-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QeScKgMgEP8ZFT1T9Xq3e434X5xd1tmio1uFf33u/yt8S2rSaP9R3dlx/gAf5FAp mdA7Abz1SMwaEaR85qgS3Q== 0001047469-98-007194.txt : 19980224 0001047469-98-007194.hdr.sgml : 19980224 ACCESSION NUMBER: 0001047469-98-007194 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19980223 EFFECTIVENESS DATE: 19980223 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA SPECIAL FUND INC CENTRAL INDEX KEY: 0000773599 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 002-99207 FILM NUMBER: 98547289 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-04362 FILM NUMBER: 98547290 BUSINESS ADDRESS: STREET 1: 1300 SW SIXTH AVE STREET 2: P O BOX 1350 CITY: PORTLAND STATE: OR ZIP: 97207 BUSINESS PHONE: 5032223600 MAIL ADDRESS: STREET 1: 1300 SW SIXTH AVE STREET 2: P O BOX 1350 CITY: PORTLAND STATE: OR ZIP: 92707 485BPOS 1 485BPOS Reg. Nos. 2-99207/811-4362 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ] Pre-Effective Amendment No. [ ] ------ Post-Effective Amendment No. 13 [ X ] ------ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ] Amendment No. 14 [ X ] ------ (Check appropriate box or boxes.) COLUMBIA SPECIAL FUND, INC. (Exact Name of Registrant as Specified in Charter) 1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (503) 222-3600 J. Jerry Inskeep, Jr. 1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207 (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. It is proposed that this filing will become effective (Check appropriate box) immediately upon filing pursuant to paragraph (b) ------ X on February 23, 1998 pursuant to paragraph (b) ------ 60 days after filing pursuant to paragraph (a) ------ on _______________________ pursuant to paragraph (a) of Rule 485. ------ 75 days after filing pursuant to paragraph (a)(2) ------ on __________ pursuant to paragraph (a)(2) of Rule 485 ------ If appropriate, check the following box: this post-effective amendment designates a new effective date for ------ a previously filed post-effective amendment. Please forward copies of communications to: Robert J. Moorman Stoel Rives LLP 900 SW Fifth Avenue, Suite 2300 Portland, Oregon 97204 -------------------------- Title of Securities Being Issued: Common Stock, par value $.01 per share. 1 COLUMBIA SPECIAL FUND, INC. CROSS-REFERENCE SHEET
Item - ---------------------------------------------------- Location in Part A - INFORMATION REQUIRED IN A PROSPECTUS Prospectus ----------- Item 1. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . Cover Item 2. Synopsis. . . . . . . . . . . . . . . . . . . . . . . . . . "Fund Expenses" Item 3. Condensed Financial Information . . . . . . . . . . . . . . "Financial Highlights" and "Performance" Item 4. General Description of Registrant . . . . . . . . . . . . . "Fund Descriptions" and "Additional Information" Item 5. Management of the Fund. . . . . . . . . . . . . . . . . . . "Fund Management" Item 5A. Management's Discussion of Fund Performance . . . . . . . . Contained in the Annual Report of the Fund Item 6. Capital Stock and Other Securities. . . . . . . . . . . . . "Fund Management"; Distributions and "Taxes"; "Investor Services"; "Fund Descriptions"; and Cover Item 7. Purchase of Securities Being Offered. . . . . . . . . . . . "Investor Services"; "Fund Descriptions" and "Fund Management" Item 8. Redemption or Repurchase. . . . . . . . . . . . . . . . . . "Investor Services" Item 9. Pending Legal Proceedings . . . . . . . . . . . . . . . . . Not applicable Location in State- Part B - INFORMATION REQUIRED IN A STATEMENT ment of Additional OF ADDITIONAL INFORMATION Information ------------------ Item 10. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . Cover Item 11. Table of Contents . . . . . . . . . . . . . . . . . . . . . "Table of Contents" Item 12. General Information and History . . . . . . . . . . . . . . Not applicable Item 13. Investment Objectives and Policies. . . . . . . . . . . . . "Investment Restrictions" and "Additional Information Regarding Certain Investments by the Funds." Additional information is in Prospectus under "Fund Descriptions" and "Additional Information." 2 Item 14. Management of the Fund. . . . . . . . . . . . . . . . . . . "Management" Item 15. Control Persons and Principal Holders of Securities . . . . . . . . . . . . . . . . . . "Management" Item 16. Investment Advisory and Other Services. . . . . . . . . . . "Investment Advisory and Other Fees Paid to Affiliates" and "Custodians." Additional information is in Prospectus under "Fund Management." Item 17. Brokerage Allocation and Other Practices. . . . . . . . . . "Portfolio Transactions" Item 18. Capital Stock and Other Securities. . . . . . . . . . . . . All required information is in Prospectus under "Fund Management." Item 19. Purchase, Redemption and Pricing of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . "Redemptions." Additional information is in Prospectus under "Investor Services." Item 20. Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . "Taxes." Additional information is in Prospectus under Distributions and "Taxes." Item 21. Underwriters. . . . . . . . . . . . . . . . . . . . . . . . "Management" Item 22. Calculation of Performance Data . . . . . . . . . . . . . . "Yield and Performance" Item 23. Financial Statements. . . . . . . . . . . . . . . . . . . . "Accounting Services and Financial Statements"
