N-CSR 1 dncsr.txt COLUMBIA FUNDS TRUST II N-CSRS COLUMBIA FUNDS TRUST II UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS 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) Russell Kane, 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: 1-617-772-3363 -------------- Date of fiscal year end: 08/31/2003 ---------- Date of reporting period: 08/31/2003 ---------- 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, ss. 3507. [GRAPHIC] Item 1. Report to Stockholders Columbia Newport Japan Opportunities Fund Annual Report August 31, 2003 We are now Columbia Funds! INSIDE -- Management's discussion of the changes effective as of October 13, 2003. President's Message [PHOTO] Dear Shareholder: As you know, the fund you invest in has long been associated with a larger investment management organization. In the 1990s, it was affiliated with Liberty Financial, whose asset management companies included Colonial, Stein Roe and Newport. In 2001, these companies became part of the asset management division of FleetBoston Financial Corp., which you know as Columbia Management Group (CMG). Earlier this year, six of the asset management firms that were brought together under the CMG umbrella were consolidated and renamed Columbia Management Advisors, Inc. On October 13, 2003, we took the natural next step forward in this process by changing the name of our funds from Liberty to Columbia. For example, Liberty Newport Japan Opportunities Fund was changed to Columbia Newport Japan Opportunities Fund. We have also modified certain fund names that existed under both the Liberty and Columbia brands. As a result of these fund name changes, most fund CUSIP numbers have changed. (A CUSIP is a unique identification number assigned to each class of a mutual fund by the Committee on Uniform Security Identification Procedures.) However, ticker symbols have not changed. A list of new fund names and other information related to these changes are available online at www.columbiafunds.com, our new website address. A consolidated identity The consolidation of our management under a single organization and the renaming of our funds are part of a larger effort to create a consistent identity. Having taken these additional steps, we believe it will be easier for our shareholders to do business with us. All funds will be listed under the "Columbia" name in the mutual fund listings section of your newspaper (as long as they meet the newspaper's listing requirements). All service inquires will be handled by Columbia Funds Services, Inc., the new name of our shareholder service organization. What will not change is our commitment to fund shareholders. We remain committed to providing the best possible customer service and to offering a wide variety of mutual funds to help you pursue your long-term financial goals. Should you have questions, please call shareholder services at 800-345-6611. In the report that follows, your portfolio manager talks in depth about investment strategies and other factors that affected your fund's performance during the period. We encourage you to read the report carefully. As always, we thank you for your business and we look forward to continuing to serve your investment needs. Sincerely, /s/ Joseph R. Palombo Joseph R. Palombo President Net asset value per share as of 8/31/03 ($) Class A 6.92 Class B 6.51 Class C 6.51 Class J/1/ 31.61 Class N/1/ 31.09 Class Z 7.25
/1/ Class J and N shares are yen denominated and only offered to residents and citizens of Japan. The value of these shares has been converted from yen to US dollars. [LOGO] Not FDIC Insured May Lose Value No Bank Guarantee Economic and market conditions change frequently. There is no assurance that trends described in this report will continue or commence. Performance Information Value of a $10,000 investment 6/3/96--8/31/03 Performance of a $10,000 investment 6/3/96--8/31/03 ($)
without sales with sales charge charge -------------------------------- Class A 7,156 6,745 -------------------------------- Class B 6,725 6,725 -------------------------------- Class C 6,725 6,725 -------------------------------- Class J 6,961 6,753 -------------------------------- Class N 6,840 6,840 -------------------------------- Class Z 7,500 n/a
[CHART] Class A shares Class A shares Without Sales With Sales MSCI Japan Charge Charge Index -------------- -------------- ---------- 10,000 9,425 10,000 06/04/1996 - 06/30/1996 10,350 9,755 10,053 07/01/1996 - 07/31/1996 10,110 9,529 9,552 08/01/1996 - 08/31/1996 9,710 9,151 9,125 09/01/1996 - 09/30/1996 9,719 9,160 9,441 10/01/1996 - 10/31/1996 9,239 8,708 8,807 11/01/1996 - 11/30/1996 9,469 8,925 8,975 12/01/1996 - 12/31/1996 9,320 8,784 8,355 01/01/1997 - 01/31/1997 8,979 8,463 7,446 02/01/1997 - 02/28/1997 9,110 8,586 7,620 03/01/1997 - 03/31/1997 9,059 8,539 7,370 04/01/1997 - 04/30/1997 9,500 8,954 7,637 05/01/1997 - 05/31/1997 10,569 9,962 8,480 06/01/1997 - 06/30/1997 11,049 10,414 9,114 07/01/1997 - 07/31/1997 11,469 10,810 8,836 08/01/1997 - 08/31/1997 10,049 9,471 8,070 09/01/1997 - 09/30/1997 10,269 9,679 7,948 10/01/1997 - 10/31/1997 9,820 9,255 7,207 11/01/1997 - 11/30/1997 9,360 8,822 6,765 12/01/1997 - 12/31/1997 9,042 8,522 6,378 01/01/1998 - 01/31/1998 9,603 9,051 6,947 02/01/1998 - 02/28/1998 9,423 8,881 6,983 03/01/1998 - 03/31/1998 9,021 8,503 6,508 04/01/1998 - 04/30/1998 9,172 8,645 6,481 05/01/1998 - 05/31/1998 8,751 8,248 6,125 06/01/1998 - 06/30/1998 8,781 8,276 6,211 07/01/1998 - 07/31/1998 9,132 8,607 6,129 08/01/1998 - 08/31/1998 8,681 8,182 5,430 09/01/1998 - 09/30/1998 8,480 7,993 5,282 10/01/1998 - 10/31/1998 9,242 8,710 6,167 11/01/1998 - 11/30/1998 9,933 9,362 6,449 12/01/1998 - 12/31/1998 10,575 9,967 6,699 01/01/1999 - 01/31/1999 10,604 9,995 6,748 02/01/1999 - 02/28/1999 10,604 9,995 6,600 03/01/1999 - 03/31/1999 12,459 11,743 7,515 04/01/1999 - 04/30/1999 13,421 12,649 7,829 05/01/1999 - 05/31/1999 13,010 12,262 7,387 06/01/1999 - 06/30/1999 15,406 14,520 8,087 07/01/1999 - 07/31/1999 17,209 16,220 8,894 08/01/1999 - 08/31/1999 18,583 17,514 8,832 09/01/1999 - 09/30/1999 19,635 18,506 9,368 10/01/1999 - 10/31/1999 20,826 19,629 9,770 11/01/1999 - 11/30/1999 24,204 22,813 10,189 12/01/1999 - 12/31/1999 26,656 25,124 10,821 01/01/2000 - 01/31/2000 24,372 22,971 10,353 02/01/2000 - 02/29/2000 24,869 23,439 10,085 03/01/2000 - 03/31/2000 23,939 22,563 10,917 04/01/2000 - 04/30/2000 21,509 20,272 10,096 05/01/2000 - 05/31/2000 19,059 17,963 9,582 06/01/2000 - 06/30/2000 19,805 18,666 10,240 07/01/2000 - 07/31/2000 16,887 15,916 9,061 08/01/2000 - 08/31/2000 18,460 17,398 9,647 09/01/2000 - 09/30/2000 17,561 16,551 9,167 10/01/2000 - 10/31/2000 15,088 14,220 8,636 11/01/2000 - 11/30/2000 14,344 13,519 8,277 12/01/2000 - 12/31/2000 12,741 12,008 7,774 01/01/2001 - 01/31/2001 12,761 12,027 7,681 02/01/2001 - 02/28/2001 11,324 10,673 7,336 03/01/2001 - 03/31/2001 10,983 10,352 7,118 04/01/2001 - 04/30/2001 11,770 11,093 7,601 05/01/2001 - 05/31/2001 12,007 11,317 7,583 06/01/2001 - 06/30/2001 11,014 10,381 7,131 07/01/2001 - 07/31/2001 9,846 9,280 6,600 08/01/2001 - 08/31/2001 9,256 8,724 6,435 09/01/2001 - 09/30/2001 8,698 8,198 5,834 10/01/2001 - 10/31/2001 9,039 8,519 5,822 11/01/2001 - 11/30/2001 9,008 8,490 5,885 12/01/2001 - 12/31/2001 8,242 7,768 5,488 01/01/2002 - 01/31/2002 7,322 6,901 5,058 02/01/2002 - 02/28/2002 7,415 6,988 5,268 03/01/2002 - 03/31/2002 7,745 7,300 5,696 04/01/2002 - 04/30/2002 8,263 7,788 5,894 05/01/2002 - 05/31/2002 8,728 8,226 6,262 06/01/2002 - 06/30/2002 8,355 7,875 5,935 07/01/2002 - 07/31/2002 7,601 7,164 5,523 08/01/2002 - 08/31/2002 7,508 7,076 5,464 09/01/2002 - 09/30/2002 7,001 6,599 5,220 10/01/2002 - 10/31/2002 6,567 6,190 4,857 11/01/2002 - 11/30/2002 6,733 6,346 5,053 12/01/2002 - 12/31/2002 6,567 6,189 4,923 01/01/2003 - 01/31/2003 6,164 5,809 4,724 02/01/2003 - 02/28/2003 6,153 5,800 4,751 03/01/2003 - 03/31/2003 5,988 5,644 4,536 04/01/2003 - 04/30/2003 5,978 5,634 4,501 05/01/2003 - 05/31/2003 6,143 5,790 4,719 06/01/2003 - 06/30/2003 6,443 6,073 5,067 07/01/2003 - 07/31/2003 6,691 6,306 5,272 08/01/2003 - 08/31/2003 7,156 6,745 5,860 Mutual fund performance changes over time. Please visit www.columbiafunds.com for daily performance updates. Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. The graph and table don't 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) Japan Index is an unmanaged index that tracks the performance of Japanese stocks. Unlike the fund, indices are not investments, do not incur fees or expenses and are not professionally managed. Securities in the fund may not match those in the index. It is not possible to invest directly in an index. Index performance is from May 31, 1996. Average annual total return as of 8/31/03 (%) Share class A B C J N Z Inception 6/3/96 6/3/96 6/3/96 9/20/00 5/15/00 6/3/96 ---------------------------------------------------------------------------------------------- without with without with without with without with without with without sales sales sales sales sales sales sales sales sales sales sales charge charge charge charge charge charge charge charge charge charge charge ---------------------------------------------------------------------------------------------- 1-year -4.68 -10.16 -5.38 -10.11 -5.24 -6.19 -4.85 -7.70 -5.42 -8.25 -0.82 ---------------------------------------------------------------------------------------------- 5-year -3.79 -4.92 -4.67 -5.04 -4.65 -4.65 -4.01 -4.59 -4.34 -4.34 -2.99 ---------------------------------------------------------------------------------------------- Life -4.51 -5.29 -5.33 -5.33 -5.33 -5.33 -4.88 -5.28 -5.11 -5.11 -3.89 ---------------------------------------------------------------------------------------------- Average annual total return as of 6/30/03 (%) Share class A B C J N Z ---------------------------------------------------------------------------------------------- without with without with without with without with without with without sales sales sales sales sales sales sales sales sales sales sales charge charge charge charge charge charge charge charge charge charge charge ---------------------------------------------------------------------------------------------- 1-year -22.90 -27.33 -23.47 -27.29 -23.27 -24.04 -22.93 -25.24 -23.42 -25.72 -19.78 ---------------------------------------------------------------------------------------------- 5-year -6.01 -7.11 -6.84 -7.20 -6.84 -6.84 -6.19 -6.76 -6.51 -6.51 -5.20 ---------------------------------------------------------------------------------------------- Life -6.03 -6.81 -6.83 -6.83 -6.83 6.83 -6.37 -6.77 -6.60 -6.60 -5.39 ----------------------------------------------------------------------------------------------
Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. All results shown assume reinvestment of distributions. The "with sales charge" returns include the maximum 5.75% sales charge for class A shares, the appropriate class B contingent deferred sales charge (CDSC) for the holding period after purchase as follows: first year - 5%, second year - 4%, third year - 3%, fourth year - 3%, fifth year - 2%, sixth year - 1%, thereafter - 0% and the class C contingent deferred sales charge of 1% for the first year only, the 3% maximum sales charge for class J shares and the 3% CDSC on the one year or less returns of class N. Performance for different share classes varies based on differences in sales charges and fees associated with each class. Class J share performance includes returns of the fund's class N share for the periods prior to the inception of class J. Class N share performance information includes returns of the fund's class B shares for periods prior to the inception of class N. These older class share returns were not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between the older share class and the newer class shares. Had the expense differential been reflected, the returns for the periods prior to the inception of the newer class of shares would have been different. 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. 1 Portfolio Managers' Report Top 10 holdings as of 8/31/03 (%) Matsushita Electric Industrial 4.2 Canon 4.0 NTT DoCoMo 3.8 Honda Motor 3.3 Keyence 3.2 Fanuc 2.8 Toyota Motor 2.7 Takeda Chemical Industries 2.6 F.C.C. Company 2.4 Rohm 2.4 Portfolio breakdowns are calculated as a percentage of net assets. Since the fund is actively managed, there is no guarantee the fund will continue to maintain the same portfolio holdings in the future.
