-----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, VOhNAkWfDgB9k4La2HoQSnatsCp+7gXN1g5PWo8RVjwRT3LhVnxpRWWHkg6JGA0h aUBiLnqTlzuIPIGbIZlz+w== 0001047469-05-013751.txt : 20050506 0001047469-05-013751.hdr.sgml : 20050506 20050506135608 ACCESSION NUMBER: 0001047469-05-013751 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050228 FILED AS OF DATE: 20050506 DATE AS OF CHANGE: 20050506 EFFECTIVENESS DATE: 20050506 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-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03009 FILM NUMBER: 05806904 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-CSRS 1 a2156411zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-3009 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: 08/31/05 ------------ Date of reporting period: 02/28/05 ------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [GRAPHIC] COLUMBIA NEWPORT GREATER CHINA FUND SEMIANNUAL REPORT FEBRUARY 28, 2005 TABLE OF CONTENTS Fund Profile 1 Performance Information 2 Understanding Your Expenses 3 Economic Update 4 Portfolio Managers' Report 5 Financial Statements 7 Investment Portfolio 8 Statement of Assets and Liabilities 12 Statement of Operations 13 Statements of Changes in Net Assets 14 Notes to Financial Statements 15 Financial Highlights 21 Important Information About This Report 25
Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. NOT FDIC MAY LOSE VALUE INSURED ------------------- NO BANK GUARANTEE PRESIDENT'S MESSAGE COLUMBIA NEWPORT GREATER CHINA 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 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, negotiations are currently underway to consolidate the transfer agency of all of our funds and to consolidate custodial services, each under a single vendor. We have reduced management fees for many funds as part of our settlement agreement (See Note 8 in the Notes to Financial Statements) with the New York Attorney General. As a result of these changes, we believe we will offer shareholders an even stronger lineup of investment options, with management expenses that continue to be competitive and fair. What will not change as we enter this next phase of consolidation is our commitment to the highest standards of performance and our dedication to superior service. Change for the good has another name: it's called improvement. It helps move us forward, and we believe that it represents progress for all our shareholders in their quest for long-term financial success. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We hope that you will read the manager reports carefully and discuss any questions you might have with your financial advisor. As always, we thank you for choosing Columbia Funds. We appreciate your continued confidence. And, we look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ Christopher Wilson Christopher Wilson Head of Mutual Funds, Columbia Management Christopher Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Management's liaison to the mutual fund boards of trustees. Chris joined Bank of America in August 2004. FUND PROFILE COLUMBIA NEWPORT GREATER CHINA FUND The information below gives you a snapshot of your fund at the end of the reporting period. Your fund is actively managed, and the composition of its portfolio will change over time. TOP 10 HOLDINGS AS OF 02/28/05 (%) China Mobile Hong Kong 5.8 China Merchants Holdings International 5.6 Taiwan Semiconductor Manufacturing 5.0 PetroChina 4.9 Datang International Power Generation 4.1 Chinatrust Financial Holding 4.0 Sun Hung Kai Properties 3.7 Hon Hai Precision Industry 3.7 Hong Kong & China Gas 3.6 Henderson Land Development 3.4
TOP 5 SECTORS AS OF 02/28/05 (%) Financials 23.7 Industrials 17.9 Information technology 15.6 Utilities 10.5 Telecommunication services 10.3
Sector breakdown and portfolio holdings are calculated as a percentage of net assets. Management style is determined by Columbia Management and is based on the investment strategy and process as outlined in the fund's prospectus. [SIDENOTE] SUMMARY - - FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2005, THE FUND'S CLASS A SHARES RETURNED 15.43% WITHOUT SALES CHARGE. - - THE FUND, ITS BENCHMARK AND PEER GROUP AVERAGE ALL REGISTERED DOUBLE-DIGIT RETURNS AS ECONOMIC PROGRESS CONTINUED THROUGHOUT THE REGION AND THE ENERGY SECTOR, IN PARTICULAR, LOGGED STRONG GAINS. - - THE FUND HAD LESS EXPOSURE TO ENERGY THAN ITS INDEX, WHICH HAMPERED PERFORMANCE, AS DID OUR EMPHASIS ON HONG KONG STOCKS, WHICH TRAILED OTHER ASIAN MARKETS. [CHART] CLASS A SHARES 15.43% MSCI CHINA INDEX 19.03%
OBJECTIVE Seeks long-term growth of capital by investing primarily in equity securities of companies located in the greater China Region TOTAL NET ASSETS $82.4 million MANAGEMENT STYLE BOX [GRAPHIC] 1 PERFORMANCE INFORMATION COLUMBIA NEWPORT GREATER CHINA FUND [CHART] VALUE OF A $10,000 INVESTMENT 05/16/97 - 02/28/05
CLASS A SHARES CLASS A SHARES WITHOUT SALES CHARGE WITH SALES CHARGE MSCI CHINA INDEX HANG SENG INDEX 05/16/97 $ 10,000 $ 9,425 $ 10,000 $ 10,000 5/31/97 $ 13,418 $ 12,646 $ 10,000 $ 10,000 6/30/97 $ 14,415 $ 13,586 $ 10,224 $ 10,304 7/31/97 $ 15,104 $ 14,236 $ 11,624 $ 11,105 8/31/97 $ 13,417 $ 12,645 $ 12,309 $ 9,621 9/30/97 $ 13,701 $ 12,913 $ 10,262 $ 10,275 10/31/97 $ 10,149 $ 9,565 $ 8,596 $ 7,271 11/30/97 $ 9,631 $ 9,077 $ 7,040 $ 7,269 12/31/97 $ 9,887 $ 9,319 $ 6,832 $ 7,397 1/31/98 $ 7,778 $ 7,331 $ 5,094 $ 6,392 2/28/98 $ 10,474 $ 9,872 $ 6,901 $ 7,929 3/31/98 $ 10,346 $ 9,751 $ 6,723 $ 8,000 4/30/98 $ 9,352 $ 8,814 $ 6,030 $ 7,241 5/31/98 $ 7,944 $ 7,487 $ 5,239 $ 6,268 6/30/98 $ 6,852 $ 6,458 $ 4,422 $ 6,025 7/31/98 $ 5,963 $ 5,621 $ 3,622 $ 5,597 8/31/98 $ 4,774 $ 4,499 $ 2,641 $ 5,167 9/30/98 $ 6,287 $ 5,926 $ 3,782 $ 5,611 10/31/98 $ 7,770 $ 7,323 $ 4,159 $ 7,245 11/30/98 $ 8,049 $ 7,586 $ 4,291 $ 7,453 12/31/98 $ 7,892 $ 7,438 $ 3,937 $ 7,199 1/31/99 $ 7,097 $ 6,689 $ 3,205 $ 6,814 2/28/99 $ 6,968 $ 6,568 $ 3,069 $ 7,067 3/31/99 $ 7,756 $ 7,310 $ 3,487 $ 7,895 4/30/99 $ 9,000 $ 8,482 $ 4,362 $ 9,644 5/31/99 $ 8,818 $ 8,311 $ 4,372 $ 8,825 6/30/99 $ 10,867 $ 10,242 $ 6,420 $ 9,839 7/31/99 $ 10,336 $ 9,741 $ 5,619 $ 9,583 8/31/99 $ 10,579 $ 9,970 $ 5,574 $ 9,836 9/30/99 $ 9,986 $ 9,412 $ 5,351 $ 9,298 10/31/99 $ 10,366 $ 9,770 $ 4,919 $ 9,725 11/30/99 $ 12,096 $ 11,400 $ 4,825 $ 11,323 12/31/99 $ 13,241 $ 12,480 $ 4,462 $ 12,490 1/31/2000 $ 13,302 $ 12,537 $ 4,268 $ 11,421 2/29/2000 $ 14,425 $ 13,595 $ 3,484 $ 12,621 3/31/2000 $ 15,760 $ 14,854 $ 3,564 $ 12,853 4/30/2000 $ 14,061 $ 13,253 $ 3,900 $ 11,487 5/31/2000 $ 13,552 $ 12,773 $ 3,970 $ 10,924 6/30/2000 $ 15,009 $ 14,146 $ 4,500 $ 12,014 7/31/2000 $ 15,503 $ 14,612 $ 4,415 $ 12,519 8/31/2000 $ 15,162 $ 14,290 $ 4,236 $ 12,761 9/30/2000 $ 14,114 $ 13,303 $ 3,721 $ 11,694 10/31/2000 $ 13,287 $ 12,523 $ 3,547 $ 11,141 11/30/2000 $ 12,574 $ 11,851 $ 3,075 $ 10,481 12/31/2000 $ 13,121 $ 12,366 $ 3,100 $ 11,317 1/31/2001 $ 14,107 $ 13,296 $ 3,549 $ 12,072 2/28/2001 $ 13,652 $ 12,867 $ 3,226 $ 11,086 3/31/2001 $ 12,445 $ 11,729 $ 2,703 $ 9,645 4/30/2001 $ 13,408 $ 12,637 $ 2,977 $ 10,146 5/31/2001 $ 13,363 $ 12,594 $ 3,058 $ 10,026 6/30/2001 $ 13,074 $ 12,322 $ 3,159 $ 9,929 7/31/2001 $ 12,436 $ 11,721 $ 2,731 $ 9,378 8/31/2001 $ 11,313 $ 10,662 $ 2,140 $ 8,498 9/30/2001 $ 10,175 $ 9,590 $ 2,067 $ 7,637 10/31/2001 $ 10,592 $ 9,983 $ 2,120 $ 7,744 11/30/2001 $ 11,472 $ 10,813 $ 2,327 $ 8,689 12/31/2001 $ 11,737 $ 11,062 $ 2,335 $ 8,782 1/31/2002 $ 11,714 $ 11,040 $ 2,116 $ 8,263 2/28/2002 $ 11,629 $ 10,961 $ 2,133 $ 8,077 3/31/2002 $ 12,342 $ 11,633 $ 2,253 $ 8,584 4/30/2002 $ 