 0.4% BEVERAGES - WINES/SPIRITS - 0.4% CONSTELLATION BRANDS, INC. 8.125% 01/15/12 2,000,000 2,175,000 2,175,000 Beverages Total 2,175,000 BIOTECHNOLOGY - 0.4% MEDICAL - BIOLOGICAL/GENE - 0.4% BIO-RAD LABORATORIES, INC. 7.500% 08/15/13 2,515,000 2,747,637 2,747,637 Biotechnology Total 2,747,637 COMMERCIAL SERVICES - 3.5% COMMERCIAL SERVICES - 0.6% IRON MOUNTAIN, INC. 7.750% 01/15/15 560,000 569,800 LANGUAGE LINES HOLDINGS, INC. 11.125% 06/15/12 (b) 2,715,000 2,918,625 3,488,425 COMMERCIAL SERVICES - FINANCE - 0.7% DOLLAR FINANCIAL GROUP, INC. 9.750% 11/15/11 3,720,000 4,017,600 4,017,600
See accompanying notes to financial statements. 17
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER, NON-CYCLICAL - (CONTINUED) COMMERCIAL SERVICES - (CONTINUED) FUNERAL SERVICES & RELATED ITEMS - 0.5% SERVICE CORP. INTERNATIONAL 7.700% 04/15/09 2,810,000 3,069,925 3,069,925 PRINTING - COMMERCIAL - 0.7% AMERICAN COLOR GRAPHICS, INC. 10.000% 06/15/10 1,060,000 911,600 SHERIDAN GROUP 10.250% 08/15/11 (b) 1,515,000 1,655,138 VERTIS, INC. 13.500% 12/07/09 (b) 1,725,000 1,828,500 4,395,238 PRIVATE CORRECTIONS - 0.2% GEO GROUP, INC. 8.250% 07/15/13 1,260,000 1,341,900 1,341,900 RENTAL AUTO/EQUIPMENT - 0.8% NATIONSRENT, INC. 9.500% 10/15/10 3,260,000 3,667,500 WILLIAMS SCOTSMAN, INC. 9.875% 06/01/07 1,415,000 1,404,388 5,071,888 Commercial Services Total 21,384,976 COSMETICS/PERSONAL CARE - 0.3% COSMETICS & TOILETRIES - 0.3% ELIZABETH ARDEN, INC. 7.750% 01/15/14 1,895,000 2,008,700 2,008,700 Cosmetics/Personal Care Total 2,008,700 FOOD - 2.3% FOOD - CONFECTIONERY - 0.7% MERISANT CO. 9.500% 07/15/13 (b) 1,855,000 1,669,500 TABLETOP HOLDINGS, INC. (a) 05/15/14 (12.250% 11/15/08) (b) 5,295,000 2,409,225 4,078,725 FOOD - MISCELLANEOUS/DIVERSIFIED - 1.2% DEL MONTE CORP. 9.250% 05/15/11 755,000 826,725 DOLE FOOD CO. INC. 8.625% 05/01/09 2,160,000 2,381,400 PINNACLE FOODS HOLDING CORP. 8.250% 12/01/13 (b) 3,380,000 3,058,900
See accompanying notes to financial statements. 18
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER, NON-CYCLICAL - (CONTINUED) FOOD - (CONTINUED) REDDY ICE HOLDINGS, INC. (a) 11/01/12 (10.500% 11/01/08) (b) 1,660,000 1,153,700 7,420,725 FOOD - RETAIL - 0.4% STATER BROTHERS HOLDINGS 8.125% 06/15/12 2,360,000 2,513,400 2,513,400 Food Total 14,012,850 HEALTH CARE - PRODUCTS - 3.8% MEDICAL - HMO - 0.3% COVENTRY HEALTH CARE, INC. 8.125% 02/15/12 1,870,000 2,057,000 2,057,000 MEDICAL - HOSPITALS - 1.5% TENET HEALTHCARE CORP. 9.875% 07/01/14 (b) 5,905,000 6,333,113 UNITED SURGICAL PARTNERS INTERNATIONAL, INC. 10.000% 12/15/11 2,600,000 2,970,500 9,303,613 MRI/MEDICAL DIAGNOSTIC IMAGING - 1.6% INSIGHT HEALTH SERVICES CORP. 9.875% 11/01/11 3,050,000 3,095,750 MEDQUEST, INC. 11.875% 08/15/12 3,020,000 3,533,400 MQ ASSOCIATES, INC. (a) 08/15/12 (12.250% 08/15/08) 4,665,000 3,265,500 9,894,650 PHYSICAL PRACTICE MANAGEMENT - 0.4% US ONCOLOGY, INC. 9.000% 08/15/12 (b) 2,280,000 2,542,200 2,542,200 Health Care - Products Total 23,797,463 HOUSEHOLD PRODUCTS/WARES - 1.3% CONSUMER PRODUCTS - MISCELLANEOUS - 1.3% AAC GROUP HOLDINGS CORP. (a) 10/01/12 (10.250% 10/01/08) (b) 565,000 381,375 AMSCAN HOLDINGS, INC. 8.750% 05/01/14 2,470,000 2,482,350 JOSTENS IH CORP. 7.625% 10/01/12 (b) 1,320,000 1,386,000 PLAYTEX PRODUCTS, INC. 9.375% 06/01/11 3,865,000 4,101,731 8,351,456 Household Products/Wares Total 8,351,456 ----------- CONSUMER, NON-CYCLICAL 78,309,457
See accompanying notes to financial statements. 19
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) ENERGY - 6.4% OIL & GAS - 2.7% OIL COMPANIES - EXPLORATION & PRODUCTION - 2.0% CHESAPEAKE ENERGY CORP. 7.500% 06/15/14 1,060,000 1,172,625 COMPTON PETROLEUM CORP. 9.900% 05/15/09 2,675,000 2,942,500 ENCORE ACQUISITION CO. 8.375% 06/15/12 1,870,000 2,085,050 ENERGY PARTNERS LTD. 8.750% 08/01/10 1,570,000 1,727,000 MAGNUM HUNTER RESOURCES, INC. 9.600% 03/15/12 1,469,000 1,674,660 TRANSTEXAS GAS CORP. 15.000% 03/15/05 (j)(k) 475,296 5 WHITING PETROLEUM CORP. 7.250% 05/01/12 2,790,000 2,929,500 12,531,340 OIL & GAS DRILLING - 0.5% OCEAN RIG NORWAY AS 10.250% 06/01/08 1,816,000 1,870,480 PRIDE INTERNATIONAL, INC. 7.375% 07/15/14 (b) 925,000 1,026,750 2,897,230 OIL REFINING & MARKETING - 0.2% PREMCOR REFINING GROUP, INC. 7.500% 06/15/15 1,015,000 1,111,425 1,111,425 Oil & Gas Total 16,539,995 OIL & GAS SERVICES - 0.4% OIL - FIELD SERVICES - 0.4% HORNBECK OFFSHORE SERVICES, INC. 6.125% 12/01/14 (b) 520,000 520,000 NEWPARK RESOURCES, INC. 8.625% 12/15/07 2,050,000 2,070,500 2,590,500 Oil & Gas Services Total 2,590,500 PIPELINES - 3.3% PIPELINES - 3.3% COASTAL CORP. 7.750% 06/15/10 4,840,000 4,979,150 DYNEGY HOLDINGS, INC. 6.875% 04/01/11 2,475,000 2,376,000 9.875% 07/15/10 (b) 1,230,000 1,389,900 NORTHWEST PIPELINE CORP. 8.125% 03/01/10 1,040,000 1,159,600 SONAT, INC. 6.875% 06/01/05 1,500,000 1,518,750 7.625% 07/15/11 4,965,000 5,039,475 SOUTHERN NATURAL GAS CO. 8.875% 03/15/10 1,630,000 1,829,675
See accompanying notes to financial statements. 20
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) ENERGY - (CONTINUED) PIPELINES - (CONTINUED) WILLIAMS COMPANIES, INC. 8.125% 03/15/12 1,935,000 2,254,275 20,546,825 Pipelines Total 20,546,825 ----------- ENERGY TOTAL 39,677,320 FINANCIALS - 2.0% DIVERSIFIED FINANCIAL SERVICES - 1.7% FINANCE - COMMERCIAL - 0.2% FINOVA GROUP, INC. 7.500% 11/15/09 (l) 3,263,100 1,558,130 1,558,130 FINANCE - INVESTMENT BANKER/BROKER - 1.0% E*TRADE FINANCIAL CORP. 8.000% 06/15/11 (b) 1,530,000 1,617,975 LABRANCHE & CO. 11.000% 05/15/12 4,155,000 4,425,075 6,043,050 REITS - HOTELS - 0.1% LA QUINTA PROPERTIES, INC. 7.000% 08/15/12 (b) 585,000 628,875 628,875 REITS - MORTGAGE - 0.4% THORNBURG MORTGAGE, INC. 8.000% 05/15/13 2,085,000 2,236,163 2,236,163 Diversified Financial Services Total 10,466,218 SAVINGS & LOANS - 0.3% SAVINGS & LOANS/THRIFTS - WESTERN US - 0.3% WESTERN FINANCIAL BANK 9.625% 05/15/12 1,475,000 1,681,500 1,681,500 Savings & Loans Total 1,681,500 ----------- FINANCIALS TOTAL 12,147,718 INDUSTRIALS - 15.9% AEROSPACE/DEFENSE - 1.4% AEROSPACE/DEFENSE - EQUIPMENT - 1.4% ARGO-TECH CORP. 9.250% 06/01/11 1,450,000 1,584,125 BE AEROSPACE, INC. 8.875% 05/01/11 2,080,000 2,173,600 SEQUA CORP. 8.875% 04/01/08 1,458,000 1,596,510 STANDARD AERO HOLDINGS, INC. 8.250% 09/01/14 (b) 1,495,000 1,607,125
See accompanying notes to financial statements. 21
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) AEROSPACE/DEFENSE - (CONTINUED) TRANSDIGM, INC. 8.375% 07/15/11 1,660,000 1,788,650 8,750,010 ELECTRONICS - MILITARY - 0.0% CONDOR SYSTEMS, INC. 11.875% 05/01/09 (j)(k) 4,000,000 40,000 40,000 Aerospace/Defense Total 8,790,010 BUILDING MATERIALS - 1.6% BUILDING & CONSTRUCTION PRODUCTS - MISCELLANEOUS - 0.5% ASSOCIATED MATERIALS, INC. (a) 03/01/14 (11.250% 03/01/09) 1,350,000 1,005,750 CONGOLEUM CORP. 8.625% 08/01/08 (m) 1,755,000 1,368,900 THL BUILDCO, INC. 8.500% 09/01/14 (b) 830,000 892,250 3,266,900 BUILDING PRODUCTS - CEMENT/AGGREGATION - 0.7% RMCC ACQUISITION CO. 9.500% 11/01/12 (b) 2,100,000 2,105,250 US CONCRETE, INC. 8.375% 04/01/14 1,880,000 2,006,900 4,112,150 BUILDING PRODUCTS - DOORS & WINDOWS - 0.4% ATRIUM COMPANIES, INC. Series B, 10.500% 05/01/09 2,210,000 2,320,500 2,320,500 Building Materials Total 9,699,550 ELECTRICAL COMPONENTS & EQUIPMENT - 0.4% WIRE & CABLE PRODUCTS - 0.4% COLEMAN CABLE, INC. 9.875% 10/01/12 (b) 2,385,000 2,510,212 2,510,212 Electrical Components & Equipment Total 2,510,212 ELECTRONICS - 0.1% ELECTRONIC COMPONENTS - MISCELLANEOUS - 0.1% FLEXTRONICS INTERNATIONAL LTD. 6.250% 11/15/14 (b) 800,000 788,000 788,000 Electronics Total 788,000
See accompanying notes to financial statements. 22
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) ENGINEERING & CONSTRUCTION - 0.4% BUILDING & CONSTRUCTION - MISCELLANEOUS - 0.4% J. RAY MCDERMOTT SA 11.000% 12/15/13 (b) 2,530,000 2,764,025 2,764,025 Engineering & Construction Total 2,764,025 ENVIRONMENTAL CONTROL - 1.4% NON-HAZARDOUS WASTE DISPOSAL - 1.3% ALLIED WASTE NORTH AMERICA, INC. 7.875% 04/15/13 4,355,000 4,398,550 8.500% 12/01/08 495,000 520,369 WASTE SERVICES, INC. 9.500% 04/15/14 (b) 3,155,000 3,123,450 8,042,369 RECYCLING - 0.1% IMCO RECYCLING ESCROW 9.000% 11/15/14 (b) 670,000 693,450 693,450 Environmental Control Total 8,735,819 HAND/MACHINE TOOLS - 0.1% MACHINE TOOLS & RELATED PRODUCTS - 0.1% NEWCOR, INC. 8.500% 01/31/13 (k) 847,510 542,406 542,406 Hand/Machine Tools Total 542,406 MACHINERY - CONSTRUCTION & MINING - 0.4% MACHINERY - CONSTRUCTION & MINING - 0.4% TEREX CORP. Series 2001 B, 10.375% 04/01/11 2,115,000 2,384,662 2,384,662 Machinery - Construction & Mining Total 2,384,662 METAL FABRICATED/HARDWARE - 2.1% METAL PROCESSORS & FABRICATION - 1.5% ALTRA INDUSTRIAL MOTION, INC. 9.000% 12/01/11 (b) 1,035,000 1,050,525 HAWK CORP. 8.750% 11/01/14 (b) 400,000 413,000 MUELLER GROUP, INC. 10.000% 05/01/12 1,065,000 1,155,525 MUELLER HOLDINGS, INC. (a) 04/15/14 (14.750% 04/15/09) 2,625,000 1,771,875 TRIMAS CORP. 9.875% 06/15/12 4,710,000 4,921,950 9,312,875
See accompanying notes to financial statements. 23
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) METAL PRODUCTS - FASTENERS - 0.6% FASTENTECH, INC. 11.500% 05/01/11 (b) 3,055,000 3,482,700 3,482,700 Metal Fabricated/Hardware Total 12,795,575 MISCELLANEOUS MANUFACTURERS - 1.6% ADVANCED MATERIALS/PRODUCTS - 0.3% HEXCEL CORP. 9.750% 01/15/09 1,800,000 1,885,500 1,885,500 DIVERSIFIED MANUFACTURER OPERATIONS - 1.0% J.B. POINDEXTER & CO. 8.750% 03/15/14 (b) 1,750,000 1,855,000 KI HOLDINGS, INC. (a) 11/15/14 (9.875% 11/15/09) (b) 2,365,000 1,501,775 KOPPERS INDUSTRIES, INC. 9.875% 10/15/13 1,565,000 1,776,275 TRINITY INDUSTRIES, INC. 6.500% 03/15/14 920,000 911,950 6,045,000 FILTERATION/SEPARATION PRODUCTS - 0.3% POLYPORE, INC. (a) 10/01/12 (10.500% 10/01/08) (b) 2,730,000 1,754,025 1,754,025 Miscellaneous Manufacturers Total 9,684,525 PACKAGING & CONTAINERS - 2.6% CONTAINERS - METAL/GLASS - 1.0% CROWN EUROPEAN HOLDINGS SA 10.875% 03/01/13 2,550,000 3,002,625 OWENS-BROCKWAY GLASS CONTAINER 8.250% 05/15/13 1,045,000 1,141,662 OWENS-ILLINOIS, INC. 7.350% 05/15/08 1,550,000 1,615,875 7.500% 05/15/10 620,000 653,325 6,413,487 CONTAINERS - PAPER/PLASTIC - 1.6% CONSOLIDATED CONTAINER CO. LLC (a) 06/15/09 1,700,000 1,428,000 (10.750% 06/15/07) MDP ACQUISITIONS PLC 9.625% 10/01/12 2,600,000 2,938,000 PORTOLA PACKAGING, INC. 8.250% 02/01/12 1,700,000 1,326,000 SMURFIT-STONE CONTAINER CORP. 8.250% 10/01/12 1,675,000 1,834,125
See accompanying notes to financial statements. 24
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) CONTAINERS - PAPER/PLASTIC - (CONTINUED) TEKNI-PLEX, INC. 12.750% 06/15/10 2,300,000 2,035,500 9,561,625 Packaging & Containers Total 15,975,112 TRANSPORTATION - 3.8% TRANSPORTATION - MARINE - 1.7% SHIP FINANCE INTERNATIONAL LTD. 8.500% 12/15/13 4,060,000 4,171,650 STENA AB 7.000% 12/01/16 (b) 785,000 771,262 7.500% 11/01/13 2,675,000 2,768,625 9.625% 12/01/12 1,630,000 1,833,750 TEEKAY SHIPPING CORP. 8.875% 07/15/11 865,000 1,003,400 10,548,687 TRANSPORTATION - RAIL - 0.5% TFM SA DE CV 12.500% 06/15/12 3,030,000 3,439,050 3,439,050 TRANSPORTATION - SERVICES - 0.9% CHC HELICOPTER CORP. 7.375% 05/01/14 1,820,000 1,924,650 PETROLEUM HELICOPTERS, INC. 9.375% 05/01/09 3,125,000 3,375,000 RAILWORKS CORP. 11.500% 04/15/09 (j) 600,000 30,000 5,329,650 TRANSPORTATION - TRUCK - 0.7% ALLIED HOLDINGS, INC. Series 1997 B, 8.625% 10/01/07 1,835,000 1,559,750 QDI CAPITAL CORP. 9.000% 11/15/10 (b) 2,810,000 2,802,975 4,362,725 Transportation Total 23,680,112 ----------- INDUSTRIALS TOTAL 98,350,008 TECHNOLOGY - 0.5% SEMICONDUCTORS - 0.5% ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.5% AMKOR TECHNOLOGY, INC. 9.250% 02/15/08 2,910,000 2,859,075 2,859,075 Semiconductors Total 2,859,075 ----------- TECHNOLOGY TOTAL 2,859,075
See accompanying notes to financial statements. 25
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) UTILITIES - 5.4% ELECTRIC - 5.4% ELECTRIC - GENERATION - 1.1% AES CORP. 9.000% 05/15/15 (b) 610,000 701,500 9.500% 06/01/09 1,253,000 1,437,818 EDISON MISSION ENERGY 9.875% 04/15/11 3,090,000 3,661,650 MISSION ENERGY HOLDING 13.500% 07/15/08 825,000 1,037,438 6,838,406 ELECTRIC - INTEGRATED - 1.4% CMS ENERGY CORP. 8.900% 07/15/08 1,990,000 2,208,900 NEVADA POWER CO. 9.000% 08/15/13 985,000 1,152,450 10.875% 10/15/09 1,765,000 2,065,050 PSE&G ENERGY HOLDINGS, INC. 8.625% 02/15/08 2,955,000 3,268,969 8,695,369 INDEPENDENT POWER PRODUCERS - 2.9% CAITHNESS COSO FUNDING CORP. 9.050% 12/15/09 3,381,457 3,753,418 CALPINE CORP. 8.500% 07/15/10 (b) 2,750,000 2,158,750 CALPINE GENERATING CO. LLC 11.169% 04/01/11 (b)(e) 3,575,000 3,387,313 11.500% 04/01/11 (b) 2,125,000 1,955,000 MSW ENERGY HOLDINGS LLC 7.375% 09/01/10 910,000 960,050 8.500% 09/01/10 2,260,000 2,486,000 ORION POWER HOLDINGS, INC. 12.000% 05/01/10 2,270,000 2,882,900 17,583,431 Electric Total 33,117,206 ----------- UTILITIES TOTAL 33,117,206 TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (COST OF $557,233,868) 569,080,193
See accompanying notes to financial statements. 26
PAR ($) VALUE ($) MUNICIPAL BOND (TAXABLE) - 0.5% CONSUMER CYCLICAL - 0.5% LODGING - 0.5% CASINO HOTELS - 0.5% CABAZON BAND MISSION INDIANS 13.000% 10/01/11 (h) 3,250,000 3,224,097 3,224,097 Lodging Total 3,224,097 ----------- CONSUMER CYCLICAL TOTAL 3,224,097 TOTAL MUNICIPAL BOND (TAXABLE) (COST OF $3,250,000) 3,224,097 CONVERTIBLE BONDS - 0.7% COMMUNICATIONS - 0.4% TELECOMMUNCIATIONS - 0.4% TELECOMMUNICATION EQUIPMENT - 0.4% NORTEL NETWORKS LTD. 4.250% 09/01/08 2,640,000 2,531,469 2,531,469 Telecommunications Total 2,531,469 ----------- COMMUNICATIONS TOTAL 2,531,469 UTILITIES - 0.3% ELECTRIC - 0.3% INDEPENDENT POWER PRODUCER - 0.3% MIRANT CORP. 2.500% 06/15/21 (f) 2,125,000 1,509,706 1,509,706 Electric Total 1,509,706 ----------- UTILITIES TOTAL 1,509,706 TOTAL CONVERTIBLE BONDS (COST OF $3,864,973) 4,041,175 SHARES PREFERRED STOCKS - 3.1% COMMUNICATIONS - 2.0% MEDIA - 2.0% BROADCASTING SERVICES/PROGRAMS - 1.1% SPANISH BROADCASTING SYSTEM, INC. 10.750% 6,284 6,943,820 6,943,820 TELEVISION - 0.3% PAXSON COMMUNICATIONS 14.250% PIK 273 2,047,500 PTV, INC. 19 104 2,047,604
See accompanying notes to financial statements. 27
SHARES VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- PREFERRED STOCKS - (CONTINUED) COMMUNICATIONS - (CONTINUED) MEDIA - (CONTINUED) PUBLISHING PERIODICALS - 0.6% PRIMEDIA, INC. Series D, 10.000% 17,700 1,690,350 Series F, 9.200% 20,390 1,835,100 Series H, 8.625% 220 19,360 3,544,810 Media Total 12,536,234 ----------- COMMUNICATIONS TOTAL 12,536,234 FINANCIALS - 0.6% FINANCIAL - 0.6% REAL ESTATE - 0.6% iSTAR FINANCIAL, INC. Series E, 7.875% 86,769 2,215,325 Series F, 7.800% 57,000 1,442,813 3,658,138 Financial Total 3,658,138 ----------- FINANCIALS TOTAL 3,658,138 UTILITIES - 0.5% ELECTRIC - 0.5% ELECTRIC - INTEGRATED - 0.5% TNP ENTERPRISES, INC. 14.500% PIK 2,788 3,220,140 3,220,140 Electric Total 3,220,140 ----------- UTILITIES TOTAL 3,220,140 TOTAL PREFERRED STOCKS (COST OF $18,655,533) 19,414,512 COMMON STOCKS (n) - 2.6% COMMUNICATIONS - 1.9% MEDIA - 0.7% CABLE TV - 0.5% NTL, INC. 46,154 3,211,395 ONO FINANCE PLC (k)(o) 5,700 -- 3,211,395
See accompanying notes to financial statements. 28
SHARES VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- COMMON STOCKS (n) - (CONTINUED) COMMUNICATIONS - (CONTINUED) MEDIA - (CONTINUED) MULTIMEDIA - 0.2% HAIGHTS CROSS COMMUNICATIONS, INC. 18,220 965,660 965,660 Media Total 4,177,055 TELECOMMUNICATIONS - 1.2% CELLULAR TELECOMMUNICATIONS - 0.8% AIRGATE PCS, INC. 22,468 729,536 HORIZON PCS, INC. Class A 73,617 1,612,212 NEXTEL COMMUNICATIONS, INC. Class A 100,000 2,846,000 5,187,748 WIRELESS EQUIPMENT - 0.4% SBA COMMUNICATIONS CORP. Class A 235,910 2,264,736 2,264,736 Telecommunications Total 7,452,484 ----------- COMMUNICATIONS TOTAL 11,629,539 CONSUMER, CYCLICAL - 0.1% LEISURE TIME - 0.1% CASINO SERVICES - 0.1% ALLIANCE GAMING CORP. 55,000 664,950 664,950 Leisure Time Total 664,950 ----------- CONSUMER, CYCLICAL TOTAL 664,950 ENERGY - 0.2% OIL& GAS - 0.0% OIL& GAS DRILLING - 0.0% COHO ENERGY, INC. (p) 750 -- HORIZON NATURAL RESOURCES CO. (k) 16,000 16 ORION REFINING CORP. (k)(o) 10 -- 16 Oil & Gas Total 16
See accompanying notes to financial statements. 29
SHARES VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- COMMON STOCKS (n) - (CONTINUED) ENERGY - (CONTINUED) PIPELINES -0.2% PIPELINES - 0.2% DYNEGY, INC. Class A 233,000 1,316,450 1,316,450 Pipelines Total 1,316,450 ----------- ENERGY TOTAL 1,316,466 INDUSTRIALS - 0.3% ENVIRONMENT CONTROL - 0.3% NON-HARZARDOUS WASTE DISPOSAL - 0.3% ALLIED WASTE INDUSTRIES, INC. 72,500 659,025 FAIRLANE MANAGEMENT CORP. (k)(o) 50,004 -- WASTE SERVICES, INC. 327,000 1,206,368 1,865,393 Environmental Control Total 1,865,393 ----------- INDUSTRIALS TOTAL 1,865,393 UTILITIES - 0.1% ELECTRIC - 0.0% ELECTRIC INTEGRATED - 0.0% BAYCORP HOLDINGS LTD. 3 38 38 Electric Total 38 OIL & GAS SERVICES - 0.1% OIL - FIELD SERVICES - 0.1% HORNBECK OFFSHORE SERVICES, INC. 27,300 551,460 551,460 Oil & Gas Services Total 551,498 ----------- UTILITIES TOTAL 551,498 TOTAL COMMON STOCKS (COST OF $16,778,114) 16,027,846
See accompanying notes to financial statements. 30
UNITS VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- WARRANTS (n)- 0.0% COMMUNICATIONS - 0.0% MEDIA - 0.0% CABLE TV - 0.0% CABLE SATISFACTION INTERNATIONAL, INC. expires 03/01/05 (b)(k)(o) 7,550 -- ONO FINANCE PLC expires 02/15/11 (b)(k)(o) 1,200 -- -- BROADCASTING SERVICES/PROGRAMS - 0.0% XM SATELLITE RADIO HOLDINGS, INC. expires 03/15/10 (b) 2,435 194,800 194,800 MULTIMEDIA - 0.0% HAIGHTS CROSS COMMUNICATIONS, INC. expires 12/10/11 (p) 20 -- expires 12/10/12 18,044 361 361 Media Total 195,161 TELECOMMUNICATIONS - 0.0% CELLULAR TELECOMMUNICATIONS - 0.0% HORIZON PCS, INC. expires 10/01/10 (b)(k)(o) 4,705 -- METRONET COMMUNICATIONS CORP. expires 08/15/07 (b)(k)(o) 1,250 -- -- TELECOMMUNICATION SERVICES - 0.0% CARRIER1 INTERNATIONAL expires 02/19/09 (b)(f)(k)(o) 2,780 -- IPCS, INC. expires 07/15/10 (b) 2,500 25 JAZZTEL PLC expires 07/15/10 (b)(k)(o) EUR 1,435 -- UBIQUITEL, INC. expires 04/15/10 (b)(k)(o) USD 5,250 -- 25 Telecommunications Total 25 ----------- COMMUNICATIONS TOTAL 195,186 CONSUMER, NON-CYCLICAL - 0.0% FOOD - 0.0% FOOD RETAIL - 0.0% PATHMARK STORES, INC. expires 09/19/10 58,758 14,689 14,689 Food Total 14,689 ----------- CONSUMER, NON-CYCLICAL TOTAL 14,689
See accompanying notes to financial statements. 31