Bought -------------------------------------------------------------------------------- Nikko Cordial Corp. (0.7% of net assets) Citigroup has a stake in this brokerage house, which has reduced costs over the past few years. We expect the company to do well as the Japanese economy and equity markets recover. Sold -------------------------------------------------------------------------------- Funai Electric We sold our holdings in Funai Electric, a consumer electronics company that manufactures products for private brands. Funai, which has lagged in the digital revolution, has continued to make analog products, even as demand for digital products rises. For the 12-month period ended August 31, 2003, class A shares of Columbia Newport Japan Opportunities Fund returned negative 4.68% without sales charge. The fund's performance was disappointing compared to its benchmark. The MSCI Japan Index returned 6.66% for the period. While Japanese stocks rose over the period, the biggest gains in the market came from deep value, lower-quality companies with heavy debt on their balance sheets. Because the fund emphasized high-quality companies with good balance sheets and strong management, it did not fully participate in the market's upward momentum. The fund also lagged because of its relatively small exposure to cyclical commodities companies, which were strong performers. We tend to avoid deep cyclical companies as our strategy is to focus on companies that are globally competitive and that we believe are positioned to do well independent of the economic environment. A turnaround in the Japanese market The Japanese stock market climbed sharply, shortly after reaching its lowest point in 13 years in April 2003. The primary catalyst for the turnaround was the government's bailout of Resona Bank, which led investors to believe that the government would support the financial system to avert a crisis. (The fund did not have a position in this stock.) An improved global economic outlook and attractive valuations were also instrumental in the Japanese stock market's advance. Quality, global competitiveness and restructuring were themes in the portfolio Automobile manufacturers and parts companies accounted for a significant position in the portfolio. In this area, we favored companies with good earnings that have been increasing their global market share, including Toyota Motor Corp. and Honda Motor Co. Ltd. (2.7% and 3.3% of net assets, respectively)./1/ We also emphasized technology companies, with holdings that spanned the broad technology spectrum. They included electronic equipment, office electronics, Internet, semiconductor and technology consulting and services companies. Matsushita Electric Industrial Co. Ltd. (4.2% of net assets), which makes the Panasonic brand, was one of our biggest holdings. Matsushita is the largest consumer electronics company in the world and has led the shift from ------------ /1/ Holdings are disclosed as of August 31, 2003 and are subject to change. 2 analog products to digital products. The company has been undergoing a multi-year restructuring and has continued to lower costs by moving some of its manufacturing to China. We increased exposure to the financial sector, adding top financial institutions such as Mitsubishi Tokyo Financial Group Inc. (1.7% of net assets). During this period, we purchased Millea Holdings Inc., a property and casualty insurance company, and Nikko Cordial Corp., a brokerage firm, which should do well as trading volume on Japan's stock exchanges picks up (0.5% and 0.7% of net assets, respectively). We also invested in Kennedy-Wilson Japan (1.0% of net assets), a real estate company that purchases distressed office properties, renovates them, raises their occupancy rates and sells them to institutional investors. A more positive outlook While Japan still has a host of problems to confront, we believe there are many reasons to be optimistic. The broad-based corporate restructuring that took place over the past several years has left many companies with significant cash, which they have started to invest. Recent economic data showed an increase in private capital spending for the first time in three years. Wages have improved and manufacturing is strong. Deflation, which has been a major problem for years, seems to be leveling off. Some economists have raised their GDP forecasts for the remainder of 2003 and 2004. /s/ Jamie Chui /s/ Richard Young Jamie Chui Richard Yeung Jamie Chui and Richard Yeung are the portfolio managers of Columbia Newport Japan Opportunities Fund. Ms. Chui has co-managed the fund since August 2001. Mr. Yeung has co-managed the fund since March 2003. International investing offers significant long-term growth potential, but also involves certain risks. These risks include currency exchange rate fluctuations, economic change, instability of emerging countries and political developments. A portfolio of stocks from a single nation poses additional risks due to limited diversification. A concentration of investments in a specific sector, such as consumer discretionary or technology, may cause the fund to experience increased volatility. Top 5 sectors as of 8/31/03 (%) [CHART] Consumer discretionary 29.5 Information technology 22.0 Health care 10.4 Industrials 9.8 Telecommunication 8.7 Sector breakdowns are calculated as a percentage of net assets. Since the fund is actively managed, there is no guarantee the fund will continue to maintain this breakdown in the future. This is the last report for this fund. On October 8, 2003, the fund's Board of Trustees voted to liquidate the fund. The fund was closed to new investors as of the close of business on October 17, 2003. The fund is scheduled for liquidation on December 5, 2003. Prior to this date, the fund will continue to accept some automatic purchases and certain retirement contributions until the fund is liquidated. 3 Investment Portfolio August 31, 2003
Common Stocks - 97.8% Shares Value ------------------------------------------------------ CONSUMER DISCRETIONARY - 29.5% Auto Components - 7.5% Bridgestone Corp. 16,000 $ 222,822 Denso Corp. 16,700 312,002 F.C.C. Co., Ltd. 12,700 374,410 Stanley Electric Co., Ltd. 14,000 247,161 ----------- 1,156,395 ----------- Automobiles - 6.0% Honda Motor Co., Ltd. 12,400 504,778 Toyota Motor Corp. 15,300 422,214 ----------- 926,992 ----------- Household Durables - 6.9% Matsushita Electric Industrial Co., Ltd. 51,000 650,366 Pioneer Corp. 13,300 298,633 Rinnai Corp. 5,500 126,323 ----------- 1,075,322 ----------- Internet & Catalog Retail - 1.0% Belluna Co., Ltd. 3,900 153,747 ----------- Media - 1.2% Dentsu, Inc. 43 189,047 ----------- Multi-Line Retail - 2.7% Don Quijote Co., Ltd. 5,600 278,356 Seiyu Ltd. (a) 62,000 146,651 ----------- 425,007 ----------- Specialty Retail - 2.4% USS Co., Ltd. 1,470 84,911 Yamada Denki Co., Ltd. 10,400 281,647 ----------- 366,558 ----------- Textiles, Apparel & Luxury Goods - 1.8% Sanyo Shokai Ltd. 44,000 276,025 ----------- ------------------------------------------------------ CONSUMER STAPLES - 6.5% Food & Drug Retailing - 2.9% Lawson, Inc. 5,000 145,691 Sugi Pharmacy Co., Ltd. 5,000 263,530 Yaoko Co., Ltd. 3,500 44,693 ----------- 453,914 ----------- Food Products - 2.3% Katokichi Co., Ltd. 9,300 148,963 Yakult Honsha Co., Ltd. 15,000 206,968 ----------- 355,931 -----------
Shares Value ---------------------------------------------------- Household Products - 1.3% Kao Corp. 6,000 $ 113,125 Uni-Charm Corp. 1,800 83,301 ----------- 196,426 ----------- ---------------------------------------------------- FINANCIALS - 6.8% Bank - 1.7% Mitsubishi Tokyo Financial Group, Inc. 46 268,072 ----------- Diversified Financials - 0.7% Nikko Cordial Corp. 23,000 110,580 ----------- Insurance - 1.1% Daido Life Insurance Co. 34 79,839 Millea Holdings, Inc. 8 82,958 ----------- 162,797 ----------- Real Estate - 3.3% Kennedy-Wilson Japan (a) 84 157,655 Mitsubishi Estate Co., Ltd. 39,000 349,608 ----------- 507,263 ----------- ---------------------------------------------------- HEALTH CARE - 10.4% Health Care Equipment & Supplies - 3.1% NIPRO Corp. 13,000 212,238 Olympus Optical Co., Ltd. 12,000 275,614 ----------- 487,852 ----------- Health Care Providers & Services - 0.9% Kuraya Sanseido, Inc. 18,900 132,657 ----------- Pharmaceuticals - 6.4% Chugai Pharmaceutical Co., Ltd. 33,700 356,971 Rohto Pharmaceutical Co., Ltd. 14,000 103,064 Sawai Pharmaceutical Co., Ltd. 5,400 132,588 Takeda Chemical Industries Ltd. 11,000 397,823 ----------- 990,446 ----------- ---------------------------------------------------- INDUSTRIALS - 9.8% Commercial Services & Supplies - 3.5% Dai Nippon Printing Co., Ltd. 24,000 305,849 Nichii Gakkan Co. 1,700 89,309 Park24 Co., Ltd. 8,800 142,538 ----------- 537,696 ----------- Construction & Engineering - 1.6% JGC Corp. 33,000 254,249 ----------- Electrical Equipment - 0.8% Nitto Denko Corp. 2,700 119,167 ----------- Machinery - 3.3% Fanuc Ltd. 6,500 428,933 Shima Seiki Manufacturing Ltd. 2,000 74,903 ----------- 503,836 -----------
See notes to investment portfolio. 4 Investment Portfolio (continued) August 31, 2003
Common Stocks (continued) Shares Value ---------------------------------------------------- INDUSTRIALS (continued) Trading Companies & Distributors - 0.6% Mitsubishi Tokyo Financial Group, Inc. 11,000 $ 92,951 ----------- ---------------------------------------------------- INFORMATION TECHNOLOGY - 22.0% Electronic Equipment & Instruments - 7.7% Hirose Electric Co., Ltd. 2,100 224,785 Hoya Corp. 4,000 306,123 Keyence Corp. 2,360 492,893 Nidec Corp. 1,100 88,143 TDK Corp. 1,200 78,159 ----------- 1,190,103 ----------- Information Technology Consulting & Services - 0.6% Net One Systems Co., Ltd. 17 101,838 ----------- Internet Software & Services - 1.2% Yahoo Japan Corp. (a) 10 180,829 ----------- Office Electronics - 8.5% Brother Industries Ltd. 39,000 345,931 Canon, Inc. 13,000 625,016 Ricoh Co., Ltd. 18,400 339,032 ----------- 1,309,979 ----------- Semiconductor Equipment & Products - 3.5% NEC Electronics Corp. 800 54,231 Rohm Co., Ltd. 2,800 365,703 Tokyo Electron Ltd. 1,700 119,758 ----------- 539,692 ----------- Software - 0.5% Sumisho Computer Systems Corp. 2,700 73,120 ----------- ---------------------------------------------------- MATERIALS - 2.2% Chemicals - 2.2% Shin-Etsu Chemical Co., Ltd. 8,800 345,409 -----------
Shares Value ------------------------------------------------------- TELECOMMUNICATION SERVICES - 8.7% Diversified Telecommunication Services - 3.0% Japan Telecom Holdings Co., Ltd. 90 $ 293,868 Nippon Telegraph & Telephone Corp. 39 171,796 ----------- 465,664 ----------- Wireless Telecommunication Services - 5.7% KDDI Corp. 56 286,515 NTT DoCoMo, Inc. 229 588,765 ----------- 875,280 ----------- ------------------------------------------------------- UTILITIES - 1.9% Gas Utilities - 1.9% Tokyo Gas Co. 97,000 295,111 ----------- Total Common Stocks (Cost of $12,280,391) 15,119,955 ----------- Short-Term Obligation - 1.5% Par ------------------------------------------------------- Repurchase agreement with State Street Bank & Trust Co., dated 08/29/03, due 09/02/03 at 0.940%, collateralized by a U.S. Treasury Bond maturing 02/15/31, market value $240,581 (repurchase proceeds $233,024) (Cost of $233,000) $233,000 233,000 ----------- Total Investments - 99.3% (Cost of $12,513,391) (b) 15,352,955 ----------- Other Assets & Liabilities, Net - 0.7% 99,770 ------------------------------------------------------- Net Assets - 100.0% $15,452,725 -----------
Notes to Investment Portfolio: (a) Non-income producing. (b) Cost for federal income tax purposes is $12,520,471. See notes to financial statements. 5 Statement of Assets and Liabilities August 31, 2003 Assets: Investments, at cost $ 12,513,391 ------------ Investments, at value $ 15,352,955 Cash 83 Foreign currency (cost of $115,536) 115,536 Receivable for: Investments sold 449,970 Fund shares sold 32,721 Dividends 1,464 Interest 18 Expense reimbursement due from Advisor/ Administrator 11,375 Deferred Trustees' compensation plan 3,714 Other assets 72 ------------ Total Assets 15,967,908 ------------ Liabilities: Payable to transfer agent 44,623 Payable for: Investments purchased 358,362 Fund shares repurchased 20,002 Management fee 12,838 Administration fee 3,615 Transfer agent fee 12,220 Pricing and bookkeeping fees 1,233 Trustees' fees 268 Custody fee 3,750 Audit fee 28,100 Reports to shareholders 16,000 Distribution, service and agency fees 6,485 Deferred Trustees' fee 3,714 Other liabilities 3,973 ------------ Total Liabilities 515,183 ------------ Net Assets $ 15,452,725 ------------ Composition of Net Assets: Paid-in capital $ 51,012,999 Accumulated net investment loss (34,428) Accumulated net realized loss (38,366,004) Net unrealized appreciation on: Investments 2,839,564 Foreign currency translations 594 ------------ Net Assets $ 15,452,725 ------------
Class A: Net assets $3,304,552 Shares outstanding 477,835 ---------- Net asset value per share $ 6.92 (a) ---------- Maximum offering price per share ($6.92/0.9425) $ 7.34 (b) ---------- Class B: Net assets $5,189,725 Shares outstanding 797,231 ---------- Net asset value and offering price per share $ 6.51 (a) ---------- Class C: Net assets $1,267,821 Shares outstanding 194,780 ---------- Net asset value and offering price per share $ 6.51 (a) ---------- Class J: Net assets $ 2,876.95 Shares outstanding 91 ---------- Net asset value and redemption price per share $ 31.61 ---------- Maximum offering price per share ($31.61/0.9700) $ 32.59 (c) ---------- Class N: Net assets $5,537,890 Shares outstanding 178,144 ---------- Net asset value and offering price per share $ 31.09 (a) ---------- Class Z: Net assets $ 149,860 Shares outstanding 20,676 ---------- Net asset value and offering price per share $ 7.25(d) ----------
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. (c) On sales of $10,000 or more the offering price is reduced. (d) Redemption price per share is equal to net asset value less any applicable redemption fee. See notes to financial statements. 6 Statement of Operations For the Year Ended August 31, 2003 Investment Income: Dividends $ 93,366 Interest 7,476 --------- Total Investment Income (net of foreign taxes withheld of $12,682) 100,842 --------- Expenses: Management fee 156,361 Administration fee 41,148 Distribution fee: Class B 35,673 Class C 11,363 Class J 7 Class N 42,963 Service fee: Class A 9,899 Class B 11,891 Class C 3,778 Class J 7 Class N 14,321 Agency fee: Class J 3 Class N 5,728 Pricing and bookkeeping fees 13,526 Transfer agent fees 92,393 Trustees' fee 7,028 Custody fee 18,754 Audit fee 32,241 Registration fee 62,248 Reports to shareholders 71,543 Other expenses 6,825 --------- Total Operating Expenses 637,700 Fees and expenses waived or reimbursed by Advisor/Administrator (214,308) Custody earnings credit (28) --------- Net Operating Expenses 423,364 Interest expense 2,216 --------- Net Expenses 425,580 --------- Net Investment Loss (324,738) ---------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency: Net realized loss on: Investments $(7,847,386) Foreign currency transactions (47,848) ----------- Net realized loss (7,895,234) ----------- Net change in unrealized appreciation/ depreciation on: Investments 7,019,470 Foreign currency translations 4,055 ----------- Net change in unrealized appreciation/ depreciation 7,023,525 ----------- Net Loss (871,709) ----------- Net Decrease in Net Assets from Operations $(1,196,447) -----------
See notes to financial statements. 7 Statement of Changes in Net Assets
Year Ended August 31, Increase (Decrease) --------------------------- in Net Assets: 2003 2002 - --------------------------- Operations: Net investment loss $ (324,738) $ (569,460) Net realized loss on investments and foreign currency transactions (7,895,234) (16,201,166) Net change in unrealized appreciation/depreciation on investments and foreign currency translations 7,023,525 11,685,137 ------------ ------------ Net Decrease from Operations (1,196,447) (5,085,489) ------------ ------------ Share Transactions: Class A: Subscriptions 48,669,672 53,717,678 Redemptions (49,579,832) (56,627,716) ------------ ------------ Net Decrease (910,160) (2,910,038) ------------ ------------ Class B: Subscriptions 2,098,255 2,711,804 Redemptions (2,514,985) (4,252,391) ------------ ------------ Net Decrease (416,730) (1,540,587) ------------ ------------ Class C: Subscriptions 15,402,678 16,869,944 Redemptions (15,924,087) (18,103,293) ------------ ------------ Net Decrease (521,409) (1,233,349) ------------ ------------ Class N: Subscriptions -- 76,471 Redemptions (1,224,814) (3,367,244) ------------ ------------ Net Decrease (1,224,814) (3,290,773) ------------ ------------ Class Z: Subscriptions 9,945,002 11,593,223 Redemptions (11,684,684) (12,081,578) Redemption fees 10,350 -- ------------ ------------ Net Decrease (1,729,332) (488,355) ------------ ------------ Net Decrease from Share Transactions (4,802,445) (9,463,102) ------------ ------------ Total Decrease in Net Assets (5,998,892) (14,548,591)
Year Ended August 31, ------------------------- 2003 2002 ----------------------------------------------------- Net Assets: Beginning of period $21,451,617 $36,000,208 ----------- ----------- End of period (accumulated net investment loss of $(34,428) and $(601,704), respectively) $15,452,725 $21,451,617 ----------- ----------- Changes in Shares: Class A: Subscriptions 7,733,574 6,768,357 Redemptions (7,860,078) (7,059,212) ----------- ----------- Net Decrease (126,504) (290,855) ----------- ----------- Class B: Subscriptions 352,873 360,078 Redemptions (423,774) (555,891) ----------- ----------- Net Decrease (70,901) (195,813) ----------- ----------- Class C: Subscriptions 2,605,348 2,251,428 Redemptions (2,669,719) (2,388,615) ----------- ----------- Net Decrease (64,371) (137,187) ----------- ----------- Class N: Subscriptions -- 1,940 Redemptions (44,903) (91,260) ----------- ----------- Net Decrease (44,903) (89,320) ----------- ----------- Class Z: Subscriptions 1,557,220 1,462,193 Redemptions (1,807,821) (1,495,715) ----------- ----------- Net Decrease (250,601) (33,522) ----------- -----------