12,879 $ 12,139 $ 2,351 $ 8,972 5/31/2002 $ 12,864 $ 12,124 $ 2,387 $ 8,859 6/30/2002 $ 12,236 $ 11,532 $ 2,307 $ 8,308 7/31/2002 $ 11,501 $ 10,839 $ 2,206 $ 8,050 8/31/2002 $ 10,949 $ 10,319 $ 2,163 $ 7,934 9/30/2002 $ 10,220 $ 9,633 $ 1,991 $ 7,186 10/31/2002 $ 10,251 $ 9,662 $ 2,003 $ 7,486 11/30/2002 $ 10,849 $ 10,225 $ 2,085 $ 7,999 12/31/2002 $ 10,272 $ 9,681 $ 2,007 $ 7,408 1/31/2003 $ 10,487 $ 9,884 $ 2,103 $ 7,358 2/28/2003 $ 10,356 $ 9,761 $ 2,050 $ 7,251 3/31/2003 $ 9,902 $ 9,332 $ 1,971 $ 6,955 4/30/2003 $ 9,994 $ 9,419 $ 1,974 $ 7,072 5/31/2003 $ 11,072 $ 10,435 $ 2,226 $ 7,749 6/30/2003 $ 11,519 $ 10,857 $ 2,369 $ 7,825 7/31/2003 $ 12,645 $ 11,918 $ 2,603 $ 8,282 8/31/2003 $ 13,778 $ 12,985 $ 2,777 $ 8,994 9/30/2003 $ 14,125 $ 13,313 $ 2,798 $ 9,352 10/31/2003 $ 15,227 $ 14,351 $ 3,224 $ 10,127 11/30/2003 $ 14,934 $ 14,076 $ 3,256 $ 10,275 12/31/2003 $ 15,905 $ 14,990 $ 3,764 $ 10,504 1/31/2004 $ 16,579 $ 15,626 $ 3,740 $ 11,082 2/29/2004 $ 17,579 $ 16,568 $ 3,973 $ 11,587 3/31/2004 $ 16,611 $ 15,655 $ 3,638 $ 10,632 4/30/2004 $ 15,169 $ 14,297 $ 3,163 $ 10,029 5/31/2004 $ 15,789 $ 14,881 $ 3,380 $ 10,343 6/30/2004 $ 15,680 $ 14,779 $ 3,359 $ 10,423 7/31/2004 $ 15,440 $ 14,552 $ 3,372 $ 10,385 8/31/2004 $ 15,998 $ 15,078 $ 3,386 $ 10,946 9/30/2004 $ 16,431 $ 15,486 $ 3,636 $ 11,233 10/31/2004 $ 16,494 $ 15,545 $ 3,548 $ 11,201 11/30/2004 $ 17,780 $ 16,758 $ 3,905 $ 12,125 12/31/2004 $ 18,200 $ 17,153 $ 3,835 $ 12,285 1/31/2005 $ 17,730 $ 16,711 $ 3,752 $ 11,805 02/28/2005 $ 18,471 $ 17,409 $ 4,028 $ 12,219
The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Morgan Stanley Capital International (MSCI) China Index is designed to broadly and fairly represent the full diversity of business activities in China. This index aims to capture 85% of the free float adjusted market capitalization in each industry group. The Hang Seng Stock Index is an unmanaged index that tracks the performance of approximately 70% of the total market capitalization of the stock exchange of Hong Kong. Unlike the fund, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Shares of the Columbia Newport Greater China Fund were offered during a subscription period that began June 20, 1997 and ended July 25, 1997. The subscription proceeds were invested into the fund on July 25, 1997. The fund's performance returns are calculated from its inception date of May 16, 1997. Index performance is from May 31, 1997. AVERAGE ANNUAL TOTAL RETURN AS OF 02/28/05 (%)
SHARE CLASS A B C Z - ------------------------------------------------------------------------------------------------ INCEPTION 05/16/97 05/16/97 05/16/97 05/16/97 - ------------------------------------------------------------------------------------------------ SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT - ------------------------------------------------------------------------------------------------ 6-MONTH (CUMULATIVE) 15.43 8.79 15.00 10.00 14.95 13.95 15.61 1-YEAR 5.05 -0.99 4.26 -0.74 4.15 3.15 5.31 5-YEAR 5.06 3.83 4.28 3.94 4.24 4.24 5.85 LIFE 8.20 7.38 7.47 7.47 7.65 7.65 8.84
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/04 (%)
SHARE CLASS A B C Z - ------------------------------------------------------------------------------------------------ SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT - ------------------------------------------------------------------------------------------------ 6-MONTH (CUMULATIVE) 16.07 9.40 15.69 10.69 15.69 14.69 16.24 1-YEAR 14.43 7.85 13.62 8.62 13.48 12.48 14.76 5-YEAR 6.57 5.31 5.79 5.47 5.73 5.73 7.38 LIFE 8.17 7.33 7.45 7.45 7.63 7.63 8.83
THE "WITH SALES CHARGE" RETURNS INCLUDE THE MAXIMUM INITIAL SALES CHARGE OF 5.75% FOR CLASS A SHARES, MAXIMUM CONTINGENT DEFERRED SALES CHARGE OF 5.00% FOR CLASS B SHARES AND 1.00% FOR CLASS C SHARES FOR THE FIRST YEAR ONLY. THE "WITHOUT SALES CHARGE" RETURNS DO NOT INCLUDE THE EFFECT OF SALES CHARGES. IF THEY HAD, RETURNS WOULD BE LOWER. ALL RESULTS SHOWN ASSUME REINVESTMENT OF DISTRIBUTIONS. CLASS Z SHARES ARE SOLD AT NET ASSET VALUE WITH NO RULE 12b-1 FEES. PERFORMANCE FOR DIFFERENT SHARE CLASSES WILL VARY BASED ON DIFFERENCES IN SALES CHARGES AND FEES ASSOCIATED WITH EACH CLASS. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. [SIDENOTE] PERFORMANCE OF A $10,000 INVESTMENT 05/16/97 - 02/28/05 ($)
SALES CHARGE: WITHOUT WITH - --------------------------------------- Class A 18,471 17,409 Class B 17,526 17,526 Class C 17,754 17,754 Class Z 19,349 n/a
Performance data quoted represents past performance and current performance may be lower or higher. Past performance is no guarantee of future results. The investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. Please visit www.columbiafunds.com for daily and most recent month-end performance updates. 2 UNDERSTANDING YOUR EXPENSES COLUMBIA NEWPORT GREATER CHINA FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES BY SHARE CLASS To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in each share class during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column for each share class assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. 09/01/04 - 02/28/05
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) Class A 1,000.00 1,000.00 1,154.32 1,016.07 9.40 8.80 1.76 Class B 1,000.00 1,000.00 1,150.01 1,012.35 13.38 12.52 2.51 Class C 1,000.00 1,000.00 1,149.51 1,012.35 13.38 12.52 2.51 Class Z 1,000.00 1,000.00 1,156.11 1,017.31 8.07 7.55 1.51
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. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided will not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other fund companies, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. [SIDENOTE] ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: - - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM COLUMBIA FUNDS SERVICES, INC., YOUR ACCOUNT BALANCE IS AVAILABLE ONLINE AT www.columbiafunds.com OR BY CALLING SHAREHOLDER SERVICES AT 800.345.6611 - - FOR SHAREHOLDERS WHO RECEIVE THEIR ACCOUNT STATEMENTS FROM THEIR BROKERAGE FIRM, CONTACT YOUR BROKERAGE FIRM TO OBTAIN YOUR ACCOUNT BALANCE 1. DIVIDE YOUR ENDING ACCOUNT BALANCE BY $1,000. FOR EXAMPLE, IF AN ACCOUNT BALANCE WAS $8,600 AT THE END OF THE PERIOD, THE RESULT WOULD BE 8.6 2. IN THE SECTION OF THE TABLE BELOW TITLED "EXPENSES PAID DURING THE PERIOD," LOCATE THE AMOUNT FOR YOUR SHARE CLASS. YOU WILL FIND THIS NUMBER IS IN THE COLUMN LABELED "ACTUAL." MULTIPLY THIS NUMBER BY THE RESULT FROM STEP 1. YOUR ANSWER IS AN ESTIMATE OF THE EXPENSES YOU PAID ON YOUR ACCOUNT DURING THE PERIOD 3 ECONOMIC UPDATE COLUMBIA NEWPORT GREATER CHINA FUND During the six-month period that began September 1, 2004, and ended February 28, 2005, the global economy expanded at an estimated pace of 4.6%. Despite three quarters of somewhat slower growth, mainland China reported that its gross domestic product (GDP) grew at an annualized rate of 9.5% in 2004. Hong Kong's economy bounced back strongly from SARS-related problems that weighed on the region in 2003 and grew 8.1%. Taiwan reported a solid but less spectacular GDP gain of approximately 5.0%. STOCK MARKETS RECORD STRONG GAINS In general, strong economic growth translated into double-digit gains for the region's stock markets. The MSCI China Index rose 19.03%. Hong Kong stocks returned 11.60%, as measured by the Hang Seng Index. The MSCI All Country Asia ex Japan Index, which measures a wider range of markets, including the smaller and emerging markets of Southeast Asia, rose 24.85% for the six-month period. CHINA CONTINUES TO DRIVE ASIA'S FORTUNES Despite