PAR ($) VALUE ($) - -------------------------------------------------- -------------------------------------------------------------------------- WARRANTS (n)- (CONTINUED) INDUSTRIALS - 0.0% AEROSPACE/DEFENSE - 0.0% AEROSPACE/DEFENSE - EQUIPMENT - 0.0% LORAL SPACE & COMMUNICATIONS LTD. expires 01/15/07 12,000 120 120 Aerospace/Defense Total 120 METAL FABRICATED/HARDWARE - 0.0% METAL PROCESSORS & FABRICATE - 0.0% MUELLER HOLDINGS, INC. expires 04/15/14 2,625 183,750 183,750 Metal Fabricated/Hardware Total 183,750 TRANSPORTATION - 0.0% TRANSPORTATION - TRUCK - 0.0% QDI LLC expires 06/15/06 (b)(k) 10,207 31,744 31,744 Transportation Total 31,744 ----------- INDUSTRIALS TOTAL 215,614 TOTAL WARRANTS (COST OF $8,220,915) 425,489 SHORT-TERM OBLIGATION - 0.1% Repurchase agreement with State Street Bank & Trust Co. dated 11/30/04, due 12/01/04 at 1.870%, collateralized by a U.S. Treasury Bond maturing 02/15/10, market value $675,863 (repurchase proceeds $658,034) 658,000 658,000 TOTAL SHORT-TERM OBLIGATION (COST OF $658,000) 658,000 TOTAL INVESTMENTS - 98.9% (COST OF $608,661,403) (Q) 612,871,312 OTHER ASSETS & LIABILITIES, NET - 1.1% 6,500,764 NET ASSETS - 100.0% 619,372,076
See accompanying notes to financial statements. 32 NOTES TO INVESTMENT PORTFOLIO: (a) Step bond. This security is currently not paying coupon. Shown parenthetically is the interest rate to be paid and the date the Fund will begin accruing at this rate. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933.These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2004, these securities amounted to $137,602,365, which represents 22.2% of net assets. (c) Step bond. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing at this rate. (d) Zero coupon bond. (e) Floating rate note. The interest rate shown reflects the rate as of November 30, 2004. (f) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt covenants. Income is not being accrued. As of November 30, 2004, the value of these securities amounted to $5,901,744, which represents 1.0% of net assets. (g) Security purchased on a delayed delivery basis. (h) Illiquid security. (i) The issuer has filed for bankruptcy protection under Chapter 11 and is in default of certain debt convenants. Income is being accrued. As of November 30, 2004, the value of these securities amounted to $4,387,608, which represents 0.7% of net assets. (j) This issuer is in default of certain debt convenants. Income is not being accrued. As of November 30, 2004, the value of these securities amounted to $6,274,005, which represents 1.0% of net assets. (k) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (l) Issued as part of bankruptcy reorganization. (m) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt convenants, however, under the issuer's plan of reorganization, the issuer has guaranteed all interest due and therefore income is still being accrued. As of November 30, 2004, the value of this security represents 0.2% of net assets. (n) Non-income producing security. (o) Security has no value. (p) Rounds to less than $1. (q) Cost for federal income tax purposes is $608,724,959. At November 30, 2004, the Fund held investments in the following sectors:
% OF NET ASSETS - ------------------------------------------------------------------------ Communications 24.7 Consumer, Cyclical 19.7 Industrials 16.2 Consumer, Non-Cyclical 12.6 Basic Materials 9.6 Energy 6.6 Utilities 6.3 Financials 2.6 Technology 0.5 Short-Term Obligation 0.1 Other assets & liabilities, net 1.1 ----- 100.0 =====
ACRONYM NAME EUR Euro PIK Payment-In-Kind REIT Real Estate Investment Trust
See accompanying notes to financial statements. 33 STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA HIGH YIELD OPPORTUNITY FUND
($) - -------------------------------------------------- -------------------------------------------------------------------------- ASSETS Investments, at cost 608,661,403 -------------- Investments, at value 612,871,312 Cash 372,719 Receivable for: Investments sold 1,810,571 Investments sold on a delayed delivery basis 1,207,742 Fund shares sold 331,061 Interest 12,506,455 Dividends 70,494 Deferred Trustees' compensation plan 32,572 ------------- Total Assets 629,202,926 LIABILITIES Payable for: Investments purchased 936,330 Investments purchased on a delayed delivery basis 4,436,084 Fund shares repurchased 1,161,038 Distributions 1,926,250 Investment advisory fee 306,439 Transfer agent fee 172,908 Pricing and bookkeeping fees 23,805 Custody fee 1,143 Distribution and service fees 299,415 Deferred Trustees' fees 32,572 Other liabilities 534,866 ------------- Total Liabilities 9,830,850 NET ASSETS 619,372,076 COMPOSITION OF NET ASSETS Paid-in capital 1,002,685,447 Undistributed net investment income 2,126,906 Accumulated net realized loss (389,650,186) Net unrealized appreciation on investments 4,209,909 NET ASSETS 619,372,076 CLASS A Net assets 315,736,279 Shares outstanding 65,672,962 Net asset value per share 4.81(a) Maximum offering price per share ($4.81/0.9525) 5.05(b) CLASS B Net assets 241,873,446 Shares outstanding 50,310,116 Net asset value and offering price per share 4.81(a) CLASS C Net assets 43,693,108 Shares outstanding 9,088,195 Net asset value and offering price per share 4.81(a) CLASS Z Net assets 18,069,243 Shares outstanding 3,758,123 Net asset value, offering and redemption price per share 4.81
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. See accompanying notes to financial statements. 34 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA HIGH YIELD OPPORTUNITY FUND
($) - -------------------------------------------------- -------------------------------------------------------------------------- INVESTMENT INCOME Interest 26,596,403 Dividends 672,943 ------------- Total Investment Income 27,269,346 EXPENSES Investment advisory fee 1,851,513 Distribution fee: Class B 917,639 Class C 167,380 Service fee: Class A 391,586 Class B 305,879 Class C 55,960 Transfer agent fee 678,330 Pricing and bookkeeping fees 102,766 Trustees' fees 9,769 Custody fee 23,299 Non-recurring costs (See Note 7) 11,824 Other expenses 141,486 ------------- Total Expenses 4,657,431 Fees waived by Distributor - Class C (33,077) Non-recurring costs assumed by Investment Advisor (See Note 7) (11,824) Custody earnings credit (5,181) ------------- Net Expenses 4,607,349 ------------- Net Investment Income 22,661,997 NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain (loss) on: INVESTMENTS AND FOREIGN CURRENCY Investments 13,610,253 Foreign currency transactions (59,080) ------------- Net realized gain 13,551,173 Net change in unrealized appreciation/depreciation on: Investments 22,493,771 Foreign currency translations 61,151 ------------- Net change in unrealized appreciation/depreciation 22,554,922 ------------- Net Gain 36,106,095 ------------- Net Increase in Net Assets from Operations 58,768,092
See accompanying notes to financial statements. 35 STATEMENT OF CHANGES IN NET ASSETS COLUMBIA HIGH YIELD OPPORTUNITY FUND
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED NOVEMBER 30, MAY 31, 2004 ($) 2004 ($) - -------------------------------------------------- ---------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS Net investment income 22,661,997 54,237,943 Net realized gain on investments and foreign currency transactions 13,551,173 8,270,746 Net change in unrealized appreciation /depreciation on investments and foreign currency translations 22,554,922 32,880,100 -------------------------------- Net Increase from Operations 58,768,092 95,388,789 DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income: Class A (12,539,947) (25,897,731) Class B (8,879,829) (18,878,503) Class C (1,656,703) (3,515,106) Class Z (598,186) (1,901,969) -------------------------------- Total Distributions Declared to Shareholders (23,674,665) (50,193,309) SHARE TRANSACTIONS Class A: Subscriptions 33,074,365 189,024,773 Distributions reinvested 6,599,221 13,650,967 Redemptions (67,383,365) (276,813,657) -------------------------------- Net Decrease (27,709,779) (74,137,917) Class B: Subscriptions 9,642,732 41,567,784 Distributions reinvested 4,403,891 8,876,772 Redemptions (38,515,319) (120,128,028) -------------------------------- Net Decrease (24,468,696) (69,683,472) Class C: Subscriptions 1,209,911 26,520,739 Distributions reinvested 1,106,392 2,226,590 Redemptions (7,497,553) (37,179,218) -------------------------------- Net Decrease (5,181,250) (8,431,889) Class Z: Subscriptions 5,753,875 31,287,165 Distributions reinvested 445,990 1,483,445 Redemptions (3,150,243) (66,364,258) -------------------------------- Net Increase (Decrease) 3,049,622 (33,593,648) Net Decrease from Share Transactions (54,310,103) (185,846,926) -------------------------------- Total Decrease in Net Assets (19,216,676) (140,651,446) NET ASSETS Beginning of period 638,588,752 779,240,198 End of period (including undistributed net investment income of $2,126,906 and $3,139,574, respectively) 619,372,076 638,588,752 CHANGES IN SHARES Class A: Subscriptions 7,104,512 42,769,227 Issued for distributions reinvested 1,409,647 3,017,589 Redemptions (14,571,594) (61,621,799) -------------------------------- Net Decrease (6,057,435) (15,834,983) Class B: Subscriptions 2,053,006 9,297,993 Issued for distributions reinvested 940,769 1,963,545 Redemptions (8,282,478) (26,516,181) -------------------------------- Net Decrease (5,288,703) (15,254,643) Class C: Subscriptions 259,853 5,944,258 Issued for distributions reinvested 236,421 492,263 Redemptions (1,610,956) (8,189,751) -------------------------------- Net Decrease (1,114,682) (1,753,230) Class Z: Subscriptions 1,217,367 7,069,802 Issued for distributions reinvested 95,152 327,668 Redemptions (680,618) (14,917,379) -------------------------------- Net Increase (Decrease) 631,901 (7,519,909)
See accompanying notes to financial statements. 36 NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA HIGH YIELD OPPORTUNITY FUND NOTE 1. ORGANIZATION Columbia High Yield Opportunity Fund (the "Fund"), a series of Columbia Funds Trust I (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL The Fund seeks high current income and total return. FUND SHARES The Fund may issue an unlimited number of shares and offers four classes of shares: Class A, Class B, Class C and Class Z. Each share class has its own sales charge and expense structure. Class A shares are subject to a maximum front-end sales charge of 4.75% based on the amount of initial investment. Class A shares purchased without an initial sales charge are subject to a 1.00% contingent deferred sales charge ("CDSC") on shares sold within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a maximum CDSC of 5.00% based upon the holding period after purchase. Class B shares will convert to Class A shares in a certain number of years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a 1.00% CDSC on shares sold within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION Debt securities generally are valued by pricing services approved by the Fund's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued data, as well as broker quotes. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign securities and such exchange rates may occur between the times at which they are determined and the close of the customary trading session of the NYSE, which would not be reflected in the computation of the Fund's 37 net asset value. If events materially affecting the values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. SECURITY TRANSACTIONS Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. DELAYED DELIVERY SECURITIES The Fund may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. This may increase the risk if the other party to the transaction fails to deliver and causes the Fund to subsequently invest at less advantageous prices. The Fund identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. INCOME RECOGNITION Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. Corporate actions and dividend income are recorded on the ex-date. The value of additional securities received as an income payment is recorded as income and as the cost basis of such securities. FOREIGN CURRENCY TRANSACTIONS The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. For financial statement purposes, the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. DETERMINATION OF CLASS NET ASSET VALUES All income, expenses (other than class-specific expenses, as shown on the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. FEDERAL INCOME TAX STATUS The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its tax-exempt or taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. 38 DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the Fund's fiscal year ended May 31, 2004 was as follows:
MAY 31, 2004 - ----------------------------------------------------------- Distributions paid from: Ordinary income $ 50,193,309 Long-term capital gains --
Unrealized appreciation (depreciation) at November 30, 2004, based on cost of investments for federal income tax purposes, was: Unrealized appreciation $ 40,254,232 Unrealized depreciation (36,107,879) ------------------------------------------------------- Net unrealized appreciation $ 4,146,353
The following capital loss carryforwards, determined as of May 31, 2004, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD - ----------------------------------------------------- 2007 $ 7,774,983 2008 44,818,986 2009 161,087,717 2010 171,019,187 2011 18,463,873 $ 403,164,746
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Columbia, the transfer agent and the distributor, are each indirect, wholly owned subsidiaries of Bank of America Corporation. INVESTMENT ADVISORY FEE Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------------------------------------- First $1 billion 0.60% Next $1 billion 0.55% Over $2 billion 0.50%
For the six-months ended November 30, 2004, the Fund's annualized effective investment advisory fee rate was 0.60%. PRICING AND BOOKKEEPING FEES Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended November 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.033%. TRANSFER AGENT FEE Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $34.00 per open account. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. Columbia has voluntarily agreed to reimburse a portion of the transfer agent fee so that the transfer agent fee will not exceed 0.23% (exclusive of out-of-pocket expenses) annually of the Fund's average daily net 39 assets. Columbia, at its discretion, may revise or discontinue this arrangement any time. For the six months ended November 30, 2004, the Fund's annualized effective transfer agent fee rate, inclusive of out-of-pocket fees, was 0.22%. Columbia did not reimburse any transfer agent fees during the six-months ended November 30, 2004. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. For the six months ended November 30, 2004, the Distributor has retained net underwriting discounts of $7,056 on sales of the Fund's Class A shares and received CDSC fees of $6,461, $353,398 and $6,037 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a monthly service fee to the Distributor equal to 0.25% annually of the average daily net assets attributable to Class A, Class B and Class C shares. The Plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.75% annually of the average daily net assets attributable to Class B and Class C shares only. The Distributor has voluntarily agreed to waive a portion of the Class C share distribution fee so that it will not exceed 0.60% annually. The CDSC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. CUSTODY CREDITS The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The credits are recorded as a reduction of total expenses on the Statement of Operations. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. FEES PAID TO OFFICERS AND TRUSTEES With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out the Fund's assets. OTHER Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended November 30, 2004, the Fund paid $1,249 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PORTFOLIO INFORMATION For the six months ended November 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $224,332,794 and $268,758,986, respectively. NOTE 6. LINE OF CREDIT The Fund and other affiliated funds participate in a $350,000,000 committed unsecured revolving line of credit provided by State Street Bank and Trust Company. Borrowings are used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.10% per annum is accrued and apportioned among the participating funds based on their pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. For the six months ended November 30, 2004, the Fund did not borrow under this arrangement. NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. 40 HIGH-YIELD SECURITIES Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns and industry events may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid to the extent there is no established secondary market. FOREIGN SECURITIES There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. LEGAL PROCEEDINGS Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. 41 In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston Financial Corporation ("FleetBoston") (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the six months ended November 30, 2004, Columbia has assumed $11,824 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 42 FINANCIAL HIGHLIGHTS COLUMBIA HIGH YIELD OPPORTUNITY FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31, CLASS A SHARES 2004 2004 2003(a) 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.76 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.18(b) 0.35(b) 0.14(b) 0.34(b) 0.52(b)(c) 0.61(d) 0.60(d) Net realized and unrealized gain (loss) on investments and foreign currency 0.28 0.21 0.30 (0.53) (0.65)(c) (1.24) (0.20) --------- ---------- ---------- --------- --------- --------- --------- Total from Investment Operations 0.46 0.56 0.44 (0.19) (0.13) (0.63) 0.40 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.19) (0.32) (0.15) (0.39) (0.51) (0.62) (0.61) Return of capital -- -- -- (0.03) (0.04) -- -- --------- ---------- ---------- --------- --------- --------- --------- Total Distributions Declared to Shareholders (0.19) (0.32) (0.15) (0.42) (0.55) (0.62) (0.61) NET ASSET VALUE, END OF PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 Total return (e) 10.25%(f) 13.30%(g) 11.01%(f)(g) (4.27)% (2.78)% (10.28)% 6.17% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.16%(i) 1.19% 1.29%(i) 1.31% 1.22% 1.16% 1.21% Net investment income (h) 7.68%(i) 7.65% 8.24%(i) 7.92% 10.34%(c) 10.00% 9.02% Waiver/reimbursement -- 0.01% --%(i)(j) -- -- -- -- Portfolio turnover rate 37%(f) 75% 45%(f) 63% 62% 28% 42% Net assets, end of period (000's) $ 315,736 $ 325,658 $ 376,944 $ 361,780 $ 369,043 $ 390,917 $ 540,201