See notes to financial statements. 8 Notes to Financial Statements August 31, 2003 Note 1. Accounting Policies Organization: Columbia Newport Japan Opportunities Fund (the "Fund") (formerly Liberty Newport Japan Opportunities Fund), a series of Columbia Funds Trust II (formerly Liberty Funds Trust II), is a diversified portfolio of a Massachusetts business trust, registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund's investment goal is to seek capital appreciation. The Fund may issue an unlimited number of shares. The Fund offers six classes of shares: Class A, Class B, Class C, Class J, Class N and Class Z. Class A shares are sold with a front-end sales charge. A 1.00% contingent deferred sales charge ("CDSC") is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a CDSC. Class B shares will convert to Class A shares in three, four or eight years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a CDSC on redemptions made within one year after purchase. Class J shares are sold with a front-end sales charge. Class N shares are subject to a CDSC. Class J and Class N shares are available for purchase only by residents and citizens of Japan. Class N shares automatically convert to Class J shares after five years, eliminating a portion of the distribution fee upon conversion. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchases of Class Z shares, as described in the Fund's prospectus. The accompanying financial statements are prepared under accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 and Transactions: Equity securities generally are valued at the last sale price reported at the close of the principal securities exchanges on which the investments are made or, in the case of unlisted or listed securities for which there were no sales during the day, at the current quoted bid price. If the 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. Forward currency contracts are valued based on the weighted value of exchange-traded contracts with similar durations. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. 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 also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such 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 value of such securities and such exchange rates occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Trustees. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. 9 Notes to Financial Statements (continued) August 31, 2003 Determination of Class Net Asset Values: All income, expenses (other than class specific fees), and realized and unrealized gains (losses) are allocated to each class proportionately on a daily basis, based on net assets, for purposes of determining the net asset value of each class. Federal Income Taxes: Consistent with the Fund's policy to qualify as a regulated investment company and to distribute all of its taxable income, no federal income tax has been accrued. Distributions to Shareholders: Distributions to shareholders are recorded on the ex-date. Foreign Currency Translations and Transactions: The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities of the Fund are translated into U.S. dollars at the daily rates of exchange on the valuation date. Purchases and sales of investment securities, dividend and interest income and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions and translations includes gains (losses) arising from the fluctuations 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 and interest income and foreign withholding taxes. 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. Forward Currency Contracts: The Fund may enter into forward currency contracts to purchase or sell foreign currencies at predetermined exchange rates in connection with the settlement of purchases and sales of securities. The Fund may also enter into forward currency contracts to hedge certain other foreign currency denominated assets. The contracts are used to minimize the exposure to foreign exchange rate fluctuations during the period between trade and settlement date of the contracts. All contracts are marked-to-market daily, resulting in unrealized gains (losses) which become realized at the time the forward currency contracts are closed or mature. Realized and unrealized gains (losses) arising from such transactions are included in net realized and unrealized gains (losses) on foreign currency transactions and translations. Forward currency contracts do not eliminate fluctuations in the prices of the Fund's portfolio securities. While the maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened, exposure is typically limited to the change in value of the contract (in U.S. dollars) over the period it remains open. Risks may also arise if counterparties fail to perform their obligations under the contracts. Redemption Fees: Effective February 10, 2003, the Fund began imposing a 2% redemption fee to shareholders of Class Z shares who redeem shares held for 60 days or less. For the period February 10, 2003 to August 31, 2003, the redemption fee for Class Z shares amounted to $10,350. This amount, which is retained by the Fund, is accounted for as an addition to paid in capital. For the period February 10, 2003 through October 8, 2003, redemption fees were recorded as a component of paid in capital on Class Z. Effective October 9, 2003, redemption fees are allocated to paid in capital of each class proportionately for purposes of determining the net asset value of each class. Other: 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 10 Notes to Financial Statements (continued) August 31, 2003 are recorded as soon after ex-date as the Fund becomes aware of such), net of non-reclaimable tax withholdings. Where a high level of uncertainty as to collection exists, income on securities is recorded net of all tax withholdings with any rebates recorded when received. The Fund's custodian takes possession through the federal book-entry system of securities collateralizing repurchase agreements. Collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund. The Fund may experience costs and delays in liquidating the collateral if the issuer defaults or enters bankruptcy. Note 2. Federal Tax Information Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for deferral of losses from wash sales, capital loss carryforwards, post-October losses and non-deductible expenses. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended August 31, 2003, permanent items identified and reclassified among the components of net assets are as follows:
Accumulated Accumulated Net Investment Net Realized Paid-In Loss Loss Capital -------------- ------------ --------- $892,014 $(528,145) $(363,869)
Net investment income, net realized gains (losses) and net assets were not affected by this reclassification. As of August 31, 2003, the components of distributable earnings on a tax basis were as follows: Unrealized Appreciation* ------------- $2,833,078 * The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains on certain forward foreign currency contracts. The following capital loss carryforwards are 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 ---------- ------------ 2006 $ 68,392 2007 1,707,149 2008 130,554 2009 845,766 2010 12,194,062 2011 16,408,445 ----------- $31,354,368 -----------
Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of August 31, 2003 for federal income tax purposes, post-October losses of $7,004,556 and $29,545 attributable to security transactions and foreign currency losses, respectively, were deferred to September 1, 2003. Expired capital less carryforwards, if any, are recorded as a reduction of paid-in capital. Note 3. Fees and Compensation Paid to Affiliates On April 1, 2003, Newport Fund Management, Inc., the investment advisor to the Fund and Colonial Management Associates Inc., the administrator to the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly known as Columbia Management Co., an indirect, wholly-owned subsidiary of FleetBoston Financial Corporation. At the time of the merger, Columbia assumed the obligations of Newport and Colonial with respect to the Fund. The merger did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. Management Fee: Columbia is the investment advisor of the Fund and receives a monthly fee equal to 0.95% annually of the Fund's average daily net assets. 11 Notes to Financial Statements (continued) August 31, 2003 At a special meeting held on October 8, 2003, the Board of Trustees approved a new management fee structure to go into effect on November 1, 2003. Under the new structure, Columbia will receive a monthly fee based on the Fund's average daily net assets as follows:
Annual Average Daily Net Assets Fee Rate ------------------------ -------- First $1 billion 0.95% Next $1 billion to $1.5 billion 0.90% Over $1.5 billion 0.85%
Administration Fee: Columbia also provides accounting and other services for a monthly fee equal to 0.25% annually of the Fund's average daily net assets. At a special meeting held on October 8, 2003, the Board of Trustees eliminated the administration fee effective November 1, 2003. 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 Bank and Trust Company ("State Street"). Columbia pays fees 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 are more than $50 million, a monthly fee equal to the average daily net assets of the Fund for that month multiplied by a fee rate that is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs for pricing services. Transfer Agent Fee: Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services for a monthly fee equal to 0.06% annually of the Fund's average daily net assets plus charges based on the number of shareholder accounts and transactions. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. Effective October 13, 2003, Liberty Funds Services, Inc. changed its name to Columbia Funds Services, Inc. At a special meeting held on October 8, 2003, the Board of Directors approved the change of transfer agent fees structure of the Fund. Effective November 1, 2003, the Fund will be charged an annual $28.00 charge per open account for the transfer agent fees. Underwriting Discounts, Service, Agency and Distribution Fees: Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the Fund's principal underwriter. Effective October 13, 2003, Liberty Funds Distributor, Inc. changed its name to Columbia Funds Distributor, Inc. For the year ended August 31, 2003, the Fund has been advised that the Distributor retained net underwriting discounts of $16,155 on sales of the Fund's Class A shares and received contingent deferred sales charges ("CDSC") of $719, $15,025 and $6,409 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan"), which requires the payment of a monthly service fee to the Distributor equal to 0.25% annually of the average daily net assets attributable to Class A, Class B, Class C, Class J and Class N shares. The Plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.75% annually of the average daily net assets attributable to Class B, Class C and Class N shares and 0.25% annually of the average daily net assets attributable to Class J shares. 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. Class J and Class N shares pay an annual agency fee of 0.10% of the Class J and Class N average daily net assets to an agent in Japan to compensate the agent for, among other things, making certain filings and reports in Japan. Expense Limits: Columbia has voluntarily agreed, until further notice, to waive fees and bear certain Fund expenses so that total expenses (exclusive of service, agency and distribution fees, brokerage commissions, interest, taxes and extraordinary expenses, if any) will not exceed 1.75% annually of the Fund's average daily net assets. 12 Notes to Financial Statements (continued) August 31, 2003 Other: The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's Independent 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. The Fund has an agreement with its custodian bank under which $28 of custody fees were 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. Note 4. Portfolio Information Investment Activity: For the year ended August 31, 2003, purchases and sales of investments, other than short-term obligations, were $12,833,525 and $17,748,027, respectively. Unrealized appreciation (depreciation) at August 31, 2003, based on cost of investments for federal income tax purposes, was: Gross unrealized appreciation $3,059,634 Gross unrealized depreciation (227,150) ---------- Net unrealized appreciation $2,832,484 ----------
Other: There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, concentration of investments in a single region or country may result in greater volatility. The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. Note 5. Line Of Credit The Fund and other affiliated funds participate in a $350,000,000 credit facility which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to the Fund based on its borrowings. In addition, the Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. Prior to April 26, 2003, the Fund participated in a separate credit agreement with similar terms to its existing agreement. For the year ended August 31, 2003, the average daily loan balance outstanding on days where borrowings existed was $1,535,714 at a weighted average interest rate of 1.80%. Note 6. Subsequent Event On October 8, 2003, the Board of Trustees of the Fund voted to liquidate the Fund. The effective date of the liquidation will be December 5, 2003, or as soon thereafter as practicable. 13 Financial Highlights Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, ------------------------------------------------------- Class A Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 -------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 7.26 $ 8.95 $ 17.85 $ 18.54 $ 8.66 --------- --------- --------- --------- -------- Income from Investment Operations: Net investment loss (b) (0.10) (0.12) (0.20) (0.28) (0.13) Net realized and unrealized gain (loss) on investments and foreign currency (0.24) (1.57) (8.70) 0.28 10.01 --------- --------- --------- --------- -------- Total from Investment Operations (0.34) (1.69) (8.90) -- 9.88 --------- --------- --------- --------- -------- Less Distributions Declared to Shareholders: From net investment income -- -- -- (0.69) -- In excess of net investment income -- -- -- --(c) -- --------- --------- --------- --------- -------- Total Distributions Declared to Shareholders -- -- -- (0.69) -- --------- --------- --------- --------- -------- Net Asset Value, End of Period $ 6.92 $ 7.26 $ 8.95 $ 17.85 $ 18.54 --------- --------- --------- --------- -------- Total return (d)(e) (4.68)% (18.88)% (49.86)% (0.68)% 114.09% --------- --------- --------- --------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (f) 2.00% 2.00% 2.00% 1.93% 2.00% Interest expense 0.01% -- -- -- -- Net expenses (f) 2.01% 2.00% 2.00% 1.93% 2.00% Net investment loss (f) (1.46)% (1.46)% (1.58)% (1.28)% (1.03)% Waiver/reimbursement 1.25% 0.41% 0.15% --% 0.46% Portfolio turnover rate 81% 33% 11% 15% 27% Net assets, end of period (000's) $ 3,305 $ 4,385 $ 8,011 $ 21,452 $ 17,091
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (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) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. 14 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, ----------------------------------------------------- Class B Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 --------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 6.88 $ 8.56 $ 17.29 $ 18.11 $ 8.52 -------- --------- --------- -------- -------- Income from Investment Operations: Net investment loss (b) (0.13) (0.17) (0.29) (0.43) (0.22) Net realized and unrealized gain (loss) on investments and foreign currency (0.24) (1.51) (8.44) 0.26 9.81 -------- --------- --------- -------- -------- Total from Investment Operations (0.37) (1.68) (8.73) (0.17) 9.59 -------- --------- --------- -------- -------- Less Distributions Declared to Shareholders: From net investment income -- -- -- (0.65) -- In excess of net investment income -- -- -- --(c) -- -------- --------- --------- -------- -------- Total Distributions Declared to Shareholders -- -- -- (0.65) -- -------- --------- --------- -------- -------- Net Asset Value, End of Period $ 6.51 $ 6.88 $ 8.56 $ 17.29 $ 18.11 -------- --------- --------- -------- -------- Total return (d)(e) (5.38)% (19.63)% (50.49)% (1.62)% 112.56% -------- --------- --------- -------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (f) 2.75% 2.75% 2.75% 2.68% 2.75% Interest expense 0.01% -- -- -- -- Net expenses (f) 2.76% 2.75% 2.75% 2.68% 2.75% Net investment loss (f) (2.14)% (2.21)% (2.33)% (2.03)% (1.78)% Waiver/reimbursement 1.33% 0.41% 0.15% --% 0.46% Portfolio turnover rate 81% 33% 11% 15% 27% Net assets, end of period (000's) $ 5,190 $ 5,969 $ 9,109 $ 28,021 $ 21,333
