-----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, LYnxwcP0SyjVhfHiFJjpPyiRrudJ7LPZKqvcw9UORdAJ2lNOdWYxi/DHBjXy2hyi 2jhI9oZbznUqxgElnqVu8Q== 0000891804-05-001731.txt : 20050611 0000891804-05-001731.hdr.sgml : 20050611 20050610163347 ACCESSION NUMBER: 0000891804-05-001731 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050610 DATE AS OF CHANGE: 20050610 EFFECTIVENESS DATE: 20050610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA FUNDS TRUST II CENTRAL INDEX KEY: 0000315665 IRS NUMBER: 046452949 FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03009 FILM NUMBER: 05890329 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY FUNDS TRUST II DATE OF NAME CHANGE: 19991015 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL TRUST II / DATE OF NAME CHANGE: 19950926 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL MONEY MARKET FUND DATE OF NAME CHANGE: 19920703 N-CSR 1 file001.txt COLUMBIA FUNDS TRUST II 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: 811-3009 Columbia Funds Trust II -------------------------------------------------- (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 --------------------------------------------------- (Address of principal executive offices) (Zip code) Vincent Pietropaolo, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 --------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-772-3698 -------------- Date of fiscal year end: 03/31/05 -------- Date of reporting period: 03/31/05 -------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Columbia Money Market Fund ANNUAL REPORT MARCH 31, 2005 [PHOTO OF WOMAN SMILING] TABLE OF CONTENTS FUND PROFILE ................................ 1 UNDERSTANDING YOUR EXPENSES ................. 2 ECONOMIC UPDATE ............................. 3 PORTFOLIO MANAGER'S REPORT .................. 4 FINANCIAL STATEMENTS ........................ 6 INVESTMENT PORTFOLIO ..................... 7 STATEMENT OF ASSETS AND LIABILITIES ...... 13 STATEMENT OF OPERATIONS .................. 14 STATEMENT OF CHANGES IN NET ASSETS ....... 15 NOTES TO FINANCIAL STATEMENTS ............ 17 FINANCIAL HIGHLIGHTS ..................... 22 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................... 26 TRUSTEES .................................... 27 OFFICERS .................................... 29 BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT ....................... 30 IMPORTANT INFORMATION ABOUT THIS REPORT ........................ 33 PRESIDENT'S MESSAGE - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND [Photo of Christopher Wilson] DEAR SHAREHOLDER: In 2004, Columbia Funds became part of the Bank of America family, one of the largest, most respected financial institutions in the United States. As a direct result of this merger, a number of changes are in the works that we believe may offer significant benefits for our shareholders. Plans are underway to combine various Nations Funds and Columbia Funds together to form a single fund family that covers a wide range of markets, sectors and asset classes under the management of talented, seasoned investment professionals. As a result, some funds will be merged in order to eliminate redundancies and fund management teams will be aligned to help maximize performance potential. You will receive more detailed information about these proposed mergers, and you will be asked to vote on certain fund changes that may affect you and your account. In this matter, your timely response will help us to implement the changes in 2005. The increased efficiencies we expect from a more streamlined offering of funds may help us reduce fees charged to the funds, because larger funds often benefit from size and scale of operations. For example, significant savings for the combined complex may result from the consolidation of certain vendor agreements. In fact, we recently announced plans to consolidate the transfer agency of all of our funds and consolidate custodial services, each under a single vendor. We have also reduced management fees for many funds as part of our settlement agreement (See Note 5 in the Notes to Financial Statements) with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the better has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Columbia Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ Christopher Wilson Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. - ----------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - ----------------- FUND PROFILE - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND SUMMARY o FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005, THE FUND'S CLASS A SHARES RETURNED 1.01%. o MONEY MARKET YIELDS MOVED HIGHER DURING THE PERIOD FOLLOWING A SERIES OF SHORT-TERM INTEREST RATE INCREASES BY THE FEDERAL RESERVE. o THE FUND'S POSITIONS IN FLOATING RATE NOTES AIDED RELATIVE PERFORMANCE. CLASS A SHARES LIPPER MONEY MARKET FUNDS CATEGORY 1.01% 0.91% OBJECTIVE Seeks maximum current income consistent with capital preservation and the maintenance of liquidity. TOTAL NET ASSETS $483.3 million The information below gives you a snapshot of your fund at the end of the reporting period. Your fund is actively managed and the composition of its portfolio will change over time. PORTFOLIO BREAKDOWN AS OF 03/31/05 (%) - ------------------------------------------------- CORPORATE FIXED-INCOME BONDS & NOTES 41.8 - ------------------------------------------------- COMMERCIAL PAPER 19.0 - ------------------------------------------------- GOVERNMENT AGENCIES & OBLIGATIONS 18.0 - ------------------------------------------------- MUNICIPAL BONDS 10.6 - ------------------------------------------------- CERTIFICATES OF DEPOSIT 9.5 - ------------------------------------------------- SHORT-TERM OBLIGATION 0.1 - ------------------------------------------------- PORTFOLIO MATURITY AS OF 03/31/05 (%) - ------------------------------------------------- 1-4 DAYS 1.8 - ------------------------------------------------- 5-14 DAYS 42.0 - ------------------------------------------------- 15-29 DAYS 30.6 - ------------------------------------------------- 30-59 DAYS 9.3 - ------------------------------------------------- MORE THAN 59 DAYS 16.3 - ------------------------------------------------- Portfolio breakdown is calculated as a percentage of net assets. Portfolio maturity is calculated as a percentage of total investments. 1 UNDERSTANDING YOUR EXPENSES - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: o 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 o FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE 1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6 2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD," LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1. YOUR ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING THE PERIOD As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period.
10/01/04 - 03/31/05 - --------------------------------------------------------------------------------------------------------------------------- ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - --------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - --------------------------------------------------------------------------------------------------------------------------- CLASS A 1,000.00 1,000.00 1,007.28 1,020.84 4.10 4.13 0.82 - --------------------------------------------------------------------------------------------------------------------------- CLASS B 1,000.00 1,000.00 1,002.29 1,017.40 7.54 7.59 1.51 - --------------------------------------------------------------------------------------------------------------------------- CLASS C 1,000.00 1,000.00 1,005.29 1,019.00 5.95 5.99 1.19 - --------------------------------------------------------------------------------------------------------------------------- CLASS Z 1,000.00 1,000.00 1,007.23 1,020.84 4.10 4.13 0.82 - ---------------------------------------------------------------------------------------------------------------------------
Expenses paid during the period are equal to the fund's 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 Investment Advisor and Distributor not waived or reimbursed a portion of Class B and Class C shares' expenses, Class B and Class C shares' total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 2 SUMMARY: FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2005 o THE FEDERAL FUNDS RATE ROSE FROM 1.0% TO 2.75%, SENDING MONEY MARKET YIELDS HIGHER DURING THE PERIOD.1 o BONDS CHALKED UP MODEST GAINS AS MEASURED BY THE LEHMAN BROTHERS AGGREGATE BOND INDEX. HIGH-YIELD BONDS LED THE FIXED-INCOME MARKETS, AS MEASURED BY THE MERRILL LYNCH US HIGH YIELD, CASH PAY INDEX. HOWEVER, THEY GAVE BACK SOME OF THEIR RETURN IN THE LAST MONTHS OF THE PERIOD. LEHMAN INDEX MERRILL LYNCH INDEX 1.15% 6.79% o STOCKS OUTPERFORMED BONDS, AS MEASURED BY THE S&P 500 INDEX. MOST OF THE PERIOD'S GAINS WERE GENERATED DURING A FOURTH-QUARTER RALLY IN 2004. S&P 500 INDEX 6.69% The Lehman Brothers Aggregate Bond Index is a market value-weighted index that tracks the daily price, coupon, pay downs, and total return performance of fixed-rate, publicly placed, dollar-denominated, non-convertible investment grade corporate debt issues with at least $250 million par amount outstanding and with at least one year to final maturity. The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that tracks the performance of non-investment-grade corporate bonds. The S&P 500 Index is an unmanaged index that tracks the performance of 500 widely held, large capitalization US stocks. 1 On May 3, 2005, the fed rate was raised to 3.00%. ECONOMIC UPDATE - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND The US economy moved ahead at a healthy pace during the 12-month period that began April 1, 2004 and ended March 31, 2005. Gross domestic product (GDP) expanded at an estimated annualized rate of 3.5%, as job growth helped buoy consumer spending and rising profits boosted business spending. Higher energy prices put something of a damper on growth as the period wore on - enough to slow the pace of growth to 3.1% in the first quarter of 2005, yet not enough to raise any serious concerns about the health of the current expansion. Job growth dominated the economic news and drove consumer confidence readings that moved up and down, depending on the number of new jobs reported. Overall, consumers remained significantly more optimistic about the prospects for the economy and about their own employment than they were a year ago. Consumer spending grew during the period, as retail sales and the housing market remained strong. The business sector also contributed to the economy's solid pace. Yet, business spending was not as robust as expected, given a maturing economic cycle, two straight years of double-digit profit growth and a significant build-up of cash on corporate balance sheets. MONEY MARKET YIELDS RISE 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 2.75% in seven one-quarter percentage point steps during the period. The Fed indicated early on that it would continue to raise short-term interest rates at a "measured pace," in an attempt to balance economic growth against inflationary pressures. So far, it has kept its word. However, the Fed left the door open for more aggressive action in remarks made on the economy and inflation when it met in March. BONDS DELIVER MODEST GAINS The US bond market delivered a positive return, despite rising interest rates in the final six weeks of the period. The yield on the 10-year Treasury note, a bellwether for the bond market, rose above 4.5%, and sent bond prices down. However, it settled just below 4.5% at the end of the period. In this environment, the Lehman Brothers Aggregate Bond Index returned 1.15% for the 12-month period. Municipal bonds did even better than investment-grade taxable bonds as state revenues strengthened and fiscal constraints helped many states balance their budgets. The Lehman Municipal Bond Index returned 2.67%. High-yield bonds led the fixed-income markets, as a stronger economy resulted in improved credit ratings, stronger balance sheets and higher profits for many companies in the high-yield universe. The Merrill Lynch US High Yield, Cash Pay Index returned 6.79%. However, the riskiest bonds were the hardest hit when the bond market pulled back, and high-yield bonds gave back some of their gains in the final months of the period. STOCKS OUTPERFORMED BONDS Buoyed by strong gains in the fourth quarter of 2004, the S&P 500 Index returned 6.69% for the period. Returns were lackluster throughout most of 2004, but most segments of the stock market bounced back after the presidential election was settled in November. However, stocks retreated early in 2005, as rising energy prices and higher interest rates turned investors cautious once again. Small and mid-cap stocks did significantly better than large-cap stocks, and value stocks led growth stocks by a significant margin. Energy and utilities were the best performing sectors. 