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to increase net investment income per share by $0.05, decrease net realized and unrealized loss per share by $0.05 and increase the ratio of net investment income to average net assets from 9.76% to 10.34%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (d) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (e) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (f) Not annualized. (g) Had the Investment Advisor not waived a portion of expenses, total return would have been reduced. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. (j) Rounds to less than 0.01%. 43 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31, CLASS B SHARES 2004 2004 2003(a) 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.76 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.16(b) 0.31(b) 0.13(b) 0.31(b) 0.48(b)(c) 0.56(d) 0.55(d) Net realized and unrealized gain (loss) on investments and foreign currency 0.28 0.22 0.29 (0.54) (0.65)(c) (1.24) (0.20) --------- ---------- ---------- --------- --------- --------- --------- Total from Investment Operations 0.44 0.53 0.42 (0.23) (0.17) (0.68) 0.35 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.17) (0.29) (0.13) (0.35) (0.47) (0.57) (0.56) Return of capital -- -- -- (0.03) (0.04) -- -- --------- ---------- ---------- --------- --------- --------- --------- Total Distributions Declared to Shareholders (0.17) (0.29) (0.13) (0.38) (0.51) (0.57) (0.56) NET ASSET VALUE, END OF PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 Total return (e) 9.84%(f) 12.46%(g) 10.67%(f)(g) (4.99)% (3.51)% (10.96)% 5.38% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.91%(i) 1.94% 2.04%(i) 2.06% 1.97% 1.91% 1.96% Net investment income (h) 6.93%(i) 6.90% 7.49%(i) 7.17% 9.59%(c) 9.25% 8.27% Waiver/reimbursement -- 0.01% --%(i)(j) -- -- -- -- Portfolio turnover rate 37%(f) 75% 45%(f) 63% 62% 28% 42% Net assets, end of period (000's) $ 241,873 $ 252,415 $ 305,021 $ 280,220 $ 350,464 $ 433,949 $ 627,057
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to increase net investment income per share by $0.05, decrease net realized and unrealized loss per share by $0.05 and increase the ratio of net investment income to average net assets from 9.02% to 9.59%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (d) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (e) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (f) Not annualized. (g) Had the Investment Advisor not waived a portion of expenses, total return would have been reduced. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. (j) Rounds to less than 0.01%. 44 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31, CLASS C SHARES 2004 2004 2003(a) 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.76 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.17(b) 0.32(b) 0.13(b) 0.31(b) 0.49(b)(c) 0.57(d) 0.56(d) Net realized and unrealized gain (loss) on investments and foreign currency 0.27 0.21 0.29 (0.53) (0.65)(c) (1.24) (0.20) --------- ---------- ---------- --------- --------- --------- --------- Total from Investment Operations 0.44 0.53 0.42 (0.22) (0.16) (0.67) 0.36 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.17) (0.29) (0.13) (0.36) (0.48) (0.58) (0.57) Return of capital -- -- -- (0.03) (0.04) -- -- --------- ---------- ---------- --------- --------- --------- --------- Total Distributions Declared to Shareholders (0.17) (0.29) (0.13) (0.39) (0.52) (0.58) (0.57) NET ASSET VALUE, END OF PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 Total return (e)(f) 9.92%(g) 12.63% 10.74%(g) (4.85)% (3.37)% (10.78)% 5.54% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.76%(i) 1.79% 1.89%(i) 1.91% 1.82% 1.76% 1.81% Net investment income (h) 7.08%(i) 7.05% 7.64%(i) 7.32% 9.74%(c) 9.40% 8.42% Waiver/reimbursement 0.15%(i) 0.16% 0.15%(i) 0.15% 0.15% 0.15% 0.15% Portfolio turnover rate 37%(g) 75% 45%(g) 63% 62% 28% 42% Net assets, end of period (000's) $ 43,693 $ 46,322 $ 51,471 $ 46,568 $ 52,122 $ 48,904 $ 56,068
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to increase net investment income per share by $0.05, decrease net realized and unrealized loss per share by $0.05 and increase the ratio of net investment income to average net assets from 9.16% to 9.74%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (d) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (e) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (f) Had the Investment Advisor and/or Distributor not waived a portion of expenses, total return would have been reduced. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 45 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, YEAR ENDED DECEMBER 31, CLASS Z SHARES 2004 2004 2003(a) 2002 2001 2000 1999(b) - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 $ 6.79 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.19(c) 0.36(c) 0.15(c) 0.33(c) 0.53(c)(d) 0.62(e) 0.60(e) Net realized and unrealized gain (loss) on investments and foreign currency 0.27 0.21 0.29 (0.51) (0.65)(d) (1.24) (0.23) --------- ---------- ---------- ---------- ---------- --------- -------- Total from Investment Operations 0.46 0.57 0.44 (0.18) (0.12) (0.62) 0.37 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.19) (0.33) (0.15) (0.40) (0.52) (0.63) (0.61) Return of capital -- -- -- (0.03) (0.04) -- -- --------- ---------- ---------- ---------- ---------- --------- -------- Total Distributions Declared to Shareholders (0.19) (0.33) (0.15) (0.43) (0.56) (0.63) (0.61) NET ASSET VALUE, END OF PERIOD $ 4.81 $ 4.54 $ 4.30 $ 4.01 $ 4.62 $ 5.30 $ 6.55 Total return (f) 10.39%(g) 13.58%(h) 11.12%(g)(h) (4.03)% (2.53)% (10.06)% 5.83%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (i) 0.91%(j) 0.94% 1.04%(j) 1.06% 0.97% 0.91% 0.95%(j) Net investment income (i) 7.93%(j) 7.92% 8.49%(j) 8.17% 10.59%(d) 10.25% 9.22%(j) Waiver/reimbursement -- 0.01% --%(j)(k) -- -- -- -- Portfolio turnover rate 37%(g) 75% 45%(g) 63% 62% 28% 42% Net assets, end of period (000's) $ 18,069 $ 14,194 $ 45,803 $ 35,541 $ 1,978 $ 566 $ 418
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Class Z shares were initially offered on January 8, 1999. Per share data and total return reflect activity from that date. (c) Per share data was calculated using average shares outstanding during the period. (d) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to increase net investment income per share by $0.05, decrease net realized and unrealized loss per share by $0.05 and increase the ratio of net investment income to average net assets from 10.01% to 10.59%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (e) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (f) Total return at net asset value assuming all distributions reinvested. (g) Not annualized. (h) Had the Investment Advisor not waived a portion of expenses, total return would have been reduced. (i) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (j) Annualized. (k) Rounds to less than 0.01%. 46 COLUMBIA FUNDS COLUMBIA HIGH YIELD OPPORTUNITY FUND LARGE GROWTH Columbia Common Stock* Columbia Growth* Columbia Growth Stock Columbia Large Cap Growth Columbia Tax-Managed Growth Columbia Tax-Managed Growth II Columbia Young Investor LARGE VALUE Columbia Disciplined Value Columbia Growth & Income Columbia Large Cap Core Columbia Tax-Managed Value MIDCAP GROWTH Columbia Acorn Select Columbia Mid Cap Growth MIDCAP VALUE Columbia Dividend Income Columbia Mid Cap Columbia Strategic Investor SMALL GROWTH Columbia Acorn Columbia Acorn USA Columbia Small Company Equity SMALL VALUE Columbia Small Cap Columbia Small Cap Value BALANCED Columbia Asset Allocation Columbia Balanced Columbia Liberty Fund SPECIALTY Columbia Real Estate Equity Columbia Technology Columbia Utilities TAXABLE FIXED-INCOME Columbia Contrarian Income* Columbia Corporate Bond* Columbia Federal Securities Columbia Fixed Income Securities Columbia High Yield Columbia High Yield Opportunity Columbia Income Columbia Intermediate Bond Columbia Intermediate Government Income Columbia Quality Plus Bond Columbia Short Term Bond Columbia Strategic Income TAX EXEMPT Columbia High Yield Municipal Columbia Intermediate Tax-Exempt Bond Columbia Managed Municipals Columbia National Municipal Bond Columbia Tax-Exempt Columbia Tax-Exempt Insured
47 SINGLE STATE TAX EXEMPT Columbia California Tax-Exempt Columbia Connecticut Intermediate Municipal Bond Columbia Connecticut Tax-Exempt Columbia Florida Intermediate Municipal Bond Columbia Massachusetts Intermediate Municipal Bond Columbia Massachusetts Tax-Exempt Columbia New Jersey Intermediate Municipal Bond Columbia New York Intermediate Municipal Bond Columbia New York Tax-Exempt Columbia Oregon Municipal Bond Columbia Pennsylvania Intermediate Municipal Bond Columbia Rhode Island Intermediate Municipal Bond MONEY MARKET Columbia Money Market Columbia Municipal Money Market INTERNATIONAL/GLOBAL Columbia Acorn International Columbia Acorn International Select Columbia Global Equity Columbia International Equity* Columbia International Stock Columbia Newport Greater China Columbia Newport Tiger INDEX Columbia Large Company Index Columbia Small Company Index Columbia U.S. Treasury Index
* The fund was closed to new investments after the close of business on November 10, 2004. The fund's trustees have approved the merger, which will take effect on or about February 26, 2005, pending shareholder approval. Please consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. Contact us at 800-345-6611 for a prospectus which contains this and other important information about the fund. Read it carefully before you invest. For complete product information on any Columbia fund, visit our website at www.columbiafunds.com. Columbia Management is the primary investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. 48 IMPORTANT INFORMATION ABOUT THIS REPORT COLUMBIA HIGH YIELD OPPORTUNITY FUND TRANSFER AGENT Columbia Funds Services, Inc. P.O. Box 8081 Boston MA 02266-8081 800.345.6611 DISTRIBUTOR Columbia Funds Distributor, Inc. One Financial Center Boston MA 02111 INVESTMENT ADVISOR Columbia Management Advisors, Inc. 100 Federal Street Boston MA 02110 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110 The fund mails one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800-345-6611 and additional reports will be sent to you. This report has been prepared for shareholders of Columbia High Yield Opportunity Fund. This report may also be used as sales literature when preceded or accompanied by the current prospectus which provides details of sales charges, investment objectives and operating policies of the fund and with the most recent copy of the Columbia Funds Performance Update. A description of the fund's proxy voting policies and procedures is available (i) on the fund's website, www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Columbia Management is the primary investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. 49 [GRAPHIC] Help your fund reduce printing and postage costs! Elect to get your shareholder reports by electronic delivery. With Columbia's eDelivery program, you receive an e-mail message when your shareholder report becomes available online. If your fund account is registered with Columbia Funds, you can sign up quickly and easily on our website at www.columbiafunds.com. Please note -- if you own your fund shares through a financial institution, contact the institution to see if it offers electronic delivery. If you own your fund shares through a retirement plan, electronic delivery may not be available to you. COLUMBIA HIGH YIELD OPPORTUNITY FUND SEMIANNUAL REPORT, NOVEMBER 30, 2004 PRSRT STD U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 [COLUMBIAFUNDS (R) LOGO] A MEMBER OF COLUMBIA MANAGEMENT (C) 2004 COLUMBIA FUNDS DISTRIBUTOR, INC. ONE FINANCIAL CENTER, BASTON, MA 02111-2621 800.345.6611 www.columbiafunds.com 730-03/744T-1104 (01/05) 05/3942 [GRAPHIC] COLUMBIA STRATEGIC INCOME FUND SEMIANNUAL REPORT NOVEMBER 30, 2004 [COLUMBIAFUNDS(R) LOGO] A MEMBER OF COLUMBIA MANAGEMENT TABLE OF CONTENTS Fund Profile 1 Performance Information 2 Understanding Your Expenses 3 Economic Update 4 Portfolio Manager's Report 5 Investment Portfolio 7 Statement of Assets and Liabilities 32 Statement of Operations 33 Statement of Changes in Net Assets 34 Notes to Financial Statements 36 Financial Highlights 42 Columbia Funds 47 Important Information About This Report 49
Economic and market conditions change frequently. There is no assurance that trends described in this report will continue or commence. NOT FDIC MAY LOSE VALUE INSURED ------------------- NO BANK GUARANTEE PRESIDENT'S MESSAGE COLUMBIA STRATEGIC INCOME FUND DEAR SHAREHOLDER: In 2004, Columbia Funds became part of the Bank of America family, one of the largest, most respected financial institutions in the United States. As a direct result of this merger, a number of changes are in the works that we believe offer significant potential benefits for our shareholders. Plans are underway to bring Nations Funds and Columbia Funds together in a single fund family that covers a wide range of markets, sectors, and asset classes under the management of talented, seasoned investment professionals. As a result, some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that affect you and your account. In this matter, your timely response will enable us to implement the changes in 2005. The increased efficiencies we expect from a more stream-lined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, negotiations are currently underway to consolidate the transfer agency of all of our funds and to consolidate custodial services, each under a single vendor. We will also be reducing management fees for many funds as part of our agreement in principle with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Columbia Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ Christopher L. Wilson Christopher L. Wilson HEAD OF MUTUAL FUNDS, COLUMBIA MANAGEMENT Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. FUND PROFILE COLUMBIA STRATEGIC INCOME FUND The information below gives you a snapshot of your fund at the end of the reporting period. Your fund is actively managed and the composition of its portfolio will change over time. TOP 5 COUNTRIES AS OF 11/30/04 (%) USA 63.2 Canada 4.0 Sweden 3.4 Germany 3.2 United Kingdom 3.2
PORTFOLIO STRUCTURE AS OF 11/30/04 (%) Corporate fixed-income bonds and Notes 40.9 Foreign government obligations 35.7 US government obligations 16.5 US government agencies 6.1 Asset-backed securities 0.7 Convertible bonds 0.3 Municipal bond (taxable) 0.2 Cash equivalents, net other assets & liabilities (0.4)
QUALITY BREAKDOWN AS OF 11/30/04 (%) AAA 40.0 AA 3.6 A 1.8 BBB 3.8 BB 11.7 B 23.9 CCC 11.8 CC 1.8 D 0.1 Non-rated 1.5
Quality breakdown is calculated as a percentage of total investments. Ratings shown in the quality breakdown represent the highest rating assigned to a particular bond by one of the following nationally-recognized rating agencies: Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. or Fitch Ratings Ltd. Country breakdown and portfolio structure are calculated as a percentage of net assets. Management Style is determined by Columbia Management and is based on the investment strategy and process as outlined in the fund's prospectus. [SIDENOTE] SUMMARY - - FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004, THE FUND'S CLASS A SHARES RETURNED 9.63% WITHOUT SALES CHARGE. - - THE FUND'S RETURN WAS SIGNIFICANTLY HIGHER THAN THE RETURN OF THE LEHMAN BROTHERS GOVERNMENT/CREDIT BOND INDEX AND THE AVERAGE RETURN OF THE LIPPER MULTI-SECTOR INCOME FUNDS CATEGORY AVERAGE, WHICH WERE 3.72% AND 8.14%, RESPECTIVELY. - - THE FUND'S HIGH-YIELD AND FOREIGN DEBT POSITIONS HELPED TO PRODUCE ABOVE-AVERAGE RESULTS. [CHART] CLASS A SHARES 9.63% LEHMAN BROTHERS GOVERNMENT/CREDIT BOND INDEX 3.72%
OBJECTIVE Seeks current income consistent with prudent risk and also seeks maximum total return TOTAL NET ASSETS $1,276.7 million MANAGEMENT STYLE [GRAPHIC] 1 PERFORMANCE INFORMATION COLUMBIA STRATEGIC INCOME FUND [CHART] VALUE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04
CLASS A SHARES CLASS A SHARES LEHMAN BROTHERS GOVERNMENT/ WITHOUT SALES CHARGE WITH SALES CHARGE CREDIT BOND INDEX 12/1/1994 $ 10,000 $ 9,525 $ 10,000 12/31/1994 $ 10,045 $ 9,568 $ 10,066 1/31/1995 $ 10,151 $ 9,669 $ 10,259 2/28/1995 $ 10,398 $ 9,904 $ 10,497 3/31/1995 $ 10,600 $ 10,096 $ 10,568 4/30/1995 $ 10,834 $ 10,320 $ 10,716 5/31/1995 $ 11,149 $ 10,620 $ 11,165 6/30/1995 $ 11,178 $ 10,647 $ 11,254 7/31/1995 $ 11,304 $ 10,767 $ 11,210 8/31/1995 $ 11,349 $ 10,810 $ 11,353 9/30/1995 $ 11,558 $ 11,009 $ 11,469 10/31/1995 $ 11,718 $ 11,162 $ 11,638 11/30/1995 $ 11,847 $ 11,284 $ 11,830 12/31/1995 $ 12,077 $ 11,503 $ 12,004 1/31/1996 $ 12,274 $ 11,691 $ 12,078 2/29/1996 $ 12,170 $ 11,591 $ 11,822 3/31/1996 $ 12,132 $ 11,556 $ 11,723 4/30/1996 $ 12,214 $ 11,634 $ 11,642 5/31/1996 $ 12,245 $ 11,663 $ 11,622 6/30/1996 $ 12,311 $ 11,726 $ 11,777 7/31/1996 $ 12,377 $ 11,790 $ 11,804 8/31/1996 $ 12,550 $ 11,953 $ 11,774 9/30/1996 $ 12,812 $ 12,203 $ 11,984 10/31/1996 $ 12,986 $ 12,369 $ 12,263 11/30/1996 $ 13,287 $ 12,656 $ 12,489 12/31/1996 $ 13,315 $ 12,683 $ 12,350 1/31/1997 $ 13,311 $ 12,679 $ 12,365 2/28/1997 $ 13,418 $ 12,780 $ 12,391 3/31/1997 $ 13,155 $ 12,530 $ 12,243 4/30/1997 $ 13,299 $ 12,668 $ 12,422 5/31/1997 $ 13,539 $ 12,896 $ 12,538 6/30/1997 $ 13,723 $ 13,071 $ 12,688 7/31/1997 $ 14,061 $ 13,393 $ 13,076 8/31/1997 $ 14,000 $ 13,335 $ 12,930 9/30/1997 $ 14,304 $ 13,624 $ 13,133 10/31/1997 $ 14,261 $ 13,584 $ 13,343 11/30/1997 $ 14,335 $ 13,654 $ 13,414 12/31/1997 $ 14,463 $ 13,776 $ 13,555 1/31/1998 $ 14,696 $ 13,997 $ 13,746 2/28/1998 $ 14,751 $ 14,051 $ 13,718 3/31/1998 $ 14,868 $ 14,162 $ 13,761 4/30/1998 $ 14,944 $ 14,234 $ 13,830 5/31/1998 $ 15,001 $ 14,288 $ 13,978 6/30/1998 $ 14,996 $ 14,284 $ 14,120 7/31/1998 $ 15,129 $ 14,411 $ 14,132 8/31/1998 $ 14,503 $ 13,814 $ 14,407 9/30/1998 $ 14,798 $ 14,095 $ 14,819 10/31/1998 $ 14,772 $ 14,071 $ 14,714 11/30/1998 $ 15,213 $ 14,490 $ 14,802 12/31/1998 $ 15,208 $ 14,486 $ 14,839 1/31/1999 $ 15,311 $ 14,584 $ 14,945 2/28/1999 $ 15,112 $ 14,395 $ 14,589 3/31/1999 $ 15,325 $ 14,598 $ 14,662 4/30/1999 $ 15,540 $ 14,802 $ 14,698 5/31/1999 $ 15,206 $ 14,484 $ 14,547 6/30/1999 $ 15,201 $ 14,479 $ 14,502 7/31/1999 $ 15,195 $ 14,474 $ 14,461 8/31/1999 $ 15,124 $ 14,405 $ 14,450 9/30/1999 $ 15,165 $ 14,444 $ 14,580 10/31/1999 $ 15,160 $ 14,440 $ 14,618 11/30/1999 $ 15,294 $ 14,567 $ 14,609 12/31/1999 $ 15,404 $ 14,672 $ 14,520 1/31/2000 $ 15,236 $ 14,512 $ 14,516 2/29/2000 $ 15,466 $ 14,731 $ 14,697 3/31/2000 $ 15,389 $ 14,658 $ 14,910 4/30/2000 $ 15,241 $ 14,517 $ 14,837 5/31/2000 $ 15,069 $ 14,353 $ 14,824 6/30/2000 $ 15,377 $ 14,647 $ 15,126 7/31/2000 $ 15,494 $ 14,758 $ 15,286 8/31/2000 $ 15,614 $ 14,872 $ 15,502 9/30/2000 $ 15,436 $ 14,702 $ 15,561 10/31/2000 $ 15,107 $ 14,389 $ 15,659 11/30/2000 $ 14,826 $ 14,122 $ 15,927 12/31/2000 $ 15,302 $ 14,575 $ 16,240 1/31/2001 $ 15,934 $ 15,177 $ 16,513 2/28/2001 $ 15,954 $ 15,197 $ 16,683 3/31/2001 $ 15,586 $ 14,846 $ 16,760 4/30/2001 $ 15,419 $ 14,687 $ 16,634 5/31/2001 $ 15,513 $ 14,776 $ 16,731 6/30/2001 $ 15,318 $ 14,590 $ 16,811 7/31/2001 $ 15,414 $ 14,682 $ 17,230 8/31/2001 $ 15,673 $ 14,929 $ 17,450 9/30/2001 $ 15,159 $ 14,439 $ 17,611 10/31/2001 $ 15,600 $ 14,859 $ 18,058 11/30/2001 $ 15,795 $ 15,045 $ 17,762 12/31/2001 $ 15,770 $ 15,021 $ 17,622 1/31/2002 $ 15,800 $ 15,049 $ 17,750 2/28/2002 $ 15,830 $ 15,078 $ 17,901 3/31/2002 $ 15,881 $ 15,126 $ 17,538 4/30/2002 $ 16,189 $ 15,420 $ 17,878 5/31/2002 $ 16,270 $ 15,497 $ 18,043 6/30/2002 $ 16,003 $ 15,243 $ 18,196 7/31/2002 $ 15,814 $ 15,063 $ 18,414 8/31/2002 $ 16,067 $ 15,304 $ 18,827 9/30/2002 $ 16,144 $ 15,377 $ 19,231 10/31/2002 $ 16,178 $ 15,410 $ 19,047 11/30/2002 $ 16,540 $ 15,755 $ 19,058 12/31/2002 $ 17,025 $ 16,216 $ 19,563 1/31/2003 $ 17,270 $ 16,450 $ 19,563 2/28/2003 $ 17,578 $ 16,743 $ 19,912 3/31/2003 $ 17,736 $ 16,893 $ 19,886 4/30/2003 $ 18,417 $ 17,542 $ 20,098 5/31/2003 $ 18,914 $ 18,016 $ 20,669 6/30/2003 $ 19,073 $ 18,167 $ 20,587 7/31/2003 $ 18,606 $ 17,722 $ 19,724 8/31/2003 $ 18,704 $ 17,816 $ 19,854 9/30/2003 $ 19,338 $ 18,420 $ 20,484 10/31/2003 $ 19,437 $ 18,514 $ 20,223 11/30/2003 $ 19,791 $ 18,851 $ 20,278 12/31/2003 $ 20,309 $ 19,345 $ 20,479 1/31/2004 $ 20,474 $ 19,501 $ 20,665 2/29/2004 $ 20,576 $ 19,599 $ 20,917 3/31/2004 $ 20,743 $ 19,758 $ 21,110 4/30/2004 $ 20,218 $ 19,258 $ 20,462 5/31/2004 $ 20,091 $ 19,136 $ 20,357 6/30/2004 $ 20,296 $ 19,332 $ 20,441 7/31/2004 $ 20,537 $ 19,562 $ 20,657 8/31/2004 $ 20,950 $ 19,955 $ 21,095 9/30/2004 $ 21,262 $ 20,252 $ 21,169 10/31/2004 $ 21,645 $ 20,617 $ 21,353 11/30/2004 $ 22,004 $ 20,959 $ 21,117