3 EXPLANATORY NOTE This Registration Statement contains two forms of Prospectus and Statement of Additional Information relating to the Registrant: One form of those documents contains information on both the Registrant (the "Fund") and other investment companies registered under the Securities Act of 1933 to whom the Fund's advisor, Columbia Funds Management Company, provides investment advisory services (the "Joint Prospectus" and "Joint Statement of Additional Information"), and the other form contains information on only the Fund (the "Fund Prospectus" and "Fund Statement of Additional Information"). 4 [LOGO] COLUMBIA FUNDS PROSPECTUS February 23, 1998 COLUMBIA COMMON STOCK FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA GROWTH FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA INTERNATIONAL STOCK FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA SPECIAL FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA SMALL CAP FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA REAL ESTATE EQUITY FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA BALANCED FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA DAILY INCOME COMPANY ---------------------------------------------------- ---------------------------------------------------- COLUMBIA U.S. GOVERNMENT SECURITIES FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA FIXED INCOME SECURITIES FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA MUNICIPAL BOND FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA HIGH YIELD FUND DEAR INVESTOR: We are pleased to present the Columbia Funds prospectus for 1998. Inside, you will find detailed descriptions of each of the Columbia Funds. We encourage you to read the prospectus carefully before investing, since it will provide greater insight to our investment philosophy, fund objectives, and management fees and expenses. As you may know, we are committed to providing our investors with consistent, long-term investment returns while managing risk. And we work hard to keep our expenses low, enabling more of your money to work for you. Investing with Columbia is easy, and everything you need to know about opening an account -- or adding to an existing account -- is included right here. If you have any questions about these materials, please be sure to contact us toll-free at 1-800-547-1707 or at 222-3606 in Portland. One of our Investor Services Representatives will be happy to assist you. Sincerely, [SIG] [SIG] John A. Kemp Thomas L. Thomsen CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF INVESTMENT OFFICER COLUMBIA FUNDS MANAGEMENT COMPANY COLUMBIA FUNDS MANAGEMENT COMPANY
COLUMBIA FUNDS PROSPECTUS ----------------------------------------------------------------- FEBRUARY 23, 1998 C olumbia Funds is a family of 12 mutual funds managed by Columbia Funds Management Company (the "Advisor"). Because the Funds are no-load, you pay no sales charges to invest in them. This Prospectus describes the different investment objectives of each Columbia Fund and provides other information about opening an account and conducting business with the Funds. Please read it carefully before investing and retain it for future reference. A Statement of Additional Information about the Funds dated February 23, 1998 has been filed with the Securities and Exchange Commission and is available along with other related materials on the SEC's Internet Web site (www.sec.gov). For a printed copy of the Statement of Additional Information, please call the Funds at 1-800-547-1707. The Statement of Additional Information is legally a part of (incorporated by reference into) this Prospectus. This Prospectus constitutes an offer to sell securities of a Fund only in those states where the Fund's shares have been registered for sale. A Fund will not accept applications from persons residing in states where the Fund's shares are not registered. Shares of the Funds are not bank deposits or obligations of, or guaranteed or endorsed by, Fleet Financial Group, Inc. or any of its affiliates, the Advisor, or any Fleet bank. Shares of the Funds are not federally insured by, guaranteed by, obligations of or otherwise supported by the U.S. Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other governmental agency. Investment in the Funds involves investment risk, including the possible loss of principal. Like all mutual funds, these securities have not been approved or disapproved by the Securities and Exchange Commission ("SEC"), nor has the SEC or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS FUND EXPENSES..................................................................1 FINANCIAL HIGHLIGHTS...........................................................2 FUND DESCRIPTIONS.............................................................14 Common Stock Fund...........................................................15 Growth Fund.................................................................15 International Stock Fund....................................................16 Special Fund................................................................17 Small Cap Fund..............................................................18 Real Estate Fund............................................................19 Balanced Fund...............................................................21 Money Market Fund...........................................................22 Government Bond Fund........................................................23 Bond Fund...................................................................24 Municipal Bond Fund.........................................................25 High Yield Fund.............................................................28 RISK FACTORS..................................................................31 PERFORMANCE...................................................................35 FUND MANAGEMENT...............................................................37 Investment Advisor..........................................................37 Investment Team.............................................................38 Personal Trading............................................................40 Other Service Providers.....................................................40 Other Information...........................................................40 INVESTOR SERVICES.............................................................41 How to Open a New Account...................................................41 How to Purchase Shares......................................................41 Paying for Your Shares......................................................42 How to Redeem (Sell) Shares.................................................42 Payment of Redemption Proceeds..............................................44 How to Exchange Shares......................................................44 Processing Your Order.......................................................45 Determining Your Share Price................................................45 Investor Inquiries..........................................................46 Account Privileges..........................................................46 IRAs and Retirement Plans...................................................47 Private Management Accounts.................................................47 DISTRIBUTIONS AND TAXES.......................................................48 ADDITIONAL INFORMATION........................................................51 COLUMBIA FUNDS PROSPECTUS ----------------------------------------------------------------- T HE DIFFERENT INVESTMENT OBJECTIVES OF THE COLUMBIA FUNDS ARE SUMMARIZED BELOW. MORE INFORMATION ABOUT THE FUNDS AND THE SERVICES AVAILABLE TO SHAREHOLDERS ARE DESCRIBED IN DETAIL IN THIS PROSPECTUS. -- NO SALES LOAD OR 12B-1 FEES -- MANY MUTUAL FUNDS CHARGE FEES TO COMPENSATE SALES REPRESENTATIVES FOR PROMOTING AND SELLING THEIR FUNDS. THERE ARE FUNDS, HOWEVER, THAT CHARGE NO SALES FEES WHEN YOU BUY SHARES. WITH THESE FUNDS, ALL OF YOUR MONEY, INSTEAD OF JUST A PORTION, IS INVESTED. IN ADDITION, SOME "NO-LOAD" MUTUAL FUNDS CHARGE AN ANNUAL 12B-1 FEE AGAINST FUND ASSETS TO HELP PAY FOR THE SALE OF FUND SHARES. COLUMBIA FUNDS ARE SOLD WITHOUT SALES LOADS OR 12B-1 FEES; ALL THE MONEY YOU PAY TO BUY SHARES IS INVESTED IN THE COLUMBIA FUND YOU SELECT. -- STOCK FUNDS -- COLUMBIA COMMON STOCK FUND, INC. (the "Common Stock Fund") seeks growth of capital and dividend income through a diversified portfolio of common stocks issued primarily by larger, well established companies, many of which have a history of paying dividends. COLUMBIA GROWTH FUND, INC. (the "Growth Fund") seeks long-term capital appreciation by investing primarily in common stocks believed to offer above-average earnings growth. COLUMBIA INTERNATIONAL STOCK FUND, INC. (the "International Stock Fund") seeks long-term capital appreciation by investing primarily in foreign equity securities. Under normal conditions, at least 65% of its total assets