3 DISTRIBUTIONS DECLARED PER SHARE 04/01/04 - 03/31/05 ($) - ------------------------------------ CLASS A 0.010 - ------------------------------------ CLASS B 0.003 - ------------------------------------ CLASS C 0.006 - ------------------------------------ CLASS Z 0.010 - ------------------------------------ 7-DAY YIELDS ON 03/31/05 (%) - ------------------------------------ CLASS A 1.98 - ------------------------------------ CLASS B 0.98 - ------------------------------------ CLASS C 1.58 - ------------------------------------ CLASS Z 1.98 - ------------------------------------ 30-DAY YIELDS ON 03/31/05 (%) - ------------------------------------ CLASS A 1.90 - ------------------------------------ CLASS B 0.90 - ------------------------------------ CLASS C 1.50 - ------------------------------------ CLASS Z 1.89 - ------------------------------------ The 30-day SEC yields reflect the portfolio's earning power, net of expenses, expressed as an annualized percentage of the public offering price at the end of the period. Performance data quoted represents past performance and current performance may be lower or higher. Past performance is no guarantee of future investment results. The investment return and principal value will fluctuate so the shares may be worth more or less than the original cost. Please visit www.columbiafunds.com for daily and most recent month-end performance updates. PORTFOLIO MANAGER'S REPORT - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND For the 12-month period ended March 31, 2005, Columbia Money Market Fund class A shares returned 1.01%. The fund's return was higher than the average return of its peer group, the Lipper Money Market Funds Category, which was 0.91% for the same period.1 The fund was aided during the period by its significant position in variable and floating rate securities. THE FED SETS THE TONE The period was characterized by the Federal Reserve's push to raise short-term interest rates in an effort to balance economic growth and potential inflation. Altogether, the Fed raised the federal funds rate by 1.75 percentage points in a series of seven quarter-point hikes that began in June of 2004. Prior to that time, rates had been kept low in an effort to stimulate the economy, but the Fed shifted its stance once steady economic growth had taken hold. While higher money market yields are a favorable outgrowth of the Fed's policy, the transition to higher rates poses special challenges to money market funds. Our most important response to the Fed's policy shift was to significantly lower the weighted average maturity of the fund. We lowered the weighted average maturity from 45 days on March 31, 2004, to just 30 days on March 31, 2005. By keeping investments ultra-short, we positioned the fund to reinvest at higher rates following each Fed intervention as well as to minimize the fund's exposure to securities whose value declines as newer, higher-yielding securities hit the market. FLOATING RATE NOTES AID PERFORMANCE Throughout the past 12 months, the fund has had over 70% of its assets invested in variable and floating rate notes. This concentrated position proved to be an ideal match for a rising-rate environment. The coupons on floating rate notes are reset (usually weekly or monthly) in accordance with the fluctuations of a set benchmark (notably the London Interbank Offered Rate, or LIBOR), so these securities hold their value as the benchmark yield increases. In addition, because LIBOR is forward-looking, and because investors expect the Fed to continue raising rates, securities pegged to LIBOR have been yielding slightly more than comparable 7-day fixed-rate paper. FOLLOWING THE FED FORWARD With the national economy demonstrating steady but unspectacular growth, we anticipate that the Federal Reserve will continue to inch short-term rates higher in 2005 and possibly beyond. With so much 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. 4 - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND speculation devoted to the Fed's intent, we have found that the market occasionally gets ahead of itself, providing the opportunity to purchase three-month or six-month securities whose yields are higher than what the Fed's interim hikes would be expected to produce. Other than capitalizing on isolated opportunities of this type, we expect to follow our basic investment model of keeping maturities short, a model that served us well during the past 12 months. [photo of Karen Arneil] Karen Arneil has managed Columbia Money Market Fund since July 2002 and has been with the advisor or its predecessors or affiliate organizations since 1996. /s/ Karen Arneil An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. 5 FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
A GUIDE TO UNDERSTANDING YOUR FUND'S FINANCIAL STATEMENTS ----------------------------------------------------------------------------------- INVESTMENT PORTFOLIO The investment portfolio details all of the fund's holdings and their market value as of the last day of the reporting period. Portfolio holdings are organized by type of asset, industry, country or geographic region (if applicable) to demonstrate areas of concentration and diversification. ----------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES This statement details the fund's assets, liabilities, net assets and share price for each share class as of the last day of the reporting period. Net assets are calculated by subtracting all the fund's liabilities (including any unpaid expenses) from the total of the fund's investment and non-investment assets. The share price for each class is calculated by dividing net assets for that class by the number of shares outstanding in that class as of the last day of the reporting period. ----------------------------------------------------------------------------------- STATEMENT OF OPERATIONS This statement details income earned by the fund and the expenses accrued by the fund during the reporting period. The Statement of Operations also shows any net gain or loss the fund realized on the sales of its holdings during the period, as well as any unrealized gains or losses recognized over the period. The total of these results represents the fund's net increase or decrease in net assets from operations. ----------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS This statement demonstrates how the fund's net assets were affected by its operating results, distributions to shareholders and shareholder transactions (e.g., subscriptions, redemptions and dividend reinvestments) during the reporting period. The Statement of Changes in Net Assets also details changes in the number of shares outstanding. ----------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS These notes disclose the organizational background of the fund, its significant accounting policies (including those surrounding security valuation, income recognition and distributions to shareholders), federal tax information, fees and compensation paid to affiliates and significant risks and contingencies. ----------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS The financial highlights demonstrate how the fund's net asset value per share was affected by the fund's operating results. The financial highlights table also discloses the classes' performance and certain key ratios (e.g., class expenses and net investment income as a percentage of average net assets).
6 INVESTMENT PORTFOLIO - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
CORPORATE FIXED-INCOME BONDS & NOTES - 41.8% FINANCIALS - 41.8% BANKS - 5.8% - ------------------------------------------ ------------------------------------------------------------------------------ PAR ($) VALUE ($) HBOS TREASURY SERVICES PLC 2.900% 07/29/05 (a)(b) 10,000,000 10,002,937 ------------------------------------------------------------------------------- US BANK NA 2.770% 02/17/06 (b) 8,000,000 7,999,943 ------------------------------------------------------------------------------- WELLS FARGO & CO. 2.780% 05/15/06 (a)(b) 10,000,000 10,000,000 ------------------------------------------------------------------------------- Banks Total 28,002,880 DIVERSIFIED FINANCIAL SERVICES - 36.0% - ------------------------------------------ ------------------------------------------------------------------------------ 20/20 CUSTOM MOLDED PLASTICS LP LOC: National City Bank 2.920% 08/01/13 (c) 4,365,000 4,365,000 ------------------------------------------------------------------------------- ACC LEASING LLC LOC: National City Bank 2.920% 05/01/23 (c) 3,366,000 3,366,000 ------------------------------------------------------------------------------- AMERICAN EXPRESS CREDIT CORP. 2.826% 06/05/06 (b) 13,000,000 13,000,000 ------------------------------------------------------------------------------- AMERICAN HEALTHCARE FUNDING CORP. LOC: LaSalle Bank NA 2.850% 03/01/29 (c) 3,803,000 3,803,000 ------------------------------------------------------------------------------- ARCHBISHOP OF CINCINNATI TRUSTEE LOC: Fifth Third Bank 2.860% 04/01/23 (c) 1,000,000 1,000,000 ------------------------------------------------------------------------------- ASSOCIATES CORP. OF NORTH AMERICA 6.625% 06/15/05 7,150,000 7,207,966 ------------------------------------------------------------------------------- AUTUMN HOUSE AT POWDER MILL, INC. LOC: SunTrust Bank 2.850% 02/01/28 (c) 3,575,000 3,575,000 ------------------------------------------------------------------------------- BATH TECHNOLOGY ASSOCIATES LTD. LOC: National City Bank 2.920% 07/01/17 (c) 1,820,000 1,820,000 ------------------------------------------------------------------------------- BEST ONE TIRE & SERVICES LLC LOC: Fifth Third Bank 2.860% 02/01/18 (c) 7,510,000 7,510,000 ------------------------------------------------------------------------------- CONGREGATION MKOR SHALOM LOC: Wachovia Bank 2.930% 06/01/23 (c) 2,225,000 2,225,000 ------------------------------------------------------------------------------- CRESCENT PAPER TUBE CO. LOC: Fifth Third Bank 2.860% 08/01/22 (c) 2,710,000 2,710,000 ------------------------------------------------------------------------------- CRESTMONT REALTY CORP. LOC: Fifth Third Bank 2.860% 11/01/22 (c) 4,440,000 4,440,000 ------------------------------------------------------------------------------- DELTIME LLC PROJECT LOC: National City Bank 2.920% 02/01/23 (c) 2,350,000 2,350,000 ------------------------------------------------------------------------------- DOMINICAN SISTERS LOC: Fifth Third Bank 2.860% 10/01/23 (c) 3,945,000 3,945,000 ------------------------------------------------------------------------------- DUBLIN BUILDING LLC LOC: National City Bank 2.920% 11/01/18 (c) 1,805,000 1,805,000 ------------------------------------------------------------------------------- FANNIN AND FANNIN LLC LOC: Fifth Third Bank 2.860% 12/01/24 (c) 2,000,000 2,000,000 ------------------------------------------------------------------------------- GENERAL ELECTRIC CAPITAL CORP. 2.930% 05/17/06 (b) 13,000,000 13,000,000 ------------------------------------------------------------------------------- HARRIER FINANCE FUNDING LLC 2.660% 10/25/05 (a)(b) 10,000,000 10,000,000 ------------------------------------------------------------------------------- K.C. JORDAN & ASSOCIATES, INC. LOC: Fifth Third Bank 2.860% 04/01/23 (c) 1,000,000 1,000,000
See Accompanying Notes to Financial Statements. 7 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