The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Lehman Brothers Government/Credit Bond Index is an unmanaged index that tracks the performance of U.S. Government and corporate bonds rated investment grade or better, with maturities of at least one year. Unlike the fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/04 (%)
SHARE CLASS A B C J Z - ------------------------------------------------------------------------------------------------------------- INCEPTION 04/21/77 05/15/92 07/01/97 11/02/98 01/29/99 - ------------------------------------------------------------------------------------------------------------- SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT 6-MONTH (CUMULATIVE) 9.63 4.43 9.06 4.06 9.31 8.31 9.29 6.01 9.66 1-YEAR 11.29 6.00 10.46 5.46 10.62 9.62 10.95 7.62 11.65 5-YEAR 7.56 6.52 6.73 6.43 6.92 6.92 7.18 6.53 7.71 10-YEAR 8.21 7.68 7.38 7.38 7.52 7.52 7.96 7.63 8.29
AVERAGE ANNUAL TOTAL RETURN AS OF 09/30/04 (%)
SHARE CLASS A B C J Z - ------------------------------------------------------------------------------------------------------------- SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT 6-MONTH (CUMULATIVE) 2.49 -2.38 2.10 -2.86 2.18 1.18 2.32 -0.75 2.63 1-YEAR 9.93 4.70 9.11 4.11 9.27 8.27 9.59 6.30 10.09 5-YEAR 6.98 5.94 6.18 5.89 6.34 6.34 6.61 5.96 7.09 10-YEAR 7.77 7.25 6.97 6.97 7.09 7.09 7.55 7.22 7.85
THE "WITH SALES CHARGE" RETURNS INCLUDE THE MAXIMUM INITIAL SALES CHARGE OF 4.75% FOR CLASS A SHARES AND 3.00% FOR CLASS J SHARES, AND MAXIMUM CONTINGENT DEFERRED SALES CHARGE OF 5.00% FOR CLASS B SHARES AND 1.00% FOR CLASS C SHARES FOR THE FIRST YEAR ONLY. THE "WITHOUT SALES CHARGE" RETURNS DO NOT INCLUDE THE EFFECT OF SALES CHARGES. IF THEY HAD, RETURNS WOULD BE LOWER. ALL RESULTS SHOWN ASSUME REINVESTMENT OF DISTRIBUTIONS. CLASS Z SHARES ARE SOLD AT NET ASSET VALUE WITH NO RULE 12b-1 FEES. PERFORMANCE FOR DIFFERENT SHARE CLASSES WILL VARY BASED ON DIFFERENCES IN SALES CHARGES AND FEES ASSOCIATED WITH EACH CLASS. PERFORMANCE REFLECTS ANY VOLUNTARY WAIVERS OR REIMBURSEMENTS OF FUND EXPENSES BY THE ADVISOR OR ITS AFFILIATES. ABSENT THESE WAIVERS OR REIMBURSEMENT ARRANGEMENTS, PERFORMANCE WOULD HAVE BEEN LOWER. The share performance information for classes J and Z (newer class shares) includes returns of the fund's class A shares (the oldest existing fund class) for periods prior to the inception of the newer class shares. These class A share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between Class A shares and the newer class shares. If differences in expenses had been reflected, the returns shown for periods prior to the inception of class J shares would have been lower and the returns for the class Z shares would have been higher. Class C is a newer class of shares. Its performance information includes returns of the fund's class B shares for periods prior to the inception of class C shares. Class B shares would have substantially similar annual returns because class B and class C shares have similar expense structures. Class A shares were initially offered on April 21, 1977, class B shares were initially offered on May 15, 1992, class C shares initially offered on July 1, 1997, class J shares were initially offered on November 2, 1998 and class Z shares were initially offered on January 29, 1999. [SIDENOTE] PERFORMANCE OF A $10,000 INVESTMENT 12/01/94 - 11/30/04 ($)
SALES CHARGE: WITHOUT WITH - ------------------------------------------ Class A 22,004 20,959 Class B 20,390 20,390 Class C 20,649 20,649 Class J 21,509 20,864 Class Z 22,174 n/a
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 STRATEGIC INCOME FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory and/or Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. 06/01/04 - 11/30/04
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) CLASS A 1,000.00 1,000.00 1,100.98 1,019.40 5.95 5.72 1.13 CLASS B 1,000.00 1,000.00 1,094.66 1,015.64 9.87 9.50 1.88 CLASS C 1,000.00 1,000.00 1,097.42 1,016.39 9.10 8.74 1.73 CLASS J 1,000.00 1,000.00 1,097.22 1,017.65 7.78 7.49 1.48 CLASS Z 1,000.00 1,000.00 1,101.28 1,020.61 4.69 4.51 0.89
Expenses paid during the period are equal to the fund's respective class annualized expense ratio, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 365. Had the distributor not waived or reimbursed a portion of Class C expenses, Class C total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only continuing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other fund companies, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. [SIDENOTE] ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM COLUMBIA FUNDS SERVICES, INC., YOUR ACCOUNT BALANCE IS AVAILABLE ONLINE AT www.columbiafunds.com OR BY CALLING SHAREHOLDER SERVICES AT 800.345.6611 - - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE 1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6 2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD," LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1. YOUR ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING THE PERIOD 3 ECONOMIC UPDATE COLUMBIA STRATEGIC INCOME FUND During the six-month period that began June 1, 2004, and ended November 30, 2004, the US economy grew at a healthy pace, despite uncertainty about new job growth and rising energy prices. The economy encountered a soft patch in the spring, as the rate of growth slowed from 4.5% to 3.3%. However, the pace picked up again heading into the final month of the year. For the third quarter, gross domestic product (GDP) increased by 4.0%. Job growth dominated the economic news. More than one million jobs were created in the spring of 2004, and consumer confidence soared to its highest level in two years. However, job growth fell below expectations in July and August. Consumer confidence fell--and continued to fall--as consumers grew increasingly cautious about employment prospects. Consumer spending held up during the period, despite a slowdown in growth during the summer. Within the business sector, industrial production rose; factories utilized more of their capacity; and spending on technology, capital equipment and construction picked up. However, business spending fell short of forecasts given the level of profit growth and the maturity of the economic cycle. BONDS DELIVER SOLID RETURNS Despite a weak start--and a weak finish--all sectors of the US bond market delivered solid returns for the six-month period. Yields rose and bond prices fell when job growth picked up in the spring and investors began to anticipate higher short-term interest rates. However, a shaky stock market, higher energy prices and some mixed economic data gave the bond market a significant boost during the summer and into the fall. In November, the 10-year Treasury yield rose sharply and bonds gave back some of their earlier gains. In this environment, the Lehman Brothers Aggregate Bond Index returned 3.82%. High-yield bonds, which can be less sensitive to changing interest rates, gained 9.31%, as measured by the CSFB High Yield Index. A relatively strong economy improved credit quality, and the sector's high yields attracted investors seeking income. Municipal and mortgage bonds outperformed Treasury bonds. STOCKS PICK UP MOMENTUM Although stock market performance was lackluster, it picked up as economic news improved and uncertainty surrounding the presidential election was resolved. The S&P 500 Index returned 5.68% for the six-month period. More than half of that return was generated in November. Small-and mid-cap stocks led the market and value stocks outperformed growth stocks. Energy and utilities stocks were the best-performing sectors for the six-month period. Information technology rebounded strongly in the second half. HIGHER SHORT-TERM INTEREST RATES After a year of the lowest short-term interest rates in recent history, the Federal Reserve Board (the Fed) raised the federal funds rate, a key short-term rate, from 1.0% to 2.0% in four equal steps during the period.(1) The Fed indicated that it would continue to raise short-term interest rates at a "measured pace," in an attempt to balance economic growth against inflationary pressures. Because the Fed's moves were widely anticipated, these rate increases have had little impact on the financial markets since they commenced. (1) The federal funds rate was raised to 2.25% on December 14, 2004. [SIDENOTE] SUMMARY FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2004 - - INVESTMENT-GRADE BONDS DELIVERED SOLID GAINS. THE LEHMAN BROTHERS AGGREGATE BOND INDEX RETURNED 3.82%. HIGH-YIELD BONDS, WHICH CAN BE LESS SENSITIVE TO CHANGING INTEREST RATES, LED THE FIXED INCOME MARKETS. THE CSFB HIGH YIELD INDEX RETURNED 9.31% [CHART] LEHMAN INDEX 3.82% CSFB HIGH YIELD INDEX 9.31%
- - AFTER A WEAK START, STOCK PRICES BOUNCED BACK IN NOVEMBER, HELPING THE S&P 500 INDEX TO A 5.68% GAIN FOR THE SIX MONTH PERIOD. VALUE STOCKS OUTPERFORMED GROWTH STOCKS, AS MEASURED BY THE RUSSELL 1000 GROWTH AND VALUE INDICES. [CHART] S&P 500 INDEX 5.68% RUSSELL 1000 VALUE INDEX 11.01%
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that tracks the performance of fixed-rate, publicly placed, dollar-denominated, non-convertible investment-grade debt issues. The CSFB High Yield Index is a broad-based, unmanaged index that tracks the performance of high-yield bonds. The S&P 500 Index is an unmanaged index that tracks the performance of 500 widely held, large capitalization US stocks. The Russell 1000 Value Index is an unmanaged index that tracks the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. 4 PORTFOLIO MANAGER'S REPORT COLUMBIA STRATEGIC INCOME FUND For the six-month period ended November 30, 2004, class A shares of Columbia Strategic Income Fund returned 9.63% without sales charge. Fund performance was greater than the Lehman Brothers Government/Credit Bond Index, which returned 3.72% for the period. The fund also surpassed the average return of the Lipper Multi-Sector Income Funds Category, which was 8.14%.(1) The fund's exposure to high-yield securities and to foreign government bonds was instrumental in producing above-average returns. HIGH YIELD CONTINUES TO OUTPERFORM Lower-quality corporate bonds outperformed US Treasury obligations during this reporting period, continuing a pattern that has been in place for most of the last two years. With approximately 40% of assets invested in the US high-yield marketplace, the fund has been positioned to take advantage of an environment that rewarded holders of bonds with lower credit quality. The fund's high-yield holdings carry an average credit quality of single B, compared to a weighted average of BBB+ for the fund as a whole. An overweight position in B and CCC-rated bonds in this sector paid off handsomely, especially during the equity rally that followed the US election in early November. For the six months as a whole, the CSFB High Yield Index was up approximately 9%, compared to gains of just 4% from the 10-year US Treasury index. The fund's position in Treasury securities was limited to just 17% of the fund's total assets during the period. Specific holdings that helped the fund included Levi Strauss & Co., the casual clothing maker, and chemicals manufacturer Huntsman ICI Holdings LLC. Levi Strauss stabilized its operation as it investigated a possible sale of its Docker's brand. (In October, the company announced plans to retain the brand.) Bonds of chemical producer Huntsman rose as commodity chemical prices trended higher, and in anticipation of a proposed transaction that would retire the bonds at a premium. Poor performers included Delta Air Lines, Inc., which faced high fuel prices and high labor costs, and Merisant Co., the manufacturer of the sugar substitute Equal. Equal lost market share to Johnson & Johnson's Splenda. FOREIGN BONDS OUTPERFORM DOMESTIC HOLDINGS Throughout the period, approximately 40% of the fund's total assets were invested outside of the United States. The fund's exposure to non-dollar denominated bonds of developed countries was approximately 20%. Exposure to foreign currencies, notably the euro and the British pound, was of particular value to the fund because the US dollar declined, adding to the gains of bonds denominated in these currencies. (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. [SIDENOTE] NET ASSET VALUE PER SHARE AS OF 11/30/04 (%) CLASS A 6.40 CLASS B 6.39 CLASS C 6.40 CLASS J 6.38 CLASS Z 6.35
DISTRIBUTIONS DECLARED PER SHARE 06/01/04 - 11/30/04 ($) CLASS A 0.19 CLASS B 0.17 CLASS C 0.17 CLASS J 0.18 CLASS Z 0.20
SEC YIELDS AS OF 11/30/04 (%) CLASS A 5.10 CLASS B 4.60 CLASS C 4.76 CLASS J 4.77 CLASS Z 5.59
The 30-day SEC yields reflect the portfolio's earning power net of expenses, expressed as an annualized percentage of the public offering price per share at the end of the period. 5 Bonds from emerging markets accounted for approximately 14-15% of the fund's total assets. Emerging market bonds performed well during the period as the global interest rate environment remained favorable and the demand for commodities strong. In particular, oil producing countries such as Russia, Venezuela and Mexico benefited from the sustained strength in oil prices. The credit quality of many emerging market issuers has improved over the past two years, adding to the strong performance of emerging market debt. Recent rating-agency credit upgrades include Brazil, Bulgaria, Peru and Venezuela. PREPARING FOR HIGHER RATES AND A LOWER DOLLAR We have structured the fund to benefit from continued stable economic growth in the United States and abroad. As long as the US economy continues to grow at a reasonable rate, we expect the Federal Reserve Board (the Fed) to continue to raise short-term rates, a course that it set in motion with four increases during this reporting period. The Fed has said that it is not currently concerned that inflation could become a problem, which has helped it keep recent rate hikes relatively small. We continue to maintain substantial allocations to the high yield and foreign government sectors, including exposure to foreign currency. Although the dollar has been weak for some time now, investors are paying increasing attention to America's fiscal, current account and trade deficits. If the financial markets bid the dollar down even further to adjust these imbalances, the fund is positioned to benefit. [PHOTO OF LAURA A. OSTRANDER] Laura A. Ostrander has managed or co-managed the Columbia Strategic Income Fund since September 2000 and has been with the advisor or its predecessors or affiliate organizations since December 1996. /s/ Laura A. Ostrander The values of fixed-income securities generally move inversely with changes in interest rates such that when interest rates rise, bond values fall and vice versa. Investing in high-yield securities offers the potential for high current income and attractive total return, but involves certain risks. Lower-rated bond risks include default of the issuer, rising interest rates and risk associated with investing in securities of foreign and emerging markets, including currency exchange rate fluctuations and economic and political change. Bond investing also involves interest rate risk, which means that bond prices may change as interest rates increase or decrease. Foreign investments involve market, political, accounting and currency risks not associated with other investments. [SIDENOTE] WE HAVE STRUCTURED THE FUND TO BENEFIT FROM CONTINUED ECONOMIC GROWTH IN THE UNITED STATES AND ABROAD. HOLDINGS DISCUSSED IN THIS REPORT AS OF 11/30/04 (%) Levi Strauss & Co. 0.2 Huntsman ICI Holdings LLC 0.4 Delta Air Lines, Inc. 0.1 Merisant Co. 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. 6 INVESTMENT PORTFOLIO NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - 40.9% BASIC MATERIALS - 4.0% CHEMICALS - 2.1% AGRICULTURAL CHEMICALS - 0.7% IMC GLOBAL, INC. 10.875% 08/01/13 1,835,000 2,330,450 TERRA CAPITAL, INC. 12.875% 10/15/08 2,990,000 3,692,650 UAP HOLDING CORP. (a) 07/15/12 (10.750% 01/15/08) (b) 1,630,000 1,238,800 UNITED AGRI PRODUCTS 8.250% 12/15/11 (8.750% 12/15/04) (b)(c) 1,535,000 1,634,775 8,896,675 CHEMICALS - DIVERSIFIED - 1.3% BCP CAYLUX HOLDING LUXEMBOURG SCA 9.625% 06/15/14 (b) 1,180,000 1,327,500 EQUISTAR CHEMICALS LP 10.625% 05/01/11 2,615,000 3,026,862 HMP EQUITY HOLDINGS CORP. (d) 05/15/08 4,620,000 3,037,650 HUNTSMAN ICI HOLDINGS LLC (d) 12/31/09 9,530,000 5,312,975 LYONDELL CHEMICAL CO. 9.625% 05/01/07 2,825,000 3,100,438 NOVA CHEMICALS CORP. 6.500% 01/15/12 780,000 809,398 WESTLAKE CHEMICAL CORP. 8.750% 07/15/11 767,000 864,793 17,479,616 CHEMICALS - SPECIALTY - 0.1% CROMPTON CORP. 7.670% 08/01/10 (b)(e) 940,000 1,015,200 1,015,200 Chemicals Total 27,391,491 FOREST PRODUCTS & PAPER - 0.9% FORESTRY - 0.2% MILLAR WESTERN FOREST PRODUCTS LTD. 7.750% 11/15/13 1,260,000 1,348,200 TEMBEC INDUSTRIES, INC. 8.500% 02/01/11 900,000 900,000 2,248,200 PAPER & RELATED PRODUCTS - 0.7% BOISE CASCADE LLC 5.005% 10/15/12 (b)(e) 915,000 933,300 7.125% 10/15/14 (b) 1,030,000 1,081,500 BUCKEYE TECHNOLOGIES, INC. 8.500% 10/01/13 390,000 429,000 CARAUSTAR INDUSTRIES, INC. 9.875% 04/01/11 1,605,000 1,725,375 GEORGIA-PACIFIC CORP. 8.000% 01/15/24 1,025,000 1,189,000 NEENAH PAPER, INC. 7.375% 11/15/14 (b) 680,000 686,800