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (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) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. 15 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, ------------------------------------------------------ Class C Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 ----------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 6.87 $ 8.57 $ 17.28 $ 18.10 $ 8.51 --------- --------- --------- --------- -------- Income from Investment Operations: Net investment loss (b) (0.13) (0.17) (0.29) (0.43) (0.22) Net realized and unrealized gain (loss) on investments and foreign currency (0.23) (1.53) (8.42) 0.26 9.81 --------- --------- --------- --------- -------- Total from Investment Operations (0.36) (1.70) (8.71) (0.17) 9.59 --------- --------- --------- --------- -------- Less Distributions Declared to Shareholders: From net investment income -- -- -- (0.65) -- In excess of net investment income -- -- -- --(c) -- --------- --------- --------- --------- -------- Total Distributions Declared to Shareholders -- -- -- (0.65) -- --------- --------- --------- --------- -------- Net Asset Value, End of Period $ 6.51 $ 6.87 $ 8.57 $ 17.28 $ 18.10 --------- --------- --------- --------- -------- Total return (d)(e) (5.24)% (19.84)% (50.41)% (1.62)% 112.69% --------- --------- --------- --------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (f) 2.75% 2.75% 2.75% 2.68% 2.75% Interest expense 0.01% -- -- -- -- Net expenses (f) 2.76% 2.75% 2.75% 2.68% 2.75% Net investment loss (f) (2.12)% (2.21)% (2.33)% (2.03)% (1.78)% Waiver/reimbursement 1.38% 0.41% 0.15% --% 0.46% Portfolio turnover rate 81% 33% 11% 15% 27% Net assets, end of period (000's) $ 1,268 $ 1,780 $ 3,395 $ 11,161 $ 8,167
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (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) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. 16 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Period Ended Year Ended August 31, August 31, ------------------- 2001 (a) Class J Shares 2003 2002 ------------ ---------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 33.22 $ 41.00 $ 80.68 -------- --------- --------- Income from Investment Operations: Net investment loss (b) (0.49) (0.66) (1.08) Net realized and unrealized loss on investments and foreign currency (1.12) (7.12) (38.60) -------- --------- --------- Total from Investment Operations (1.61) (7.78) (39.68) -------- --------- --------- Net Asset Value, End of Period $ 31.61 $ 33.22 $ 41.00 -------- --------- --------- Total return (c)(d) (4.85)% (18.98)% (49.18)%(e) -------- --------- --------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (f) 2.35% 2.35% 2.35%(g) Interest expense 0.01% -- -- Net expenses (f) 2.36% 2.35% 2.35%(g) Net investment loss (f) (1.63)% (1.81)% (1.93)%(g) Waiver/reimbursement 1.36% 0.41% 0.15%(g) Portfolio turnover rate 81% 33% 11% Net assets, end of period (000's) $ 3 $ 3 $ 4
(a) Class J shares were initially offered on September 20, 2000. Per share data and total return reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming no initial sales charge. (d) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g) Annualized. 17 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended Period Ended August 31, August 31, ------------------------------ 2000 (a) Class N Shares 2003 2002 2001 ------------ -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 32.87 $ 40.78 $ 82.43 $ 91.37 -------- --------- --------- -------- Income from Investment Operations: Net investment loss (b) (0.66) (0.84) (1.40) (0.16) Net realized and unrealized loss on investments and foreign currency (1.12) (7.07) (40.25) (8.78) -------- --------- --------- -------- Total from Investment Operations (1.78) (7.91) (41.65) (8.94) -------- --------- --------- -------- Net Asset Value, End of Period $ 31.09 $ 32.87 $ 40.78 $ 82.43 -------- --------- --------- -------- Total return (c)(d) (5.42)% (19.40)% (50.53)% (9.78)%(e) -------- --------- --------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (f) 2.85% 2.85% 2.85% 2.78%(g) Interest expense 0.01% -- -- -- Net expenses (f) 2.86% 2.85% 2.85% 2.78%(g) Net investment loss (f) (2.23)% (2.31)% (2.43)% (2.55)%(g) Waiver/reimbursement 1.32% 0.41% 0.15% --% Portfolio turnover rate 81% 33% 11% 15% Net assets, end of period (000's) $ 5,538 $ 7,332 $ 12,738 $ 32,035
(a) Class N shares were initially offered on May 15, 2000. Per share data and total return reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming no contingent deferred sales charge. (d) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g) Annualized. 18 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, ---------------------------------------------------------- Class Z Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 --------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 7.31 $ 9.00 $ 18.00 $ 18.70 $ 8.71 --------- --------- --------- --------- --------- Income from Investment Operations: Net investment loss (b) (0.07) (0.10) (0.17) (0.22) (0.10) Net realized and unrealized gain (loss) on investments and foreign currency (0.14)(c) (1.59) (8.83) 0.23 10.09 --------- --------- --------- --------- --------- Total from Investment Operations (0.21) (1.69) (9.00) 0.01 9.99 --------- --------- --------- --------- --------- Less Distributions Declared to Shareholders: From net investment income -- -- -- (0.71) -- In excess of net investment income -- -- -- --(d) -- --------- --------- --------- --------- --------- Total Distributions Declared to Shareholders -- -- -- (0.71) -- --------- --------- --------- --------- --------- Redemption Fees: Redemption fees added to paid-in capital (b) 0.15(b) N/A N/A N/A N/A --------- --------- --------- --------- --------- Net Asset Value, End of Period $ 7.25 $ 7.31 $ 9.00 $ 18.00 $ 18.70 --------- --------- --------- --------- --------- Total return (e)(f) (0.82)% (18.78)% (50.00)% (0.66)% 114.70% --------- --------- --------- --------- --------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (g) 1.75% 1.75% 1.75% 1.68% 1.75% Interest expense 0.01% -- -- -- -- Net expenses (g) 1.76% 1.75% 1.75% 1.68% 1.75% Net investment loss (g) (1.00)% (1.21)% (1.33)% (1.03)% (0.78)% Waiver/reimbursement 1.07% 0.41% 0.15% --% 0.46% Portfolio turnover rate 81% 33% 11% 15% 27% Net assets, end of period (000's) $ 150 $ 1,984 $ 2,744 $ 5,272 $ 2,971
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (b) Per share data was calculated using average shares outstanding during the period. (c) The amount shown for a share outstanding does not correspond with the aggregate net loss on investments for the period due to timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund. (d) Rounds to less than $0.01 per share. (e) Total return at net asset value assuming all distributions reinvested. (f) Had the 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%. 19 Auditor's Opinion REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Trustees of Columbia Funds Trust II and the Shareholders of Columbia Newport Japan Opportunities Fund We have audited the accompanying statement of assets and liabilities of Columbia Newport Japan Opportunities Fund (formerly, Liberty Newport Japan Opportunities Fund) (one of the portfolios constituting Columbia Funds Trust II (formerly, Liberty Funds Trust II), the "Trust"), including the Investment Portfolio, as of August 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended August 31, 1999 were audited by other auditors whose report dated October 12, 1999 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2002, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Columbia Newport Japan Opportunities Fund of Columbia Funds Trust II, at August 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Boston, Massachusetts October 17, 2003 20 Trustees Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth had been directors of 15 Columbia Funds and 12 funds in the CMG Fund Trust. Also effective October 8, 2003, the incumbent trustees of the Fund were elected as directors of the 15 Columbia Funds and as trustees of the 12 funds in the CMG Fund Trust. The new combined Board of Trustees of the Fund now oversees 124 funds in the Columbia Funds Complex (including the former Liberty Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of those trustees also serve on the Boards of other funds in the Columbia Funds Complex. The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and officers of the Funds in the Columbia Funds Complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex. The Statement of Additional Information (SAI) contains additional information about the Trustees and is available without charge upon request by calling the fund's distributor at 800-345-6611.
Number of Year First Portfolios in Position Elected or Columbia Funds with Appointed Principal Occupation(s) Complex Overseen Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee -------------------------------------------------------------------------------------------------------------- Disinterested Trustees Douglas A. Hacker (Age 48) Trustee 1996 Executive Vice President - Strategy of 124 P.O. Box 66100 United Airlines (airline) since Chicago, IL 60666 December, 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001 to December, 2002; Executive Vice President and Chief Financial Officer of United Airlines from March, 1993 to September, 2001; Senior Vice President and Chief Financial Officer of UAL, Inc. prior thereto). Janet Langford Kelly (Age 45) Trustee 1996 Chief Administrative Officer and Senior 124 3100 West Beaver Road Vice President, Kmart Holding Troy, MI 48084-3163 Corporation since September, 2003 (formerly Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January, 1995 to September, 1999). Richard W. Lowry (Age 67) Trustee 1995 Private Investor since August, 1987 126/3/ 10701 Charleston Drive (formerly Chairman and Chief Executive Vero Beach, FL 32963 Officer, U.S. Plywood Corporation (building products manufacturer)). Charles R. Nelson (Age 61) Trustee 1981 Professor of Economics, University of 124 Department of Economics Washington, since January, 1976; Ford University of Washington and Louisa Van Voorhis Professor of Seattle, WA 98195 Political Economy, University of Washington, since September, 1993; Director, Institute for Economic Research, University of Washington, since September, 2001; Adjunct Professor of Statistics, University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. John J. Neuhauser (Age 60) Trustee 1985 Academic Vice President and Dean of 127/3,4/ 84 College Road Faculties since August, 1999, Boston Chestnut Hill, MA 02467-3838 College (formerly Dean, Boston College School of Management from September, 1977 to September, 1999. Patrick J. Simpson (Age 58) Trustee 2000 Partner, Perkins Coie L.L.P. (formerly 124 1211 S.W. 5th Avenue Partner, Stoel Rives Boley Jones & Suite 1500 Grey). Portland, OR 97204 Thomas E. Stitzel (Age 67) Trustee 1998 Business Consultant since 1999 124 2208 Tawny Woods Place (formerly Professor of Finance from Boise, ID 83706 1975 to 1999 and Dean from 1977 to 1991, College of Business, Boise State University); Chartered Financial Analyst.
Other Principal Occupation(s) Directorships During Past Five Years Held --------------------------------------------------------------------------- Executive Vice President - Strategy of None United Airlines (airline) since December, 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001 to December, 2002; Executive Vice President and Chief Financial Officer of United Airlines from March, 1993 to September, 2001; Senior Vice President and Chief Financial Officer of UAL, Inc. prior thereto). Chief Administrative Officer and Senior None Vice President, Kmart Holding Corporation since September, 2003 (formerly Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January, 1995 to September, 1999). Private Investor since August, 1987 None (formerly Chairman and Chief Executive Officer, U.S. Plywood Corporation (building products manufacturer)). Professor of Economics, University of None Washington, since January, 1976; Ford and Louisa Van Voorhis Professor of Political Economy, University of Washington, since September, 1993; Director, Institute for Economic Research, University of Washington, since September, 2001; Adjunct Professor of Statistics, University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. Academic Vice President and Dean of Saucony, Inc. (athletic footwear); Faculties since August, 1999, Boston SkillSoft Corp. College (formerly Dean, Boston College (E-Learning) School of Management from September, 1977 to September, 1999. Partner, Perkins Coie L.L.P. (formerly None Partner, Stoel Rives Boley Jones & Grey). Business Consultant since 1999 None (formerly Professor of Finance from 1975 to 1999 and Dean from 1977 to 1991, College of Business, Boise State University); Chartered Financial Analyst.
21 Trustees (continued)
Number of Year First Portfolios in Position Elected or Columbia Funds with Appointed Principal Occupation(s) Complex Overseen Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee --------------------------------------------------------------------------------------------------------------- Disinterested Trustees Thomas C. Theobald (Age 66) Trustee 1996 Managing Director, William Blair 124 27 West Monroe Street, Capital Partners (private equity Suite 3500 investing) since September, 1994 Chicago, IL 60606 (formerly Chief Executive Officer and Chairman of the Board of Directors, Continental Bank Corporation prior thereto). Anne-Lee Verville (Age 58) Trustee 1998 Author and speaker on educational 125/4/ 359 Stickney Hill Road systems needs (formerly General Hopkinton, NH 03229 Manager, Global Education Industry from 1994 to 1997, and President, Applications Solutions Division from 1991 to 1994, IBM Corporation (global education and global applications)). Richard L. Woolworth (Age 62) Trustee 1991 Chairman and Chief Executive Officer, 124 100 S.W. Market Street The Regence Group (healthcare #1500 maintenance organization) (formerly Portland, OR 97207 Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company). Interested Trustees William E. Mayer/2/ (Age 63) Trustee 1994 Managing Partner, Park Avenue Equity 126/3/ 399 Park Avenue Partners (private equity) since Suite 3204 February, 1999 (formerly Founding New York, NY 10022 Partner, Development Capital LLC from November 1996 to February, 1999; Dean and Professor, College of Business and Management, University of Maryland from October, 1992 to November, 1996). Joseph R. Palombo/2/ (Age 50) Trustee, 2000 Executive Vice President and Chief 125/5/ One Financial Center Chairman Operating Officer of Columbia Boston, MA 02111 of the Management Group, Inc. (Columbia Board Management) since December, 2001 and and Director, Executive Vice President and President Chief Operating Officer of the Advisor since April, 2003 (formerly Chief Operations Officer of Mutual Funds, Liberty Financial Companies, Inc. from August, 2000 to November, 2001; Executive Vice President of Stein Roe & Farnham Incorporated (Stein Roe) from April, 1999 to April, 2003; Director of Colonial Management Associates, Inc. (Colonial) from April, 1999 to April, 2003; Director of Stein Roe from September, 2000 to April, 2003) President of Columbia Funds and Galaxy Funds since February, 2003 (formerly Vice President from September 2002 to February 2003); Manager of Stein Roe Floating Rate Limited Liability Company since October, 2000; (formerly Vice President of the Columbia Funds from April, 1999 to August, 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December, 1993 to March, 1999).
Other Principal Occupation(s) Directorships During Past Five Years Held ------------------------------------------------------------------------ Managing Director, William Blair Anixter International (network Capital Partners (private equity support equipment distributor), investing) since September, 1994 Jones Lang LaSalle (real estate (formerly Chief Executive Officer and management services) and Chairman of the Board of Directors, MONY Group (life insurance). Continental Bank Corporation prior thereto). Author and speaker on educational Chairman of the Board of systems needs (formerly General Directors, Enesco Group, Inc. Manager, Global Education Industry from (designer, importer and 1994 to 1997, and President, distributor of giftware and Applications Solutions Division from collectibles). 1991 to 1994, IBM Corporation (global education and global applications)). Chairman and Chief Executive Officer, NW Natural, a natural gas The Regence Group (healthcare service provider maintenance organization) (formerly Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company). Managing Partner, Park Avenue Equity Lee Enterprises (print media), Partners (private equity) since WR Hambrecht + Co. (financial February, 1999 (formerly Founding service provider) and First Partner, Development Capital LLC from Health (healthcare). November 1996 to February, 1999; Dean and Professor, College of Business and Management, University of Maryland from October, 1992 to November, 1996). Executive Vice President and Chief None Operating Officer of Columbia Management Group, Inc. (Columbia Management) since December, 2001 and Director, Executive Vice President and Chief Operating Officer of the Advisor since April, 2003 (formerly Chief Operations Officer of Mutual Funds, Liberty Financial Companies, Inc. from August, 2000 to November, 2001; Executive Vice President of Stein Roe & Farnham Incorporated (Stein Roe) from April, 1999 to April, 2003; Director of Colonial Management Associates, Inc. (Colonial) from April, 1999 to April, 2003; Director of Stein Roe from September, 2000 to April, 2003) President of Columbia Funds and Galaxy Funds since February, 2003 (formerly Vice President from September 2002 to February 2003); Manager of Stein Roe Floating Rate Limited Liability Company since October, 2000; (formerly Vice President of the Columbia Funds from April, 1999 to August, 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December, 1993 to March, 1999).