CORPORATE FIXED-INCOME BONDS & NOTES - (CONTINUED) FINANCIALS - (CONTINUED) DIVERSIFIED FINANCIAL SERVICES - (CONTINUED) - ------------------------------------------ ------------------------------------------------------------------------------- PAR ($) VALUE ($) KINGSTON CARE CENTER OF SYLVANIA LOC: Bank One NA 2.900% 05/01/33 (c) 11,675,000 11,675,000 ------------------------------------------------------------------------------- MICHIGAN EQUITY GROUP LLC LOC: Fifth Third Bank 2.860% 04/01/34 (c) 5,890,000 5,890,000 ------------------------------------------------------------------------------- MORGAN STANLEY 2.890% 04/27/06 (b) 12,000,000 12,000,000 ------------------------------------------------------------------------------- PILOT DRIVE PROPERTIES LLC LOC: JPMorgan Chase Bank 2.900% 02/01/35 (c) 4,000,000 4,000,000 ------------------------------------------------------------------------------- PRECISION RADIOTHERAPY LLC LOC: Fifth Third Bank 2.860% 08/01/18 (c) 2,430,000 2,430,000 ------------------------------------------------------------------------------- PS GREETINGS, INC. LOC: LaSalle Bank NA 3.020% 12/01/33 (c) 965,000 965,000 ------------------------------------------------------------------------------- REDCAY FUNDING LLC LOC: Sun Trust Bank 2.890% 11/01/25 (c) 2,145,000 2,145,000 ------------------------------------------------------------------------------- SEDNA FINANCE, INC. 2.590% 10/14/05 (a)(b) 10,000,000 10,000,000 ------------------------------------------------------------------------------- SERVAAS, INC. LOC: Fifth Third Bank 2.860% 03/01/13 (c) 5,190,000 5,190,000 ------------------------------------------------------------------------------- SHEPHERD CAPITAL LLC LOC: Old Kent Bank & Trust 2.980% 03/15/49 (c) 1,935,000 1,935,000 ------------------------------------------------------------------------------- SKELETAL PROPERTIES LLC LOC: Fifth Third Bank 2.860% 11/01/14 (c) 2,000,000 2,000,000 ------------------------------------------------------------------------------- SOUTHTOWN PARTNERS LLC LOC: Fifth Third Bank 2.860% 12/01/44 (c) 2,000,000 2,000,000 ------------------------------------------------------------------------------- SPRINGSIDE CORP. EXCHANGE PARTNERS I LLC LOC: US Bank NA 2.920% 02/01/36 (c) 2,245,000 2,245,000 ------------------------------------------------------------------------------- TANGO FINANCE CORP. 2.650% 01/17/06 (a)(b) 10,000,000 10,001,012 ------------------------------------------------------------------------------- WHITE PINE FINANCE LLC 2.905% 09/07/05 (a)(b) 10,000,000 9,998,267 ------------------------------------------------------------------------------- YOUNG MEN'S CHRISTIAN ASSOCIATION LOC: Wachovia Bank 2.830% 02/01/24 (c) 2,400,000 2,400,000 ------------------------------------------------------------------------------- Diversified Financial Services Total 173,996,245 FINANCIALS TOTAL 201,999,125 TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (COST OF $201,999,125) 201,999,125 COMMERCIAL PAPER - 19.0% - ------------------------------------------ ------------------------------------------------------------------------------ ATLANTIS ONE FUNDING CORP. 3.250% 09/19/05 (d) 6,000,000 5,908,800 ------------------------------------------------------------------------------- CANCARA ASSET SECURITISATION LTD. 2.740% 05/18/05 (d) 5,000,000 4,982,114 ------------------------------------------------------------------------------- GIRO BALANCED FUNDING CORP. 3.250% 09/23/05 (d) 5,000,000 4,922,222 ------------------------------------------------------------------------------- GRAMPIAN FUNDING LLC 2.860% 06/30/05 (d) 8,000,000 7,942,800 3.130% 09/09/05 (d) 8,000,000 7,888,016
See Accompanying Notes to Financial Statements. 8 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
COMMERCIAL PAPER - (CONTINUED) PAR ($) VALUE ($) - ------------------------------------------ ------------------------------------------------------------------------------ HARRIER FINANCE FUNDING LLC 2.720% 06/10/05 (d) 5,000,000 4,973,556 ------------------------------------------------------------------------------- MANE FUNDING CORP. 2.540% 04/07/05 (d) 5,000,000 4,997,883 ------------------------------------------------------------------------------- MITTEN GMAC MORTGAGE CORP. 2.890% 04/01/05 (d) 8,500,000 8,500,000 ------------------------------------------------------------------------------- PREMIER ASSET COLLECTION LLC 2.840% 05/25/05 (d) 5,000,000 4,978,700 ------------------------------------------------------------------------------- SCALDIS CAPITAL LLC 3.000% 06/30/05 (d) 5,000,000 4,962,500 ------------------------------------------------------------------------------- SIGMA FINANCE, INC. 2.750% 07/01/05 (d) 4,000,000 3,972,195 2.970% 06/27/05 (d) 10,000,000 9,928,708 ------------------------------------------------------------------------------- SOLITAIRE FUNDING LLC 3.000% 06/22/05 (d) 5,000,000 4,965,833 ------------------------------------------------------------------------------- SUNBELT FUNDING CORP. 2.830% 04/21/05 (d) 8,000,000 7,987,422 ------------------------------------------------------------------------------- WHISTLEJACKET CAPITAL LTD. 2.760% 04/15/05 (a)(b) 5,000,000 4,999,943 TOTAL COMMERCIAL PAPER (COST OF $91,910,692) 91,910,692 GOVERNMENT AGENCIES & OBLIGATIONS - 18.0% U.S. GOVERNMENT AGENCIES & OBLIGATIONS - 18.0% - ------------------------------------------ ------------------------------------------------------------------------------- FEDERAL HOME LOAN BANK 1.350% 04/15/05-04/29/05 13,000,000 13,000,000 2.590% 04/19/05 (b) 15,000,000 14,999,779 2.770% 04/25/05 (b) 7,000,000 6,999,815 ------------------------------------------------------------------------------- FEDERAL HOME LOAN MORTGAGE CORP. 2.550% 10/07/05 (b) 30,000,000 30,000,000 2.725% 11/07/05 (b) 8,000,000 8,000,000 ------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION 1.550% 05/04/05 6,000,000 6,000,000 1.600% 05/13/05 3,000,000 3,000,000 1.750% 05/23/05 5,000,000 5,000,000 U.S. GOVERNMENT AGENCIES & OBLIGATIONS TOTAL 86,999,594 TOTAL GOVERNMENT AGENCIES & OBLIGATIONS (COST OF $86,999,594) 86,999,594 MUNICIPAL BONDS - 10.6% CALIFORNIA - 2.1% - ------------------------------------------ ------------------------------------------------------------------------------- CA ABAG FINANCE AUTHORITY FOR NONPROFIT CORPS. California Multifamily Revenue: Bachenheimer Building Apartments, Series 2002, LOC: FNMA 2.850% 07/15/35 (c) 2,100,000 2,100,000 Berkeleyan LLC, Series 2003, LOC: FNMA 2.850% 05/15/33 (c) 2,200,000 2,200,000 Gaia Building LLC, Series 2000, LOC: FNMA 2.850% 09/15/32 (c) 2,375,000 2,375,000
See Accompanying Notes to Financial Statements. 9 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
MUNICIPAL BONDS - (CONTINUED) CALIFORNIA - (CONTINUED) PAR ($) VALUE ($) - ------------------------------------------ ------------------------------------------------------------------------------ CA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY Vineyard Creek Apartments, Series 2003, LOC: Federal Home Loan Bank 2.900% 12/01/36 (c) 3,700,000 3,700,000 ------------------------------------------------------------------------------- CALIFORNIA TOTAL 10,375,000 IOWA - 0.5% - ------------------------------------------ ------------------------------------------------------------------------------ IA FINANCE AUTHORITY St. Luke's Health Foundation, Series 2003 B, LOC: General Electric Capital Corp. 2.850% 03/01/18 (c) 2,280,000 2,280,000 ------------------------------------------------------------------------------- IOWA TOTAL 2,280,000 MARYLAND - 1.7% - ------------------------------------------ ------------------------------------------------------------------------------ MD BALTIMORE PROJECT REVENUE Baltimore Parking Facilities Series 2002 Insured: FGIC SPA: Dexia Credit Local 2.850% 07/01/32 (c) 8,100,000 8,100,000 ------------------------------------------------------------------------------- MARYLAND TOTAL 8,100,000 MASSACHUSETTS - 0.8% - ------------------------------------------ ------------------------------------------------------------------------------ MA STATE HOUSING FINANCE AGENCY REVENUE Avalon Upper Falls LLC Series 2004 A LOC: JPMorgan Chase Bank 2.840% 12/01/34 (c) 3,780,000 3,780,000 ------------------------------------------------------------------------------- MASSACHUSETTS TOTAL 3,780,000 MICHIGAN - 1.0% - ------------------------------------------ ------------------------------------------------------------------------------ MI OAKLAND COUNTY Series 2004, 1.625% 05/01/05 5,000,000 4,995,986 ------------------------------------------------------------------------------- MICHIGAN TOTAL 4,995,986 NEW HAMPSHIRE - 1.4% - ------------------------------------------ ------------------------------------------------------------------------------ NH BUSINESS FINANCE AUTHORITY Series 2002 A, SPA: Bank of New York 2.910% 11/01/20 (c) 7,100,000 7,100,000 ------------------------------------------------------------------------------- NEW HAMPSHIRE TOTAL 7,100,000 TENNESSEE - 0.4% - ------------------------------------------ ------------------------------------------------------------------------------ TN COFFEE COUNTY INDUSTRIAL BOARD, INC., REVENUE Stamtec, Inc., Series 1999, LOC: JPMorgan Chase Bank 2.930% 09/01/14 (c) 1,890,000 1,890,000 ------------------------------------------------------------------------------- TENNESSEE TOTAL 1,890,000
See Accompanying Notes to Financial Statements. 10 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
MUNICIPAL BONDS - (CONTINUED) TEXAS - 2.2% PAR ($) VALUE ($) - ------------------------------------------ ------------------------------------------------------------------------------ TX STATE Veterans' Housing, Series 2002 B, SPA: Landesbank Hessen-Thuringen GZ 2.850% 06/01/23 (c) 10,550,000 10,550,000 ------------------------------------------------------------------------------- TEXAS TOTAL 10,550,000 VIRGINIA - 0.5% - ------------------------------------------ ------------------------------------------------------------------------------ VA RICHMOND REDEVELOPMENT & HOUSING Old Manchester, AUTHORITY PROJECT REVENUE Series 1995 B, LOC : Wachovia Bank, NA 2.900% 12/01/25 (c) 2,310,000 2,310,000 ------------------------------------------------------------------------------- VIRGINIA TOTAL 2,310,000 TOTAL MUNICIPAL BONDS (COST OF $51,380,986) 51,380,986 CERTIFICATES OF DEPOSIT - 9.5% - ------------------------------------------ ------------------------------------------------------------------------------ BARCLAYS BANK PLC 2.775% 05/25/05 10,000,000 9,999,548 ------------------------------------------------------------------------------- CANADIAN IMPERIAL BANK OF CANADA 2.860% 03/15/08 (b) 20,000,000 20,000,000 ------------------------------------------------------------------------------- CS FIRST BOSTON 3.110% 12/29/05 (b) 6,000,000 6,000,897 ------------------------------------------------------------------------------- UNICREDITO ITALIANO S.P.A. 2.630% 07/27/05 (b) 10,000,000 9,997,848 TOTAL CERTIFICATES OF DEPOSIT (COST OF $45,998,293) 45,998,293 SHORT-TERM OBLIGATION - 0.1% - ------------------------------------------ ------------------------------------------------------------------------------ Repurchase agreement with State Street Bank & Trust Co., dated 03/31/05, due 04/01/05 at 2.560%, collateralized by a U.S. Government Agency maturing 03/05/19, market value of $292,500 (repurchase proceeds $286,020) 286,000 286,000 TOTAL SHORT-TERM OBLIGATION (COST OF $286,000) 286,000 TOTAL INVESTMENTS - 99.0% (COST OF $478,574,690) (E) 478,574,690 OTHER ASSETS & LIABILITIES, NET - 1.0% 4,734,272 NET ASSETS - 100.0% 483,308,962
See Accompanying Notes to Financial Statements. 11 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND NOTES TO INVESTMENT PORTFOLIO: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2005, these securities amounted to $65,002,159, which represents 13.4% of net assets. (b) Floating rate note. The interest rate shown reflects the rate as of March 31, 2005. (c) Variable rate security. The interest rate shown reflects the rate as of March 31, 2005. (d) Security exempt from registration under Section 4(2) of the Securities Act of 1933. These securities may only be resold in exempt transactions to qualified buyers. Private resales of these securities to qualified institutional buyers are also exempt from registration pursuant to Rule 144A under the Securities Act of 1933. At March 31, 2005, these securities amounted to $86,910,749, which represents 18.0% of net assets. (e) Cost for federal income tax purposes is $478,574,690. Acronym Name ------- ---- ABAG Association of Bay Area Government FGIC Financial Guaranty Insurance Co. FNMA Federal National Mortgage Association LOC Letter of Credit/Line of Credit SPA Stand-by Purchase Agreement See Accompanying Notes to Financial Statements. 12 STATEMENT OF ASSETS AND LIABILITIES - ------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