See accompanying notes to financial statements. 7
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) BASIC MATERIALS - (CONTINUED) FOREST PRODUCTS & PAPER - (CONTINUED) NEWARK GROUP, INC. 9.750% 03/15/14 (b) 1,335,000 1,398,413 NORSKE SKOG CANADA LTD. 7.375% 03/01/14 565,000 593,250 8.625% 06/15/11 850,000 918,000 8,954,638 Forest Products & Paper Total 11,202,838 IRON/STEEL - 0.6% METAL - IRON - 0.2% WISE METALS GROUP LLC 10.250% 05/15/12 (b) 2,295,000 2,312,213 2,312,213 STEEL - PRODUCERS - 0.1% BAYOU STEEL CORP. 9.000% 03/31/11 750,000 705,000 STEEL DYNAMICS, INC. 9.500% 03/15/09 940,000 1,041,050 1,746,050 STEEL - SPECIALTY - 0.3% OREGON STEEL MILLS, INC. 10.000% 07/15/09 995,000 1,114,400 UCAR FINANCE, INC. 10.250% 02/15/12 2,200,000 2,530,000 3,644,400 Iron/Steel Total 7,702,663 MINING - 0.4% METAL - ALUMINUM - 0.2% KAISER ALUMINUM & CHEMICAL CORP. 10.875% 10/15/06 (f) 3,200,000 2,752,000 2,752,000 METAL - DIVERSIFIED - 0.2% EARLE M. JORGENSEN & CO. 9.750% 06/01/12 2,045,000 2,300,625 2,300,625 Mining Total 5,052,625 ---------- BASIC MATERIALS TOTAL 51,349,617 COMMUNICATIONS - 9.8% ADVERTISING - 0.1% ADVERTISING SERVICES - 0.1% WDAC SUBSIDIARY CORP. 8.375% 12/01/14 (b)(g) 1,455,000 1,469,550 1,469,550 Advertising Total 1,469,550
See accompanying notes to financial statements. 8
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES -(CONTINUED) COMMUNICATIONS - (CONTINUED) MEDIA - 4.8% BROADCAST SERVICES/PROGRAMS - 0.4% FISHER COMMUNICATIONS, INC. 8.625% 09/15/14 (b) 925,000 999,000 TV AZTECA SA DE CV 10.500% 02/15/07 2,345,000 2,403,625 XM SATELLITE RADIO HOLDINGS, INC. 7.660% 05/01/09 (e) 1,380,000 1,407,600 4,810,225 CABLE TV - 1.9% ATLANTIC BROADBAND FINANCE LLC 9.375% 01/15/14 (b) 1,965,000 1,906,050 CABLEVISION SYSTEMS CORP. 6.669% 04/01/09 (b)(e) 1,580,000 1,651,100 CHARTER COMMUNICATIONS HOLDING LLC 9.920% 04/01/11 9,135,000 7,513,537 10.250% 09/15/10 1,130,000 1,186,500 CSC HOLDINGS, INC. 6.750% 04/15/12 (b) 1,310,000 1,342,750 7.625% 04/01/11 180,000 193,050 DIRECTV HOLDINGS LLC 8.375% 03/15/13 945,000 1,065,488 ECHOSTAR DBS CORP. 6.375% 10/01/11 1,960,000 2,018,800 INSIGHT COMMUNICATIONS (a) 02/15/11 (12.250% 02/15/06) 955,000 921,575 INSIGHT MIDWEST LP 9.750% 10/01/09 1,020,000 1,074,825 NORTHLAND CABLE TELEVISION, INC. 10.250% 11/15/07 2,835,000 2,835,000 PEGASUS SATELLITE COMMUNICATIONS, INC. 11.250% 01/15/10 (b)(f) 2,290,000 1,459,875 TELENET GROUP HOLDING NV (a) 06/15/14 (11.500% 12/15/08) (b) 2,210,000 1,707,225 24,875,775 MULTIMEDIA - 0.7% ADVANSTAR COMMUNICATIONS, INC. (a) 10/15/11 (15.000% 10/15/05) 1,555,000 1,313,975 12.000% 02/15/11 1,840,000 2,005,600 HAIGHTS CROSS COMMUNICATIONS (a) 08/15/11 (12.500% 02/15/09) 1,735,000 1,119,075 HAIGHTS CROSS OPERATING CO. 11.750% 08/15/11 1,690,000 1,926,600 QUEBECOR MEDIA, INC. 11.125% 07/15/11 1,830,000 2,099,925 8,465,175
See accompanying notes to financial statements. 9
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) COMMUNICATIONS - (CONTINUED) MEDIA - (CONTINUED) PUBLISHING - NEWSPAPERS - 0.1% HOLLINGER, INC. 11.875% 03/01/11 (b)(h) 734,000 794,394 12.875% 03/01/11 (b) 1,157,000 1,261,130 2,055,524 PUBLISHING - PERIODICALS - 1.0% CBD MEDIA HOLDINGS & FINANCE, INC. 9.250% 07/15/12 (b) 1,160,000 1,189,000 DEX MEDIA, INC. (a) 11/15/13 (9.000% 11/15/08) 1,375,000 1,055,312 8.000% 11/15/13 1,800,000 1,926,000 DEX MEDIA EAST LLC 12.125% 11/15/12 1,677,000 2,054,325 DEX MEDIA WEST LLC 9.875% 08/15/13 1,621,000 1,872,255 PRIMEDIA, INC. 8.875% 05/15/11 2,330,000 2,399,900 YELL FINANCE BV 10.750% 08/01/11 1,560,000 1,817,400 12,314,192 RADIO - 0.2% SPANISH BROADCASTING SYSTEM 9.625% 11/01/09 2,325,000 2,441,250 2,441,250 TELEVISION - 0.5% GRANITE BROADCASTING CORP. 9.750% 12/01/10 2,875,000 2,702,500 PAXSON COMMUNICATIONS 10.750% 07/15/08 2,830,000 2,914,900 SINCLAIR BROADCAST GROUP, INC. 8.750% 12/15/11 960,000 1,032,000 6,649,400 Media Total 61,611,541 TELECOMMUNICATIONS - 4.9% CELLULAR TELECOMMUNICATIONS - 2.1% AMERICAN CELLULAR CORP. Series B, 10.000% 08/01/11 1,430,000 1,204,775 DOBSON CELLULAR SYSTEMS 8.375% 11/01/11 (b) 450,000 461,250 DOBSON COMMUNICATIONS CORP. 8.875% 10/01/13 2,980,000 2,011,500 HORIZON PCS, INC. 11.375% 07/15/12 (b) 1,150,000 1,259,250 iPCS ESCROW CO. 11.500% 05/01/12 (b) 705,000 786,075 NEXTEL COMMUNICATIONS, INC. 7.375% 08/01/15 3,700,000 4,070,000
See accompanying notes to financial statements. 10
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) COMMUNICATIONS - (CONTINUED) TELECOMMUNICATIONS - (CONTINUED) NEXTEL PARTNERS, INC. 8.125% 07/01/11 2,855,000 3,140,500 ROGERS CANTEL, INC. 9.750% 06/01/16 3,580,000 4,215,450 ROGERS WIRELESS, INC. 8.000% 12/15/12 (b) 1,125,000 1,172,812 RURAL CELLULAR CORP. 8.250% 03/15/12 1,215,000 1,266,637 UBIQUITEL OPERATING CO. 9.875% 03/01/11 1,255,000 1,377,363 9.875% 03/01/11 (b) 915,000 1,004,213 US UNWIRED, INC. 10.000% 06/15/12 2,465,000 2,736,150 WESTERN WIRELESS CORP. 9.250% 07/15/13 2,205,000 2,381,400 27,087,375 SATELLITE TELECOMMUNICATIONS - 0.3% INMARSAT FINANCE II PLC (a) 11/15/12 (10.375% 11/15/08) (b) 690,000 477,825 NEW SKIES SATELLITES NV 9.125% 11/01/12 (b) 1,035,000 1,055,700 PANAMSAT CORP. (a) 11/01/14 (10.375% 11/01/09) (b) 2,240,000 1,344,000 9.000% 08/15/14 (b) 910,000 978,250 3,855,775 TELECOMMUNICATION EQUIPMENT - 0.1% LUCENT TECHNOLOGIES, INC. 6.450% 03/15/29 1,700,000 1,457,750 1,457,750 TELECOMMUNICATION SERVICES - 0.8% AXTEL SA 11.000% 12/15/13 2,260,000 2,401,250 CARRIER1 INTERNATIONAL SA 13.250% 02/15/09 (f) 6,000,000 540,000 FAIRPOINT COMMUNICATIONS, INC. 11.875% 03/01/10 1,670,000 1,899,625 SECURUS TECHNOLOGIES, INC. 11.000% 09/01/11 (b) 1,855,000 1,855,000 TIME WARNER TELECOM LLC 9.750% 07/15/08 2,120,000 2,114,700 10.125% 02/01/11 750,000 720,000 9,530,575 TELEPHONE - INTEGRATED - 1.3% CINCINNATI BELL, INC. 8.375% 01/15/14 2,335,000 2,346,675 QWEST CAPITAL FUNDING, INC. 7.250% 02/15/11 5,045,000 4,792,750 7.750% 02/15/31 2,065,000 1,765,575
See accompanying notes to financial statements. 11
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) COMMUNICATIONS - (CONTINUED) TELECOMMUNICATIONS - (CONTINUED) QWEST SERVICES CORP. 13.500% 12/15/10 (b) 5,505,000 6,550,950 US LEC CORP. 10.670% 10/01/09 (b)(e) 935,000 932,980 16,388,930 WIRELESS EQUIPMENT - 0.3% AMERICAN TOWERS, INC. 7.250% 12/01/11 1,150,000 1,216,125 SBA COMMUNICATIONS CORP. (a) 12/15/11 (9.750% 12/15/07) 1,100,000 926,750 SPECTRASITE INC. 8.250% 05/15/10 1,120,000 1,212,400 3,355,275 Telecommunications Total 61,675,680 ----------- COMMUNICATIONS TOTAL 124,756,771 CONSUMER CYCLICAL - 8.2% AIRLINES - 0.5% AIRLINES - 0.5% CONTINENTAL AIRLINES, INC. 7.568% 12/01/06 2,450,000 1,886,500 DELTA AIR LINES, INC. 7.900% 12/15/09 1,115,000 624,400 NORTHWEST AIRLINES, INC. 9.875% 03/15/07 3,230,000 2,810,100 UNITED AIR LINES, INC. 2.020% 03/02/04 (e)(i) 1,755,069 1,404,055 6,725,055 Airlines Total 6,725,055 APPAREL - 0.5% APPAREL MANUFACTURERS - 0.5% BRODER BROTHERS CO. 11.250% 10/15/10 1,360,000 1,414,400 11.250% 10/15/10 (b) 670,000 696,800 LEVI STRAUSS & CO. 12.250% 12/15/12 2,325,000 2,452,875 PHILLIPS-VAN HEUSEN CORP. 7.250% 02/15/11 815,000 859,825 8.125% 05/01/13 850,000 930,750 6,354,650 Apparel Total 6,354,650 AUTO MANUFACTURERS - 0.1% AUTO - MEDIUM & HEAVY DUTY TRUCKS - 0.1% NAVISTAR INTERNATIONAL CORP. 7.500% 06/15/11 1,450,000 1,566,000 1,566,000 Auto Manufacturers Total 1,566,000
See accompanying notes to financial statements. 12
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER CYCLICAL - (CONTINUED) AUTO PARTS & EQUIPMENT - 0.7% AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL - 0.4% ACCURIDE CORP. 9.250% 02/01/08 875,000 890,312 AFFINIA GROUP, INC. 9.000% 11/30/14 (b) 230,000 236,900 DELCO REMY INTERNATIONAL, INC. 11.000% 05/01/09 1,695,000 1,788,225 DURA OPERATING CORP. 8.625% 04/15/12 2,125,000 2,167,500 5,082,937 AUTO/TRUCK PARTS & EQUIPMENT - REPLACEMENT - 0.1% REXNORD CORP. 10.125% 12/15/12 1,040,000 1,175,200 1,175,200 RUBBER - TIRES - 0.2% GOODYEAR TIRE & RUBBER CO. 7.857% 08/15/11 2,565,000 2,545,763 2,545,763 Auto Parts & Equipment Total 8,803,900 ENTERTAINMENT - 1.1% GAMBLING (NON-HOTEL) - 0.2% GLOBAL CASH ACCESS LLC/GLOBAL CASH FINANCE CORP. 8.750% 03/15/12 1,945,000 2,100,600 2,100,600 MUSIC - 0.3% STEINWAY MUSICAL INSTRUMENTS, INC. 8.750% 04/15/11 1,260,000 1,367,100 WARNER MUSIC GROUP 7.375% 04/15/14 (b) 1,920,000 1,963,200 3,330,300 RESORTS/THEME PARKS - 0.2% SIX FLAGS, INC. 8.875% 02/01/10 2,005,000 2,015,025 9.625% 06/01/14 895,000 883,813 2,898,838 THEATERS - 0.4% LCE ACQUISITION CORP. 9.000% 08/01/14 (b) 2,435,000 2,617,625 MARQUEE HOLDINGS, INC. (a) 08/15/14 (12.000% 08/15/09) (b) 4,935,000 3,183,075 5,800,700 Entertainment Total 14,130,438
See accompanying notes to financial statements. 13
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER CYCLICAL - (CONTINUED) HOME BUILDERS - 0.7% BUILDING - RESIDENTIAL/COMMERCIAL - 0.7% D.R. HORTON, INC. 9.750% 09/15/10 2,855,000 3,418,862 K. HOVNANIAN ENTERPRISES, INC. 8.875% 04/01/12 1,270,000 1,397,000 10.500% 10/01/07 1,470,000 1,694,175 STANDARD PACIFIC CORP. 9.250% 04/15/12 1,770,000 2,066,475 8,576,512 Home Builders Total 8,576,512 HOME FURNISHINGS - 0.3% HOME FURNISHINGS - 0.3% NORCRAFT COMPANIES 9.000% 11/01/11 835,000 905,975 WII COMPONENTS, INC. 10.000% 02/15/12 2,535,000 2,484,300 3,390,275 Home Furnishings Total 3,390,275 LEISURE TIME - 0.7% CRUISE LINES - 0.1% NCL CORP. 10.625% 07/15/14 (b) 710,000 731,300 731,300 LEISURE & RECREATIONAL PRODUCTS - 0.2% BOMBARDIER RECREATIONAL PRODUCTS, INC. 8.375% 12/15/13 1,935,000 2,089,800 K2, INC. 7.375% 07/01/14 (b) 990,000 1,086,525 3,176,325 RECREATIONAL CENTERS - 0.4% AMF BOWLING WORLDWIDE, INC. 10.000% 03/01/10 1,340,000 1,433,800 EQUINOX HOLDINGS, INC. 9.000% 12/15/09 2,130,000 2,247,150 TOWN SPORTS INTERNATIONAL, INC. (a) 02/01/14 (11.000% 02/01/09) 2,395,000 1,335,213 5,016,163 Leisure Time Total 8,923,788 LODGING - 2.3% CASINO HOTELS - 2.2% AMERISTAR CASINOS, INC. 10.750% 02/15/09 750,000 842,812 CIRCUS & ELDORADO/SILVER LEGACY CAPITAL CORP. 10.125% 03/01/12 1,495,000 1,637,025
See accompanying notes to financial statements. 14
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER CYCLICAL - (CONTINUED) LODGING - (CONTINUED) HARD ROCK HOTEL, INC. 8.875% 06/01/13 1,555,000 1,710,500 HOLLYWOOD CASINO SHREVEPORT 13.000% 08/01/06 (j) 5,220,000 4,593,600 INN OF THE MOUNTAIN GODS RESORT & CASINO 12.000% 11/15/10 1,680,000 1,957,200 MGM MIRAGE 8.375% 02/01/11 2,135,000 2,412,550 MOHEGAN TRIBAL GAMING AUTHORITY 7.125% 08/15/14 (b) 355,000 378,962 PARK PLACE ENTERTAINMENT CORP. 9.375% 02/15/07 660,000 730,950 PINNACLE ENTERTAINMENT 8.250% 03/15/12 3,835,000 3,988,400 8.750% 10/01/13 1,855,000 1,994,125 PREMIER ENTERTAINMENT BILOXI FINANCIAL LLC 10.750% 02/01/12 1,120,000 1,209,600 RIVER ROCK ENTERTAINMENT 9.750% 11/01/11 2,090,000 2,314,675 SENECA GAMING CORP. 7.250% 05/01/12 1,860,000 1,966,950 STATION CASINOS, INC. 6.875% 03/01/16 520,000 546,000 WYNN LAS VEGAS LLC 6.625% 12/01/14 (b)(g) 1,345,000 1,324,825 12.000% 11/01/10 796,000 1,002,960 28,611,134 HOTELS & MOTELS - 0.1% STARWOOD HOTELS & RESORTS WORLDWIDE, INC. 7.875% 05/01/12 1,130,000 1,292,438 1,292,438 Lodging Total 29,903,572 RETAIL - 1.1% RETAIL - AUTOMOBILES - 0.1% ASBURY AUTOMOTIVE GROUP, INC. 8.000% 03/15/14 1,630,000 1,613,700 1,613,700 RETAIL - DRUG STORES - 0.3% JEAN COUTU GROUP (PJC), INC. 8.500% 08/01/14 (b) 1,205,000 1,223,075 RITE AID CORP. 9.250% 06/01/13 2,435,000 2,514,137 3,737,212 RETAIL - HOME FURNISHINGS - 0.2% LEVITZ HOME FURNISHINGS 12.000% 11/01/11 (b) 1,130,000 1,152,600 TEMPUR-PEDIC, INC. 10.250% 08/15/10 1,446,000 1,655,670 2,808,270
See accompanying notes to financial statements. 15
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER CYCLICAL - (CONTINUED) RETAIL - (CONTINUED) RETAIL - JEWELRY - 0.1% FINLAY FINE JEWELRY CORP. 8.375% 06/01/12 1,460,000 1,591,400 1,591,400 RETAIL - MAJOR DEPARTMENT STORES - 0.1% SAKS, INC. 7.000% 12/01/13 533,000 542,328 542,328 RETAIL - PROPANE DISTRIBUTORS - 0.2% FERRELLGAS PARTNERS LP 8.750% 06/15/12 1,520,000 1,656,800 1,656,800 RETAIL - RESTAURANTS - 0.1% DENNY'S HOLDINGS, INC. 10.000% 10/01/12 (b) 1,380,000 1,452,450 1,452,450 Retail Total 13,402,160 TEXTILES - 0.2% TEXTILE - PRODUCTS - 0.2% COLLINS & AIKMAN FLOOR COVERING, INC. 9.750% 02/15/10 1,400,000 1,505,000 INVISTA 9.250% 05/01/12 (b) 1,150,000 1,276,500 2,781,500 Textiles Total 2,781,500 ----------- CONSUMER CYCLICAL TOTAL 104,557,850 CONSUMER NON-CYCLICAL - 5.2% AGRICULTURE - 0.3% AGRICULTURAL OPERATIONS - 0.2% SEMINIS VEGETABLE SEEDS, INC. 10.250% 10/01/13 2,332,000 2,623,500 2,623,500 TOBACCO - 0.1% NORTH ATLANTIC TRADING CO., INC. 9.250% 03/01/12 1,245,000 996,000 996,000 Agriculture Total 3,619,500 BEVERAGES - 0.1% BEVERAGES - WINE/SPIRITS - 0.1% CONSTELLATION BRANDS, INC. 8.125% 01/15/12 1,175,000 1,277,812 1,277,812 Beverages Total 1,277,812
See accompanying notes to financial statements. 16
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER NON-CYCLICAL - (CONTINUED) BIOTECHNOLOGY - 0.2% MEDICAL - BIOMEDICAL/GENE - 0.2% BIO-RAD LABORATORIES, INC. 7.500% 08/15/13 2,020,000 2,206,850 2,206,850 Biotechnology Total 2,206,850 COMMERCIAL SERVICES - 1.4% COMMERCIAL SERVICES - 0.2% IRON MOUNTAIN, INC. 7.750% 01/15/15 470,000 478,225 LANGUAGE LINE HOLDINGS, INC. 11.125% 06/15/12 (b) 2,365,000 2,542,375 3,020,600 COMMERCIAL SERVICES - FINANCE - 0.3% DOLLAR FINANCIAL GROUP, INC. 9.750% 11/15/11 3,140,000 3,391,200 3,391,200 FUNERAL SERVICES & RELATED ITEMS - 0.2% SERVICE CORP. INTERNATIONAL 7.700% 04/15/09 2,385,000 2,605,612 2,605,612 PRINTING - COMMERCIAL - 0.3% AMERICAN COLOR GRAPHICS, INC. 10.000% 06/15/10 895,000 769,700 SHERIDAN GROUP 10.250% 08/15/11 (b) 1,290,000 1,409,325 VERTIS, INC. 13.500% 12/07/09 (b) 1,465,000 1,552,900 3,731,925 PRIVATE CORRECTIONS - 0.1% GEO GROUP, INC. 8.250% 07/15/13 940,000 1,001,100 1,001,100 RENTAL AUTO/EQUIPMENT - 0.3% NATIONSRENT, INC. 9.500% 10/15/10 2,575,000 2,896,875 WILLIAMS SCOTSMAN, INC. 9.875% 06/01/07 1,130,000 1,121,525 4,018,400 Commercial Services Total 17,768,837 COSMETICS/PERSONAL CARE - 0.1% COSMETICS & TOILETRIES - 0.1% ELIZABETH ARDEN, INC. 7.750% 01/15/14 1,365,000 1,446,900 1,446,900 Cosmetics/Personal Care Total 1,446,900
See accompanying notes to financial statements. 17
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER NON-CYCLICAL - (CONTINUED) FOOD - 1.0% FOOD - CONFECTIONERY - 0.2% MERISANT CO. 9.500% 07/15/13 (b) 1,425,000 1,282,500 TABLETOP HOLDINGS, INC. (a) 05/15/14 (12.250% 11/15/08) (b) 4,055,000 1,845,025 3,127,525 FOOD - MISCELLANEOUS/DIVERSIFIED - 0.6% DEL MONTE CORP. 9.250% 05/15/11 1,600,000 1,752,000 DOLE FOOD CO., INC. 8.625% 05/01/09 1,880,000 2,072,700 PINNACLE FOODS HOLDING CORP. 8.250% 12/01/13 (b) 2,945,000 2,665,225 REDDY ICE HOLDINGS, INC. (a) 11/01/12 (10.500% 11/01/08) (b) 1,375,000 955,625 7,445,550 FOOD - RETAIL - 0.2% STATER BROTHERS HOLDINGS 8.125% 06/15/12 2,085,000 2,220,525 2,220,525 Food Total 12,793,600 HEALTHCARE - SERVICES - 1.5% MEDICAL - HMO - 0.1% COVENTRY HEALTH CARE, INC. 8.125% 02/15/12 1,690,000 1,859,000 1,859,000 MEDICAL - HOSPITALS - 0.6% TENET HEALTHCARE CORP. 9.875% 07/01/14 (b) 4,790,000 5,137,275 UNITED SURGICAL PARTNERS INTERNATIONAL, INC. 10.000% 12/15/11 2,235,000 2,553,488 7,690,763 MRI/MEDICAL DIAGNOSTIC IMAGING - 0.6% INSIGHT HEALTH SERVICES CORP. 9.875% 11/01/11 2,400,000 2,436,000 MEDQUEST, INC. 11.875% 08/15/12 2,460,000 2,878,200 MQ ASSOCIATES, INC. (a) 08/15/12 (12.250% 08/15/08) 3,945,000 2,761,500 8,075,700
See accompanying notes to financial statements. 18
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) CONSUMER NON-CYCLICAL - (CONTINUED) HEALTHCARE - SERVICES - (CONTINUED) PHYSICAL PRACTICE MANAGEMENT - 0.2% US ONCOLOGY, INC. 9.000% 08/15/12 (b) 1,955,000 2,179,825 2,179,825 Healthcare - Services Total 19,805,288 HOUSEHOLD PRODUCTS/WARES - 0.6% CONSUMER PRODUCTS - MISCELLANEOUS - 0.6% AAC GROUP HOLDINGS CORP. (a) 10/01/12 (10.250% 10/01/08) (b) 480,000 324,000 AMSCAN HOLDINGS, INC. 8.750% 05/01/14 2,255,000 2,266,275 JOSTENS IH CORP. 7.625% 10/01/12 (b) 1,155,000 1,212,750 PLAYTEX PRODUCTS, INC. 9.375% 06/01/11 3,160,000 3,353,550 7,156,575 Household Products/Wares Total 7,156,575 ---------- CONSUMER NON-CYCLICAL TOTAL 66,075,362 ENERGY - 3.5% OIL & GAS - 2.1% OIL COMPANIES - EXPLORATION & PRODUCTION - 1.8% CHESAPEAKE ENERGY CORP. 7.500% 06/15/14 885,000 979,031 COMPTON PETROLEUM CORP. 9.900% 05/15/09 2,200,000 2,420,000 ENCORE ACQUISITION CO. 8.375% 06/15/12 1,885,000 2,101,775 ENERGY PARTNERS LTD. 8.750% 08/01/10 1,150,000 1,265,000 GAZPROM 9.625% 03/01/13 5,760,000 6,648,768 MAGNUM HUNTER RESOURCES, INC. 9.600% 03/15/12 1,472,000 1,678,080 PEMEX FINANCE LTD. 9.150% 11/15/18 2,485,000 3,084,158 10.610% 08/15/17 1,650,000 2,207,271 TRANSTEXAS GAS CORP. 15.000% 03/15/05 (j)(k) 465,296 5 WHITING PETROLEUM CORP. 7.250% 05/01/12 2,290,000 2,404,500 22,788,588 OIL & GAS DRILLING - 0.2% OCEAN RIG NORWAY AS 10.250% 06/01/08 1,585,000 1,632,550 PRIDE INTERNATIONAL, INC. 7.375% 07/15/14 (b) 865,000 960,150 2,592,700
See accompanying notes to financial statements. 19
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) ENERGY - (CONTINUED) OIL & GAS - (CONTINUED) OIL REFINING & MARKETING - 0.1% PREMCOR REFINING GROUP, INC. 7.500% 06/15/15 1,430,000 1,565,850 1,565,850 Oil & Gas Total 26,947,138 OIL & GAS SERVICES - 0.1% OIL - FIELD SERVICES - 0.1% HORNBECK OFFSHORE SERVICES, INC. 6.125% 12/01/14 (b) 460,000 460,000 NEWPARK RESOURCES, INC. 8.625% 12/15/07 1,560,000 1,575,600 2,035,600 Oil & Gas Services Total 2,035,600 PIPELINES - 1.3% PIPELINES - 1.3% COASTAL CORP. 7.750% 06/15/10 3,550,000 3,652,062 DYNEGY HOLDINGS, INC. 6.875% 04/01/11 1,895,000 1,819,200 9.875% 07/15/10 (b) 960,000 1,084,800 NORTHWEST PIPELINE CORP. 8.125% 03/01/10 760,000 847,400 SONAT, INC. 6.875% 06/01/05 1,000,000 1,012,500 7.625% 07/15/11 4,230,000 4,293,450 SOUTHERN NATURAL GAS CO. 8.875% 03/15/10 1,335,000 1,498,538 WILLIAMS COMPANIES, INC. 8.125% 03/15/12 1,780,000 2,073,700 16,281,650 Pipelines Total 16,281,650 ---------- ENERGY TOTAL 45,264,388 FINANCIALS - 0.8% DIVERSIFIED FINANCIAL SERVICES - 0.5% FINANCE - COMMERCIAL - 0.1% FINOVA Group, Inc. 7.500% 11/15/09 (l) 2,409,000 1,150,298 1,150,298 FINANCE - INVESTMENT BANKER/BROKER - 0.4% E*TRADE FINANCIAL CORP. 8.000% 06/15/11 (b) 1,370,000 1,448,775 LABRANCHE & CO., INC. 11.000% 05/15/12 3,545,000 3,775,425 5,224,200 Diversified Financial Services Total 6,374,498