will be invested in at least three countries other than the United States. COLUMBIA SPECIAL FUND, INC. (the "Special Fund") seeks capital appreciation by investing in securities that are considered more volatile than the market as a whole (as measured by the S&P 500 Stock Index). The Fund invests primarily in small to mid-sized companies, as well as special situations such as new issues, companies that may benefit from technological or product developments or new management, or companies involved in mergers and buyouts. COLUMBIA SMALL CAP FUND, INC. (the "Small Cap Fund") seeks significant capital appreciation by investing primarily in common stocks of smaller companies ("small cap"). A company is considered small cap if it has a market capitalization of less than $1 billion. Investing in small cap companies may offer greater potential for capital growth, but is generally riskier than investing in larger, more established companies. COLUMBIA REAL ESTATE EQUITY FUND, INC. (the "Real Estate Fund") seeks capital appreciation and above-average current income, with equal emphasis, by investing primarily in equity securities of companies that are principally engaged in the real estate industry, including real estate investment trusts (REITs). COLUMBIA FUNDS PROSPECTUS ----------------------------------------------------------------- -- BALANCED FUND -- COLUMBIA BALANCED FUND, INC. (the "Balanced Fund") is designed to provide high total return (growth of capital and income) by investing in common stocks and fixed income securities. -- MONEY MARKET FUND -- COLUMBIA DAILY INCOME COMPANY (the "Money Market Fund") seeks a high level of current income consistent with the maintenance of liquidity and the preservation of capital by investing in short-term, money market securities. Income is paid, compounded, and reinvested daily. SHARES OF THE MONEY MARKET FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. WHILE THE FUND INTENDS TO MAINTAIN A CONSTANT NET ASSET VALUE OF ONE DOLLAR PER SHARE, THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO. -- BOND FUNDS -- COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC. (the "Government Bond Fund") seeks to provide shareholders with preservation of capital and a high level of income. It invests substantially all of its assets in U.S. Government obligations with a maximum maturity of three years. The Fund's shares are not guaranteed by the U.S. Government. COLUMBIA FIXED INCOME SECURITIES FUND, INC. (the "Bond Fund") seeks a high level of income by investing in a broad range of investment-grade, fixed income securities with intermediate- to long-term maturities. COLUMBIA MUNICIPAL BOND FUND, INC. (the "Municipal Bond Fund") is a tax-exempt bond fund whose goal is to provide a high level of income exempt from federal and State of Oregon income taxes. The Municipal Bond Fund concentrates its investments in obligations of Oregon issuers, to the extent consistent with its other investment policies and restrictions. Therefore, the Municipal Bond Fund's portfolio may be exposed to special risks that would not affect funds that do not concentrate in obligations of one state. See "Columbia Municipal Bond Fund -- Special Investment Considerations." COLUMBIA HIGH YIELD FUND, INC. (the "High Yield Fund") seeks to provide a high level of current income by investing primarily in lower-rated fixed income securities, commonly known as "junk bonds." INVESTMENTS OF THIS TYPE ARE SUBJECT TO GREATER RISK OF LOSS OF PRINCIPAL AND NONPAYMENT OF INTEREST THAN ARE HIGHER-RATED INVESTMENTS. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "FUND DESCRIPTIONS -- RISK FACTORS." ---------------------------------------------------- FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL 222-3606 IN PORTLAND OR 1-800-547-1707 NATIONWIDE. YOU MAY ALSO VISIT THE FUNDS' WEB SITE AT WWW.COLUMBIAFUNDS.COM. FUND EXPENSES ----------------------------------------------------------------- The following information is provided to assist you in understanding the various costs and expenses that an investor in each Fund will bear directly or indirectly. "Annual Fund Operating Expenses" are the expenses incurred by each Fund for 1997. Expenses paid by the Funds include management fees as well as audit, transfer agent, custodian and legal fees and other business operating expenses. For more information about Fund expenses, see "Columbia Funds Prospectus -- No Sales Load or 12b-1 Fees" and "Fund Management." -- SHAREHOLDER TRANSACTION COSTS -- FOR ALL FUNDS SALES LOAD IMPOSED ON PURCHASES...... NONE SALES LOAD IMPOSED ON REINVESTED DIVIDENDS............................ NONE REDEMPTION FEES*..................... NONE EXCHANGE FEES........................ NONE *WIRE REDEMPTIONS MAY BE SUBJECT TO A FEE OF UP TO $5, IN ADDITION TO ANY CHARGES BY YOUR BANK.