($) - ------------------------------------------ ----------------------------------------------------------------------------- ASSETS Investments, at cost 478,574,690 Investments, at value 478,574,690 Cash 546 Receivable for: Investments sold 4,510,123 Fund shares sold 961,336 Interest 1,276,424 Expense reimbursement due from Investment Advisor 65,267 Deferred Trustees' compensation plan 26,729 ------------- Total Assets 485,415,115 ------------------------------------------------------------------------------ LIABILITIES Payable for: Fund shares repurchased 1,472,297 Distributions 16,824 Investment advisory fee 100,705 Administration fee 106,930 Transfer agent fee 190,963 Pricing and bookkeeping fees 17,040 Trustees' fees 1,621 Custody fee 2,875 Distribution and service fees 110,646 Deferred Trustees' fees 26,729 Other liabilities 59,523 ------------- Total Liabilities 2,106,153 NET ASSETS 483,308,962 ------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS Paid-in capital 483,340,967 Overdistributed net investment income (30,807) Accumulated net realized loss (1,198) ------------- NET ASSETS 483,308,962 ------------------------------------------------------------------------------ CLASS A Net assets 208,148,289 Shares outstanding 208,199,287 Net asset value and offering price per share 1.00(a) ------------------------------------------------------------------------------ CLASS B Net assets 61,467,330 Shares outstanding 61,498,782 Net asset value and offering price per share 1.00(a) ------------------------------------------------------------------------------ CLASS C Net assets 9,978,888 Shares outstanding 9,983,791 Net asset value and offering price per share 1.00(a) ------------------------------------------------------------------------------ CLASS Z Net assets 203,714,455 Shares outstanding 203,964,233 Net asset value, offering and redemption price per share 1.00
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements. 13 STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- FOR THE YEAR ENDED MARCH 31, 2005 COLUMBIA MONEY MARKET FUND
($) - ------------------------------------------ ----------------------------------------------------------------------------- ($) - ------------------------------------------ ------------------------------------------------------------------------------ INVESTMENT INCOME Interest 9,329,151 ------------------------------------------------------------------------------ EXPENSES Investment advisory fee 1,320,197 Administration fee 1,310,632 Distribution fee: Class B 576,696 Class C 85,589 Service fee: Class B 192,232 Class C 28,602 Transfer agent fee 1,162,794 Pricing and bookkeeping fees 141,444 Trustees' fees 25,176 Custody fee 21,624 Other expenses 229,830 ---------- Total Expenses 5,094,816 Distribution and service fees reimbursed by Investment Advisor: Class B (236,287) Class C (3,728) Fees waived by Distributor - Class C (68,429) Custody earnings credit (2,029) ---------- Net Expenses 4,784,343 ---------- Net Investment Income 4,544,808 ------------------------------------------------------------------------------- NET REALIZED GAIN ON INVESTMENTS Net realized gain on investments 5,343 ---------- Net Increase in Net Assets from Operations 4,550,151
See Accompanying Notes to Financial Statements. 14 STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND
YEAR ENDED PERIOD ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, INCREASE (DECREASE) IN NET ASSETS: 2005 ($) 2004 (a)($) 2003 (b)($) - ------------------------------------------ ------------------------------------------------------------------------------ OPERATIONS Net investment income 4,544,808 1,035,604 3,538,268 Net realized gain (loss) on investments 5,343 (149) -- ------------------------------------------- Net Increase from Operations 4,550,151 1,035,455 3,538,268 ------------------------------------------------------------------------------ DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income: Class A (2,113,778) (441,305) (1,493,624) Class B (191,763) (73,946) (208,504) Class C (63,771) (12,956) (55,169) Class Z (2,175,651) (588,244) (1,763,556) ------------------------------------------- Total Distributions Declared to Shareholders (4,544,963) (1,116,451) (3,520,853) ------------------------------------------------------------------------------ SHARE TRANSACTIONS Class A: Subscriptions 215,560,472 271,755,492 910,150,826 Distributions reinvested 2,043,937 412,583 1,302,088 Redemptions (238,207,842) (309,985,945) (855,426,770) ------------------------------------------- Net Increase (Decrease) (20,603,433) (37,817,870) 56,026,144 Class B: Subscriptions 53,430,955 54,247,449 155,689,122 Distributions reinvested 169,267 64,742 158,062 Redemptions (74,471,696) (82,734,676) (141,953,170) ------------------------------------------- Net Increase (Decrease) (20,871,474) (28,422,485) 13,894,014 Class C: Subscriptions 16,402,459 33,670,794 120,063,340 Distributions reinvested 58,574 10,662 45,279 Redemptions (21,875,105) (35,609,703) (123,559,631) ------------------------------------------- Net Decrease (5,414,072) (1,928,247) (3,451,012) Class Z: Subscriptions 179,117,629 167,190,771 262,511,827 Proceeds received in connection with merger -- -- 338,355,029 Distributions reinvested 2,094,040 565,585 1,710,449 Redemptions (225,823,469) (208,829,522) (313,151,895) ------------------------------------------- Net Increase (Decrease) (44,611,800) (41,073,166) 289,425,410 Net Increase (Decrease) from Share Transactions (91,500,779) (109,241,768) 355,894,556 ------------------------------------------- Total Increase (Decrease) in Net Assets (91,495,591) (109,322,764) 355,911,971 ------------------------------------------------------------------------------ NET ASSETS Beginning of period 574,804,553 684,127,317 328,215,346 End of period 483,308,962 574,804,553 684,127,317 Undistributed (overdistributed) net investment income at end of period (30,807) (30,652) 42,533
(a) The Fund changed its fiscal year end from June 30 to March 31, effective March 31, 2004. (b) Class Z shares commenced operations on July 29, 2002. See Accompanying Notes to Financial Statements. 15 COLUMBIA MONEY MARKET FUND - --------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2005 2004 (a) 2003 (b) - ------------------------------------------ ------------------------------------------------------------------------------ CHANGES IN SHARES Class A: Subscriptions 215,560,472 271,755,491 910,150,825 Issued for distributions reinvested 2,043,937 412,582 1,302,088 Redemptions (238,207,842) (309,985,944) (855,426,769) ------------------------------------------- Net Increase (Decrease) (20,603,433) (37,817,871) 56,026,144 Class B: Subscriptions 53,430,954 54,247,449 155,689,123 Issued for distributions reinvested 169,266 64,742 158,062 Redemptions (74,471,685) (82,734,670) (141,953,166) ------------------------------------------- Net Increase (Decrease) (20,871,465) (28,422,479) 13,894,019 Class C: Subscriptions 16,402,459 33,670,794 120,063,342 Issued for distributions reinvested 58,575 10,662 45,279 Redemptions (21,875,105) (35,609,703) (123,559,630) ------------------------------------------- Net Decrease (5,414,071) (1,928,247) (3,451,009) Class Z: Subscriptions 179,117,629 167,190,771 262,735,612 Issued in connection with merger -- -- 338,355,029 Issued for distributions reinvested 2,094,040 565,585 1,710,449 Redemptions (225,823,468) (208,829,520) (313,151,894) ------------------------------------------- Net Increase (Decrease) (44,611,799) (41,073,164) 289,649,196
(a) The Fund changed its fiscal year end from June 30 to March 31, effective March 31, 2004. (b) Class Z shares commenced operations on July 29, 2002. See Accompanying Notes to Financial Statements. 16 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND NOTE 1. ORGANIZATION Columbia Money Market Fund (the "Fund"), a series of Columbia Funds Trust II (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 maximum current income consistent with capital preservation and the maintenance of liquidity. 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 sold at net asset value. Class A shares 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. When exchanged for Class A shares in another Columbia Fund, a sales charge may be imposed. 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 Securities in the Fund are valued utilizing the amortized cost valuation method permitted in accordance with Rule 2a-7 under the 1940 Act provided certain conditions are met. This method involves valuing a portfolio security initially at its cost and thereafter assuming a constant accretion or amortization to maturity of any discount or premium, respectively. Short-term obligations maturing within 60 days are valued at amortized cost, which approximates market value. 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. INCOME RECOGNITION Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. DETERMINATION OF CLASS NET ASSET VALUES All income, expenses (other than class-specific expenses, as shown on the Statement of Operations) and realized and unrealized gains (losses) are allocated 17 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND to each class of the Fund on a daily basis for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. FEDERAL INCOME TAX STATUS The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually. NOTE 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. No reclassifications were necessary for the fiscal year ended March 31, 2005. The tax character of distributions paid during the year ended March 31, 2005, the period ended March 31, 2004 and the year ended June 30, 2003 was as follows: MARCH 31, MARCH 31, JUNE 30, 2005 2004 2003 - -------------------------------------------------------------------------------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME $4,544,963 $1,116,451 $3,520,853 As of March 31, 2005, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED ORDINARY INCOME - -------------------------------------------------------------------------------- $14,467 The following capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD - -------------------------------------------------------------------------------- 2008 $ 694 2009 355 2012 149 - -------------------------------------------------------------------------------- TOTAL $1,198 Of the capital loss carryforwards attributable to the Fund, $111 was obtained in the merger with Stein Roe Cash Reserves Fund and will expire on March 31, 2008. Capital loss carryforwards of $5,343 were utilized during the year ended March 31, 2005. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and receives a monthly investment advisory fee based on the Fund's average daily net assets at the following annual rates: AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - -------------------------------------------------------------------------------- FIRST $500 MILLION 0.250% - -------------------------------------------------------------------------------- $500 MILLION TO $1 BILLION 0.225% - -------------------------------------------------------------------------------- OVER $1 BILLION 0.200% - -------------------------------------------------------------------------------- For the year ended March 31, 2005, the Fund's effective investment advisory fee rate was 0.25%. ADMINISTRATION FEE Columbia provides administrative and other services to the Fund for a monthly administration fee based 18 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND on the Fund's average daily net assets at the following annual rates: AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - -------------------------------------------------------------------------------- FIRST $500 MILLION 0.25% - -------------------------------------------------------------------------------- $500 MILLION TO $1 BILLION 0.20% - -------------------------------------------------------------------------------- OVER $1 BILLION 0.15% - -------------------------------------------------------------------------------- For the year ended March 31, 2005, the Fund's effective administration fee rate was 0.25%. PRICING AND BOOKKEEPING FEES Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees collected to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the year ended March 31, 2005, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.027%. 