See accompanying notes to financial statements. 20
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) FINANCIALS - (CONTINUED) REITS - 0.2% REITS - HOTELS - 0.1% LA QUINTA PROPERTIES, INC. 7.000% 08/15/12 (b) 500,000 537,500 537,500 REITS - MORTGAGES - 0.1% THORNBURG MORTGAGE, INC. 8.000% 05/15/13 1,545,000 1,657,013 1,657,013 REITS Total 2,194,513 SAVINGS & LOANS - 0.1% SAVINGS & LOANS/ THRIFTS - WESTERN US - 0.1% WESTERN FINANCIAL BANK 9.625% 05/15/12 1,090,000 1,242,600 1,242,600 Savings & Loans Total 1,242,600 --------- FINANCIALS TOTAL 9,811,611 INDUSTRIALS - 6.8% AEROSPACE/DEFENSE - 0.6% AEROSPACE/DEFENSE - EQUIPMENT - 0.6% ARGO-TECH CORP. 9.250% 06/01/11 1,215,000 1,327,387 BE AEROSPACE, INC. 8.875% 05/01/11 2,095,000 2,189,275 SEQUA CORP. 8.875% 04/01/08 1,335,000 1,461,825 STANDARD AERO HOLDINGS, INC. 8.250% 09/01/14 (b) 1,370,000 1,472,750 TRANSDIGM, INC. 8.375% 07/15/11 1,175,000 1,266,063 7,717,300 ELECTRONICS - MILITARY - 0.0% CONDOR SYSTEMS, INC. 11.875% 05/01/09 (j)(k) 4,000,000 40,000 40,000 Aerospace/Defense Total 7,757,300 BUILDING MATERIALS - 0.8% BUILDING & CONSTRUCTION PRODUCTS - MISCELLANEOUS - 0.2% ASSOCIATED MATERIALS, INC. (a) 03/01/14 (11.250% 03/01/09) 1,095,000 815,775 CONGOLEUM CORP. 8.625% 08/01/08 (m) 1,305,000 1,017,900
See accompanying notes to financial statements. 21
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) BUILDING MATERIALS - (CONTINUED) NORTEK HOLDINGS, INC. 8.500% 09/01/14 (b) 695,000 747,125 2,580,800 BUILDING PRODUCTS - CEMENT/AGGREGATION - 0.3% RMCC ACQUISITION CO. 9.500% 11/01/12 (b) 1,810,000 1,814,525 US CONCRETE, INC. 8.375% 04/01/14 1,670,000 1,782,725 3,597,250 BUILDING PRODUCTS - DOORS & WINDOWS - 0.3% ATRIUM COMPANIES, INC. Series B, 10.500% 05/01/09 3,885,000 4,079,250 4,079,250 Building Materials Total 10,257,300 ELECTRICAL COMPONENTS & EQUIPMENT - 0.2% WIRE & CABLE PRODUCTS - 0.2% COLEMAN CABLE, INC. 9.875% 10/01/12 (b) 2,065,000 2,173,412 2,173,412 Electrical Components & Equipment Total 2,173,412 ELECTRONICS - 0.1% ELECTRONIC COMPONENTS - MISCELLANEOUS - 0.1% FLEXTRONICS INTERNATIONAL LTD. 6.250% 11/15/14 (b) 670,000 659,950 659,950 Electronics Total 659,950 ENGINEERING & CONSTRUCTION - 0.2% BUILDING & CONSTRUCTION - MISCELLANEOUS - 0.2% J. RAY MCDERMOTT SA 11.000% 12/15/13 (b) 2,160,000 2,359,800 2,359,800 Engineering & Construction Total 2,359,800 ENVIRONMENTAL CONTROL - 0.6% NON-HAZARDOUS WASTE DISPOSAL - 0.5% ALLIED WASTE NORTH AMERICA, INC. 7.875% 04/15/13 1,500,000 1,515,000 8.500% 12/01/08 2,330,000 2,449,412 WASTE SERVICES, INC. 9.500% 04/15/14 (b) 2,735,000 2,707,650 6,672,062
See accompanying notes to financial statements. 22
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) RECYCLING - 0.1% IMCO RECYCLING ESCROW 9.000% 11/15/14 (b) 575,000 595,125 595,125 Environmental Control Total 7,267,187 HAND/MACHINE TOOLS - 0.0% MACHINE TOOLS & RELATED PRODUCTS - 0.0% NEWCOR, INC. 6.000% 01/01/13 (k) 847,510 542,406 542,406 Hand/Machine Tools Total 542,406 MACHINERY - CONSTRUCTION & MINING - 0.1% MACHINERY - CONSTRUCTION & MINING - 0.1% TEREX CORP. Series 2001 B, 10.375% 04/01/11 1,700,000 1,916,750 1,916,750 Machinery - Construction & Mining Total 1,916,750 METAL FABRICATED/HARDWARE - 0.9% METAL PROCESSORS & FABRICATION - 0.7% ALTRA INDUSTRIAL MOTION, INC. 9.000% 12/01/11 (b) 895,000 908,425 HAWK CORP. 8.750% 11/01/14 (b) 345,000 356,213 MUELLER GROUP, INC. 10.000% 05/01/12 1,700,000 1,844,500 MUELLER HOLDINGS, INC. (a) 04/15/14 (14.750% 04/15/09) 2,083,000 1,406,025 TRIMAS CORP. 9.875% 06/15/12 4,165,000 4,352,425 8,867,588 METAL PRODUCTS - FASTENERS - 0.2% FASTENTECH, INC. 11.500% 05/01/11 (b) 2,680,000 3,055,200 3,055,200 Metal Fabricated/Hardware Total 11,922,788 MISCELLANEOUS MANUFACTURERS - 0.7% ADVANCED MATERIALS/PRODUCTS - 0.1% HEXCEL CORP. 9.750% 01/15/09 1,385,000 1,450,787 1,450,787 DIVERSIFIED MANUFACTURER OPERATIONS - 0.5% J.B. POINDEXTER & CO. 8.750% 03/15/14 (b) 1,835,000 1,945,100
See accompanying notes to financial statements. 23
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) MISCELLANEOUS MANUFACTURERS - (CONTINUED) KI HOLDINGS, INC. (a) 11/15/14 (9.875% 11/15/09) (b) 2,025,000 1,285,875 KOPPERS INDUSTRIES, INC. 9.875% 10/15/13 1,960,000 2,224,600 TRINITY INDUSTRIES, INC. 6.500% 03/15/14 740,000 733,525 6,189,100 FILTERATION/SEPARATION PRODUCTS - 0.1% POLYPORE, INC. (a) 10/01/12 (10.500% 10/01/08) (b) 2,365,000 1,519,513 1,519,513 Miscelleaneous Manufacturers Total 9,159,400 PACKAGING & CONTAINERS - 1.1% CONTAINERS - METAL/GLASS - 0.4% CROWN EUROPEAN HOLDINGS SA 10.875% 03/01/13 1,800,000 2,119,500 OWENS-BROCKWAY GLASS CONTAINER 8.250% 05/15/13 340,000 371,450 OWENS-ILLINOIS, INC. 7.350% 05/15/08 1,950,000 2,032,875 7.500% 05/15/10 440,000 463,650 4,987,475 CONTAINERS - PAPER/PLASTIC - 0.7% CONSOLIDATED CONTAINER CO. LLC (a) 06/15/09 (10.750% 06/15/07) 1,500,000 1,260,000 MDP ACQUISITIONS PLC 9.625% 10/01/12 2,800,000 3,164,000 PORTOLA PACKAGING, INC. 8.250% 02/01/12 1,460,000 1,138,800 SMURFIT-STONE CONTAINER CORP. 8.250% 10/01/12 1,600,000 1,752,000 TEKNI-PLEX, INC. 12.750% 06/15/10 1,755,000 1,553,175 8,867,975 Packaging & Containers Total 13,855,450 TRANSPORTATION - 1.5% TRANSPORTATION - MARINE - 0.7% SHIP FINANCE INTERNATIONAL LTD. 8.500% 12/15/13 3,795,000 3,899,363 STENA AB 7.000% 12/01/16 (b) 670,000 658,275 7.500% 11/01/13 2,215,000 2,292,525 9.625% 12/01/12 1,425,000 1,603,125 TEEKAY SHIPPING CORP. 8.875% 07/15/11 485,000 562,600 9,015,888
See accompanying notes to financial statements. 24
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) INDUSTRIALS - (CONTINUED) TRANSPORTATION - (CONTINUED) TRANSPORTATION - RAIL - 0.2% TFM SA DE CV 12.500% 06/15/12 2,210,000 2,508,350 2,508,350 TRANSPORTATION - SERVICES - 0.3% CHC HELICOPTER CORP. 7.375% 05/01/14 1,450,000 1,533,375 PETROLEUM HELICOPTERS, INC. 9.375% 05/01/09 2,710,000 2,926,800 4,460,175 TRANSPORTATION - TRUCK - 0.3% ALLIED HOLDINGS, INC. 8.625% 10/01/07 1,410,000 1,198,500 QDI CAPITAL CORP. 9.000% 11/15/10 (b) 2,060,000 2,054,850 3,253,350 Transportation Total 19,237,763 ---------- INDUSTRIALS TOTAL 87,109,506 TECHNOLOGY - 0.2% SEMICONDUCTORS - 0.2% ELECTRONIC COMPONENTS - SEMICONDUCTORS - 0.2% AMKOR TECHNOLOGY, INC. 9.250% 02/15/08 2,505,000 2,461,162 2,461,162 Semiconductors Total 2,461,162 ---------- TECHNOLOGY TOTAL 2,461,162 UTILITIES - 2.4% ELECTRIC - 2.4% ELECTRIC - GENERATION - 0.5% AES CORP. 9.000% 05/15/15 (b) 585,000 672,750 9.500% 06/01/09 1,646,000 1,888,785 EDISON MISSION ENERGY 9.875% 04/15/11 2,290,000 2,713,650 MISSION ENERGY HOLDING 13.500% 07/15/08 710,000 892,825 6,168,010 ELECTRIC - INTEGRATED - 0.8% CMS ENERGY CORP. 8.900% 07/15/08 2,360,000 2,619,600 NEVADA POWER CO. 9.000% 08/15/13 1,060,000 1,240,200 10.875% 10/15/09 2,025,000 2,369,250 PSE&G ENERGY HOLDINGS, INC. 8.625% 02/15/08 2,495,000 2,760,094
See accompanying notes to financial statements. 25
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) UTILITIES - (CONTINUED) ELECTRIC - (CONTINUED) TNP ENTERPRISES, INC. 10.250% 04/01/10 1,630,000 1,744,100 10,733,244 INDEPENDENT POWER PRODUCERS - 1.1% CAITHNESS COSO FUNDING CORP. 9.050% 12/15/09 2,585,820 2,870,260 CALPINE CORP. 8.500% 07/15/10 (b) 2,345,000 1,840,825 CALPINE GENERATING CO. LLC 11.169% 04/01/11 (b)(e) 2,950,000 2,795,125 11.500% 04/01/11 (b) 1,725,000 1,587,000 MSW ENERGY HOLDINGS LLC 7.375% 09/01/10 800,000 844,000 8.500% 09/01/10 2,130,000 2,343,000 ORION POWER HOLDINGS, INC. 12.000% 05/01/10 1,520,000 1,930,400 14,210,610 Electric Total 31,111,864 ----------- UTILITIES TOTAL 31,111,864 TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (COST OF $495,964,694) 522,498,131 MUNICIPAL BOND (TAXABLE) - 0.2% CONSUMER CYCLICAL - 0.2% LODGING - 0.2% CASINO HOTELS - 0.2% CABAZON BAND MISSION INDIANS 13.000% 10/01/11 (h) 2,820,000 2,797,525 2,797,525 Lodging Total 2,797,525 ----------- CONSUMER CYCLICAL 2,797,525 TOTAL MUNICIPAL BOND (TAXABLE) (COST OF $2,820,000) 2,797,525
See accompanying notes to financial statements. 26
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- FOREIGN GOVERNMENT OBLIGATIONS - 35.7% FOREIGN GOVERNMENT BONDS - 35.7% SOVEREIGN - 35.7% ARIES VERMOGENSVERWALTNG 7.750% 10/25/09 (b) EUR 2,500,000 3,707,330 CANADIAN GOVERNMENT BOND 5.250% 06/01/13 CAD 6,200,000 5,544,803 COMMONWEALTH OF AUSTRALIA 8.750% 08/15/08 AUD 13,580,000 11,777,509 EUROPEAN INVESTMENT BANK 7.625% 12/07/07 GBP 5,110,000 10,535,729 FEDERAL REPUBLIC OF BRAZIL 7.720% 06/29/09 (e) USD 6,350,000 7,128,700 8.250% 01/20/34 4,595,000 4,238,887 11.500% 04/02/09 EUR 4,250,000 6,677,294 14.500% 10/15/09 USD 12,750,000 16,670,625 GOVERNMENT OF CANADA 10.000% 06/01/08 CAD 24,110,000 24,635,158 GOVERNMENT OF NEW ZEALAND 6.000% 11/15/11 NZD 21,400,000 15,358,594 6.500% 04/15/13 27,600,000 20,453,385 GOVERNMENT OF NORWAY 5.500% 05/15/09 NOK 41,770,000 7,487,444 GOVERNMENT OF SPAIN 5.500% 07/30/17 EUR 7,635,000 11,666,432 GOVERNMENT OF SWEDEN 5.000% 01/28/09 SEK 153,580,000 24,338,189 6.750% 05/05/14 86,735,000 15,587,070 PERU GOVERNMENT INTERNATIONAL BOND 7.500% 10/14/14 EUR 2,475,000 3,416,655 POLAND GOVERNMENT BOND 8.500% 05/12/07 PLN 29,915,000 9,867,862 REPUBLIC OF BULGARIA 2.750% 07/28/11 (e) USD 7,280,000 7,269,080 8.250% 01/15/15 4,215,000 5,220,278 REPUBLIC OF COLOMBIA 9.750% 04/09/11 2,697,672 3,102,323 10.000% 01/23/12 5,523,000 6,254,798 11.500% 05/31/11 EUR 3,010,000 4,959,051 11.750% 02/25/20 USD 4,620,000 5,781,930 REPUBLIC OF FRANCE 4.000% 04/25/14 EUR 8,220,000 11,144,559 REPUBLIC OF GERMANY 4.250% 07/04/14 11,740,000 16,238,812 6.000% 07/04/07 10,280,000 14,830,731 REPUBLIC OF GREECE 5.350% 05/18/11 5,000,000 7,353,689 REPUBLIC OF ITALY 5.000% 02/01/12 23,170,000 33,678,825 REPUBLIC OF PANAMA 8.875% 09/30/27 USD 6,230,000 6,572,650 REPUBLIC OF PERU 9.875% 02/06/15 6,100,000 7,091,250 REPUBLIC OF PHILIPPINES 10.625% 03/16/25 3,100,000 3,216,250
See accompanying notes to financial statements. 27
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- FOREIGN GOVERNMENT OBLIGATIONS - (CONTINUED) FOREIGN GOVERNMENT BONDS - (CONTINUED) SOVEREIGN - (CONTINUED) REPUBLIC OF SOUTH AFRICA 5.250% 05/16/13 EUR 11,030,000 15,378,960 13.000% 08/31/10 ZAR 24,700,000 5,162,893 REPUBLIC OF VENEZUELA 9.250% 09/15/27 USD 6,945,000 7,222,800 RUSSIAN FEDERATION 5.000% 03/31/30 6,060,000 6,024,852 11.000% 07/24/18 5,752,000 7,760,598 12.750% 06/24/28 7,430,000 11,757,975 UNITED KINGDOM TREASURY 5.000% 03/07/12 GBP 2,540,000 4,979,174 7.500% 12/07/06 6,535,000 13,223,957 9.000% 07/12/11 4,750,000 11,356,471 UNITED MEXICAN STATES 7.500% 03/08/10 EUR 5,040,000 7,745,048 7.500% 04/08/33 USD 9,255,000 9,643,710 11.375% 09/15/16 7,590,000 11,062,425 WESTERN AUSTRALIA TREASURY 7.500% 10/15/09 AUD 14,665,000 12,370,794 455,495,549 Sovereign Total 455,495,549 ----------- FOREIGN GOVERNMENT BONDS TOTAL 455,495,549 TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST OF $395,156,538) 455,495,549 GOVERNMENT AGENCIES & OBLIGATIONS - 22.6% AGENCY - 0.7% FEDERAL FARM CREDIT BANK 5.000% 08/25/10 USD 8,600,000 8,698,805 8,698,805 AGENCY TOTAL 8,698,805 MORTGAGE-BACKED SECURITIES - 5.4% FEDERAL HOME LOAN MORTGAGE CORP. 7.500% 03/01/16 9,958 10,198 8.000% 04/01/06 - 05/01/16 69,083 71,157 8.500% 02/01/07 - 07/01/10 60,487 63,439 8.750% 06/01/08 - 07/01/08 12,161 12,742 9.000% 06/01/08 - 01/01/22 80,013 87,207 9.250% 08/01/08 - 05/01/16 90,430 99,671 9.500% 11/01/08 - 08/01/16 41,253 44,388 9.750% 12/01/08 - 09/01/16 10,489 11,313 10.000% 07/01/09 - 11/01/19 129,749 140,277 10.500% 01/01/20 - 10/01/24 94,091 105,498 10.750% 05/01/10 - 09/01/13 136,987 150,364 11.250% 10/01/10 - 11/01/15 143,394 159,779
See accompanying notes to financial statements. 28
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- GOVERNMENT AGENCIES & OBLIGATIONS - (CONTINUED) MORTGAGE-BACKED SECURITIES - (CONTINUED) FEDERAL NATIONAL MORTGAGE ASSOCIATION 7.500% 02/01/06 - 11/01/11 23,209 23,494 8.000% 07/01/08 - 07/01/09 48,933 51,133 8.250% 11/01/07 25,210 25,592 8.500% 05/01/08 - 09/01/21 146,215 153,628 9.000% 11/01/08 - 08/01/21 414,610 448,810 9.250% 05/01/16 95,113 106,649 10.000% 11/01/13 - 03/01/16 262,172 291,236 10.500% 03/01/14 - 03/01/16 269,997 300,160 TBA, 6.500% 12/13/34 (g) 60,590,000 63,562,667 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 8.500% 02/15/06 1,393 1,447 9.000% 08/15/08 - 12/15/17 1,295,681 1,442,820 9.500% 06/15/09 - 11/15/17 615,793 676,383 10.000% 11/15/09 - 09/15/21 174,793 193,570 10.500% 12/15/10 - 04/15/21 54,966 61,409 11.000% 12/15/09 - 10/15/15 294,440 329,998 11.750% 08/15/13 8,765 9,860 12.000% 05/15/14 491 559 68,635,448 ----------- MORTGAGE-BACKED SECURITIES TOTAL 68,635,448 U.S. TREASURY BONDS & NOTES - 16.5% U.S. TREASURY BONDS 7.500% 11/15/24 12,000,000 15,722,808 8.875% 02/15/19 9,000,000 12,772,620 10.375% 11/15/12 52,000,000 62,243,584 10.625% 08/15/15 29,415,000 44,798,133 12.500% 08/15/14 52,151,000 71,782,983 207,320,128 U.S. TREASURY NOTE 4.875% 02/15/12 3,500,000 3,668,711 3,668,711 ----------- U.S. TREASURY BONDS & NOTES TOTAL 210,988,839 TOTAL GOVERNMENT AGENCIES & OBLIGATIONS (COST OF $298,268,248) 288,323,092 ASSET-BACKED SECURITIES - 0.7% EQUITY ONE ABS, INC. 4.205% 04/25/34 5,050,000 4,922,437 GMAC MORTGAGE CORP. 4.865% 09/25/34 4,130,000 4,078,052 9,000,489 TOTAL ASSET-BACKED SECURITIES (COST OF $9,143,703) 9,000,489
See accompanying notes to financial statements. 29
PAR ($) VALUE ($) - ------------------------------------------ ---------------------------------------------------------------------------- CONVERTIBLE BONDS - 0.3% UTILITIES - 0.3% ELECTRIC - 0.3% INDEPENDENT POWER PRODUCERS - 0.3% MIRANT CORP. 2.500% 06/15/21 (f) 1,565,000 1,111,854 NORTEL NETWORKS CORP. 4.250% 09/01/08 2,265,000 2,171,886 Electric Total 3,283,740 ------------- UTILITIES TOTAL 3,283,740 TOTAL CONVERTIBLE BONDS (COST OF $3,115,519) 3,283,740 SHORT-TERM OBLIGATION - 2.9% Repurchase agreement with State Street Bank & Trust Co., dated 11/30/04, due 12/01/04 at 1.870%, collateralized by a U.S. Treasury Note maturing 07/15/09, market value of $37,775,244 (repurchase proceeds $37,031,924) 37,030,000 37,030,000 TOTAL SHORT-TERM OBLIGATION (COST OF $37,030,000) 37,030,000 TOTAL INVESTMENTS - 103.3% (COST OF $1,241,498,702) (n) 1,318,428,526 OTHER ASSETS & LIABILITIES, NET - (3.3)% (41,719,039) NET ASSETS - 100.0% 1,276,709,487
NOTES TO INVESTMENT PORTFOLIO: (a) Step bond. This security is currently not paying coupon. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing at this rate. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2004, these securities amounted to $121,125,585, which represents 9.5% of net assets. (c) Step bond. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing at this rate. (d) Zero coupon bond. (e) Floating rate note. The interest rate shown reflects the rate as of November 30, 2004. (f) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt covenants. Income is not being accrued. As of November 30, 2004, the value of these securities amounted to $5,863,729, which represents 0.5% of net assets. (g) Securities purchased on a delayed delivery basis. See accompanying notes to financial statements. 30 (h) Illiquid security. (i) The issuer has filed for bankruptcy protection under Chapter 11 and is default of certain debt convenants. Income is being accrued. As of November 30, 2004, the value of this security represents 0.1% of net assets. (j) The issuer is in default of certain debt convenants. Income is not being accrued. As of November 30, 2004, the value of these securities amounted to $4,633,605, which represents 0.4% of net assets. (k) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (l) Issued as part of bankruptcy reorganization. (m) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt convenants, however, under the issuer's plan of reorganization, the issuer has guaranteed all interest due and therefore income is still being accrued. As of November 30, 2004, the value of this security represents 0.1% of net assets. (n) Cost for federal income tax purposes is $1,255,758,829.
FORWARD CURRENCY AGGREGATE SETTLEMENT UNREALIZED CONTRACTS TO SELL VALUE FACE VALUE DATE DEPRECIATION ---------------------------------------------------------------------------------- EUR 13,480,000 $ 17,911,604 $ 17,564,575 12/23/04 $ (347,029) EUR 3,751,000 4,984,934 4,905,258 01/26/05 (79,676) EUR 6,620,750 8,798,722 8,660,868 01/26/05 (137,854) EUR 4,462,500 5,930,638 5,840,431 01/31/05 (90,207) GBP 7,020,000 13,402,654 12,916,800 12/13/04 (485,854) GBP 3,530,000 6,719,968 6,572,860 01/26/05 (147,108) -------------- $ (1,287,728) --------------
AT NOVEMBER 30, 2004, THE FUND HELD INVESTMENTS IN THE FOLLOWING SECTORS:
% OF NET ASSETS --------------------------------------------------------------------------- Corporate Fixed-Income Bonds & Notes 40.9 Foreign Government Bonds 35.7 Government Agencies & Obligations 22.6 Asset-Backed Securities 0.7 Convertible Bonds 0.3 Municipal Bond 0.2 Short-Term Obligation 2.9 Other Assets & Liabilities, Net (3.3) ----- 100.0 -----
ACRONYM NAME AUD Australian Dollar CAD Canadian Dollar EUR Euro GBP British Pound NOK Norwegian Krona NZD New Zealand Dollar PIK Payment-In-Kind PLN Polish Zloty REIT Real Estate Investment Trust SEK Swedish Krona TBA To Be Announced USD United States Dollar ZAR South African Rand
See accompanying notes to financial statements. 31 STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND
($) - ------------------------------------------ ---------------------------------------------------------------------------- ASSETS Investments, at cost 1,241,498,702 --------------- Investments, at value 1,318,428,526 Cash 456,166 Foreign currency (cost of $46) 45 Receivable for: Investments sold 1,540,801 Investments sold on a delayed delivery basis 1,046,710 Fund shares sold 1,385,183 Dollar roll fee income 351,678 Interest 26,094,965 Foreign tax reclaim 160,686 Deferred Trustees' compensation plan 48,463 --------------- Total Assets 1,349,513,223 LIABILITIES Net unrealized depreciation on foreign forward currency contracts 1,287,728 Payable for: Investments purchased 813,363 Investments purchased on a delayed delivery basis 67,506,648 Fund shares repurchased 1,535,704 Investment advisory fee 669,532 Transfer agent fee 248,252 Pricing and bookkeeping fees 44,032 Custody fee 29,931 Distribution and service fees 572,773 Deferred Trustees' fees 48,463 Other liabilities 47,310 --------------- Total Liabilities 72,803,736 NET ASSETS 1,276,709,487 COMPOSITION OF NET ASSETS Paid-in capital 1,537,591,199 Overdistributed net investment income (813,390) Accumulated net realized loss (336,357,512) Net unrealized appreciation (depreciation) on: Investments 76,929,824 Foreign currency translations (640,634) NET ASSETS 1,276,709,487 CLASS A Net assets 605,709,092 Shares outstanding 94,708,301 Net asset value per share 6.40(a) Maximum offering price per share ($6.40/0.9525) 6.72(b) CLASS B Net assets 389,011,586 Shares outstanding 60,867,234 Net asset value and offering price per share 6.39(a) CLASS C Net assets 43,505,634 Shares outstanding 6,802,019 Net asset value and offering price per share 6.40(a) CLASS J Net assets 228,672,912 Shares outstanding 35,829,636 Net asset value and redemption price per share 6.38(a) Maximum offering price per share ($6.38/0.9700) 6.58(b) CLASS Z Net assets 9,810,263 Shares outstanding 1,545,602 Net asset value, offering and redemption price per share 6.35
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. See accompanying notes to financial statements. 32 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND
($) - ------------------------------------------ ---------------------------------------------------------------------------- INVESTMENT INCOME Interest 43,076,857 Dollar roll fee income 972,877 --------------- Total Investment Income (net of foreign taxes withheld of $101,358) 44,049,734 EXPENSES Investment advisory fee 4,015,730 Distribution fee: Class B 1,490,185 Class C 155,471 Class J 402,453 Service fee: Class A 697,681 Class B 476,986 Class C 49,623 Class J 276,199 Transfer agent fee 1,095,143 Pricing and bookkeeping fees 194,740 Trustees' fees 12,261 Custody fee 113,980 Non-recurring costs (See Note 7) 23,458 Other expenses 174,643 --------------- Total Expenses 9,178,553 Fees waived by Distributor - Class C (30,843) Non-recurring costs assumed by Investment Advisor (See Note 7) (23,458) Custody earnings credit (6,111) --------------- Net Expenses 9,118,141 --------------- Net Investment Income 34,931,593 NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain (loss) on: INVESTMENTS AND FOREIGN CURRENCY Investments 14,368,944 Foreign currency transactions (5,527,153) --------------- Net realized gain 8,841,791 Net change in unrealized appreciation/depreciation on: Investments 67,421,600 Foreign currency translations 657,114 --------------- Net change in unrealized appreciation/depreciation 68,078,714 --------------- Net Gain 76,920,505 --------------- Net Increase in Net Assets from Operations 111,852,098
See accompanying notes to financial statements. 33 STATEMENT OF CHANGES IN NET ASSETS COLUMBIA STRATEGIC INCOME FUND
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED NOVEMBER 30, MAY 31, 2004 ($) 2004 ($) - ------------------------------------------ ---------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS Net investment income 34,931,593 74,531,176 Net realized gain on investments and foreign currency transactions 8,841,791 43,311,979 Net change in unrealized appreciation/depreciation on investments and foreign currency translations 68,078,714 (39,526,227) ------------------------------------ Net Increase from Operations 111,852,098 78,316,928 DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income: Class A (17,894,034) (42,467,084) Class B (10,687,371) (29,338,162) Class C (1,152,780) (2,896,843) Class J (6,691,004) (16,932,962) Class Z (172,143) (64,839) ------------------------------------ Total Distributions Declared to Shareholders (36,597,332) (91,699,890) SHARE TRANSACTIONS Class A: Subscriptions 43,781,997 68,039,895 Distributions reinvested 10,105,223 22,542,999 Redemptions (49,371,074) (113,152,672) ------------------------------------ Net Increase (Decrease) 4,516,146 (22,569,778) Class B: Subscriptions 11,807,135 40,064,707 Distributions reinvested 6,145,954 16,158,239 Redemptions (61,044,544) (128,322,218) ------------------------------------ Net Decrease (43,091,455) (72,099,272) Class C: Subscriptions 4,742,489 8,693,636 Distributions reinvested 666,921 1,571,832 Redemptions (5,910,683) (13,809,960) ------------------------------------ Net Decrease (501,273) (3,544,492) Class J: Subscriptions 1,496,496 5,771,627 Redemptions (15,751,320) (32,286,028) ------------------------------------ Net Decrease (14,254,824) (26,514,401) Class Z: Subscriptions 8,690,366 1,051,458 Distributions reinvested 38,899 55,898 Redemptions (406,537) (1,113,389) ------------------------------------ Net Increase (Decrease) 8,322,728 (6,033) Net Decrease from Share Transactions (45,008,678) (124,733,976) ------------------------------------ Total Increase (Decrease) in Net Assets 30,246,088 (138,116,938) NET ASSETS Beginning of period 1,246,463,399 1,384,580,337 End of period (including undistributed (overdistributed) net investment income of $(813,390) and $852,349, respectively) 1,276,709,487 1,246,463,399
See accompanying notes to financial statements. 34
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED NOVEMBER 30, MAY 31, 2004 ($) 2004 ($) - ------------------------------------------ ---------------------------------------------------------------------------------- CHANGES IN SHARES Class A: Subscriptions 7,033,298 11,072,096 Issued for distributions reinvested 1,631,632 3,674,542 Redemptions (7,986,373) (18,468,207) ------------------------------------ Net Increase (Decrease) 678,557 (3,721,569) Class B: Subscriptions 1,906,071 6,545,770 Issued for distributions reinvested 993,441 2,635,178 Redemptions (9,880,024) (20,955,613) ------------------------------------ Net Decrease (6,980,512) (11,774,665) Class C: Subscriptions 759,845 1,417,309 Issued for distributions reinvested 107,712 256,111 Redemptions (959,305) (2,263,480) ------------------------------------ Net Decrease (91,748) (590,060) Class J: Subscriptions 239,070 931,651 Redemptions (2,539,845) (5,247,368) ------------------------------------ Net Decrease (2,300,775) (4,315,717) Class Z: Subscriptions 1,412,621 171,694 Issued for distributions reinvested 6,302 9,156 Redemptions (65,764) (184,806) ------------------------------------ Net Increase (Decrease) 1,353,159 (3,956)
See accompanying notes to financial statements. 35 NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 2004 (UNAUDITED) COLUMBIA STRATEGIC INCOME FUND NOTE 1. ORGANIZATION Columbia Strategic Income Fund (the "Fund"), a series of Columbia Funds Trust I (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL The Fund seeks current income consistent with prudent risk. The Fund also seeks maximum total return. FUND SHARES The Fund may issue an unlimited number of shares and offers five classes of shares: Class A, Class B, Class C, Class J and Class Z. Each share class has its own sales charge and expense structure. Class A shares are subject to a maximum front-end sales charge of 4.75% based on the amount of initial investment. Class A shares purchased without an initial sales charge are subject to a 1.00% contingent deferred sales charge ("CDSC") on shares sold within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a maximum CDSC of 5.00% based upon the holding period after purchase. Class B shares will convert to Class A shares in a certain number of years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a 1.00% CDSC on shares sold within one year after purchase. Class J shares are subject to a 3% front-end sales charge and are available for purchase only by residents or citizens of Japan. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION Debt securities generally are valued by pricing services approved by the Fund's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Forward currency exchange contracts are valued at the prevailing forward exchange rate of the underlying currencies. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign securities and such exchange rates may occur between the times at which they are determined and the close of the customary trading session of the NYSE, which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the values 36 of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. SECURITY TRANSACTIONS Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Forward foreign currency exchange contracts are agreements to exchange one currency for another at a future date at a specified price. These contracts are used to minimize the exposure to foreign exchange rate fluctuations during the period between trade and settlement date of the contracts. The Fund may utilize forward foreign currency exchange contracts in connection with the settlement of purchases and sales of securities. The Fund may also enter into these contracts to hedge certain other foreign currency denominated assets. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Forward currency contracts are valued daily at the current exchange rate of the underlying currency, resulting in unrealized gains (losses) which become realized at the time the foreign currency contracts are closed or mature. Realized and unrealized gains (losses) arising from such transactions are included in net realized and unrealized gains (losses) on foreign currency transactions. The use of forward currency contracts does not eliminate fluctuations in the prices of the Fund's portfolio securities. While the maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened, exposure is typically limited to the change in value of the contract (in U.S. dollars) over the period it remains open. The Fund could also be exposed to risk if the counterparties of the contracts are unable to fulfill the terms of the contracts. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. MORTGAGE DOLLAR ROLL TRANSACTIONS The Fund may enter into mortgage dollar roll transactions. A mortgage dollar roll transaction involves a sale by the Fund of securities that it holds with an agreement by the Fund to repurchase substantially similar securities at an agreed upon price and date. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions involve the risk that the market value of the securities sold by the Fund may decline below the repurchase price of those securities. In the event the buyer of the securities under a mortgage dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of proceeds of the transaction may be restricted pending a determination by or with respect to the other party. The Fund identifies U.S. Government securities or other liquid high grade debt obligations as segregated with the custodian in an amount equal to the mortgage dollar roll transactions. DELAYED DELIVERY SECURITIES The Fund may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. This may increase the risk if the other party to the transaction fails to deliver and causes the Fund to subsequently invest at less advantageous prices. The Fund identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. 37 INCOME RECOGNITION Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. The value of additional securities received as an income payment is recorded as income and as the cost basis of such securities. Fee income attributable to mortgage dollar roll transactions is recorded on the accrual basis over the term of the transaction. FOREIGN CURRENCY TRANSACTIONS The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. For financial statement purposes, the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. DETERMINATION OF CLASS NET ASSET VALUES All income, expenses (other than class-specific expenses, as shown on the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. FEDERAL INCOME TAX STATUS The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its tax-exempt or taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the Fund's fiscal year ended May 31, 2004 was as follows:
MAY 31,2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary Income $ 91,699,890 Long-Term Capital Gains --
Unrealized appreciation (depreciation) at November 30, 2004, based on cost of investments for federal income tax purposes, was: Unrealized appreciation $ 96,880,515 Unrealized depreciation (34,210,818) Net unrealized appreciation $ 62,669,697
The following capital loss carryforwards, determined as of May 31, 2004, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD - -------------------------------------------------------------------------------- 2007 $ 8,852,750 2008 63,518,542 2009 136,912,288 2010 135,415,014 2011 318,608 $ 345,017,202
Capital loss carryforwards of $12,688,939 were utilized during the year ended May 31, 2004 for the Fund. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Columbia, the transfer agent and the distributor, are each indirect, wholly owned subsidiaries of Bank of America Corporation. 38 INVESTMENT ADVISORY FEE Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - -------------------------------------------------------------------------------- First $1 billion 0.65% Next $1 billion 0.60% Over $2 billion 0.55%
For the six-months ended November 30, 2004, the Fund's annualized effective investment advisory fee rate was 0.64%. PRICING AND BOOKKEEPING FEES Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended November 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.031%. TRANSFER AGENT FEE Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has a subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $34.00 per open account. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. For the six months ended November 30, 2004, the Fund's annualized effective transfer agent fee rate, inclusive of out-of-pocket fees, was 0.17%. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. For the six months ended November 30, 2004, the Distributor has retained net underwriting discounts of $43,301 sales of the Fund's Class A shares and received CDSC fees of $226, $548,609 and $2,375 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a monthly service fee to the Distributor. The service fee is equal to 0.15% annually of the average daily net assets attributable to outstanding Class A and Class B shares issued prior to January 1, 1993 and 0.25% annually of the average daily net assets attributable to outstanding Class A, Class B, Class C and Class J shares issued thereafter. This arrangement results in an effective service fee between the 0.15% and 0.25% annual rates. For the six months ended November 30, 2004, the annualized effective service fee rate was 0.24% for Class A, Class B, Class C and Class J shares of the Fund. The Plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.75% annually of the average daily net assets attributable to Class B and Class C shares and 0.35% annually of the average daily net assets attributable to Class J shares. The Distributor has voluntarily agreed to waive a portion of the Class C share distribution fee so that it will not exceed 0.60% annually. The CDSC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. CUSTODY CREDITS The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. 39 FEES PAID TO OFFICERS AND TRUSTEES With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. OTHER Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended November 30, 2004, the Fund paid $1,697 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PORTFOLIO INFORMATION For the six months ended November 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $342,473,704 and $375,296,521, respectively. NOTE 6. LINE OF CREDIT The Fund and other affiliated funds participate in a $350,000,000 committed unsecured revolving line of credit provided by State Street Bank and Trust Company. Borrowings are used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.10% per annum is accrued and apportioned among the participating funds based on their pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. For the six months ended November 30, 2004, the Fund did not borrow under this arrangement. NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. HIGH-YIELD SECURITIES Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns and industry events may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid to the extent there is no established secondary market. INDUSTRY FOCUS The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from 40 various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston Financial Corporation ("FleetBoston") (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the six months ended November 30, 2004, Columbia has assumed $23,458 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 41 FINANCIAL HIGHLIGHTS COLUMBIA STRATEGIC INCOME FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, CLASS A SHARES 2004 2004 2003(a) - ----------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.63 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.18(b) 0.36(b) 0.16(b) Net realized and unrealized gain (loss) on investments and foreign currency 0.39 0.01 0.46 ------------ ------------ ------------ Total from Investment Operations 0.57 0.37 0.62 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.19) (0.44) (0.16) Return of capital -- -- -- ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.19) (0.44) (0.16) NET ASSET VALUE, END OF PERIOD $ 6.40 $ 6.02 $ 6.09 Total return (f) 9.63%(g) 6.21% 11.10%(g) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 1.13%(i) 1.17% 1.27%(i) Net investment income (h) 5.90%(i) 5.90% 6.52%(i) Portfolio turnover rate 29%(g) 68% 59%(g) Net assets, end of period (000's) $ 605,709 $ 566,269 $ 595,223 YEAR ENDED DECEMBER 31, CLASS A SHARES 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.64 $ 6.00 $ 6.62 $ 7.11 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.38(b) 0.48(b)(c) 0.58(d) 0.57(d) Net realized and unrealized gain (loss) on investments and foreign currency 0.05 (0.30)(c) (0.62) (0.48) ------------ ------------ ------------ ------------ Total from Investment Operations 0.43 0.18 (0.04) 0.09 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.42) (0.50) (0.53) (0.58)(e) Return of capital (0.02) (0.04) (0.05) -- ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.44) (0.54) (0.58) (0.58) NET ASSET VALUE, END OF PERIOD $ 5.63 $ 5.64 $ 6.00 $ 6.62 Total return (f) 7.97% 3.07% (0.68)% 1.28% RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 1.23% 1.21% 1.17% 1.19% Net investment income (h) 6.75% 8.22%(c) 9.12% 8.30% Portfolio turnover rate 62% 106% 35% 44% Net assets, end of period (000's) $ 552,737 $ 575,791 $ 536,481 $ 669,795