/1/ In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Funds (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds Complex). /2/ Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. Mr. Palombo is an interested person as an employee of the Advisor. /3/ Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. /4/ Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. /5/ Mr. Palombo also serves as an interested director of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. 22 Officers and Transfer Agent
Year First Elected or Position with Appointed Principal Occupation(s) Name, address and age Columbia Funds to Office During Past Five Years ------------------------------------------------------------------------------------------------------------ Officers Vicki L. Benjamin (Age 42) Chief Accounting 2001 Controller of the Columbia Funds and of the One Financial Center Officer and Liberty All-Star Funds since May, 2002; Chief Boston, MA 02111 Controller Accounting Officer of the Columbia Funds and Liberty All-Star Funds since June, 2001; Controller and Chief Accounting Officer of the Galaxy Funds since September, 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May, 1998 to April, 2001; Audit Manager from July, 1994 to June, 1997; Senior Audit Manager from July, 1997 to May, 1998, Coopers & Lybrand, LLP). J. Kevin Connaughton (Age 39) Treasurer 2000 Treasurer of the Columbia Funds and of the One Financial Center Liberty All-Star Funds since December, 2000; Vice Boston, MA 02111 President of the Advisor since April, 2003 (formerly Controller of the Liberty Funds and of the Liberty All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December, 2002 (formerly Vice President of Colonial from February, 1998 to October, 2000 and Senior Tax Manager, Coopers & Lybrand, LLP from April, 1996 to January, 1998).
Important Information About This Report The Transfer Agent for Columbia Newport Japan Opportunities Fund is: Columbia Funds Services, Inc. P.O. Box 8081 Boston, MA 02266-8081 Please note our new name as of October 13, 2003 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 Japan Opportunities 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. Annual Report: Columbia Newport Japan Opportunities Fund Columbia Newport Japan Opportunities Fund Annual Report, August 31, 2003 [LOGO](R) ColumbiaFunds A Member of Columbia Management Group (c)2003 Columbia Funds Distributor, Inc. One Financial Center, Boston, MA 02111-2621 800.426.3750 WWW.columbiafunds.com 734-02/215P-0803 (10/03) 03/2928 PRSRT STD U.S. Postage PAID Holliston, MA Permit NO. 20 [GRAPHIC] Columbia Newport Greater China Fund Annual Report August 31, 2003 We are now Columbia Funds! INSIDE -- Management's discussion of the changes effective as of October 13, 2003. President's Message [PHOTO] Joseph R. Palombo Dear Shareholder: As you know, the fund you invest in has long been associated with a larger investment management organization. In the 1990s, it was affiliated with Liberty Financial, whose asset management companies included Colonial, Stein Roe and Newport. In 2001, these companies became part of the asset management division of FleetBoston Financial Corp., which you know as Columbia Management Group (CMG). Earlier this year, six of the asset management firms that were brought together under the CMG umbrella were consolidated and renamed Columbia Management Advisors, Inc. On October 13, 2003, we took the natural next step forward in this process by changing the name of our funds from Liberty to Columbia. For example, Newport Greater China was changed to Columbia Newport Greater China Fund. We have also modified certain fund names that existed under both the Liberty and Columbia brands. As a result of these fund name changes, most fund CUSIP numbers have changed. (A CUSIP is a unique identification number assigned to each class of a mutual fund by the Committee on Uniform Security Identification Procedures.) However, ticker symbols have not changed. A list of new fund names and other information related to these changes are available online at www.columbiafunds.com, our new website address. A consolidated identity The consolidation of our management under a single organization and the renaming of our funds are part of a larger effort to create a consistent identity. Having taken these additional steps, we believe it will be easier for our shareholders to do business with us. All funds will be listed under the "Columbia" name in the mutual fund listings section of your newspaper (as long as they meet the newspaper's listing requirements). All service inquires will be handled by Columbia Funds Services, Inc., the new name of our shareholder service organization. What will not change is our commitment to fund shareholders. We remain committed to providing the best possible customer service and to offering a wide variety of mutual funds to help you pursue your long-term financial goals. Should you have questions, please call shareholder services at 800-345-6611. In the report that follows, your portfolio manager talks in depth about investment strategies and other factors that affected your fund's performance during the period. We encourage you to read the report carefully. As always, we thank you for your business and we look forward to continuing to serve your investment needs. Sincerely, /s/ Joseph R. Palombo Joseph R. Palombo President Net asset value per share as of 8/31/03 ($) Class A 17.88 Class B 17.51 Class C 17.76 Class Z 18.51
Distributions declared per share 9/1/02-8/31/03 ($) Class A 0.08 Class B 0.00 Class C 0.00 Class Z 0.12
[LOGO] Not FDIC Insured May Lose Value No Bank Guarantee Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. Performance Information Value of a $10,000 investment 5/16/97--8/31/03 Performance of a $10,000 investment 5/16/97--8/31/03 ($)
without sales with sales charge charge -------------------------------- Class A 13,782 12,990 -------------------------------- Class B 13,223 13,223 -------------------------------- Class C 13,414 13,414 -------------------------------- Class Z 14,374 n/a
[CHART] Liberty Newport Liberty Newport Greater China - A Greater China - A Without With Sales MSCI China Sales Charge Charge Index GD ----------------- ------------------ ----------- 10,000 9,425 05/17/1997 - 05/31/1997 13,418 12,646 10,000 06/01/1997 - 06/30/1997 14,415 13,586 10,224 07/01/1997 - 07/31/1997 15,104 14,236 11,624 08/01/1997 - 08/31/1997 13,417 12,645 12,309 09/01/1997 - 09/30/1997 13,701 12,913 10,262 10/01/1997 - 10/31/1997 10,149 9,565 8,596 11/01/1997 - 11/30/1997 9,631 9,077 7,040 12/01/1997 - 12/31/1997 9,887 9,319 6,832 01/01/1998 - 01/31/1998 7,778 7,331 5,094 02/01/1998 - 02/28/1998 10,474 9,872 6,901 03/01/1998 - 03/31/1998 10,346 9,751 6,723 04/01/1998 - 04/30/1998 9,352 8,814 6,030 05/01/1998 - 05/31/1998 7,944 7,487 5,239 06/01/1998 - 06/30/1998 6,852 6,458 4,422 07/01/1998 - 07/31/1998 5,963 5,621 3,622 08/01/1998 - 08/31/1998 4,774 4,499 2,641 09/01/1998 - 09/30/1998 6,287 5,926 3,782 10/01/1998 - 10/31/1998 7,770 7,323 4,159 11/01/1998 - 11/30/1998 8,049 7,586 4,291 12/01/1998 - 12/31/1998 7,892 7,438 3,937 01/01/1999 - 01/31/1999 7,097 6,689 3,205 02/01/1999 - 02/28/1999 6,968 6,568 3,069 03/01/1999 - 03/31/1999 7,756 7,310 3,487 04/01/1999 - 04/30/1999 9,000 8,482 4,362 05/01/1999 - 05/31/1999 8,818 8,311 4,372 06/01/1999 - 06/30/1999 10,867 10,242 6,420 07/01/1999 - 07/31/1999 10,336 9,741 5,619 08/01/1999 - 08/31/1999 10,579 9,970 5,574 09/01/1999 - 09/30/1999 9,986 9,412 5,351 10/01/1999 - 10/31/1999 10,366 9,770 4,919 11/01/1999 - 11/30/1999 12,096 11,400 4,825 12/01/1999 - 12/31/1999 13,241 12,480 4,462 01/01/2000 - 01/31/2000 13,302 12,537 4,268 02/01/2000 - 02/29/2000 14,425 13,595 3,484 03/01/2000 - 03/31/2000 15,760 14,854 3,564 04/01/2000 - 04/30/2000 14,061 13,253 3,900 05/01/2000 - 05/31/2000 13,552 12,773 3,970 06/01/2000 - 06/30/2000 15,009 14,146 4,500 07/01/2000 - 07/31/2000 15,503 14,612 4,415 08/01/2000 - 08/31/2000 15,162 14,290 4,236 09/01/2000 - 09/30/2000 14,114 13,303 3,721 10/01/2000 - 10/31/2000 13,287 12,523 3,547 11/01/2000 - 11/30/2000 12,574 11,851 3,075 12/01/2000 - 12/31/2000 13,121 12,366 3,100 01/01/2001 - 01/31/2001 14,107 13,296 3,549 02/01/2001 - 02/28/2001 13,652 12,867 3,226 03/01/2001 - 03/31/2001 12,445 11,729 2,703 04/01/2001 - 04/30/2001 13,408 12,637 2,977 05/01/2001 - 05/31/2001 13,363 12,594 3,058 06/01/2001 - 06/30/2001 13,074 12,322 3,159 07/01/2001 - 07/31/2001 12,436 11,721 2,731 08/01/2001 - 08/31/2001 11,313 10,662 2,140 09/01/2001 - 09/30/2001 10,175 9,590 2,067 10/01/2001 - 10/31/2001 10,592 9,983 2,120 11/01/2001 - 11/30/2001 11,472 10,813 2,327 12/01/2001 - 12/31/2001 11,737 11,062 2,335 01/01/2002 - 01/31/2002 11,714 11,040 2,116 02/01/2002 - 02/28/2002 11,629 10,961 2,133 03/01/2002 - 03/31/2002 12,342 11,633 2,252 04/01/2002 - 04/30/2002 12,879 12,139 2,352 05/01/2002 - 05/31/2002 12,864 12,124 2,387 06/01/2002 - 06/30/2002 12,236 11,532 2,307 07/01/2002 - 07/31/2002 11,501 10,839 2,206 08/01/2002 - 08/31/2002 10,949 10,319 2,163 09/01/2002 - 09/30/2002 10,220 9,633 1,991 10/01/2002 - 10/31/2002 10,251 9,662 2,003 11/01/2002 - 11/30/2002 10,849 10,225 2,085 12/01/2002 - 12/31/2002 10,272 9,681 2,007 01/01/2003 - 01/31/2003 10,487 9,884 2,103 02/01/2003 - 02/28/2003 10,356 9,761 2,050 03/01/2003 - 03/31/2003 9,902 9,332 1,971 04/01/2003 - 04/30/2003 9,994 9,419 1,974 05/01/2003 - 05/31/2003 11,072 10,435 2,226 06/01/2003 - 06/30/2003 11,519 10,857 2,369 07/01/2003 - 07/31/2003 12,645 11,918 2,604 08/01/2003 - 08/31/2003 13,782 12,990 2,776 Mutual fund performance changes over time. Please visit www.columbiafunds.com for daily performance updates. Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. The graph and table do not reflect the deduction of taxes 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. Country indices are based on MSCI market indices, assuming dividends are reinvested. Unlike the fund, indices are not investments, do not incur fees or expenses and are not professionally managed. Securities in the fund may not match those in the index. It is not possible to invest directly in an index. Index performance is from May 31, 1997. 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. Average annual total return as of 8/31/03 (%) Share class A B C Z Inception 5/16/97 5/16/97 5/16/97 5/16/97 ---------------------------------------------------------------- without with without with without with without sales sales sales sales sales sales sales charge charge charge charge charge charge charge ---------------------------------------------------------------- 1-year 25.84 18.60 24.89 19.89 24.89 23.89 29.51 ---------------------------------------------------------------- 5-year 23.62 22.16 22.59 22.41 23.02 23.02 24.49 ---------------------------------------------------------------- Life 5.23 4.24 4.54 4.54 4.78 4.78 5.94 ---------------------------------------------------------------- Average annual total return as of 6/30/03 (%) Share class A B C Z ---------------------------------------------------------------- without with without with without with without sales sales sales sales sales sales sales charge charge charge charge charge charge charge ---------------------------------------------------------------- 1-year -5.85 -11.26 -6.56 -11.24 -6.66 -7.59 -3.31 ---------------------------------------------------------------- 5-year 10.95 9.65 10.14 9.86 10.41 10.41 11.72 ---------------------------------------------------------------- Life 2.34 1.36 1.68 1.68 1.90 1.90 3.02 ----------------------------------------------------------------
Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. All results shown assume reinvestment of distributions. The "with sales charge" returns include the maximum 5.75% sales charge for class A shares, the appropriate class B contingent deferred sales charge for the holding period after purchase as follows: first year - 5%, second year - 4%, third year - 3%, fourth year - 3%, fifth year - 2%, sixth year - 1%, thereafter - 0% and the class C contingent deferred sales charge of 1% for the first year only. Performance for different share classes varies 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. 1 Portfolio Manager's Report Top 10 holdings as of 8/31/03 (%) Taiwan Semiconductor Manufacturing 5.7 Beijing Datang Power Generation 5.0 Huaneng Power International 5.0 China Merchants Holdings International 4.7 Hutchison Whampoa 4.6 Sun Hung Kai Properties 4.5 Zhejiang Expressway 4.4 Hong Kong & China Gas 4.4 PetroChina 4.2 China Mobile 4.1 Portfolio breakdowns are calculated as a percentage of net assets. Since the fund is actively managed, there is no guarantee the fund will continue to maintain these holdings in the future. Bought ---------------------------------- PetroChina (4.2% of net assets). As China's economy continues to grow, we believe this oil exploration and distribution company should benefit from higher consumption levels and energy prices. Sold ---------------------------------- Huaneng Power International (5.0% of net assets). We took profits in this electric utility company, because it reached what we believe was fair valuation. A reduced position remains in the portfolio.