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 $33.50 per open account. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. For the year ended March 31, 2005, the Fund's effective transfer agent fee rate, inclusive of out-of-pocket expenses, was 0.22%. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. For the year ended March 31, 2005, the Distributor has retained net CDSC fees of $19,000, $468,256 and $14,934 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a monthly service fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B and Class C shares of the Fund. The Plan also requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.75% of the average daily net assets attributable to Class B and Class C shares only. The Distributor has voluntarily agreed to waive a portion of the Class C share distribution fee so that it will not exceed 0.15% annually of Class C average daily net assets. In addition, Columbia has voluntarily agreed to reimburse a portion of the Class B share service fee and a portion of the Class B and Class C share distribution fees. The CDSC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. CUSTODY CREDITS The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. FEES PAID TO OFFICERS AND TRUSTEES With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee for the Office of the Chief Compliance Officer will not exceed $15,000 per year. 19 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. OTHER Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended March 31, 2005, the Fund paid $1,986 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES CONCENTRATION OF CREDIT RISK The Fund holds investments that are insured by private insurers who guarantee the payment of principal and interest in the event of default or that are supported by a letter of credit. At March 31, 2005, private insurers who insured greater than 5% of the total investments of the Fund were as follows: % OF INSURER TOTAL INVESTMENTS - -------------------------------------------------------------------------------- FIFTH THIRD BANK 8.3% LEGAL PROCEEDINGS On February 9, 2005, Columbia and the Distributor (collectively, the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as the "Settlements". The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. At this time, the distribution plan is still under development. As such, any gain to the fund or its shareholders can not currently be determined. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. 20 - -------------------------------------------------------------------------------- MARCH 31, 2005 COLUMBIA MONEY MARKET FUND The Fund and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the Fund. In connection with events described in detail above, various parties have filed suit against certain funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, can not currently be made. 21 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD ENDED ENDED YEAR ENDED JUNE 30, MARCH 31, MARCH 31, ------------------------------------------------------ CLASS A SHARES 2005 2004 (a) 2003 (b) 2002 (b) 2001 (b) 2000 (b) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.010(c) 0.002(c) 0.006(c) 0.015 0.052 0.052 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.010) (0.002) (0.006) (0.015) (0.052) (0.052) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 Total return (d) 1.01% 0.22%(e)(f) 0.60% 1.56% 5.34%(f) 5.26%(f) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses 0.79%(g) 0.88%(g)(h) 0.89%(g) 1.01% 0.70% 0.65%(g) Net investment income 0.97%(g) 0.27%(g)(h) 0.61%(g) 1.54% 5.31% 5.13%(g) Waiver/reimbursement -- 0.04%(h) -- -- 0.19% 0.19% Net assets, end of period (000's) $208,148 $228,750 $266,602 $210,616 $189,822 $178,678 - ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective March 31, 2004. (b) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio, prior to the merger. (c) Per share data was calculated using average shares outstanding during the period. (d) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (e) Not annualized. (f) Had the Investment Advisor/Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. 22 - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD ENDED ENDED YEAR ENDED JUNE 30, MARCH 31, MARCH 31, ------------------------------------------------------ CLASS B SHARES 2005 2004 (a) 2003 (b) 2002 (b) 2001 (b) 2000 (b) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.003(c) 0.001(c) 0.002(c) 0.007 0.042 0.041 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.003) (0.001) (0.002) (0.007) (0.042) (0.041) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 Total return (d)(e) 0.28% 0.08%(f) 0.17% 0.73% 4.31% 3.99% - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses 1.48%(g) 1.06%(g)(h) 1.41%(g) 1.84% 1.70% 1.65%(g) Net investment income 0.25%(g) 0.09%(g)(h) 0.10%(g) 0.71% 4.31% 4.13%(g) Waiver/reimbursement 0.31% 0.86%(h) 0.56% 0.17% 0.19% 0.19% Net assets, end of period (000's) $ 61,467 $ 82,338 $110,776 $ 96,827 $ 80,879 $ 69,214 - ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective March 31, 2004. (b) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio, prior to the merger. (c) Per share data was calculated using average shares outstanding for the period. (d) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (e) Had the Investment Advisor/Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. (f) Not annualized. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. 23 - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR PERIOD ENDED ENDED YEAR ENDED JUNE 30, MARCH 31, MARCH 31, ------------------------------------------------------ CLASS C SHARES 2005 2004 (a) 2003 (b) 2002 (b) 2001 (b) 2000 (b) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.006(c) 0.001(c) 0.003(c) 0.011 0.048 0.048 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.006) (0.001) (0.003) (0.011) (0.048) (0.048) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000 Total return (d)(e) 0.63% 0.08%(f) 0.27% 1.16% 4.93% 4.71% - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses 1.16%(g) 1.06%(g)(h) 1.23%(g) 1.41% 1.10% 1.05%(g) Net investment income 0.56%(g) 0.10%(g)(h) 0.30%(g) 1.14% 4.91% 4.73%(g) Waiver/reimbursement 0.63% 0.86%(h) 0.66% 0.60% 0.79% 0.79% Net assets, end of period (000's) $9,979 $15,393 $17,324 $20,772 $10,010 $3,950 - ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective March 31, 2004. (b) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio, prior to the merger. (c) Per share data was calculated using average shares outstanding for the period. (d) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (e) Had the Investment Advisor/Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. (f) Not annualized. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. 24 - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
YEAR ENDED PERIOD ENDED PERIOD ENDED MARCH 31, MARCH 31, JUNE 30, CLASS Z SHARES 2005 2004 (a) 2003 (b) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (c) 0.010 0.002 0.006 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.010) (0.002) (0.006) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 Total return (d) 1.01% 0.22%(e)(f) 0.55%(e) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g) 0.79% 0.88%(h) 0.89%(h) Net investment income (g) 0.97% 0.27%(h) 0.61%(h) Waiver/reimbursement -- 0.04%(h) -- Net assets, end of period (000's) $203,714 $248,324 $289,425 - ------------------------------------------------------------------------------------------------------------------------------------
(a) The Fund changed its fiscal year end from June 30 to March 31, effective March 31, 2004. (b) Class Z shares were initially offered on July 29, 2002. 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) Total return at net asset value assuming all distributions reinvested. (e) Not annualized. (f) Had the Investment Advisor/Administrator and/or Distributor not waived a portion of expenses, total return would have been reduced. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. 25 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND TO THE TRUSTEES OF COLUMBIA FUNDS TRUST II AND THE SHAREHOLDERS OF COLUMBIA MONEY MARKET FUND In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Columbia Money Market Fund (the "Fund") (a series of Columbia Funds Trust II) at March 31, 2005, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.We believe that our audit, which included confirmation of securities at March 31, 2005 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. The financial statements and financial highlights of the fund for periods prior to July 1, 2003 were audited by another independent registered public accounting firm whose report dated August 19, 2003 expressed an unqualified opinion on those statements. PricewaterhouseCoopers LLP Boston, Massachusetts May 20, 2005 26 TRUSTEES - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds Complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD Disinterested Trustees DOUGLAS A. HACKER (Age 49) Executive Vice President - Strategy of United Airlines (airline) since December, P.O. Box 66100 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001 to Chicago, IL 60666 December, 2002; Executive Vice President and Chief Financial Officer of United Trustee (since 1996) Airlines from July, 1999 to September, 2001; Senior Vice President-Finance from March, 1993 to July, 1999). Oversees 104, None ----------------------------------------------------------------------------------- JANET LANGFORD KELLY (Age 47) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm); Adjunct Professor 9534 W. Gull Lake Drive of Law, Northwestern University, since September, 2004 (formerly Chief Richland, MI 49083-8530 Administrative Officer and Senior Vice President, Kmart Holding Corporation Trustee (since 1996) (consumer goods), from September, 2003 to March, 2004; Executive Vice President- Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January, 1995 to September, 1999). Oversees 104, None ----------------------------------------------------------------------------------- RICHARD W. LOWRY (Age 69) Private Investor since August, 1987 (formerly Chairman and Chief Executive Officer, 10701 Charleston Drive U.S. Plywood Corporation (building products manufacturer)). Oversees 1063, None Vero Beach, FL 32963 Trustee (since 1995) ----------------------------------------------------------------------------------- CHARLES R. NELSON (Age 62) Professor of Economics, University of Washington, since January, 1976; Ford and Department of Economics Louisa Van Voorhis Professor of Political Economy, University of Washington, since University of Washington September, 1993 (formerly Director, Institute for Economic Research, University of Seattle, WA 98195 Washington from September, 2001 to June, 2003) Adjunct Professor of Statistics, Trustee (since 1981) University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. Oversees 104, None ----------------------------------------------------------------------------------- JOHN J. NEUHAUSER (Age 62) Academic Vice President and Dean of Faculties since August, 1999, Boston College 84 College Road (formerly Dean, Boston College School of Management from September, 1977 to August, Chestnut Hill, MA 02467-3838 1999). Oversees 1063, Saucony, Inc. (athletic footwear) Trustee (since 1985) ----------------------------------------------------------------------------------- 27 - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD DISINTERESTED TRUSTEES PATRICK J. SIMPSON (Age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 104, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000) ----------------------------------------------------------------------------------- THOMAS E. STITZEL (Age 69) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, 2208 Tawny Woods Place College of Business, Boise State University); Chartered Financial Analyst. Oversees Boise, ID 83706 104, None Trustee (since 1998) ----------------------------------------------------------------------------------- THOMAS