a relatively successful attempt by the People's Bank of China to rein in the pace of economic growth, Chinese exports hit record levels in 2004, thanks in part to a weaker dollar. Agricultural output soared and retail sales also helped spur the sizeable jump in GDP. Imports of crude oil rose nearly 35% to meet rising demand from electricity producers and to satisfy the need for fuel for autos and trucks as private ownership of vehicles rapidly expands. Yet, some key indicators suggest that the government's efforts to slow the economy are working. Industrial production is growing at a slower pace compared to 2003 and early 2004, and fixed asset investment has slowed. Slower growth in the euro zone and the United States in 2005 is expected to lower demand for Chinese exports going forward. EMPLOYMENT GAINS FUELED GROWTH IN HONG KONG AND TAIWAN Hong Kong's economic recovery broadened in 2004, partly to meet strong demand from mainland China but also in response to improved domestic demand. Although unemployment remains stubbornly high at around 6.5%, increased economic activity helped drive Hong Kong's unemployment rate down by more than one percentage point. Hong Kong's pace of growth is likely to slow in 2005 in response to slower worldwide growth. Export demand is likely to fall and household income growth is not expected to be strong, which could restrain domestic demand. Taiwan's economy expanded in 2004 as declining unemployment and a strong currency drove stronger domestic demand. Economic growth slowed somewhat during the first half of this reporting period, and 2005 could bring even slower growth. The Taiwanese government has lowered its official forecast for growth to just over 4.0%, citing lower expectations for exports. However, the slowdown in exports could be offset by a further pick-up in domestic demand. LOOKING AHEAD Because both Hong Kong and Taiwan rely heavily on mainland China for economic activity, they share a common fate. If further measures to cool the Chinese economy fail, a hard landing would have a significant impact on both economies. A sharp decline in consumer spending in the United States, Europe and Japan would also hurt both Hong Kong and Taiwan. As a result, all eyes remain fixed on China as an indicator of growth for the region in the period ahead. [SIDENOTE] SUMMARY: FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 28, 2005 - - SOLID ECONOMIC GROWTH HELPED THE STOCK MARKETS OF GREATER CHINA GENERATE DOUBLE-DIGIT GAINS. THE MSCI CHINA INDEX RETURNED 19.03%. - - HONG KONG STOCKS, AS MEASURED BY THE HANG SENG INDEX, GAINED 11.60%. - - THE CHINESE GOVERNMENT'S ABILITY TO REIN IN ECONOMIC GROWTH IS EXPECTED TO BE A KEY FACTOR IN ECONOMIC AND MARKET PERFORMANCE IN 2005. [CHART] MSCI CHINA INDEX 19.03% HANG SENG INDEX 11.60%
The Morgan Stanley Capital International (MSCI) China Index is designed to broadly and fairly represent the full diversity of business activities in China. This index aims to capture 85% of the free float adjusted market capitalization in each industry group. The Hang Seng Stock Index is an unmanaged index that tracks the performance of approximately 70% of the total market capitalization of the stock exchange of Hong Kong. 4 PORTFOLIO MANAGER'S REPORT COLUMBIA NEWPORT GREATER CHINA FUND For the six-month period ended February 28, 2005, class A shares of Columbia Newport Greater China Fund returned 15.43% without sales charge. The fund trailed the MSCI China Index, which returned 19.03%. The fund's return was higher than the 11.60% return of the Hang Seng Stock Index, an index that tracks the performance of Hong Kong stocks, which are not included in the MSCI China Index. The fund underperformed the 16.99% average of its peer group, the Lipper China Region Funds Category.(1) An underweight in the energy sector held back the fund's return as the sector was one of the period's strongest performers. However, the fund benefited from exposure to two strong performers in the energy sector--China-based PetroChina and Hong Kong-based CNOOC. A significant overweight in Hong Kong, which did not perform as well as some other Asian markets, also detracted from results. Hong Kong stocks pulled back in the second half of 2004 after making strong gains in the first half of the year. ECONOMIC GROWTH LINKED TO DOMESTIC TRENDS For more than a year, we have focused the portfolio on three important trends that we believe could have long-term influence on economic growth in the Greater China region--infrastructure development, domestic consumption and "re-inflation," or an end to the long deflationary period that some Asian economies have experienced. Because the portfolio was already positioned to take advantage of these broad themes, we made relatively few changes over the six-month period. The fund's country allocation remained relatively unchanged; and financials, industrials and information technology remain its largest sector weights. In China we added marginally to a few stocks, such as China Merchants Holdings International, the country's leading public port operator. After successfully engineering a modest slowdown in economic growth early in 2004, China's stock market rallied later in the year, and the fund's investments in the country contributed substantially to return. Real estate stocks accounted for the largest part of our position in Hong Kong. Over the period, economic growth continued to improve and prices for goods and services rose. Unfortunately, this improving economic backdrop was overshadowed by concerns about rising US interest rates, and Hong Kong stocks--particularly in the property sector--turned in mixed results. Henderson Land Development declined while Swire Pacific produced a double-digit return. Although we were disappointed in the short-term results of some property stocks, we maintained the fund's relatively large position in the sector because we continue to believe that the long-term prospects for Hong Kong real estate are positive. (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. [SIDENOTE] NET ASSET VALUE PER SHARE AS OF 02/28/05 ($) Class A 23.61 Class B 23.15 Class C 23.45 Class Z 24.45
DISTRIBUTIONS DECLARED PER SHARE 09/01/04 - 02/28/05 ($) Class A 0.21 Class B 0.06 Class C 0.06 Class Z 0.26
HOLDINGS DISCUSSED IN THIS REPORT AS OF 02/28/05 (%) PetroChina 4.9 CNOOC 1.9 China Merchants Holdings International 5.6 Henderson Land Development 3.4 Swire Pacific 1.8 Delta Electronics 1.0 Hon Hai Precision Industry 3.7 Taiwan Semiconductor Manufacturing 5.0 Chinatrust Financial Holding 4.0 Cathay Financial Holding 2.8 Esprit Holdings 2.7 Li & Fung 3.3