- -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - ----------------------------------------------------------------- (AS A PERCENTAGE OF AVERAGE NET ASSETS)
INTERNATIONAL REAL MONEY COMMON GROWTH STOCK SPECIAL SMALL CAP ESTATE BALANCED MARKET STOCK FUND FUND FUND FUND FUND FUND FUND FUND ---------- --------- ------------ --------- --------- --------- ---------- --------- Management fees 0.60% 0.58% 1.00% 0.84% 1.00% 0.75% 0.50% 0.48% 12b-1 fees None None None None None None None None Other expenses* 0.17% 0.13% 0.62% 0.14% 0.46% 0.27% 0.18% 0.15% TOTAL OPERATING EXPENSES 0.77% 0.71% 1.62% 0.98% 1.46% 1.02% 0.68% 0.63% GOVERNMENT HIGH BOND MUNICIPAL YIELD FUND BOND FUND BOND FUND FUND ----------- --------- ---------- --------- Management fees 0.50% 0.50% 0.50% 0.60% 12b-1 fees None None None None Other expenses* 0.37% 0.16% 0.07% 0.40% TOTAL OPERATING EXPENSES 0.87% 0.66% 0.57% 1.00%
*The Advisor has voluntarily agreed to assume ordinary recurring expenses of the High Yield Fund to the extent these expenses, together with the Fund's Management Fee, exceed 1% of the Fund's average net assets. Without the expense reimbursement, the "Total operating expenses" for the Fund for 1997 would have been 1.02%. - -------------------------------------------------------------------------------- EXAMPLE OF EXPENSES - ----------------------------------------------------------------- Based on the expense ratios above, you would pay the following expenses on a $1,000 investment (assuming a 5% annual return and redemption at the end of each time period).
INTERNATIONAL REAL MONEY COMMON GROWTH STOCK SPECIAL SMALL CAP ESTATE BALANCED MARKET STOCK FUND FUND FUND FUND FUND FUND FUND FUND ---------- --------- ------------ --------- --------- --------- ---------- --------- 1 year $8 $7 $16 $10 $15 $10 $7 $6 3 years $25 $23 $51 $31 $46 $32 $22 $20 5 years $43 $40 $88 $54 $80 $56 $38 $35 10 years $95 $88 $192 $120 $175 $125 $85 $79 GOVERNMENT HIGH BOND MUNICIPAL YIELD FUND BOND FUND BOND FUND FUND ----------- --------- ---------- --------- 1 year $9 $7 $6 $10 3 years $28 $21 $18 $32 5 years $48 $37 $32 $55 10 years $107 $82 $71 $122
This example should not be considered a representation of past or future expenses or performance; actual expenses and performance may be greater or less than those shown. - 1 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD The tables below have been audited by Coopers & Lybrand L.L.P., independent accountants, as stated in their report appearing in the 1997 Annual Report to Shareholders, which is incorporated by reference into the Statement of Additional Information. Additional information about the performance of the Funds for 1997, including a discussion by the investment advisor to the Funds, is contained in the 1997 Annual Report to Shareholders. For a copy of that report, please write to the Funds or call 1-800-547-1707. - --------------------- --------------------- -- COLUMBIA COMMON STOCK FUND, INC. -- ---------------------------------------------
1997 1996 1995 1994 1993 1992 1991(1) NET ASSET VALUE, BEGINNING OF PERIOD $19.26 $18.59 $15.16 $15.29 $14.04 $13.15 $12.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income........................... .29 .25 .26 .27 .22 .24 .09 Net realized and unrealized gains on investments.................................... 4.58 3.61 4.38 .04 2.08 1.06 1.17 - ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations.............. 4.87 3.86 4.64 .31 2.30 1.30 1.26 - ---------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income).......... (.27) (.23) (.26) (.25) (.21) (.24) (.10) Distributions (from capital gains).............. (1.84) (2.96) (.95) (.19) (.84) (.17) (.01) - ---------------------------------------------------------------------------------------------------------------------------- Total distributions........................... (2.11) (3.19) (1.21) (.44) (1.05) (.41) (.11) NET ASSET VALUE, END OF PERIOD $22.02 $19.26 $18.59 $15.16 $15.29 $14.04 $13.15 TOTAL RETURN...................................... 