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.02, increase net realized and unrealized loss per share by $0.02 and decrease the ratio of net investment income to average net assets from 8.60% to 8.22%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (d) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (e) Distributions from income include currency gains and gains on securities treated as ordinary income for tax purposes. (f) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (g) Not annualized (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 42 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, CLASS B SHARES 2004 2004 2003(a) - ----------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.62 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.16(b) 0.32(b) 0.14(b) Net realized and unrealized gain (loss) on investments and foreign currency 0.38 0.01 0.47 ------------ ------------ ------------ Total from Investment Operations 0.54 0.33 0.61 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.17) (0.40) (0.14) Return of capital -- -- -- ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.17) (0.40) (0.14) NET ASSET VALUE, END OF PERIOD $ 6.39 $ 6.02 $ 6.09 Total return (f) 9.06%(g) 5.42% 10.95%(g) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 1.88%(i) 1.92% 2.02%(i) Net investment income (h) 5.15%(i) 5.15% 5.77%(i) Portfolio turnover rate 29%(g) 68% 59%(g) Net assets, end of period (000's) $ 389,012 $ 408,345 $ 484,540 YEAR ENDED DECEMBER 31, CLASS B SHARES 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.63 $ 6.00 $ 6.62 $ 7.11 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.34(b) 0.44(b)(c) 0.53(d) 0.51(d) Net realized and unrealized gain (loss) on investments and foreign currency 0.04 (0.32)(c) (0.62) (0.48) ------------ ------------ ------------ ------------ Total from Investment Operations 0.38 0.12 (0.09) 0.03 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.37) (0.45) (0.48) (0.52)(e) Return of capital (0.02) (0.04) (0.05) -- ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.39) (0.49) (0.53) (0.52) NET ASSET VALUE, END OF PERIOD $ 5.62 $ 5.63 $ 6.00 $ 6.62 Total return (f) 7.17% 2.12% (1.41)% 0.52% RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 1.98% 1.96% 1.92% 1.94% Net investment income (h) 6.00% 7.47%(c) 8.37% 7.55% Portfolio turnover rate 62% 106% 35% 44% Net assets, end of period (000's) $ 456,563 $ 533,406 $ 693,733 $ 914,145
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.02, increase net realized and unrealized loss per share by $0.02 and decrease the ratio of net investment income to average net assets from 7.85% to 7.47%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (d) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (e) Distributions from income include currency gains and gains on securities treated as ordinary income for tax purposes. (f) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 43 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, CLASS C SHARES 2004 2004 2003(a) - --------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 6.02 $ 6.09 $ 5.63 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.16(b) 0.33(b) 0.14(b) Net realized and unrealized gain (loss) on investments and foreign currency 0.39 0.01 0.46 ------------ ------------ ------------ Total from Investment Operations 0.55 0.34 0.60 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.17) (0.41) (0.14) Return of capital -- -- -- ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.17) (0.41) (0.14) NET ASSET VALUE, END OF PERIOD $ 6.40 $ 6.02 $ 6.09 Total return (g) 9.31%(h)(i) 5.57%(h) 10.82%(h)(i) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (j) 1.73%(k) 1.77% 1.87%(k) Net investment income (j) 5.30%(k) 5.31% 5.92%(k) Waiver/reimbursement 0.15%(k) 0.15% 0.15%(k) Portfolio turnover rate 29%(i) 68% 59%(i) Net assets, end of period (000's) $ 43,506 $ 41,520 $ 45,572 YEAR ENDED DECEMBER 31, CLASS C SHARES 2002 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.64 $ 6.00 $ 6.62 $ 7.11 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.35(b) 0.45(b)(c) 0.54(d)(e) 0.52(d)(e) Net realized and unrealized gain (loss) on investments and foreign currency 0.04 (0.31)(c) (0.62) (0.48) ------------ ------------ ------------ ------------ Total from Investment Operations 0.39 0.14 (0.08) 0.04 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.38) (0.46) (0.49) (0.53)(f) Return of capital (0.02) (0.04) (0.05) -- ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.40) (0.50) (0.54) (0.53) NET ASSET VALUE, END OF PERIOD $ 5.63 $ 5.64 $ 6.00 $ 6.62 Total return (g) 7.32%(h) 2.45% (1.26)%(h) 0.67%(h) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (j) 1.83% 1.81% 1.77%(d) 1.79%(d) Net investment income (j) 6.15% 7.62%(c) 8.52%(d) 7.70%(d) Waiver/reimbursement 0.15% -- 0.15% 0.15% Portfolio turnover rate 62% 106% 35% 44% Net assets, end of period (000's) $ 38,923 $ 42,906 $ 43,538 $ 57,246
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.02, increase net realized and unrealized loss per share by $0.02 and decrease the ratio of net investment income to average net assets from 8.00% to 7.62%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (d) Net of fees waived by the Distributor which amounted to $0.02 and $0.01 per share and 0.15% and 0.15% for the periods ended December 31, 2000 and 1999, respectively. (e) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (f) Distributions from income include currency gains and gains on securities treated as ordinary income for tax purposes. (g) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (h) Had the Distributor not waived a portion of expenses, total return would have been reduced. (i) Not annualized. (j) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (k) Annualized. 44 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, CLASS J SHARES 2004 2004 2003(a) - ----------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 6.01 $ 6.08 $ 5.62 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.17(b) 0.34(b) 0.15(b) Net realized and unrealized gain (loss) on investments and foreign currency 0.38 0.01 0.46 ------------ ------------ ------------ Total from Investment Operations 0.55 0.35 0.61 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.18) (0.42) (0.15) Return of capital -- -- -- ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.18) (0.42) (0.15) NET ASSET VALUE, END OF PERIOD $ 6.38 $ 6.01 $ 6.08 Total return (f) 9.29%(g) 5.88% 10.97%(g) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 1.48%(i) 1.52% 1.62%(i) Net investment income (h) 5.55%(i) 5.55% 6.17%(i) Portfolio turnover rate 29%(g) 68% 59%(g) Net assets, end of period (000's) $ 228,673 $ 229,179 $ 258,057 YEAR ENDED DECEMBER 31, CLASS J SHARES 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.63 $ 6.00 $ 6.62 $ 7.10 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.36(b) 0.46(b)(c) 0.55(d) 0.54(d) Net realized and unrealized gain (loss) on investments and foreign currency 0.05 (0.31)(c) (0.62) (0.47) ------------ ------------ ------------ ------------ Total from Investment Operations 0.41 0.15 (0.07) 0.07 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.40) (0.48) (0.50) (0.55)(e) Return of capital (0.02) (0.04) (0.05) -- ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.42) (0.52) (0.55) (0.55) NET ASSET VALUE, END OF PERIOD $ 5.62 $ 5.63 $ 6.00 $ 6.62 Total return (f) 7.61% 2.56% (1.02)% 1.07% RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 1.58% 1.56% 1.52% 1.54% Net investment income (h) 6.40% 7.87%(c) 8.77% 7.95% Portfolio turnover rate 62% 106% 35% 44% Net assets, end of period (000's) $ 271,733 $ 323,866 $ 508,079 $ 568,311
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.02, increase net realized and unrealized loss per share by $0.02 and decrease the ratio of net investment income to average net assets from 8.25% to 7.87%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (d) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (e) Distributions from income include currency gains and gains on securities treated as ordinary income for tax purposes. (f) Total return at net asset value assuming all distributions reinvested and no initial sales charge. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 45 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED ENDED NOVEMBER 30, MAY 31, MAY 31, CLASS Z SHARES 2004 2004 2003(a) - ----------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.98 $ 6.05 $ 5.59 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.19(c) 0.38(c) 0.17(c) Net realized and unrealized gain (loss) on investments and foreign currency 0.38 0.01 0.45 ------------ ------------ ------------ Total from Investment Operations 0.57 0.39 0.62 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.20) (0.46) (0.16) Return of capital -- -- -- ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.20) (0.46) (0.16) NET ASSET VALUE, END OF PERIOD $ 6.35 $ 5.98 $ 6.05 Total return (g) 9.66%(h) 6.52% 11.29%(h) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (i) 0.89%(j) 0.93% 1.03%(j) Net investment income (i) 6.14%(j) 6.15% 6.76%(j) Portfolio turnover rate 29%(h) 68% 59%(h) Net assets, end of period (000) $ 9,810 $ 1,150 $ 1,188 YEAR ENDED DECEMBER 31, CLASS Z SHARES 2002 2001 2000 1999(b) - ------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.62 $ 5.99 $ 6.62 $ 7.10 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.39(c) 0.49(c)(d) 0.59(e) 0.53(e) Net realized and unrealized gain (loss) on investments and foreign currency 0.03 (0.31)(d) (0.63) (0.47) ------------ ------------ ------------ ------------ Total from Investment Operations 0.42 0.18 (0.04) 0.06 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.43) (0.51) (0.54) (0.54)(f) Return of capital (0.02) (0.04) (0.05) -- ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.45) (0.55) (0.59) (0.54) NET ASSET VALUE, END OF PERIOD $ 5.59 $ 5.62 $ 5.99 $ 6.62 Total return (g) 7.87% 3.14% (0.59)% 1.50%(h) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (i) 0.99% 0.98% 0.93% 0.95%(j) Net investment income (i) 6.99% 8.45%(d) 9.36% 8.54%(j) Portfolio turnover rate 62% 106% 35% 44% Net assets, end of period (000) $ 3 $ 1,860 $ 1 $ 4,928
(a) The Fund changed its fiscal year end from December 31 to May 31. (b) Class Z shares were initially offered on January 29, 1999. Per share data and total return reflect activity from that date. (c) Per share data was calculated using average shares outstanding during the period. (d) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.02, increase net realized and unrealized loss per share by $0.02 and decrease the ratio of net investment income to average net assets from 8.84% to 8.45%. Per share data and ratios for periods prior to December 31, 2001 have not been restated to reflect this change in presentation. (e) The per share net investment income amount does not reflect the period's reclassification of differences between book and tax basis net investment income. (f) Distributions from income include currency gains and gains on securities treated as ordinary income for tax purposes. (g) Total return at net asset value assuming all distributions reinvested. (h) Not annualized. (i) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (j) Annualized. 46 COLUMBIA FUNDS COLUMBIA STRATEGIC INCOME FUND LARGE GROWTH Columbia Common Stock* Columbia Growth* Columbia Growth Stock Columbia Large Cap Growth Columbia Tax-Managed Growth Columbia Tax-Managed Growth II Columbia Young Investor LARGE VALUE Columbia Disciplined Value Columbia Growth & Income Columbia Large Cap Core Columbia Tax-Managed Value MIDCAP GROWTH Columbia Acorn Select Columbia Mid Cap Growth MIDCAP VALUE Columbia Dividend Income Columbia Mid Cap Columbia Strategic Investor SMALL GROWTH Columbia Acorn Columbia Acorn USA Columbia Small Company Equity SMALL VALUE Columbia Small Cap Columbia Small Cap Value BALANCED Columbia Asset Allocation Columbia Balanced Columbia Liberty Fund SPECIALTY Columbia Real Estate Equity Columbia Technology Columbia Utilities TAXABLE FIXED-INCOME Columbia Contrarian Income* Columbia Corporate Bond* Columbia Federal Securities Columbia Fixed Income Securities Columbia High Yield Columbia High Yield Opportunity Columbia Income Columbia Intermediate Bond Columbia Intermediate Government Income Columbia Quality Plus Bond Columbia Short Term Bond Columbia Strategic Income TAX EXEMPT Columbia High Yield Municipal Columbia Intermediate Tax-Exempt Bond Columbia Managed Municipals Columbia National Municipal Bond Columbia Tax-Exempt Columbia Tax-Exempt Insured
47 SINGLE STATE TAX EXEMPT Columbia California Tax-Exempt Columbia Connecticut Intermediate Municipal Bond Columbia Connecticut Tax-Exempt Columbia Florida Intermediate Municipal Bond Columbia Massachusetts Intermediate Municipal Bond Columbia Massachusetts Tax-Exempt Columbia New Jersey Intermediate Municipal Bond Columbia New York Intermediate Municipal Bond Columbia New York Tax-Exempt Columbia Oregon Municipal Bond Columbia Pennsylvania Intermediate Municipal Bond Columbia Rhode Island Intermediate Municipal Bond MONEY MARKET Columbia Money Market Columbia Municipal Money Market INTERNATIONAL/GLOBAL Columbia Acorn International Columbia Acorn International Select Columbia Global Equity Columbia International Equity* Columbia International Stock Columbia Newport Greater China Columbia Newport Tiger INDEX Columbia Large Company Index Columbia Small Company Index Columbia U.S. Treasury Index
* The fund was closed to new investments after the close of business on November 10, 2004. The fund's trustees have approved the merger, which will take effect on or about February 26, 2005, pending shareholder approval. Please consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. Contact us at 800-345-6611 for a prospectus which contains this and other important information about the fund. Read it carefully before you invest. For complete product information on any Columbia fund, visit our website at www.columbiafunds.com. Columbia Management is the primary investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. 48 IMPORTANT INFORMATION ABOUT THIS REPORT COLUMBIA STRATEGIC INCOME FUND TRANSFER AGENT Columbia Funds Services, Inc. P.O. Box 8081 Boston MA 02266-8081 800.345.6611 DISTRIBUTOR Columbia Funds Distributor, Inc. One Financial Center Boston MA 02111 INVESTMENT ADVISOR Columbia Management Advisors, Inc. 100 Federal Street Boston MA 02110 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110 The fund mails one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800-345-6611 and additional reports will be sent to you. This report has been prepared for shareholders of Columbia Strategic Income Fund. This report may also be used as sales literature when preceded or accompanied by the current prospectus which provides details of sales charges, investment objectives and operating policies of the fund and with the most recent copy of the Columbia Funds Performance Update. A description of the fund's proxy voting policies and procedures is available (i) on the fund's website, www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Columbia Management is the primary investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. 49 [GRAPHIC] eDELIVERY Help your fund reduce printing and postage costs! Elect to get your shareholder reports by electronic delivery. With Columbia's eDelivery program, you receive an e-mail message when your shareholder report becomes available online. If your fund account is registered with Columbia Funds, you can sign up quickly and easily on our website at www.columbiafunds.com. Please note -- if you own your fund shares through a financial institution, contact the institution to see if it offers electronic delivery. If you own your fund shares through a retirement plan, electronic delivery may not be available to you. COLUMBIA STRATEGIC INCOME FUND SEMIANNUAL REPORT, PRSRT STD NOVEMBER 30, 2004 U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 [COLUMBIAFUNDS LOGO] A MEMBER OF COLUMBIA MANAGEMENT (C) 2004 COLUMBIA FUNDS DISTRIBUTOR, INC. ONE FINANCIAL CENTER, BOSTON, MA 02111-2621 800.345.6611 www.columbiafunds.com 716-03/751T-1104 (01/05) 05/3938 ITEM 2. CODE OF ETHICS. Not applicable at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not yet applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not applicable at this time. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Columbia Funds Trust I -------------------------------------------------------------------- By (Signature and Title) /S/ Christopher L. Wilson -------------------------------------------------------- Christopher L. Wilson, President Date January 26, 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 January 26, 2005 ---------------------------------------------------------------------------- By (Signature and Title) /S/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, Treasurer Date January 26, 2005 ---------------------------------------------------------------------------- EX-99.302CERT 2 a2149608zex-99_302cert.txt EXHIBIT 99.302CERT Exhibit 99.CERT I, Christopher L. Wilson, certify that: 1. I have reviewed this report on Form N-CSR of Columbia Funds Trust I; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change 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; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 26, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, President I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Columbia Funds Trust I; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change 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; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 26, 2005 /S/ J. Kevin Connaughton -------------------------------------- J. Kevin Connaughton, Treasurer EX-99.906CERT 3 a2149608zex-99_906cert.txt EXHIBIT 99.906CERT Exhibit 99.906 CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of Columbia Funds Trust I (the "Trust") on Form N-CSR for the period ending November 30, 2004, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), the undersigned hereby certifies that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Date: January 26, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, President Date: January 26, 2005 /S/ J. Kevin Connaughton ----------------------------------- J. Kevin Connaughton, Treasurer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----