Your fund is actively managed and the composition of its portfolio will change over time. Information provided is calculated as a percentage of net assets. 5 FINDING VALUE IN TECHNOLOGY IN TAIWAN We added to the fund's holdings in Taiwan, where we took advantage of attractively-valued technology stocks. We invested in Delta Electronics which contributed to return. Two long-term holdings, Hon Hai Precision Industry and Taiwan Semiconductor Manufacturing, also aided results. Chinatrust Financial Holding and Cathay Financial Holding--both Taiwan financial companies--generated double-digit returns. Investments in consumer discretionary stocks reflected our outlook for a pick-up in consumer spending. In Hong Kong, retailer Esprit Holdings did well, as did Li & Fung, a global supplier of consumer products. A CONTINUED EMPHASIS ON DOMESTIC TRENDS We continue to believe that companies that rely on internal consumer and business spending rather than on exports will be the strongest performers. In China, valuations are high after a nine-month rally, based on historical price levels, but we do not plan to reduce the fund's exposure to China. Instead, we will seek buying opportunities during market pullbacks. We plan to add to our positions in Taiwan and Hong Kong. We believe the Taiwan market is attractively priced because it has not performed as well as other Asian markets. In Hong Kong, we believe that re-inflation has the potential to boost corporate profits and, ultimately, stock prices. [PHOTO OF ERIC SANDLUND] Eric Sandlund has managed Columbia Newport Greater China Fund since March 2004 and has been with the advisor and its predecessors or affiliate organizations since June 2002. /s/ Eric Sandlund Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. International investing may involve certain risks, including foreign taxation, currency fluctuations, risks associated with possible differences in financial standards and other monetary and political risks. A portfolio of stocks from a single region poses additional risks due to limited diversification. Some of the countries the fund invests in are considered emerging economies, which means there may be greater risks associated with investing there than in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. [SIDENOTE] WE PLAN TO ADD TO OUR POSITIONS IN TAIWAN AND HONG KONG. 6 FINANCIAL STATEMENTS FEBRUARY 28, 2005 (UNAUDITED) COLUMBIA NEWPORT GREATER CHINA FUND A GUIDE TO UNDERSTANDING YOUR FUND'S FINANCIAL STATEMENTS INVESTMENT PORTFOLIO The investment portfolio details all of the fund's holdings and their market value as of the last day of the reporting period. Portfolio holdings are organized by type of asset, industry, country or geographic region (if applicable) to demonstrate areas of concentration and diversification. STATEMENT OF ASSETS AND LIABILITIES This statement details the fund's assets, liabilities, net assets and share price for each share class as of the last day of the reporting period. Net assets are calculated by subtracting all the fund's liabilities (including any unpaid expenses) from the total of the fund's investment and non-investment assets. The share price for each class is calculated by dividing net assets for that class by the number of shares outstanding in that class as of the last day of the reporting period. STATEMENT OF OPERATIONS This statement details income earned by the fund and the expenses accrued by the fund during the reporting period. The Statement of Operations also shows any net gain or loss the fund realized on the sales of its holdings during the period, as well as any unrealized gains or losses recognized over the period. The total of these results represents the fund's net increase or decrease in net assets from operations. STATEMENT OF CHANGES IN NET ASSETS This statement demonstrates how the fund's net assets were affected by its operating results, distributions to shareholders and shareholder transactions (e.g., subscriptions, redemptions and dividend reinvestments) during the reporting period. The Statement of Changes in Net Assets also details changes in the number of shares outstanding. NOTES TO FINANCIAL STATEMENTS These notes disclose the organizational background of the fund, its significant accounting policies (including those surrounding security valuation, income recognition and distributions to shareholders), federal tax information, fees and compensation paid to affiliates and significant risks and contingencies. FINANCIAL HIGHLIGHTS The financial highlights demonstrate how the fund's net asset value per share was affected by the fund's operating results. The financial highlights table also discloses the classes' performance and certain key ratios (e.g., class expenses and net investment income as a percentage of average net assets). 7 INVESTMENT PORTFOLIO FEBRUARY 28, 2005 (UNAUDITED) COLUMBIA NEWPORT GREATER CHINA FUND
SHARES VALUE ($) -------------------------------------------------------------------------------- COMMON STOCKS - 97.9% CONSUMER DISCRETIONARY - 7.7% DISTRIBUTORS - 4.4% China Resources Enterprise Ltd. 652,000 926,152 Li & Fung Ltd. 1,580,000 2,703,842 Distributors Total 3,629,994 HOUSEHOLD DURABLES - 0.6% Guangdong Kelon Electrical Holdings Co., Ltd., Class H (a) 1,576,000 443,927 Household Durables Total 443,927 SPECIALTY RETAIL - 2.7% Esprit Holdings Ltd. 315,000 2,248,882 Specialty Retail Total 2,248,882 -------------- CONSUMER DISCRETIONARY TOTAL 6,322,803 CONSUMER STAPLES - 2.6% FOOD & STAPLES RETAILING - 0.5% Convenience Retail Asia Ltd. 1,176,000 435,367 Food & Staples Retailing Total 435,367 FOOD PRODUCTS - 2.1% China Mengniu Dairy Co., Ltd. (a) 534,000 402,648 People's Food Holdings Ltd. 1,564,000 1,298,519 Food Products Total 1,701,167 -------------- CONSUMER STAPLES TOTAL 2,136,534 ENERGY - 6.8% OIL & GAS - 6.8% CNOOC Ltd. 2,772,500 1,588,304 PetroChina Co., Ltd., Class H 6,378,000 4,014,370 Oil & Gas Total 5,602,674 -------------- ENERGY TOTAL 5,602,674 FINANCIALS - 23.7% COMMERCIAL BANKS - 7.0% Chinatrust Financial Holding Co., Ltd. 2,769,247 3,310,244 Dah Sing Financial Group 224,800 1,697,857 Hang Seng Bank Ltd. 58,000 793,871 Commercial Banks Total 5,801,972 DIVERSIFIED FINANCIAL SERVICES - 2.0% Aeon Credit Service Co., Ltd. 524,000 352,735 Guoco Group Ltd. 89,000 876,966 JCG Holdings Ltd. 424,000 404,846 Diversified Financial Services Total 1,634,547 INSURANCE - 3.7% Cathay Financial Holding Co., Ltd. 1,143,000 2,320,311 China Insurance International Holdings Co., Ltd. 1,726,000 752,454 Insurance Total 3,072,765 REAL ESTATE - 11.0% Cheung Kong Holdings Ltd. 114,000 1,082,337 Henderson Land Development Co., Ltd. 602,000 2,820,525 Shanghai Forte Land Co., Ltd., Class H 1,522,000 536,113 Sun Hung Kai Properties Ltd. 332,000 3,082,905 Swire Pacific Ltd., Class A 185,000 1,507,802 Real Estate Total 9,029,682 -------------- FINANCIALS TOTAL 19,538,966
See Accompanying Notes to Financial Statements. 8
SHARES VALUE ($) -------------------------------------------------------------------------------- COMMON STOCKS - (CONTINUED) HEALTH CARE - 0.6% HEALTH CARE EQUIPMENT & SUPPLIES - 0.6% Golden Meditech Co., Ltd. 952,000 192,372 Pihsiang Machinery Manufacturing Co., Ltd. 128,698 307,469 Health Care Equipment & Supplies Total 499,841 -------------- HEALTH CARE TOTAL 499,841 INDUSTRIALS - 17.9% ELECTRICAL EQUIPMENT - 1.2% Johnson Electric Holdings Ltd. 1,049,000 994,000 Electrical Equipment Total 994,000 INDUSTRIAL CONGLOMERATES - 8.6% China Merchants Holdings International Co., Ltd. 2,192,000 4,573,172 Hutchison Whampoa Ltd. 278,200 2,501,759 Industrial Conglomerates Total 7,074,931 MARINE - 2.6% Cosco Pacific Ltd. 972,000 2,156,091 Marine Total 2,156,091 TRANSPORTATION INFRASTRUCTURE - 5.5% Anhui Expressway Co., Ltd., Class H 1,442,000 812,382 Jiangsu Expressway Co., Ltd., Class H 2,198,000 1,076,940 Zhejiang Expressway Co., Ltd., Class H 3,628,000 2,616,015 Transportation Infrastructure Total 4,505,337 -------------- INDUSTRIALS TOTAL 14,730,359 INFORMATION TECHNOLOGY - 15.6% COMPUTERS & PERIPHERALS - 3.4% Acer, Inc. 802,582 1,306,199 Lite-On Technology Corp. 1,348,732 1,464,630 Computers & Peripherals Total 2,770,829 ELECTRONIC EQUIPMENT & INSTRUMENTS - 6.1% Delta Electronics, Inc., GDR 471,000 827,568 Hon Hai Precision Industry Co., Ltd. 650,226 3,030,159 Synnex Technology International Corp. 799,700 1,198,180 Electronic Equipment & Instruments Total 5,055,907 INTERNET SOFTWARE & SERVICES - 0.4% China Finance Online Co., ADR (a) 44,400 313,464 Internet Software & Services Total 313,464 SEMICONDUCTORS & SEMICONDUCTOR Taiwan Semiconductor Manufacturing EQUIPMENT - 5.0% Co., Ltd. 2,335,692 4,146,344 Semiconductors & Semiconductor Equipment Total 4,146,344 SOFTWARE - 0.7% Ninetowns Digital World Trade Holdings Ltd., ADS (a) 66,600 577,422 Software Total 577,422 -------------- INFORMATION TECHNOLOGY TOTAL 12,863,966 MATERIALS - 2.2% METALS & MINING - 2.2% Yanzhou Coal Mining Co., Ltd., Class H 1,126,000 1,777,375 Metals & Mining Total 1,777,375 -------------- MATERIALS TOTAL 1,777,375 TELECOMMUNICATION SERVICES - 10.3% DIVERSIFIED TELECOMMUNICATION China Telecom Corp., Ltd., SERVICES - 2.8% Class H 6,016,000 2,303,418 Diversified Telecommunication Services Total 2,303,418