25.37% 20.71% 30.84% 2.06% 16.44% 9.99% 10.25%(2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).......... $783,906 $536,760 $358,523 $124,263 $100,715 $51,049 $20,457 Ratio of expenses to average net assets........... 0.77% 0.76% 0.80% 0.84% 0.84% 0.86% 0.86% Ratio of net investment income to average net assets........................................... 1.37% 1.32% 1.68% 1.82% 1.48% 1.97% 2.48% Portfolio turnover rate........................... 90.23% 111.39% 75.36% 64.21% 90.90% 67.83% 12.08% Average commission rate paid on portfolio transactions (3)................................. $0.0601 $0.0601
(1) From inception of operations on September 12, 1991. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 2 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ------------------------- ------------------------- -- COLUMBIA GROWTH FUND, INC. -- --------------------------------------
1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $30.74 $29.84 $24.84 $26.38 $26.18 INCOME FROM INVESTMENT OPERATIONS: Net investment income............ .19 .19 .31 .29 .16 Net realized and unrealized gains (losses) on investments......... 7.90 6.04 7.86 (.46) 3.24 - --------------------------------------------------------------------------------------------- Total from investment operations.................... 8.09 6.23 8.17 (.17) 3.40 - --------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)......................... (.17) (.17) (.29) (.26) (.18) Distributions (from capital gains).......................... (4.32) (5.14) (2.87) (1.11) (2.98) Distributions (in excess of capital gains).................. (.02) (.01) (.04) - --------------------------------------------------------------------------------------------- Total distributions............ (4.49) (5.33) (3.17) (1.37) (3.20) NET ASSET VALUE, END OF PERIOD $34.34 $30.74 $29.84 $24.84 $26.38 TOTAL RETURN....................... 26.32% 20.80% 32.98% -0.63% 13.01% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $1,324,918 $1,064,100 $848,731 $591,694 $605,401 Ratio of expenses to average net assets............................ 0.71% 0.71% 0.75% 0.81% 0.82% Ratio of net investment income to average net assets................ 0.55% 0.63% 1.14% 1.12% 0.66% Portfolio turnover rate............ 95.67% 75.49% 94.73% 79.28% 105.64% Average commission rate paid on portfolio transactions (1)........ $0.0594 $0.0590 1992 1991 1990 1989 1988 NET ASSET VALUE, BEGINNING OF PERIOD $26.26 $21.68 $23.40 $21.21 $20.19 INCOME FROM INVESTMENT OPERATIONS: Net investment income............ .17 .32 .45 .48 .52 Net realized and unrealized gains (losses) on investments......... 2.93 7.09 (1.23) 5.65 1.66 - ----------------------------------- ----------------------------------------------------- Total from investment operations.................... 3.10 7.41 (.78) 6.13 2.18 - ----------------------------------- ----------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)......................... (.20) (.39) (.48) (.54) (.52) Distributions (from capital gains).......................... (2.98) (2.44) (.46) (3.40) (.64) Distributions (in excess of capital gains).................. - ----------------------------------- ----------------------------------------------------- Total distributions............ (3.18) (2.83) (.94) (3.94) (1.16) NET ASSET VALUE, END OF PERIOD $26.18 $26.26 $21.68 $23.40 $21.21 TOTAL RETURN....................... 11.82% 34.26% -3.31% 29.09% 10.81% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $518,366 $431,460 $270,667 $266,925 $204,353 Ratio of expenses to average net assets............................ 0.86% 0.90% 0.96% 0.96% 1.04% Ratio of net investment income to average net assets................ 0.77% 1.50% 2.08% 2.14% 2.33% Portfolio turnover rate............ 116.38% 163.91% 171.80% 166.06% 179.08% Average commission rate paid on portfolio transactions (1)........