For the 12-month period ended August 31, 2003, class A shares of Columbia Newport Greater China Fund returned 25.84% without sales charge. The fund's performance was lower than its benchmark, the MSCI China Index, which returned 28.35%. While the MSCI China Index is a reasonable proxy for stock market performance in China, it is not a perfect match with the fund's investment universe, which includes companies in Hong Kong and Taiwan in its definition of "greater" China. During the period, the performance of investments in Hong Kong and Taiwan lagged that of investments in China and were instrumental in the fund's underperformance relative to its index. The fund also underperformed the Lipper China Region Funds Category average, which was 27.75%/2/. The fund participated in a strong rally for stocks within the greater China region, most of which took place in the second half of the reporting period. However, the fund's position in consumer staples stocks detracted somewhat from its return relative to its benchmark, as investors shifted their focus away from these defensive stocks to more economically-sensitive companies, which typically do well when economic growth picks up. An improving investment environment At the beginning of the 12-month period, the investment environment in greater China was clouded by a struggling global economy, the SARS (severe acute respiratory syndrome) epidemic and uncertainty about war in Iraq. However, economic activity picked up in the spring when the war ended and the SARS epidemic appeared under control. The region's stock markets rallied on better economic news, and the fund registered strong gains for the balance of the period. Utility companies contributed most to performance The fund's investments in the utility sector accounted for a significant portion of its returns. As China's economy has expanded, the demand and costs for energy have been moving higher, increasing the value of many of the country's utility companies. Portfolio holdings, such as Beijing Datang Power Generation Co., Ltd., which develops and operates power plants, and Huaneng Power International, Inc., which owns and operates coal-fired power plants throughout China, were the fund's best performers for the period (5.0% and 5.0% of net assets, respectively)./1/ ------------ /1/ Holdings are disclosed as of August 31, 2003 and are subject to change. /2/ Lipper Inc., a widely respected data provider in the industry, calculates an average of total returns for mutual funds with similar objectives as the fund. 2 Despite its strong performance, we reduced our position in Huaneng Power when it reached what we believe was fair valuation. We used some of the proceeds from the sale of this stock to purchase PetroChina Co. Ltd. (4.2% of net assets), an oil exploration and distribution company, which also performed well during the period. Industrials and information technology stocks made a strong showing The fund's investments in the industrial and information technology sectors also helped boost the return. Long-term holding Johnson Electric Holdings Ltd. (2.4% of net assets), a company that produces micro motors that are used to power automobile seats, rearview mirrors and other devices, was an important driver of performance. In information technology, Taiwan Semiconductor Manufacturing Co. Ltd. (5.7% of net assets) led performance. The company benefited from an improving global economy and an upturn in the technology sector. Hong Kong-based Legend Group Ltd. and Taiwan-based motherboard manufacturer Asustek Computer, Inc. (2.6% and 1.9% of net assets, respectively) also added to the fund's return. A personal computer manufacturer, Legend leads the market in sales of computers to China. Long-term growth prospects remain positive Although we are optimistic about the long-term prospects for greater China, we would not be surprised by a slowdown in the Chinese economy. The US consumer has been a major part of China's export growth, and the relatively high level of consumer spending in the US may not be sustainable. In addition, China's economic planners have made policy changes that suggest they want to slow economic growth. We believe such a move would be healthy, because it could position China for steadier and more robust growth over the long term. /s/ Chris Legallet Chris Legallet has managed or co-managed the fund since it commenced operations in May, 1997. International investing offers significant long-term growth potential, but also involves certain risks. These risks include currency exchange rate fluctuations, economic change, instability of emerging countries and political developments. A portfolio of stocks from a single region poses additional risks due to limited diversification. Top 5 sectors as of 08/31/03 (%) [CHART] Industrials 25.9 Information technology 15.8 Financials 15.1 Utilities 14.9 Consumer discretionary 7.9 Sector breakdowns are calculated as a percentage of net assets. Since the fund is actively managed, there is no guarantee the fund will continue to maintain this breakdown in the future. 3 Investment Portfolio August 31, 2003
Common Stocks - 94.0% Shares Value ----------------------------------------------------------- CONSUMER DISCRETIONARY - 7.9% Distributors - 5.2% China Resources Enterprise Ltd. 652,000 $ 631,163 Giordano International Ltd. 496,000 206,687 Li & Fung Ltd. 1,132,000 1,930,391 ---------- 2,768,241 ---------- Hotels, Restaurants & Leisure - 0.9% Cafe de Coral Holdings Ltd. 554,000 461,711 ---------- Media - 1.8% Television Broadcasts Ltd. 230,000 970,222 ---------- ----------------------------------------------------------- CONSUMER STAPLES - 1.2% Food & Drug Retailing - 1.2% Convenience Retail Asia Ltd. 2,480,000 651,858 ---------- ----------------------------------------------------------- ENERGY - 6.1% Oil & Gas - 6.1% CNOOC Ltd. 554,500 1,030,900 PetroChina Co., Ltd. 6,378,000 2,228,426 ---------- 3,259,326 ---------- ----------------------------------------------------------- FINANCIALS - 15.1% Banks - 4.8% ChinaTrust Financial Holding Co., Ltd. 1,962,480 1,600,380 Hang Seng Bank Ltd. 82,100 907,924 JCG Holdings Ltd. 66,000 39,138 ---------- 2,547,442 ---------- Diversified Financials - 2.0% Swire Pacific Ltd. 185,000 1,038,946 ---------- Real Estate - 8.3% Cheung Kong Holdings Ltd. 114,000 884,316 Henderson Land Development Co., Ltd. 296,000 1,119,595 Sun Hung Kai Properties Ltd. 332,000 2,405,103 ---------- 4,409,014 ---------- ----------------------------------------------------------- HEALTH CARE - 0.7% Health Care Equipment & Supplies - 0.7% Pihsiang Machinery Manufacturing Co., Ltd. 119,000 387,474 ----------
Shares Value ----------------------------------------------------------- INDUSTRIALS - 25.9% Electrical Equipment - 3.0% Johnson Electric Holdings Ltd. 837,500 $1,299,324 Phoenixtec Power Co., Ltd. 245,220 287,732 ---------- 1,587,056 ---------- Industrial Conglomerates - 10.2% China Merchants Holdings International Co., Ltd. 2,234,000 2,492,009 Hutchison Whampoa Ltd. 333,200 2,456,518 Xinao Gas Holdings Ltd. (a) 1,040,000 453,377 ---------- 5,401,904 ---------- Transportation Infrastructure - 12.7% Anhui Expressway Co., Ltd., Class H 1,442,000 402,135 Beijing Capital International Airport Co., Inc., Class H 1,590,000 448,505 Cosco Pacific Ltd. 1,066,000 1,189,114 Hainan Meilan Airport Co., Ltd., Class H 762,000 473,853 Jiangsu Expressway Co., Ltd., Class H 2,198,000 880,694 Sinotrans Ltd., Class H 3,000,000 1,019,329 Zhejiang Expressway Co., Ltd., Class H 4,820,000 2,332,981 ---------- 6,746,611 ---------- ----------------------------------------------------------- INFORMATION TECHNOLOGY - 15.8% Communications Equipment - 1.5% UTStarcom, Inc. (a) 19,000 816,240 ---------- Computers & Peripherals - 5.9% Ambit Microsystems Corp. 188,100 515,909 Asustek Computer, Inc. 370,125 998,871 Legend Group Ltd. 3,170,000 1,361,605 Lite-On Technology Corp. 211,120 239,670 ---------- 3,116,055 ---------- Electronic Equipment & Instruments - 1.4% Hon Hai Precision Industry Co., Ltd. 41,868 173,171 Synnex Technology International Corp. 385,000 581,622 ---------- 754,793 ---------- Semiconductor Equipment & Products - 7.0% Realtek Semiconductor Corp. 310,800 674,661 Taiwan Semiconductor Manufacturing Co., Ltd., Class H (a) 1,541,296 3,029,241 ---------- 3,703,902 ----------
See notes to investment portfolio. 4 Investment Portfolio (continued) August 31, 2003
Common Stocks (continued) Shares Value ---------------------------------------------------------- MATERIALS - 1.3% Construction Material - 0.0% China Resources Cement Holding Ltd. (a) 65,200 $ 20,272 ----------- Metals & Mining - 1.3% Yanzhou Coal Mining Co., Ltd., Class H 1,126,000 660,506 ----------- ---------------------------------------------------------- TELECOMMUNICATION SERVICES - 5.1% Wireless Telecommunication Services - 5.1% China Mobile Ltd. 842,000 2,164,580 China Unicom Ltd. 806,000 568,388 ----------- 2,732,968 ----------- ---------------------------------------------------------- UTILITIES - 14.9% Electric Utilities - 10.1% Beijing Datang Power Generation Co., Ltd., Class H 4,946,000 2,679,341 Huaneng Power International, Inc., Class H 1,948,000 2,672,513 ----------- 5,351,854 ----------- Gas Utilities - 4.8% Hong Kong & China Gas Co., Ltd. 1,718,304 2,313,323 Wah Sang Gas Holdings Ltd. 1,892,000 223,180 ----------- 2,536,503 ----------- Total Common Stocks (cost of $40,656,410) 49,922,898 -----------
Short-Term Obligation - 4.7% Par Value --------------------------------------------------------- Repurchase agreement with State Street Bank & Trust Co., dated 08/29/03, due 09/02/03 at 0.940%, collateralized by a U.S. Treasury Bonds maturing 08/15/19, market value $2,554,833 (repurchase proceeds $2,502,261) (cost of $2,502,000) $2,502,000 $ 2,502,000 ----------- Total Investments - 98.7% (cost of $43,158,410) (b) 52,424,898 ----------- Other Assets & Liabilities, Net - 1.3% 692,316 --------------------------------------------------------- Net Assets - 100.0% $53,117,214 -----------
Notes to Investment Portfolio: (a) Non-income producing. (b) Cost for both financial statement and federal income tax purposes is the same.
Summary of Securities by % of Total Country Value Investments ------------------------------------------------ China $23,459,222 44.8% Hong Kong 16,685,056 31.8 Taiwan 8,488,732 16.2 United States 3,791,888 7.2 ----------- ----- $52,424,898 100.0% ----------- -----
Certain securities are listed by country of underlying exposure but may trade predominately on other exchanges. See notes to financial statements. 5 Statement of Assets and Liabilities August 31, 2003 Assets: Investments, at cost $ 43,158,410 ------------ Investments, at value $ 52,424,898 Cash 399 Foreign currency (cost of $352,622) 355,945 Receivable for: Fund shares sold 505,445 Dividends 89,665 Interest 196 Deferred Trustees' compensation plan 3,750 ------------ Total Assets 53,380,298 ------------ Liabilities: Payable for: Fund shares repurchased 112,896 Management fee 48,455 Administration fee 10,534 Transfer agent fee 14,369 Pricing and bookkeeping fees 1,923 Trustees' fees 414 Audit fee 28,100 Distribution and services fees 15,382 Expense reimbursement due to Advisor/Administrator 4,871 Deferred Trustees' fee 3,750 Other liabilities 22,390 ------------ Total Liabilities 263,084 ------------ Net Assets $ 53,117,214 ------------ Composition of Net Assets: Paid-in capital $ 81,959,681 Undistributed net investment income 246,209 Accumulated net realized loss (38,358,746) Net unrealized appreciation on: Investments 9,266,488 Foreign currency translations 3,582 ------------ Net Assets $ 53,117,214 ------------ Class A: Net assets $ 42,685,284 Shares outstanding 2,386,837 ------------ Net asset value per share $ 17.88 (a) ------------ Maximum offering price per share ($17.88/0.9425) $ 18.97 (b) ------------ Class B: Net assets $ 5,120,600 Shares outstanding 292,361 ------------ Net asset value and offering price per share $ 17.51 (a) ------------ Class C: Net assets $ 3,315,613 Shares outstanding 186,657 ------------ Net asset value and offering price per share $ 17.76 (a) ------------ Class Z: Net assets $ 1,995,717 Shares outstanding 107,847 ------------ Net asset value and offering price per share $ 18.51(c) ------------
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced. (c) Redemption price per share is equal to net asset value less any applicable redemption fee. Statement of Operations For the Year Ended August 31, 2003 Investment Income: Dividends $ 1,210,310 Interest 13,513 ----------- Total Investment Income (net of foreign taxes withheld of $13,470) 1,223,823 ----------- Expenses: Management fee 448,408 Administration fee 97,480 Distribution fee: Class B 28,048 Class C 14,925 Service fee: Class A 82,043 Class B 9,354 Class C 4,975 Transfer agent fee 158,761 Pricing and bookkeeping fees 11,958 Trustees' fee 7,322 Custody fee 38,219 Registration fee 67,253 Other expenses 57,380 ----------- Total Operating Expenses 1,026,126 Fees and expenses waived or reimbursed by Advisor/Administrator (145,220) Custody earnings credit (2) ----------- Net Operating Expenses 880,904 Interest expense 377 ----------- Net Expenses 881,281 ----------- Net Investment Income 342,542 ----------- Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency: Net realized gain (loss) on: Investments 1,823,458 Foreign currency transactions (22,186) ----------- Net realized gain 1,801,272 ----------- Net change in unrealized appreciation/ depreciation on: Investments 8,350,419 Foreign currency translations 5,327 ----------- Net change in unrealized appreciation/ depreciation 8,355,746 ----------- Net Gain 10,157,018 ----------- Net Increase in Net Assets from Operations $10,499,560 -----------
See notes to financial statements. 6 Statement of Changes in Net Assets
Year Ended August 31, Increase (Decrease) -------------------------- in Net Assets: 2003 2002 - --------------------------- Operations: Net investment income $ 342,542 $ 237,736 Net realized gain (loss) on investments and foreign currency transactions 1,801,272 (1,654,609) Net change in unrealized appreciation/depreciation on investments and foreign currency translations 8,355,746 506,034 ------------ ------------ Net Increase (Decrease) from Operations 10,499,560 (910,839) ------------ ------------ Distributions Declared to Shareholders: From net investment income: Class A (211,935) (373,665) Class B -- (11,000) Class C -- (3,498) Class Z (4,185) (2,195) ------------ ------------ Total Distributions Declared to Shareholders (216,120) (390,358) ------------ ------------ Share Transactions: Class A: Subscriptions 42,825,644 39,177,370 Distributions reinvested 167,826 272,269 Redemptions (41,932,214) (42,820,843) ------------ ------------ Net Increase (Decrease) 1,061,256 (3,371,204) ------------ ------------ Class B: Subscriptions 2,556,672 1,634,125 Distributions reinvested -- 9,061 Redemptions (2,218,990) (1,785,215) ------------ ------------ Net Increase (Decrease) 337,682 (142,029) ------------ ------------ Class C: Subscriptions 4,366,827 8,269,957 Distributions reinvested -- 2,795 Redemptions (3,463,081) (7,745,504) ------------ ------------ Net Increase 903,746 527,248 ------------ ------------ Class Z: Subscriptions 5,991,931 2,966,512 Distributions reinvested 2,201 2,195 Redemptions (4,470,220) (2,979,944) Redemption fees 5,884 -- ------------ ------------ Net Increase (Decrease) 1,529,796 (11,237) ------------ ------------ Net Increase (Decrease) from Share Transactions 3,832,480 (2,997,222) ------------ ------------ Total Increase (Decrease) in Net Assets 14,115,920 (4,298,419)
Year Ended August 31, ------------------------ 2003 2002 -------------------------------------------------------- Net Assets: Beginning of period $39,001,294 $43,299,713 ----------- ----------- End of period (undistributed net investment income of $246,209 and $141,784, respectively) $53,117,214 $39,001,294 ----------- ----------- Changes in Shares: Class A: Subscriptions 3,071,717 2,614,029 Issued for distributions reinvested 11,869 17,466 Redemptions (3,019,611) (2,833,877) ----------- ----------- Net Increase (Decrease) 63,975 (202,382) ----------- ----------- Class B: Subscriptions 181,670 108,551 Issued for distributions reinvested -- 589 Redemptions (163,897) (118,333) ----------- ----------- Net Increase (Decrease) 17,773 (9,193) ----------- ----------- Class C: Subscriptions 311,576 535,143 Issued for distributions reinvested -- 179 Redemptions (252,340) (498,990) ----------- ----------- Net Increase 59,236 36,332 ----------- ----------- Class Z: Subscriptions 415,808 189,434 Issued for distributions reinvested 155 140 Redemptions (317,706) (189,630) ----------- ----------- Net Increase (Decrease) 98,257 (56) ----------- -----------