See Accompanying Notes to Financial Statements. 9
SHARES VALUE ($) -------------------------------------------------------------------------------- COMMON STOCKS - (CONTINUED) TELECOMMUNICATION SERVICES - (CONTINUED) WIRELESS TELECOMMUNICATION SERVICES - 7.5% China Mobile Hong Kong Ltd. 1,476,500 4,786,670 Taiwan Cellular Corp. 1,330,000 1,434,324 Wireless Telecommunication Services Total 6,220,994 -------------- TELECOMMUNICATION SERVICES TOTAL 8,524,412 UTILITIES - 10.5% ELECTRIC UTILITIES - 5.4% Datang International Power Generation Co., Ltd., Class H 4,402,000 3,403,471 Huaneng Power International, Inc., Class H 1,352,000 1,045,607 Electric Utilities Total 4,449,078 GAS UTILITIES - 5.1% Hong Kong & China Gas Co., Ltd. 1,390,304 2,948,458 Xinao Gas Holdings Ltd. (a) 2,292,000 1,268,864 Gas Utilities Total 4,217,322 -------------- UTILITIES TOTAL 8,666,400 Total Common Stocks (cost of $56,440,276) 80,663,330 PAR ($) -------------------------------------------------------------------------------- SHORT-TERM OBLIGATION - 1.4% Repurchase agreement with State Street Bank & Trust Co., dated 02/28/05, due 03/01/05 at 2.520%, collateralized by a U.S. Treasury Bond maturing 02/15/25, market value of $1,130,642 (repurchase proceeds $1,106,077) 1,106,000 1,106,000 Total Short-Term Obligation (cost of $1,106,000) 1,106,000 TOTAL INVESTMENTS - 99.3% (COST OF $57,546,276) (b) 81,769,330 OTHER ASSETS & LIABILITIES, NET - 0.7% 593,598 NET ASSETS - 100.0% 82,362,928
NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal tax purposes is $57,546,276. ACRONYM NAME ADR American Depositary Receipt ADS American Depositary Shares GDR Global Depositary Receipt See Accompanying Notes to Financial Statements. 10
SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE ($) INVESTMENTS - ------------------------------------------------------- Hong Kong 41,098,877 50.3% Taiwan 19,345,429 23.7 China 18,920,505 23.0 Singapore 1,298,519 1.6 United States* 1,106,000 1.4 ------------ ----- $ 81,769,330 100.0% ============ =====
* Represents short-term obligation. Certain securities are listed by country of underlying exposure but may trade predominantly on other exchanges. At February 28, 2005, the Fund held investments in the following sectors:
SECTOR % OF NET ASSETS - --------------------------------------------------------- Financials 23.7% Industrials 17.9 Information Technology 15.6 Utilities 10.5 Telecommunication Services 10.3 Consumer Discretionary 7.7 Energy 6.8 Consumer Staples 2.6 Materials 2.2 Health Care 0.6 Short-Term Obligation 1.4 Other Assets & Liabilities, Net 0.7 ----- 100.0% =====
See Accompanying Notes to Financial Statements. 11 STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 2005 (UNAUDITED) COLUMBIA NEWPORT GREATER CHINA FUND
($) --------------------------------------------------------------------------------------- ASSETS Investments, at cost 57,546,276 ---------------- Investments, at value 81,769,330 Cash 366 Foreign currency (cost of $74,364) 75,204 Receivable for: Fund shares sold 762,560 Interest 77 Deferred Trustees' compensation plan 6,401 ---------------- Total Assets 82,613,938 LIABILITIES Payable for: Fund shares repurchased 100,264 Investment advisory fee 58,190 Transfer agent fee 22,049 Pricing and bookkeeping fees 6,907 Custody fee 7,433 Distribution and service fees 27,251 Deferred Trustees' fees 6,401 Other liabilities 22,515 ---------------- Total Liabilities 251,010 NET ASSETS 82,362,928 COMPOSITION OF NET ASSETS Paid-in capital 92,888,199 Overdistributed net investment income (243,635) Accumulated net realized loss (34,505,419) Net unrealized appreciation on: Investments 24,223,054 Foreign currency translations 729 ---------------- NET ASSETS 82,362,928 CLASS A Net assets 50,441,709 Shares outstanding 2,136,792 Net asset value per share 23.61(a)(b) Maximum offering price per share ($23.61/0.9425) 25.05(c) CLASS B Net assets 11,952,990 Shares outstanding 516,312 Net asset value and offering price per share 23.15(a)(b) CLASS C Net assets 11,968,805 Shares outstanding 510,304 Net asset value and offering price per share 23.45(a)(b) CLASS Z Net assets 7,999,424 Shares outstanding 327,221 Net asset value, offering and redemption price per share 24.45(b)
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) Redemption price per share is equal to net asset value less any applicable redemption fee. (c) On sales of $50,000 or more the offering price is reduced. See Accompanying Notes to Financial Statements. 12 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 2005 (UNAUDITED) COLUMBIA NEWPORT GREATER CHINA FUND
($) ------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends 634,539 Interest 7,767 ---------------- Total Investment Income 642,306 EXPENSES Investment advisory fee 365,159 Distribution fee: Class B 41,914 Class C 39,311 Service fee: Class A 61,078 Class B 13,971 Class C 13,104 Transfer agent fee 96,161 Pricing and bookkeeping fees 17,092 Trustees' fees 3,133 Custody fee 37,300 Non-recurring costs (See Note 8) 676 Other expenses 63,625 ---------------- Total Expenses 752,524 Non-recurring costs assumed by Investment Advisor (See Note 8) (676) Custody earnings credit (187) ---------------- Net Expenses 751,661 ---------------- Net Investment Loss (109,355) NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized gain on: INVESTMENTS AND FOREIGN CURRENCY Investments 852,415 Foreign currency transactions 21,343 ---------------- Net realized gain 873,758 Net change in unrealized appreciation/depreciation on: Investments 10,208,614 Foreign currency translations 503 ---------------- Net change in unrealized appreciation/depreciation 10,209,117 ---------------- Net Gain 11,082,875 ---------------- Net Increase in Net Assets from Operations 10,973,520
See Accompanying Notes to Financial Statements. 13 STATEMENT OF CHANGES IN NET ASSETS COLUMBIA NEWPORT GREATER CHINA FUND