C. THEOBALD (Age 68) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) 8 Sound Shore Drive, since September, 2004 (formerly Managing Director, William Blair Capital Partners Suite 285 (private equity investing) from September, 1994 to September, 2004). Oversees 104, Greenwich, CT 06830 Anixter International (network support equipment distributor); Ventas, Inc. (real Trustee and Chairman of the Board4 estate investment trust); Jones Lang LaSalle (real estate management services) and (since 1996) Ambac Financial Group (financial guaranty insurance) ----------------------------------------------------------------------------------- ANNE-LEE VERVILLE (Age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM 359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 104, Chairman of Hopkinton, NH 03229 the Board of Directors, Enesco Group, Inc. (designer, importer and distributor of Trustee (since 1998) giftware and collectibles) ----------------------------------------------------------------------------------- RICHARD L. WOOLWORTH (Age 64) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The 100 S.W. Market Street Regence Group (regional health insurer); Chairman and Chief Executive Officer, #1500 BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Portland, OR 97207 Company). Oversees 104, Northwest Natural Gas Co. (natural gas service provider) Trustee (since 1991) ----------------------------------------------------------------------------------- INTERESTED TRUSTEE WILLIAM E. MAYER2 (Age 65) Partner, Park Avenue Equity Partners (private equity) since February, 1999 399 Park Avenue (formerly Partner, Development Capital LLC from November 1996 to February, 1999). Suite 3204 Oversees 1063, Lee Enterprises (print media), WR Hambrecht + Co. (financial service New York, NY 10022 provider); Reader's Digest (publishing); OPENFIELD Solutions (retail industry technology provider) Trustee (since 1994) -----------------------------------------------------------------------------------
(1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds Complex. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. The Statement of Additional Information Includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 28 OFFICERS - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS CHRISTOPHER L. WILSON (Age 47) Head of Mutual Funds since August, 2004 and Senior Vice President of the Advisor One Financial Center since January, 2005; President of the Columbia Funds, Liberty Funds and Stein Roe Boston, MA 02111 Funds since October, 2004; President and Chief Executive Officer of the Nations President (since 2004) Funds since January, 2005; President of the Galaxy Funds since April, 2005; Director of Bank of America Global Liquidity Funds, plc since May, 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). ----------------------------------------------------------------------------------- J. KEVIN CONNAUGHTON (Age 40) Treasurer of the Columbia Funds since October, 2003 and of the Liberty Funds, Stein One Financial Center Roe Funds and All-Star Funds since December, 2000; Vice President of the Advisor Boston, MA 02111 since April, 2003 (formerly President of the Columbia Funds, Liberty Funds and Treasurer (since 2000) Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). ----------------------------------------------------------------------------------- MARY JOAN HOENE (Age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds, Liberty 40 West 57th Street Funds, Stein Roe Funds and All-Star Funds since August, 2004 (formerly Partner, New York, NY 10005 Carter, Ledyard & Milburn LLP from January, 2001 to August, 2004; Counsel, Carter, Senior Vice President and Chief Compliance Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Officer (since 2004) Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). ----------------------------------------------------------------------------------- MICHAEL G. CLARKE (Age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein Roe Funds and One Financial Center All-Star Funds since October, 2004 (formerly Controller of the Columbia Funds, Boston, MA 02111 Liberty Funds, Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Chief Accounting Officer (since 2004) Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Touche LLP from May, 1997 to August, 1999). ----------------------------------------------------------------------------------- JEFFREY R. COLEMAN (Age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds One Financial Center since October, 2004 (formerly Vice President of CDC IXIS Asset Management Services, Boston, MA 02111 Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from Controller (since 2004) February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). ----------------------------------------------------------------------------------- R. SCOTT HENDERSON (Age 45) Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds since December, One Financial Center 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to September, 2004; Boston, MA 02111 Executive Director and General Counsel, Massachusetts Pension Reserves Investment Secretary (since 2004) Management Board from September, 1997 to March, 2001). -----------------------------------------------------------------------------------
29 BOARD CONSIDERATION AND APPROVAL OF INVESTMENT ADVISORY AGREEMENT - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") requires that the Board of Trustees/Directors (the "Board") of the Columbia Funds (the "Funds"), including a majority of the Trustees and Directors (collectively, the "Trustees") who are not "interested persons" of the Trusts, as defined in the 1940 Act (the "Independent Trustees"), annually review and approve the terms of the Funds' investment advisory agreements. During the most recent six months covered by this report, the Board reviewed and approved the management contracts ("Advisory Agreements") with Columbia Management Advisors, Inc. ("CMA") for the Fund. At meetings held on September 23, 2004 and October 12, 2004, the Advisory Fees and Expenses Committee (the "Committee") of the Board considered the factors described below relating to the selection of CMA and the approval of the Advisory Agreement. At a meeting held on October 13, 2004, the Board, including the Independent Trustees (who were advised by their independent legal counsel), considered these factors and reached the conclusions described below. NATURE, EXTENT AND QUALITY OF SERVICES The Board considered information regarding the nature, extent and quality of services that CMA provides to the Fund under the Advisory Agreement. CMA provided the most recent investment adviser registration form ("Form ADV") and code of ethics for CMA to the Board. The Board reviewed information on the status of Securities and Exchange Commission ("SEC") and New York Attorney General ("NYAG") proceedings against CMA and certain of its affiliates, including the agreement in principle entered into with the SEC and the NYAG on March 15, 2004 to settle civil complaints filed by the SEC and the NYAG relating to trading activity in mutual fund shares.1 The Board evaluated the ability of CMA, including its resources, reputation and other attributes, to attract and retain highly qualified research, advisory and supervisory investment professionals. The Board considered information regarding CMA's compensation program for its personnel involved in the management of the Fund. Based on these considerations and other factors, including those referenced below, the Board concluded that they were generally satisfied with the nature, extent and quality of the investment advisory services provided to the Fund by CMA. FUND PERFORMANCE AND EXPENSES CMA provided the Board with relative performance and expense information for the Fund in a report prepared by Lipper Inc. ("Lipper") an independent provider of investment company data. The Board considered the total return performance information, which included the ranking of the Fund within a performance universe made up of funds with the same Lipper investment classification and objective (the "Performance Universe") by total return for one-year, three-year, five-year, ten-year or life of fund periods, as applicable. They also considered the Fund's performance in comparison to the performance results of a group (the "Performance Peer Group") of funds selected by Lipper based on similarities in fund type (e.g. open-end), investment classification and objective, asset size, load type and 12b-1/service fees and other expense features, and to the performance results of the Fund's benchmark index. The Board reviewed a description of Lipper's methodology for selecting the mutual funds in the Fund's Performance Peer Group and Performance Universe. The Board considered statistical information regarding the Fund's total expenses and certain components thereof, including management fees (both actual management fees based on expenses for advisory and administrative fees including any reductions for fee waivers and expense reimbursements as well as contractual management fees that are computed for a hypothetical level of assets), actual non-management expenses, and fee waivers/caps and expense reimbursements. They also considered comparisons of these expenses to the expense information for funds within a group (the "Expense Peer Group") selected by Lipper based on similarities in fund type (e.g. open-end), investment 1 On February 9, 2005, CMA and its affiliate, Columbia Funds Distributor, Inc., entered into settlement agreements with the SEC and the NYAG that contain substantially the terms outlined in the agreements in principle. 30 - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND classification and objective, asset size, load type and 12b-1/service fees and other expense features (but which, unlike the Performance Peer Group, may include funds with several different investment classifications and objectives) and an expense universe ("Expense Universe") selected by Lipper based on the criteria for determining the Expense Peer Group other than asset size. The expense information in the Lipper report took into account all existing fee waivers and expense reimbursements as well as all voluntary advisory fee reductions applicable to certain Funds that were being proposed by management in order to reduce the aggregate advisory fees received from mutual funds advised by CMA and Banc of America Capital Management, LLC ("BACAP") by $32 million per year for five years as contemplated by the agreement in principle with the NYAG. The Committee also considered the projected impact on expenses of these Funds resulting from the overall cost reductions that management anticipated would result from the proposed shift to a common group of service providers for transfer agency, fund accounting and custody services for mutual funds advised by Bank of America affiliates. The Boards also considered information is the Lipper report that ranked each Fund based on (i) each Fund's one-year performance and actual advisory fees, (ii) each Fund's one-year performance and total expenses and (iii) each Fund's 3-year performance and total expenses. Based on these comparisons and expense and performance rankings of the Fund in the Lipper Report, CMA determined an overall score for the Fund. The Committee and the Board also considered projected savings to the Fund that would result from certain modifications in soft dollar arrangements. The Committee also considered more detailed information relating to certain Funds that were highlighted for additional review based upon the fact that they ranked poorly in terms of overall expense or management fees, maintained poor performance or demonstrated a combination of below average to poor performance while maintaining below average or poor expense rankings. At its September 23, 2004 meeting, the Committee discussed these Funds with management and in executive session. The Committee requested additional information from management regarding the cause(s) of the below-average relative performance of these Funds, any remedial actions management recommended to improve performance and the general standards for review of portfolio manager performance. At its October 12, 2004 meeting, the Committee considered additional information provided by management regarding these Funds including yield information with respect to certain Funds. The Board also considered management's proposal to merge or liquidate some of these Funds. Based on these considerations and other factors, the Board concluded that the overall performance and expense results supported by the approval of the Advisory Agreements for each Fund. INVESTMENT ADVISORY FEE RATES The Board reviewed and considered the proposed contractual investment advisory fee rates (the "Advisory Agreement Rates") payable by the Funds to CMA for investment advisory services. In addition, the Board reviewed and considered the existing and proposed fee waiver and reimbursement arrangements applicable to the Advisory Agreement Rates and considered the Advisory Agreement Rates after taking the fee waivers and reimbursements into account (the "Net Advisory Rates"). At previous meetings, the Committee had separately considered management's proposal to reduce annual investment advisory fees for certain Funds under the NYAG agreement in principle and the impact of these reductions on each affected Fund. Additionally, the Board considered information comparing the Advisory Agreement Rates and Net Advisory Rates (both on a stand-alone basis and on a combined basis with the Funds' administration fee rates) with those of the other funds in the Expense Peer Group. The Board concluded that the Advisory Agreement Rates and Net Advisory Rates represented reasonable compensation to CMA, in light of the nature, extent and quality of the services provided to the Funds, the fees paid and expenses borne by comparable funds and the costs that CMA incurs in providing these services to the Funds. 