See notes to financial statements. 7 Notes to Financial Statements August 31, 2003 Note 1. Accounting Policies Organization: Columbia Newport Greater China Fund (the "Fund") (formerly Liberty Newport Greater China Fund), a series of Columbia Funds Trust II (the "Trust") (formerly Liberty Funds Trust II), is a non-diversified portfolio of a Massachusetts business trust, registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund's investment goal is to seek long-term growth of capital. The Fund may issue an unlimited number of shares. The Fund offers four classes of shares: Class A, Class B, Class C and Class Z. Class A shares are sold with a front-end sales charge. A 1.00% contingent deferred sales charge ("CDSC") is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a CDSC. Class B shares will convert to Class A shares in three, four or eight years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a CDSC on redemptions made 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. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 and Transactions: Equity securities generally are valued at the last sale price reported at the close of the principal securities exchanges on which the investments are made or, in the case of unlisted or listed securities for which there were no sales during the day, at the current quoted bid price. In certain countries, the Fund may hold foreign designated shares. If the 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. Forward currency contracts are valued based on the weighted value of exchange-traded contracts with similar durations. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. 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 also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such 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 value of such securities and such exchange rates occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Trustees. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. Determination of Class Net Asset Values: All income, expenses (other than class specific fees), and realized and unrealized gains (losses) are allocated to each class proportionately on a daily basis, based on net assets, for purposes of determining the net asset value of each class. 8 Notes to Financial Statements (continued) August 31, 2003 Federal Income Taxes: Consistent with the Fund's policy to qualify as a regulated investment company and to distribute all of its taxable income, no federal income tax has been accrued. Distributions to Shareholders: Distributions to shareholders are recorded on the ex-date. Foreign Currency Translations and Transactions: The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities of the Fund are translated into U.S. dollars at the daily rates of exchange on the valuation date. Purchases and sales of investment securities, dividend and interest income and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions includes gains (losses) arising from the fluctuations 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 and interest income and foreign withholding taxes. 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. Forward Currency Contracts: The Fund may enter into forward currency contracts to purchase or sell foreign currencies at predetermined exchange rates in connection with the settlement of purchases and sales of securities. The Fund may also enter into forward currency contracts to hedge certain other foreign currency denominated assets. The contracts are used to minimize the exposure to foreign exchange rate fluctuations during the period between trade and settlement date of the contracts. All contracts are marked-to-market daily, resulting in unrealized gains (losses) which become realized at the time the forward currency contracts are closed or mature. Realized and unrealized gains (losses) arising from such transactions are included in net realized and unrealized gains (losses) on foreign currency transactions. Forward currency contracts do not eliminate fluctuations in the prices of the Fund's portfolio securities. While the maximum potential loss from such contracts is the aggregate face value in U.S. dollars at the time the contract was opened, exposure is typically limited to the change in value of the contract (in U.S. dollars) over the period it remains open. Risks may also arise if counterparties fail to perform their obligations under the contracts. Redemption Fees: Effective February 10, 2003, the Fund began imposing a 2% redemption fee to shareholders of Class Z shares who redeem shares held for 60 days or less. For the period February 10, 2003 to August 31, 2003, the redemption fee for Class Z shares amounted to $5,884. This amount, which is retained by the Fund, is accounted for as an addition to paid in capital. For the period February 10, 2003 through October 8, 2003, redemption fees were recorded as a component of paid in capital on Class Z. Effective October 9, 2003, redemption fees are allocated to paid in capital of each class proportionately for purposes of determining the net asset value of each class. Other: 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. Where a high level of uncertainty as to collection exists, income on securities is recorded net of all tax withholdings with any rebates recorded when received. The Fund's custodian takes possession through the federal book-entry system of securities collateralizing repurchase agreements. Collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund. The Fund may experience costs and delays in liquidating the collateral if the issuer defaults or enters into bankruptcy. 9 Notes to Financial Statements (continued) August 31, 2003 Note 2. Federal Tax Information Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to capital loss carryforwards and non- deductible expenses. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended August 31, 2003, permanent items identified and reclassified among the components of net assets are as follows:
Undistributed Accumulated Net Investment Net Realized Paid-In Income Loss Capital -------------- ------------ ------- $(21,997) $22,186 $(189)
Net investment income, net realized gains (losses) and net assets were not affected by this reclassification. The tax character of distributions paid during the year was as follows:
Year Ended August 31, --------------------- 2003 2002 - -------- -------- Ordinary income $216,120 $390,358
As of August 31, 2003, the components of distributable earnings on a tax basis were as follows:
Undistributed Undistributed Ordinary Long-Term Unrealized Income Capital Gains Appreciation* ------------- ------------- ------------- $251,178 $-- $9,270,070
* The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the realization for tax purposes of unrealized gains on certain forward foreign currency contracts. The following capital loss carryforwards are 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 $32,607,119 2008 703,958 2010 5,047,669 ----------- $38,358,746 -----------
Expired Capital loss carryforward, if any, are recorded as a reduction of paid-in capital. Note 3. Fees and Compensation Paid to Affiliates On April 1, 2003, Newport Fund Management, Inc., the investment advisor to the Fund and Colonial Management Associates Inc., the administrator to the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly known as Columbia Management Co., an indirect, wholly-owned subsidiary of FleetBoston Financial Corporation. At the time of the merger, Columbia assumed the obligations of Newport Fund Management and Colonial with respect to the Fund. The merger did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. Management Fee: Columbia is the investment advisor of the Fund and receives a monthly fee equal to 1.15% annually of the Fund's average daily net assets. At a special meeting held on October 8, 2003, the Board of Trustees approved a new management fee structure to go into effect on November 1, 2003. Under the new structure, Columbia will receive a monthly fee based on the Fund's average daily net assets as follows:
Annual Average Daily Net Assets Fee Rate ------------------------ -------- First $1 billion 0.95% Next $1 billion to $1.5 billion 0.90% Over $1.5 billion 0.85%
Administration Fee: Columbia also provides accounting and other services for a monthly fee equal to 0.25% annually of the Fund's average daily net assets. At a special meeting held on October 8, 2003, the Board of Trustees eliminated the administration fee effective November 1, 2003. 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 10 Notes to Financial Statements (continued) August 31, 2003 those functions to State Street Bank and Trust Company ("State Street"). Columbia pays fees 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 are more than $50 million, a monthly fee equal to the average daily net assets of the Fund for that month multiplied by a fee rate that is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs for pricing services. Transfer Agent Fee: Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services for a monthly fee equal to 0.06% annually of the Fund's average daily net assets plus charges based on the number of shareholder accounts and transactions. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. Effective October 13, 2003, Liberty Funds Services, Inc. changed its name to Columbia Funds Services, Inc. At a special meeting held on October 8, 2003, the Board of Directors approved the change of transfer agent fees structure of the Fund. Effective November 1, 2003, the Fund will be charged an annual $28.00 charge per open account for the transfer agent fees. Underwriting Discounts, Service and Distribution Fees: Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the Fund's principal underwriter. Effective October 13, 2003, Liberty Funds Distributor, Inc. changed its name to Columbia Funds Distributor, Inc. For the year ended August 31, 2003, the Fund has been advised that the Distributor retained net underwriting discounts of $15,755 on sales of the Fund's Class A shares and received CDSC of $721, $13,378 and $1,772 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan"), which requires the payment of a monthly service fee to the Distributor equal to 0.25% annually of the average daily net assets attributable to Class A, Class B and Class C shares. The Plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.75% annually of the average daily net assets attributable to Class B and Class C shares only. The 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: Columbia has voluntarily agreed, until further notice, to waive fees and bear certain Fund expenses to the extent that total expenses (exclusive of service and distribution fees, brokerage commissions, interest, taxes and extraordinary expenses, if any) will not exceed 1.90% annually of the Fund's average daily net assets. Other: The Fund pays no compensation to its officers, all of whom are employees of the Columbia or any of their affiliates. The Fund's Independent 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. The Fund has an agreement with its custodian bank under which $2 of custody fees were reduced by balance credits for the year ended August 31, 2003. 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. Note 4. Portfolio Information Investment Activity: For the year ended August 31, 2003, purchases and sales of investments, other than short-term obligations, were $14,204,163 and $12,436,240, respectively. Unrealized appreciation (depreciation) at August 31, 2003, for federal income tax purposes, was: Gross unrealized appreciation $14,681,152 Gross unrealized depreciation (5,414,664) ----------- Net unrealized appreciation $ 9,266,488 -----------
11 Notes to Financial Statements (continued) August 31, 2003 Other: There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, concentration of investments in a single region or country may result in greater volatility. The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. Note 5. Line of Credit The Fund and other affiliated funds participate in a $350,000,000 credit facility which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to the Fund based on its borrowings. In addition, the Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. Prior to April 26, 2003, the Fund participated in a separate credit agreement with similar terms to its existing agreement. For the year ended August 31, 2003, the average daily loan balance outstanding on days where borrowings existed was $1,000,000 at a weighted average interest rate of 2.24%. 12 Financial Highlights Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, ---------------------------------------------------- Class A Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 ----------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 14.29 $ 14.91 $ 19.98 $ 13.94 $ 6.34 ------- -------- --------- ------- -------- Income from Investment Operations: Net investment income (b) 0.14 0.10 0.12 0.05 0.10 Net realized and unrealized gain (loss) on investments and foreign currency 3.53 (0.57) (5.19) 5.99 7.58 ------- -------- --------- ------- -------- Total from Investment Operations 3.67 (0.47) (5.07) 6.04 7.68 ------- -------- --------- ------- -------- Less Distributions Declared to Shareholders: From net investment income (0.08) (0.15) -- -- (0.08) ------- -------- --------- ------- -------- Net Asset Value, End of Period $ 17.88 $ 14.29 $ 14.91 $ 19.98 $ 13.94 ------- -------- --------- ------- -------- Total return (c)(d) 25.84% (3.22)% (25.38)% 43.33% 121.59% ------- -------- --------- ------- -------- Ratios to Average Net Assets: Operating expenses (e) 2.15% 2.15% 2.15% 2.15% 2.15% Interest expense --%(f) --%(f) --% --% --% Expenses (e) 2.15% 2.15% 2.15% 2.15% 2.15% Net investment income (e) 0.97% 0.65% 0.68% 0.26% 0.92% Waiver/reimbursement 0.37% 0.29% 0.21% 0.10% 0.30% Portfolio turnover rate 33% 16% 14% 28% 20% Net assets, end of period (000's) $42,685 $ 33,201 $ 37,652 $64,722 $ 54,623
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (e) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f) Rounds to less than 0.01%. 13 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, ---------------------------------------------------- Class B Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 ----------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 14.02 $ 14.63 $ 19.75 $ 13.88 $ 6.34 ------- -------- --------- -------- -------- Income from Investment Operations: Net investment income (loss) (b) 0.04 (0.02) (0.01) (0.09) 0.02 Net realized and unrealized gain (loss) on investments and foreign currency 3.45 (0.55) (5.11) 5.96 7.52 ------- -------- --------- -------- -------- Total from Investment Operations 3.49 (0.57) (5.12) 5.87 7.54 ------- -------- --------- -------- -------- Less Distributions Declared to Shareholders: From net investment income -- (0.04) -- -- -- ------- -------- --------- -------- -------- Net Asset Value, End of Period $ 17.51 $ 14.02 $ 14.63 $ 19.75 $ 13.88 ------- -------- --------- -------- -------- Total return (c)(d) 24.89% (3.93)% (25.92)% 42.29% 118.93% ------- -------- --------- -------- -------- Ratios to Average Net Assets: Operating expenses (e) 2.90% 2.90% 2.90% 2.90% 2.90% Interest expense --%(f) --%(f) --% --% --% Expenses (e) 2.90% 2.90% 2.90% 2.90% 2.90% Net investment income (loss) (e) 0.30% (0.10)% (0.07)% (0.49)% 0.17% Waiver/reimbursement 0.37% 0.29% 0.21% 0.10% 0.30% Portfolio turnover rate 33% 16% 14% 28% 20% Net assets, end of period (000's) $ 5,121 $ 3,850 $ 4,151 $ 6,335 $ 3,423
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (d) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (e) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f) Rounds to less than 0.01%. 14 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, ---------------------------------------------------- Class C Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 ----------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 14.22 $ 14.84 $ 20.03 $ 14.10 $ 6.32 ------- -------- --------- -------- -------- Income from Investment Operations: Net investment income (loss) (b) 0.05 (0.02) (0.01) (0.09) 0.02 Net realized and unrealized gain (loss) on investments and foreign currency 3.49 (0.56) (5.18) 6.02 7.76 ------- -------- --------- -------- -------- Total from Investment Operations 3.54 (0.58) (5.19) 5.93 7.78 ------- -------- --------- -------- -------- Less Distributions Declared to Shareholders: From net investment income -- (0.04) -- -- -- ------- -------- --------- -------- -------- Net Asset Value, End of Period $ 17.76 $ 14.22 $ 14.84 $ 20.03 $ 14.10 ------- -------- --------- -------- -------- Total return (c)(d) 24.89% (3.94)% (25.91)% 42.06% 123.10% ------- -------- --------- -------- -------- Ratios to Average Net Assets: Operating expenses (e) 2.90% 2.90% 2.90% 2.90% 2.90% Interest expense --% (f) --%(f) --% --% --% Expenses (e) 2.90% 2.90% 2.90% 2.90% 2.90% Net investment income (loss) (e) 0.35% (0.10)% (0.07)% (0.49)% 0.17% Waiver/reimbursement 0.37% 0.29% 0.21% 0.10% 0.30% Portfolio turnover rate 33% 16% 14% 28% 20% Net assets, end of period (000's) $ 3,316 $ 1,812 $ 1,352 $ 1,296 $ 774
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (d) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (e) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f) Rounds to less than 0.01%. 15 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, --------------------------------------------------------- Class Z Shares 2003 (a) 2002 (a) 2001 (a) 2000 (a) 1999 ------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $ 14.41 $ 15.05 $ 20.11 $ 14.01 $ 6.38 --------- --------- --------- --------- --------- Income from Investment Operations: Net investment income (b) 0.11 0.14 0.16 0.09 0.13 Net realized and unrealized gain (loss) on investments and foreign currency 4.10 (0.59) (5.22) 6.01 7.61 --------- --------- --------- --------- --------- Total from Investment Operations 4.21 (0.45) (5.06) 6.10 7.74 --------- --------- --------- --------- --------- Less Distributions Declared to Shareholders: From net investment income (0.12) (0.19) -- -- (0.11) --------- --------- --------- --------- --------- Redemption fees: Redemption fees added to paid in capital (b) 0.01 N/A N/A N/A N/A --------- --------- --------- --------- --------- Net Asset Value, End of Period $ 18.51 $ 14.41 $ 15.05 $ 20.11 $ 14.01 --------- --------- --------- --------- --------- Total return (c)(d) 29.51% (3.10)% (25.16)% 43.54% 121.80% --------- --------- --------- --------- --------- Ratios to Average Net Assets: Operating expenses (e) 1.90% 1.90% 1.90% 1.90% 1.90% Interest expense --%(f) --%(f) --% --% --% Expenses (e) 1.90% 1.90% 1.90% 1.90% 1.90% Net investment income (e) 0.70% 0.90% 0.93% 0.51% 1.17% Waiver/reimbursement 0.37% 0.29% 0.21% 0.10% 0.30% Portfolio turnover rate 33% 16% 14% 28% 20% Net assets, end of period (000's) $ 1,996 $ 138 $ 145 $ 164 $ 112
(a) For the years ended August 31, 2003, 2002, 2001 and 2000, the Fund was audited by Ernst & Young LLP. The previous year was audited by other auditors. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced. (e) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f) Rounds to less than 0.01%. 16 Report of Ernst & Young LLP, Independent Auditors To the Trustees of Columbia Funds Trust II and the Shareholders of Columbia Newport Greater China Fund We have audited the accompanying statement of assets and liabilities of Columbia Newport Greater China Fund (formerly, Liberty Newport Greater China Fund) (one of the portfolios constituting the Columbia Funds Trust II (formerly, Liberty Funds Trust II), the "Trust"), including the Investment Portfolio, as of August 31, 2003, and the related statement of operations for the year ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended August 31, 1999 were audited by other auditors whose report dated October 12, 1999 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2002, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Columbia Newport Greater China Fund of Columbia Funds Trust II at August 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Boston, Massachusetts October 17, 2003 17 Unaudited Information Federal Income Tax Information Foreign taxes paid during the fiscal year ended August 31, 2003, amounting to $13,470 ($0.01 per share) are expected to be passed through to shareholders as 100% allowable foreign tax credits on Form 1099-DIV. Gross income derived from sources within foreign countries amounted to $1,222,602 ($0.41 per share) for the fiscal year ended August 31, 2003. 18 Trustees Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth had been directors of 15 Columbia Funds and 12 funds in the CMG Fund Trust. Also effective October 8, 2003, the incumbent trustees of the Fund were elected as directors of the 15 Columbia Funds and as trustees of the 12 funds in the CMG Fund Trust. The new combined Board of Trustees of the Fund now oversees 124 funds in the Columbia Funds Complex (including the former Liberty Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of those trustees also serve on the Boards of other funds in the Columbia Funds Complex. The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and officers of the Funds in the Columbia Funds Complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex. The Statement of Additional Information (SAI) contains additional information about the Trustees and is available without charge upon request by calling the fund's distributor at 800-345-6611.