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, INCREASE (DECREASE) IN NET ASSETS: 2005 ($) 2004 ($) - ------------------------------------------ ----------------------------------------------------------------------------------- OPERATIONS Net investment income (loss) (109,355) 490,889 Net realized gain on investments and foreign currency transactions 873,758 3,011,456 Net change in unrealized appreciation/depreciation on investments and foreign currency translations 10,209,117 4,744,596 ------------------------------- Net Increase from Operations 10,973,520 8,246,941 DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income: Class A (470,125) (271,209) Class B (28,877) -- Class C (26,795) -- Class Z (73,253) (33,006) ------------------------------- Total Distributions Declared to Shareholders (599,050) (304,215) SHARE TRANSACTIONS Class A: Subscriptions 4,772,091 11,934,006 Distributions reinvested 375,691 202,579 Redemptions (8,549,658) (13,899,730) ------------------------------- Net Decrease (3,401,876) (1,763,145) Class B: Subscriptions 1,212,093 8,194,945 Distributions reinvested 20,937 -- Redemptions (1,290,886) (3,513,395) ------------------------------- Net Increase (Decrease) (57,856) 4,681,550 Class C: Subscriptions 1,930,492 10,274,672 Distributions reinvested 21,479 -- Redemptions (853,722) (4,715,322) ------------------------------- Net Increase 1,098,249 5,559,350 Class Z: Subscriptions 2,469,207 6,509,751 Distributions reinvested 60,968 19,453 Redemptions (551,428) (3,704,101) ------------------------------- Net Increase 1,978,747 2,825,103 Net Increase (Decrease) from Share Transactions (382,736) 11,302,858 Redemption fees 961 7,435 ------------------------------- Total Increase in Net Assets 9,992,695 19,253,019 NET ASSETS Beginning of period 72,370,233 53,117,214 End of period (including (overdistributed) undistributed net investment income of $(243,635) and $464,770, respectively) 82,362,928 72,370,233 CHANGES IN SHARES Class A: Subscriptions 213,372 587,185 Issued for distributions reinvested 16,263 10,373 Redemptions (383,987) (693,251) ------------------------------- Net Decrease (154,352) (95,693) Class B: Subscriptions 55,566 402,492 Issued for distributions reinvested 922 -- Redemptions (59,019) (176,010) ------------------------------- Net Increase (Decrease) (2,531) 226,482 Class C: Subscriptions 86,335 507,747 Issued for distributions reinvested 934 -- Redemptions (38,453) (232,916) ------------------------------- Net Increase 48,816 274,831 Class Z: Subscriptions 106,282 308,478 Issued for distributions reinvested 2,550 963 Redemptions (23,928) (174,971) ------------------------------- Net Increase 84,904 134,470
See Accompanying Notes to Financial Statements. 14 NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 2005 (UNAUDITED) COLUMBIA NEWPORT GREATER CHINA FUND NOTE 1. ORGANIZATION Columbia Newport Greater China Fund (the "Fund"), a series of Columbia Funds Trust II (the "Trust"), is a non-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 long-term growth of capital by investing primarily in equity securities of companies located in the Greater China Region. FUND SHARES The Fund may issue an unlimited number of shares and offers four classes of shares: Class A, Class B, Class C and Class Z. Each share class has its own sales charge and expense structure. Class A shares are subject to a maximum front-end sales charge of 5.75% based on the amount of initial investment. Class A shares purchased without an initial sales charge are subject to a 1.00% contingent deferred sales charge ("CDSC") on shares sold within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a maximum CDSC of 5.00% based upon the holding period after purchase. Class B shares will convert to Class A shares in a certain number of years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a 1.00% CDSC on shares sold within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are generally determined at 2:00 p.m. Eastern (U.S.) time. Events affecting the values of such foreign securities and such exchange rates may occur between the times at which they are determined and the close of the customary trading session of the NYSE, which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. The Fund may use a systematic fair valuation model provided by an independent third party to value securities principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. If a security is valued at a "fair value", such value is likely to be different from the last quoted market price for the security. Investments for which market quotations are not readily available, or quotations which management 15 believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. SECURITY TRANSACTIONS Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date, except for certain foreign securities which are recorded as soon after ex-date as the Fund becomes aware of such, net of non-reclaimable tax withholdings. FOREIGN CURRENCY TRANSACTIONS The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. For financial statement purposes, the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. DETERMINATION OF CLASS NET ASSET VALUES All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value 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 Distributions to shareholders are recorded on ex-date. Net realized capital gains, if any, are distributed at least annually. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended August 31, 2004 was as follows:
AUGUST 31, 2004 - -------------------------------------------------------------------------------- Distributionss paid from: Ordinary income $ 304,215
Unrealized appreciation and depreciation at February 28, 2005, based on cost of investments for federal income tax purposes and excluding any unrealized appreciation and depreciation from changes in the value of other assets and liabilities resulting from changes in exchange rates, was: Unrealized appreciation $ 27,315,065 Unrealized depreciation (3,092,011) ------------- Net unrealized appreciation $ 24,223,054
16 The following capital loss carryforwards, determined as of August 31, 2004, may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARD - ----------------------------------------------------------------- 2007 $ 29,627,550 2008 703,958 2010 5,047,669 $ 35,379,177
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 $1 billion 0.95% Next $500 million 0.87% Next $1.5 billion 0.82% Next $3 billion 0.77% Over $6 billion 0.72%
Prior to November 1, 2004, Columbia received a monthly investment advisory fee based on the Fund's average daily net assets as follows:
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ----------------------------------------------------------------- First $1 billion 0.95% Next $500 million 0.90% Over $1.5 billion 0.85%
For the six months ended February 28, 2005, the Fund's annualized effective investment advisory fee rate was 0.95%. ADMINISTRATION FEES Columbia provides administrative and other services to the Fund. The Fund is not charged a fee for these services. 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 six months ended February 28, 2005, the Fund's annualized effective pricing and bookkeeping fee rate, inclusive of out-of-pocket expenses, was 0.044%. TRANSFER AGENT FEES 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 $28.00 per open account. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. For the six months ended February 28, 2005, the Fund's annualized effective transfer agent fee rate, inclusive of out-of-pocket expenses, was 0.25%. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. For the six months ended February 28, 2005, the Distributor has retained net underwriting discounts of $14,477 on sales of the Fund's Class A shares and received CDSC fees of $9,651 and $2,399 on Class B and Class C share redemptions, respectively for the period. The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a monthly service fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class A, Class B and Class C shares of the Fund. The Plan also requires the 17 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 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. EXPENSE LIMITS AND FEE REIMBURSEMENTS Columbia has voluntarily agreed to waive fees and reimburse certain expenses to the extent that total expenses (exclusive of distribution and service fees, brokerage commissions, interest, taxes and extraordinary expenses, if any) exceed 1.90% annually of the Fund's average daily net assets. This arrangement may be revised or discontinued by Columbia at any time. 