31 - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET FUND PROFITABILITY The Board considered a detailed profitability analysis of CMA based on 2003 financial statements, adjusted to take into account advisory fee reductions implemented in November 2003 and proposed reductions under the NYAG proposed settlement. The Board concluded that, in light of the costs of providing investment management and other services to the Funds, the profits and other ancillary benefits that CMA and its affiliates received for providing these services to the Funds were not unreasonable. ECONOMIES OF SCALE In evaluating potential economies of scale, the Board considered CMA's proposal to implement a standardized breakpoint schedule for combined advisory and administrative fees for the majority of the funds of the same general asset type within the Columbia Funds complex (other than index and closed-end funds). The Board noted that the standardization of the breakpoints would not result in a fee increase for any Fund. The Board concluded that any actual or potential economies of scale are, or will be, shared fairly with Fund shareholders, including most particularly through Advisory Agreement Rate breakpoints at current and reasonably foreseeable asset levels. INFORMATION ABOUT SERVICES TO OTHER CLIENTS In evaluating the proposed fee reductions under the NYAG agreement in principle, the Board considered information regarding the advisory fee rates charged by BACAP for the Nations Funds. Members of the Committee and the Board had also separately reviewed advisory fee rates for variable insurance product funds advised by CMA. This information assisted the Board in assessing the reasonableness of fees paid under the Advisory Agreements in light of the nature, extent and quality of services provided under those agreements. OTHER BENEFITS TO CMA The Board considered information regarding potential "fall-out" or ancillary benefits received by CMA and its affiliates as a result of their relationship with the Funds. These benefits could include benefits directly attributable to the relationship of CMA with the Funds (such as soft dollar credits) and benefits potentially derived from an increase in the business of CMA as a result of their relationship with the Funds (such as the ability to market to shareholders other financial products offered by CMA and its affiliates). OTHER FACTORS AND BROADER REVIEW The Board reviews detailed materials provided by CMA annually as part of the approval process under Section 15(c) of the 1940 Act. The Board also regularly reviews and assesses the quality of the services that the Funds receive throughout the year. In this regard, the Board reviews information provided by CMA at their regular meetings, including, among other things, a detailed portfolio review, and detailed fund performance reports. In addition, the Board interviews the heads of each investment area at each regular meeting of the Board and selected portfolio managers of the Funds at various times throughout the year. After considering the above-described factors and based on the deliberations and their evaluation of the information provided to them, the Board concluded that re-approval of the Advisory Agreements for each of the Funds was in the best interest of the Funds and their shareholders. Accordingly, the Board unanimously approved the Advisory Agreements. 32 IMPORTANT INFORMATION ABOUT THIS REPORT - -------------------------------------------------------------------------------- COLUMBIA MONEY MARKET 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 funds mail 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 Money Market 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 funds and with the most recent copy of the Columbia Funds Performance Update. A description of the policies and procedures that the fund uses to determine how to vote proxies and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. 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. 33 [eDelivery picure/logo] 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 Money Market Fund Annual Report, March 31, 2005 Columbia Management(R) (c) 2005 Columbia Funds Distributor, Inc. One Financial Center, Boston, MA 02111-2621 800.345.6611 www.columbiafunds.com --------------- PRSRT STD U.S. Postage PAID Holliston, MA Permit NO. 20 --------------- 757-02/047V-0405 (05/05) 05/5542 ITEM 2. CODE OF ETHICS. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr. Woolworth are each independent trustees, as defined in paragraph (a)(2) of this item's instructions and collectively constitute the entire Audit Committee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fee information below is disclosed for the single series of the registrant whose report to stockholders is included in this annual filing. (a) Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows: 2005 2004 $21,500 $20,500 Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows: 2005 2004 $3,700 $4,000 Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. In both fiscal years 2005 and 2004, Audit-Related Fees include certain agreed-upon procedures performed for semi-annual shareholder reports. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows: 2005 2004 $1,600 $1,400 Tax Fees in both fiscal years 2005 and 2004 consist primarily of the review of annual tax returns and include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years ended March 31, 2005 and March 31, 2004 are approximately as follows: 2005 2004 $0 $0 All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. None of the amounts described in paragraphs (a) through (d) above were approved pursuant to the "de minimus" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES I. GENERAL OVERVIEW The Audit Committee of the registrant has adopted a formal policy (the "Policy") which sets forth the procedures and the conditions pursuant to which the Audit Committee will pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant's independent auditor to the registrant and individual funds (collectively "Fund Services"), and (ii) all non-audit services provided by the registrant's independent auditor to the funds' adviser or a control affiliate of the adviser, that relate directly to the funds' operations and financial reporting (collectively "Fund-related Adviser Services"). A "control affiliate" is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser. The adviser and control affiliates are collectively referred to as "Adviser Entities." The Audit Committee uses a combination of specific (on a case-by-case basis as potential services are contemplated) and general (pre-determined list of permitted services) pre-approvals. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. The Policy does not delegate the Audit Committee's responsibilities to pre-approve services performed by the independent auditor to management. II. GENERAL PROCEDURES On an annual basis, the Fund Treasurer and/or Director of Trustee Administration shall submit to the Audit Committee a schedule of the types of Fund Services and Fund-related Adviser Services that are subject to general pre-approval. These schedules will provide a description of each type of service that is subject to general pre-approval and, where possible, will provide estimated fees for each instance of providing each service. This general pre-approval and related fees (where provided) will generally cover a one-year period (for example, from June 1 through May 31 of the following year). The Audit Committee will review and approve the types of services and review the projected fees for the next one-year period and may add to, or subtract from, the list of general pre-approved services from time to time, based on subsequent determinations. This approval acknowledges that the Audit Committee is in agreement with the specific types of services that the independent auditor will be permitted to perform. The fee amounts will be updated to the extent necessary at other regularly scheduled meetings of the Audit Committee. In addition to the fees for each individual service, the Audit Committee has the authority to implement a fee cap on the aggregate amount of non-audit services provided to an individual fund. If, subsequent to general pre-approval, a fund, its investment adviser or a control affiliate determines that it would like to engage the independent auditor to perform a service that requires pre-approval and that is not included in the general pre-approval list, the specific pre-approval procedure shall be as follows: o A brief written request shall be prepared by management detailing the proposed engagement with explanation as to why the work is proposed to be performed by the independent auditor; o The request should be addressed to the Audit Committee with copies to the Fund Treasurer and/or Director of Trustee Administration; o The Fund Treasurer and/or Director of Trustee Administration will arrange for a discussion of the service to be included on the agenda for the next regularly scheduled Audit Committee meeting, when the Committee will discuss the proposed engagement and approve or deny the request. o If the timing of the project is critical and the project needs to commence before the next regularly scheduled meeting, the Chairperson of the Audit Committee may approve or deny the request on behalf of the Audit Committee, or, in the Chairperson's discretion, determine to call a special meeting of the Audit Committee for the purpose of considering the proposal. Should the Chairperson of the Audit Committee be unavailable, any other member of the Audit Committee may serve as an alternate for the purpose of approving or denying the request. Discussion with the Chairperson (or alternate, if necessary) will be arranged by the Fund Treasurer and/or Director of Trustee Administration. The independent auditor will not commence any such project unless and until specific approval has been given. III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES The Audit Committee recognizes that there are cases where services proposed to be provided by the independent auditor to the adviser or control affiliates are not Fund-related Adviser Services within the meaning of the Policy, but nonetheless may be relevant to the Audit Committee's ongoing evaluation of the auditor's independence and objectivity with respect to its audit services to the funds. As a result, in all cases where an Adviser Entity engages the independent auditor to provide audit or non-audit services that are not Fund Services or Fund-related Adviser Services, were not subject to pre-approval by the Audit Committee, and the projected fees for any such engagement (or the aggregate of