Number of Year First Portfolios in Position Elected or Columbia Funds with Appointed Principal Occupation(s) Complex Overseen Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee -------------------------------------------------------------------------------------------------------------- Disinterested Trustees Douglas A. Hacker (Age 48) Trustee 1996 Executive Vice President - Strategy of 124 P.O. Box 66100 United Airlines (airline) since Chicago, IL 60666 December, 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001 to December, 2002; Executive Vice President and Chief Financial Officer of United Airlines from March, 1993 to September, 2001; Senior Vice President and Chief Financial Officer of UAL, Inc. prior thereto). Janet Langford Kelly (Age 45) Trustee 1996 Chief Administrative Officer and Senior 124 3100 West Beaver Road Vice President, Kmart Holding Troy, MI 48084-3163 Corporation since September, 2003 (formerly Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January, 1995 to September, 1999). Richard W. Lowry (Age 67) Trustee 1995 Private Investor since August, 1987 126/3/ 10701 Charleston Drive (formerly Chairman and Chief Executive Vero Beach, FL 32963 Officer, U.S. Plywood Corporation (building products manufacturer)). Charles R. Nelson (Age 61) Trustee 1981 Professor of Economics, University of 124 Department of Economics Washington, since January, 1976; Ford University of Washington and Louisa Van Voorhis Professor of Seattle, WA 98195 Political Economy, University of Washington, since September, 1993; Director, Institute for Economic Research, University of Washington, since September, 2001; Adjunct Professor of Statistics, University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. John J. Neuhauser (Age 60) Trustee 1985 Academic Vice President and Dean of 127/3,4/ 84 College Road Faculties since August, 1999, Boston Chestnut Hill, MA 02467-3838 College (formerly Dean, Boston College School of Management from September, 1977 to September, 1999. Patrick J. Simpson (Age 58) Trustee 2000 Partner, Perkins Coie L.L.P. (formerly 124 1211 S.W. 5th Avenue Partner, Stoel Rives Boley Jones & Suite 1500 Grey). Portland, OR 97204 Thomas E. Stitzel (Age 67) Trustee 1998 Business Consultant since 1999 124 2208 Tawny Woods Place (formerly Professor of Finance from Boise, ID 83706 1975 to 1999 and Dean from 1977 to 1991, College of Business, Boise State University); Chartered Financial Analyst.
Other Principal Occupation(s) Directorships During Past Five Years Held --------------------------------------------------------------------------- Executive Vice President - Strategy of None United Airlines (airline) since December, 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001 to December, 2002; Executive Vice President and Chief Financial Officer of United Airlines from March, 1993 to September, 2001; Senior Vice President and Chief Financial Officer of UAL, Inc. prior thereto). Chief Administrative Officer and Senior None Vice President, Kmart Holding Corporation since September, 2003 (formerly Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January, 1995 to September, 1999). Private Investor since August, 1987 None (formerly Chairman and Chief Executive Officer, U.S. Plywood Corporation (building products manufacturer)). Professor of Economics, University of None Washington, since January, 1976; Ford and Louisa Van Voorhis Professor of Political Economy, University of Washington, since September, 1993; Director, Institute for Economic Research, University of Washington, since September, 2001; Adjunct Professor of Statistics, University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. Academic Vice President and Dean of Saucony, Inc. (athletic footwear); Faculties since August, 1999, Boston SkillSoft Corp. College (formerly Dean, Boston College (E-Learning) School of Management from September, 1977 to September, 1999. Partner, Perkins Coie L.L.P. (formerly None Partner, Stoel Rives Boley Jones & Grey). Business Consultant since 1999 None (formerly Professor of Finance from 1975 to 1999 and Dean from 1977 to 1991, College of Business, Boise State University); Chartered Financial Analyst.
19 Trustees (continued)
Number of Year First Portfolios in Position Elected or Columbia Funds with Appointed Principal Occupation(s) Complex Overseen Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee --------------------------------------------------------------------------------------------------------------- Disinterested Trustees Thomas C. Theobald (Age 66) Trustee 1996 Managing Director, William Blair 124 27 West Monroe Street, Capital Partners (private equity Suite 3500 investing) since September, 1994 Chicago, IL 60606 (formerly Chief Executive Officer and Chairman of the Board of Directors, Continental Bank Corporation prior thereto). Anne-Lee Verville (Age 58) Trustee 1998 Author and speaker on educational 125/4/ 359 Stickney Hill Road systems needs (formerly General Hopkinton, NH 03229 Manager, Global Education Industry from 1994 to 1997, and President, Applications Solutions Division from 1991 to 1994, IBM Corporation (global education and global applications)). Richard L. Woolworth (Age 62) Trustee 1991 Chairman and Chief Executive Officer, 124 100 S.W. Market Street The Regence Group (healthcare #1500 maintenance organization) (formerly Portland, OR 97207 Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company). Interested Trustees William E. Mayer/2/ (Age 63) Trustee 1994 Managing Partner, Park Avenue Equity 126/3/ 399 Park Avenue Partners (private equity) since Suite 3204 February, 1999 (formerly Founding New York, NY 10022 Partner, Development Capital LLC from November 1996 to February, 1999; Dean and Professor, College of Business and Management, University of Maryland from October, 1992 to November, 1996). Joseph R. Palombo/2/ (Age 50) Trustee, 2000 Executive Vice President and Chief 125/5/ One Financial Center Chairman Operating Officer of Columbia Boston, MA 02111 of the Management Group, Inc. (Columbia Board Management) since December, 2001 and and Director, Executive Vice President and President Chief Operating Officer of the Advisor since April, 2003 (formerly Chief Operations Officer of Mutual Funds, Liberty Financial Companies, Inc. from August, 2000 to November, 2001; Executive Vice President of Stein Roe & Farnham Incorporated (Stein Roe) from April, 1999 to April, 2003; Director of Colonial Management Associates, Inc. (Colonial) from April, 1999 to April, 2003; Director of Stein Roe from September, 2000 to April, 2003) President of Columbia Funds and Galaxy Funds since February, 2003 (formerly Vice President from September 2002 to February 2003); Manager of Stein Roe Floating Rate Limited Liability Company since October, 2000; (formerly Vice President of the Columbia Funds from April, 1999 to August, 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December, 1993 to March, 1999).
Other Principal Occupation(s) Directorships During Past Five Years Held ------------------------------------------------------------------------ Managing Director, William Blair Anixter International (network Capital Partners (private equity support equipment distributor), investing) since September, 1994 Jones Lang LaSalle (real estate (formerly Chief Executive Officer and management services) and Chairman of the Board of Directors, MONY Group (life insurance). Continental Bank Corporation prior thereto). Author and speaker on educational Chairman of the Board of systems needs (formerly General Directors, Enesco Group, Inc. Manager, Global Education Industry from (designer, importer and 1994 to 1997, and President, distributor of giftware and Applications Solutions Division from collectibles). 1991 to 1994, IBM Corporation (global education and global applications)). Chairman and Chief Executive Officer, NW Natural, a natural gas The Regence Group (healthcare service provider maintenance organization) (formerly Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company). Managing Partner, Park Avenue Equity Lee Enterprises (print media), Partners (private equity) since WR Hambrecht + Co. (financial February, 1999 (formerly Founding service provider) and First Partner, Development Capital LLC from Health (healthcare). November 1996 to February, 1999; Dean and Professor, College of Business and Management, University of Maryland from October, 1992 to November, 1996). Executive Vice President and Chief None Operating Officer of Columbia Management Group, Inc. (Columbia Management) since December, 2001 and Director, Executive Vice President and Chief Operating Officer of the Advisor since April, 2003 (formerly Chief Operations Officer of Mutual Funds, Liberty Financial Companies, Inc. from August, 2000 to November, 2001; Executive Vice President of Stein Roe & Farnham Incorporated (Stein Roe) from April, 1999 to April, 2003; Director of Colonial Management Associates, Inc. (Colonial) from April, 1999 to April, 2003; Director of Stein Roe from September, 2000 to April, 2003) President of Columbia Funds and Galaxy Funds since February, 2003 (formerly Vice President from September 2002 to February 2003); Manager of Stein Roe Floating Rate Limited Liability Company since October, 2000; (formerly Vice President of the Columbia Funds from April, 1999 to August, 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December, 1993 to March, 1999).
/1/ In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Funds (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds Complex). /2/ Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. Mr. Palombo is an interested person as an employee of the Advisor. /3/ Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. /4/ Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. /5/ Mr. Palombo also serves as an interested director of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. 20 Officers and Transfer Agent
Year First Elected or Position with Appointed Name, Address and Age Columbia Funds to Office Principal Occupation(s) During Past Five Years ------------------------------------------------------------------------------------------------------------ Officers Vicki L. Benjamin (Age 42) Chief Accounting 2001 Controller of the Columbia Funds and of the One Financial Center Officer and Columbia All-Star Funds since May, 2002; Chief Boston, MA 02111 Controller Accounting Officer of the Columbia Funds and Columbia All-Star Funds since June, 2001; Controller and Chief Accounting Officer of the Galaxy Funds since September, 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May, 1998 to April, 2001; Audit Manager from July, 1994 to June, 1997; Senior Audit Manager from July, 1997 to May, 1998, Coopers & Lybrand, LLP). J. Kevin Connaughton (Age 39) Treasurer 2000 Treasurer of the Columbia Funds and of the One Financial Center Liberty All-Star Funds since December, 2000; Vice Boston, MA 02111 President of the Advisor since April, 2003 (formerly Controller of the Liberty Funds and of the Liberty All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December, 2002 (formerly Vice President of Colonial from February, 1998 to October, 2000 and Senior Tax Manager, Coopers & Lybrand, LLP from April, 1996 to January, 1998).
Important Information About This Report The Transfer Agent for Columbia Newport Greater China Fund is: Columbia Funds Services, Inc. P.O. Box 8081 Boston, MA 02266-8081 Please note our new name as of October 13, 2003. 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. Annual Report: Columbia Newport Greater China Fund Columbia Newport Greater China Fund Annual Report, August 31, 2003 [LOGO](R) ColumbiaFunds A Member of Columbia Management Group (c)2003 Columbia Funds Distributor, Inc. One Financial Center, Boston, MA 02111-2621 800.426.3750 WWW.columbiafunds.com 736-02/214P-0802 (10/03) 03/2893 PRSRT STD U.S. Postage PAID Holliston, MA Permit NO. 20 Item 2. Code of Ethics. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. Item 3. Audit Committee Financial Expert. The registrant's Board of Trustees has determined that Douglas A. Hacker and Anne-Lee Verville, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker and Ms. Verville are each independent trustees, as defined in paragraph (a)(2) of this item's instructions. Item 4. Principal Accountant Fees and Services. Not applicable at this time. Item 5. Audit Committee of Listed Registrants. Not applicable at this time. Item 6. Reserved. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Reserved. Item 9. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer, 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 last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (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/ Joseph R. Palombo ------------------------- Joseph R. Palombo, President Date November 7, 2003 ---------------------------------------------- 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/ Joseph R. Palombo -------------------------- Joseph R. Palombo, President Date November 7, 2003 ---------------------------------------------- By (Signature and Title) /s/ J. Kevin Connaughton -------------------------- J. Kevin Connaughton, Treasurer Date November 7, 2003 ----------------------------------------------