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 will not exceed $15,000 per year. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. OTHER Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended February 28, 2005, the Fund paid $791 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PORTFOLIO INFORMATION For the six months ended February 28, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $2,803,676 and $4,445,507, respectively. NOTE 6. REDEMPTION FEES The Fund imposes a 2.00% redemption fee to shareholders of Class Z shares who redeem shares held for 60 days or less. Effective January 3, 2005, the Fund also began imposing a 2.00% redemption fee to shareholders of Class A, Class B and Class C shares who redeem shares held for 60 days or less. Redemption fees, which are retained by the Fund, are accounted for as an addition to paid-in capital and are allocated to each class proportionately for purposes of determining the net asset value of each class. For the six months ended February 28, 2005, the redemption fees for Class A, Class B, Class C and Class Z shares of the Fund amounted to $600, $140, $135 and $86, respectively. NOTE 7. LINE OF CREDIT The Fund and other affiliated funds participate in a $350,000,000 committed unsecured revolving line of credit provided by State Street Bank and Trust Company. Borrowings are used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.10% per annum is accrued and apportioned among the participating funds based on their pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. For the six months ended February 28, 2005, the Fund did not borrow under this arrangement. NOTE 8. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES There are certain additional risks involved when investing in foreign securities that are not inherent 18 with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. GEOGRAPHIC CONCENTRATION Because the Fund's investments are concentrated in the Greater China Region, events within the region will have a greater effect on the Fund than if the Fund were more geographically diversified. In addition, events in any one country within the region may impact the other countries or the region as a whole. Markets in the region can experience significant volatility due to social, regulatory and political uncertainties. INDUSTRY FOCUS As a non-diversified fund, the Fund may invest a greater percentage of its total assets in the securities of fewer issuers than a diversified fund. The Fund may, therefore, have a greater risk of loss from a few issuers than a similar fund that invests more broadly. LEGAL PROCEEDINGS On February 9, 2005, Columbia and Columbia Funds Distributor, Inc. (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 February 28, 2005 (Unaudited) Columbia Newport Greater China Fundcollectively 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 voluntarily 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 fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants 19 in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Funds and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. On March 2, 2005, four civil revenue sharing actions alleging, among other things, that various mutual funds advised by Columbia Management and certain other affiliates inappropriately used fund assets to pay brokers to promote the funds by directing fund brokerage transactions to such brokers and did not February 28, 2005 (Unaudited) Columbia Newport Greater China Fund fully disclose such arrangements to shareholders, and charged excessive 12b-1 fees, were consolidated into a single action in the United States District Court for Massachusetts (In re Columbia Entities Litigation, Civil Action No. 04-11704-REK). The consolidated complaint has not yet been filed. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These 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 funds. For the six months ended February 28, 2005, Columbia has assumed $676 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 20 FINANCIAL HIGHLIGHTS COLUMBIA NEWPORT GREATER CHINA FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 28, -------------------------------------------------------------------- CLASS A SHARES 2005 2004 2003(a) 2002(a) 2001(a) 2000(a) - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 20.64 $ 17.88 $ 14.29 $ 14.91 $ 19.98 $ 13.94 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (b) (0.01) 0.17 0.14 0.10 0.12 0.05 Net realized and unrealized gain (loss) on investments and foreign currency 3.19 2.70 3.53 (0.57) (5.19) 5.99 ---------------- ---------- -------- -------- --------- --------- Total from Investment Operations 3.18 2.87 3.67 (0.47) (5.07) 6.04 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.21) (0.11) (0.08) (0.15) -- -- REDEMPTION FEES: Redemption fees added to paid-in-capital --(b)(c) --(b)(c) -- -- -- -- NET ASSET VALUE, END OF PERIOD $ 23.61 $ 20.64 $ 17.88 $ 14.29 $ 14.91 $ 19.98 Total return (d) 15.43%(e) 16.11% 25.84%(f) (3.22)%(f) (25.38)%(f) 43.33%(f) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Operating expenses (g) 1.76%(h) 1.89% 2.15% 2.15% 2.15% 2.15% Interest expense -- -- --%(i) --%(i) -- -- Expenses (g) 1.76%(h) 1.89% 2.15% 2.15% 2.15% 2.15% Net investment income (loss) (g) (0.06)%(h) 0.84% 0.97% 0.65% 0.68% 0.26% Waiver/reimbursement -- -- 0.37% 0.29% 0.21% 0.10% Portfolio turnover rate 4%(e) 25% 33% 16% 14% 28% Net assets, end of period (000's) $ 50,442 $ 47,282 $ 42,685 $ 33,201 $ 37,652 $ 64,722
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. (b) Per share data was calculated using average shares outstanding during the period. (c) Rounds to less than $0.01 per share. (d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (e) Not annualized. (f) Had the Investment Advisor/Administrator not waived or reimbursed 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. (i) Rounds to less than 0.01% 21 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 28, -------------------------------------------------------------------- CLASS B SHARES 2005 2004 2003(a) 2002(a) 2001(a) 2000(a) - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 20.18 $ 17.51 $ 14.02 $ 14.63 $ 19.75 $ 13.88 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (b) (0.09) 0.05 0.04 (0.02) (0.01) (0.09) Net realized and unrealized gain (loss) on investments and foreign currency 3.12 2.62 3.45 (0.55) (5.11) 5.96 ---------------- ---------- -------- -------- --------- --------- Total from Investment Operations 3.03 2.67 3.49 (0.57) (5.12) 5.87 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.06) -- -- (0.04) -- -- REDEMPTION FEES: Redemption fees added to paid-in-capital --(b)(c) --(b)(c) -- -- -- -- NET ASSET VALUE, END OF PERIOD $ 23.15 $ 20.18 $ 17.51 $ 14.02 $ 14.63 $ 19.75 Total return (d) 15.00%(e) 15.25% 24.89%(f) (3.93)%(f) (25.92)%(f) 42.29%(f) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Operating expenses (g) 2.51%(h) 2.64% 2.90% 2.90% 2.90% 2.90% Interest expense -- -- --%(i) --%(i) -- -- Expenses (g) 2.51%(h) 2.64% 2.90% 2.90% 2.90% 2.90% Net investment income (loss) (g) (0.85)%(h) 0.23% 0.30% (0.10)% (0.07)% (0.49)% Waiver/reimbursement -- -- 0.37% 0.29% 0.21% 0.10% Portfolio turnover rate 4%(e) 25% 33% 16% 14% 28% Net assets, end of period (000's) $ 11,953 $ 10,471 $ 5,121 $ 3,850 $ 4,151 $ 6,335