all such engagements during the period covered by the Policy) exceeds a pre-determined threshold established by the Audit Committee; the independent auditor, Fund Treasurer and/or Director of Trustee Administration will notify the Audit Committee not later than its next meeting. Such notification shall include a general description of the services provided, the entity that is to be the recipient of such services, the timing of the engagement, the entity's reasons for selecting the independent auditor, and the projected fees. Such information will allow the Audit Committee to consider whether non-audit services provided to the adviser and Adviser Entities, which were not subject to Audit Committee pre-approval, are compatible with maintaining the auditor's independence with respect to the Funds. IV. REPORTING TO THE AUDIT COMMITTEE The Fund Treasurer or Director of Trustee Administration shall report to the Audit Committee at each of its regular meetings regarding all Fund Services or Fund-related Adviser Services initiated since the last such report was rendered, including: o A general description of the services, and o Actual billed and projected fees, and o The means by which such Fund Services or Fund-related Adviser Services were pre-approved by the Audit Committee. In addition, the independent auditor shall report to the Audit Committee annually, and no more than 90 days prior to the filing of audit reports with the SEC, all non-audit services provided to entities in the funds' "investment company complex," as defined by SEC rules, that did not require pre-approval under the Policy. V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE The Policy may be amended from time to time by the Audit Committee. Prompt notice of any amendments will be provided to the independent auditor, Fund Treasurer and Director of Trustee Administration. The Policy shall be reviewed and approved at least annually by the Audit Committee. ***** (e)(2) The percentage of services described in paragraphs (b) through (d) of this Item approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended March 31, 2005 and March 31, 2004 was zero. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years ended March 31, 2005 and March 31, 2004 are disclosed in (b) through (d) of this Item. During the fiscal years ended March 31, 2005 and March 31, 2004, there were no Audit-Related Fees or Tax Fees that were approved for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. During the fiscal years ended March 31, 2005 and March 31, 2004, All Other Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $93,500 and $95,000, respectively. For both fiscal years, All Other Fees relate to internal controls reviews of the registrant's transfer agent. The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during both fiscal years ended March 31, 2005 and March 31, 2004 was zero. (h) The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, has concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Columbia Funds Trust II ------------------------------------------------------------------- By (Signature and Title) /S/ Christopher L. Wilson ------------------------------------------------------- Christopher L. Wilson, President Date May 27, 2005 --------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /S/ Christopher L. Wilson ------------------------------------------------------- Christopher L. Wilson, President Date May 27, 2005 --------------------------------------------------------------------------- By (Signature and Title) /S/ J. Kevin Connaughton ------------------------------------------------------- J. Kevin Connaughton, Treasurer Date May 27, 2005 --------------------------------------------------------------------------- EX-99.CODE ETH 2 file002.txt CODE OF ETHICS COLUMBIA MANAGEMENT GROUP FAMILY OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (the "Code") for the investment companies within the Columbia Management Group fund complex (collectively the "Funds" and each, a "Fund") applies to the Funds' Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director of Trustee Administration (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC"), and in other public communications made by a Fund; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer shall adhere to a high standard of business ethics and shall be sensitive to situations that may give rise to actual or apparent conflicts of interest. II. ADMINISTRATION OF THE CODE . The Boards of Trustees and Boards of Directors of the Funds (collectively, the "Board") shall designate an individual to be primarily responsible for the administration of the Code (the "Code Officer"). The Code shall be administered by the Columbia Management Group Compliance Department. In the absence of the Code Officer, his or her designee shall serve as the Code Officer, but only on a temporary basis. Each Fund has designated a chief legal officer (the "Chief Legal Officer") for purposes of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Chief Legal Officer of a Fund shall assist the Fund's Code Officer in administration of this Code. The Chief Legal Officer shall be responsible for applying this Code to specific situations in which questions are presented under it (in consultation with Fund counsel, where appropriate) and has the authority to interpret this Code in any particular situation. However, any waivers sought by a Covered Officer must be approved by each Audit Committee of the Funds (collectively, the "Audit Committee"). III. MANAGING CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a family member, receives improper personal benefits as a result of the Covered Officer's position with a Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (the "Company Act") and the Investment Advisers Act of 1940 (the "Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as "affiliated persons" of the Fund. A Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of those provisions. This Code does not, and is not intended to, repeat or replace those programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Fund and its investment adviser, administrator, principal underwriter, pricing and bookkeeping agent and/or transfer agent (each, a "Service Provider") of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Provider and a Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of a Fund. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions of the Company Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund. Each Covered Officer must: o not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer or an immediate family member would benefit personally to the detriment of a Fund; and o not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer or an immediate family member rather than the benefit of the Fund.1. There are some conflict of interest situations that must be approved by the Code Officer, after consultation with the Chief Legal Officer. Those situations include, but are not limited to,: o service as director on the board of any public or private company; o the receipt of any gifts in excess of $100 in the aggregate from a third party that does or seeks to do business with the Funds during any 12-month period; o the receipt of any entertainment from any company with which a Fund has current or prospective business dealings, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any material ownership interest in, or any consulting or employment relationship with, any Fund service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect material financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. IV. DISCLOSURE AND COMPLIANCE Each Covered Officer shall: o be familiar with the disclosure requirements generally applicable to the Funds; o not knowingly misrepresent, or cause others to misrepresent, facts about any Fund to others, whether within or outside the Fund, - -------------- 1 For purposes of this Code, personal trading activity of the Covered Officers shall be monitored in accordance with the Columbia Management Group Code of Ethics. Each Covered Officer shall be considered an "Access Person" under such Code. The term "immediate family" shall have the same meaning as provided in such Code. including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; o to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or after becoming a Covered Officer), affirm in writing to the Board that he/she has received, read and understands the Code; o annually affirm to the Board compliance with the requirements of the Code; o not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; o notify the Chief Legal Officer and the Code Officer promptly if he/she knows of any violation of this Code; and o respond to the trustee and officer questionnaires circulated periodically in connection with the preparation of disclosure documents for the Funds. The Code Officer shall maintain records of all activities related to this Code. The Funds will follow the procedures set forth below in investigating and enforcing this Code: o The Chief Legal Officer and/or the Code Officer will take all appropriate action to investigate any potential violation reported to him/her; o If, after such investigation, the Chief Legal Officer and the Code Officer believes that no violation has occurred, the Code Officer will notify the person(s) reporting the potential violation, and no further action is required; o Any matter that the Chief Legal Officer and/or the Code Officer believes is a violation will be reported to the Audit Committee; o If the Audit Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to the Chief Executive Officer of Columbia Management Group; or a recommendation to sanction or dismiss the Covered Officer; o The Audit Committee will be responsible for granting waivers in its sole discretion; o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. The Chief Legal Officer shall: o report to the Audit Committee quarterly any approvals provided in accordance with Section III of this Code; and o report to the Audit Committee quarterly any violations of, or material issues arising under, this Code. VI. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other polices or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities (including, but not limited to, personal trading activities) of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Company Act and any policies and procedures of the Service Providers are separate requirements applicable to the Covered Officers and are not part of this Code. VII. AMENDMENTS All material amendments to this Code must be approved or ratified by the Board, including a majority of independent directors. VIII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Covered Officers, the Chief Legal Officer, the Code Officer, outside audit firms and legal counsel to the Funds, and senior management of Columbia Management Group. IX. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. EX-99.CERT 3 file003.txt CERTIFICATIONS I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Columbia Funds Trust II; 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 officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) 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 officer(s) 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: May 27, 2005 /S/ J. Kevin Connaughton ------------------------------------ J. Kevin Connaughton, Treasurer I, Christopher L. Wilson, certify that: 1. I have reviewed this report on Form N-CSR of Columbia Funds Trust II; 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 officer(s) 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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) 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 officer(s) 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: May 27, 2005 /S/ Christopher L. Wilson ------------------------------------ Christopher L. Wilson, President EX-99.906CERT 4 file004.txt CERTIFICATIONS CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of Columbia Funds Trust II (the "Trust") on Form N-CSR for the period ending March 31, 2005, 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: May 27, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, President Date: May 27, 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. ss.1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----