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. (b) Per share data was calculated using average shares outstanding during the period. (c) Rounds to less than $0.01 per share. (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 not waived or reimbursed 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. (i) Rounds to less than 0.01% 22 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 28, -------------------------------------------------------------------- CLASS C SHARES 2005 2004 2003(a) 2002(a) 2001(a) 2000(a) - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 20.45 $ 17.76 $ 14.22 $ 14.84 $ 20.03 $ 14.10 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (b) (0.10) 0.04 0.05 (0.02) (0.01) (0.09) Net realized and unrealized gain (loss) on investments and foreign currency 3.16 2.65 3.49 (0.56) (5.18) 6.02 ---------------- ---------- -------- -------- --------- --------- Total from Investment Operations 3.06 2.69 3.54 (0.58) (5.19) 5.93 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.06) -- -- (0.04) -- -- REDEMPTION FEES: Redemption fees added to paid-in-capital --(b)(c) --(b)(c) -- -- -- -- NET ASSET VALUE, END OF PERIOD $ 23.45 $ 20.45 $ 17.76 $ 14.22 $ 14.84 $ 20.03 Total return (d) 14.95%(e) 15.15% 24.89%(f) (3.94)%(f) (25.91)%(f) 42.06%(f) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Operating expenses (g) 2.51%(h) 2.64% 2.90% 2.90% 2.90% 2.90% Interest expense -- -- --%(i) --%(i) -- -- Expenses (g) 2.51%(h) 2.64% 2.90% 2.90% 2.90% 2.90% Net investment income (loss) (g) (0.89)%(h) 0.20% 0.35% (0.10)% (0.07)% (0.49)% Waiver/reimbursement -- -- 0.37% 0.29% 0.21% 0.10% Portfolio turnover rate 4%(e) 25% 33% 16% 14% 28% Net assets, end of period (000's) $ 11,969 $ 9,436 $ 3,316 $ 1,812 $ 1,352 $ 1,296
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. (b) Per share data was calculated using average shares outstanding during the period. (c) Rounds to less than $0.01 per share. (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 not waived or reimbursed 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. (i) Rounds to less than 0.01% 23 SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED AUGUST 31, FEBRUARY 28, -------------------------------------------------------------------- CLASS Z SHARES 2005 2004 2003(a) 2002(a) 2001(a) 2000(a) - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 21.38 $ 18.51 $ 14.41 $ 15.05 $ 20.11 $ 14.01 INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) --(c) 0.22 0.11 0.14 0.16 0.09 Net realized and unrealized gain (loss) on investments and foreign currency 3.33 2.81 4.10 (0.59) (5.22) 6.01 ---------------- ---------- -------- -------- --------- --------- Total from Investment Operations 3.33 3.03 4.21 (0.45) (5.06) 6.10 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.26) (0.16) (0.12) (0.19) -- -- REDEMPTION FEES: Redemption fees added to paid-in-capital --(b)(c) --(b)(c) 0.01 -- -- -- NET ASSET VALUE, END OF PERIOD $ 24.45 $ 21.38 $ 18.51 $ 14.41 $ 15.05 $ 20.11 Total return (d) 15.61%(e) 16.44% 29.51%(f) (3.10)%(f) (25.16)%(f) 43.54%(f) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Operating expenses (g) 1.51%(h) 1.64% 1.90% 1.90% 1.90% 1.90% Interest expense -- -- --%(i) --%(i) -- -- Expenses (g) 1.51%(h) 1.64% 1.90% 1.90% 1.90% 1.90% Net investment income (g) 0.01%(h) 1.06% 0.70% 0.90% 0.93% 0.51% Waiver/reimbursement -- -- 0.37% 0.29% 0.21% 0.10% Portfolio turnover rate 4%(e) 25% 33% 16% 14% 28% Net assets, end of period (000's) $ 7,999 $ 5,182 $ 1,996 $ 138 $ 145 $ 164
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. (b) Per share data was calculated using average shares outstanding during the period. (c) Rounds to less than $0.01 per share. (d) Total return at net asset value assuming all distributions reinvested. (e) Not annualized (f) Had the Investment Advisor/Administrator not waived or reimbursed 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. (i) Rounds to less than 0.01% 24 IMPORTANT INFORMATION ABOUT THIS REPORT COLUMBIA NEWPORT GREATER CHINA FUND TRANSFER AGENT Columbia Funds Services, Inc. P.O. Box 8081 Boston MA 02266-8081 800.345.6611 DISTRIBUTOR Columbia Funds Distributor, Inc. One Financial Center Boston MA 02111 INVESTMENT ADVISOR Columbia Management Advisors, Inc. 100 Federal Street Boston MA 02110 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 125 High Street Boston, MA 02110 The fund mails one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800-345-6611 and additional reports will be sent to you. This report has been prepared for shareholders of Columbia Newport Greater China Fund. This report may also be used as sales literature when preceded or accompanied by the current prospectus which provides details of sales charges, investment objectives and operating policies of the fund and with the most recent copy of the Columbia Funds Performance Update. A description of the fund's proxy voting policies and procedures is available (i) on the fund's website, www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Columbia Management is the primary investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. 25 [GRAPHIC] Help your fund reduce printing and postage costs! Elect to get your shareholder reports by eletronic delivery. With Columbia's eDelivery program, you receive an e-mail message when your shareholder report becomes available online. If your fund account is registered with Columbia Funds, you can sign up quickly and easily on our website at www.columbiafunds.com. Please note -- if you own your fund shares through a financial institution, contact the institution to see if it offers electronic delivery. If you own your fund shares through a retirement plan, electronic delivery may not be available to you. COLUMBIA NEWPORT GREATER CHINA FUND SEMIANNUAL REPORT, FEBRUARY 28, 2005 PRSRT STD U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20
[COLUMBIA MANAGEMENT(R) LOGO] (C)2005 COLUMBIA FUNDS DISTRIBUTOR, INC. ONE FINANCIAL CENTER, BOSTON, MA 02111-2621 800.345.6611 www.columbiafunds.com 736-03/729U-0205 (04/05) 05/5131 ITEM 2. CODE OF ETHICS. Not applicable at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not applicable at this time. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Columbia Funds Trust II -------------------------------------------------------------------- By (Signature and Title) /S/ Christopher L. Wilson -------------------------------------------------------- Christopher L. Wilson, President Date April 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 April 27, 2005 ---------------------------------------------------------------------------- By (Signature and Title) /S/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, Treasurer Date April 27, 2005 ---------------------------------------------------------------------------- EX-99.302CERT 2 a2156411zex-99_302cert.txt EX-99.302CERT 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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 27, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, President I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Columbia Funds Trust 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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 27, 2005 /S/ J. Kevin Connaughton ----------------------------------- J. Kevin Connaughton, Treasurer EX-99.906CERT 3 a2156411zex-99_906cert.txt EX-99.906CERT 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 February 28, 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: April 27, 2005 /S/ Christopher L. Wilson ----------------------------------- Christopher L. Wilson, President Date: April 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. Section 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----