(1) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 3 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ------------------ ------------------ -- COLUMBIA INTERNATIONAL STOCK FUND, INC. -- ----------------------------------------------------
1997 1996 1995 1994 1993 1992(1) NET ASSET VALUE, BEGINNING OF PERIOD $13.86 $13.07 $12.43 $12.96 $9.95 $10.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)......................... .03 .03 .02 (.02) (.02) (.03) Net realized and unrealized gains (losses) on investments and foreign currency transactions....... 1.56 2.13 .62 (.30) 3.34 .11 - ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations................... 1.59 2.16 .64 (.32) 3.32 .08 - ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends (from net investment income)............... (.03) Dividends (in excess of net investment income)....... (.20) Distributions (from capital gains)................... (1.75) (1.14) (.21) (.31) (.13)(2) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions................................ (1.75) (1.37) -- (.21) (.31) (.13) NET ASSET VALUE, END OF PERIOD $13.70 $13.86 $13.07 $12.43 $12.96 $9.95 TOTAL RETURN........................................... 11.47% 16.59% 5.15% -2.47% 33.37% 0.60%(3) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............... $146,281 $125,510 $100,873 $118,484 $73,047 $9,745 Ratio of expenses to average net assets................ 1.62% 1.54% 1.54% 1.52% 1.71% 2.22% Ratio of net investment income (loss) to average net assets................................................ 0.19% 0.22% 0.15% (0.21)% (0.62)% (1.28)% Portfolio turnover rate................................ 121.53% 129.40% 156.09% 138.79% 144.78% 25.75% Average commission rate paid on portfolio transactions (4)................................................... $0.0039 $0.0011
(1) From inception of operations on September 10, 1992. Ratios and portfolio turnover rate are annualized. (2) Includes amounts distributed from net realized gains on foreign currency transactions taxable as ordinary income. (3) Not annualized. (4) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 4 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ------------------------ ------------------------ -- COLUMBIA SPECIAL FUND, INC.(1) -- ----------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 NET ASSET VALUE, BEGINNING OF PERIOD $19.85 $21.44 $18.69 $19.51 $18.79 $17.45 $12.12 $13.85 $11.32 $9.26 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................ .01 (.06) .03 .08 .01 (.03) (.01) .01 .07 .03 Net realized and unrealized gains on investments........... 2.50 2.85 5.45 .36 4.04 2.41 6.11 (1.72) 3.52 3.90 - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations.......... 2.51 2.79 5.48 .44 4.05 2.38 6.10 (1.71) 3.59 3.93 - --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income).... (.02) (.07) (.02) (.01) Dividends (in excess of net investment income)............... (.01) Distributions (from capital gains)........ (2.10) (4.38) (2.68) (1.16) (3.32) (1.04) (.77) (1.05) (1.87) Distributions (in excess of capital gains)................ (.03) (.03) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions....... (2.10) (4.38) (2.73) (1.26) (3.33) (1.04) (.77) (.02) (1.06) (1.87) NET ASSET VALUE, END OF PERIOD $20.26 $19.85 $21.44 $18.69 $19.51 $18.79 $17.45 $12.12 $13.85 $11.32 TOTAL RETURN............. 12.64% 13.07% 29.53% 2.29% 21.68% 13.70% 50.46% -12.39% 31.92% 42.55% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).......... $1,249,718 $1,585,284 $1,384,415 $889,526 $772,741 $470,663 $264,358 $121,592 $95,939 $30,471 Ratio of expenses to average net assets...... 0.98% 0.94% 0.98% 1.05% 1.12% 1.19% 1.22% 1.32% 1.35% 1.38% Ratio of net investment income (loss) to average net assets.............. 0.04% (0.29)% 0.16% 0.40% 0.01% (0.25)% (0.16)% 0.05% 0.18% 0.06% Portfolio turnover rate.................... 166.46% 150.07% 182.99% 178.91% 154.68% 116.75% 114.53% 147.04% 124.29% 244.36% Average commission rate paid on portfolio transactions (2)........ $0.0585 $0.0553
(1) As of December 31, 1991, historical per share data has been restated to reflect a 3 for 1 stock split to shareholders of record on January 31, 1992. (2) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 5 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ------------------------ ------------------------ -- COLUMBIA SMALL CAP FUND, INC. -- ----------------------------------------
1997 1996(1) NET ASSET VALUE, BEGINNING OF PERIOD $12.99 $12.00 INCOME FROM INVESTMENT OPERATIONS: Net investment loss................................................. (.08) Net realized and unrealized gains on investments.................... 4.51 .99 - ------------------------------------------------------------------------------------------ Total from investment operations.................................. 4.43 .99 - ------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Distributions (from capital gains).................................. (.77) - ------------------------------------------------------------------------------------------ Total distributions............................................... (.77) -- NET ASSET VALUE, END OF PERIOD $16.65 $12.99 TOTAL RETURN.......................................................... 34.10% 7.62% (2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).............................. $96,431 $21,061 Ratio of expenses to average net assets............................... 1.46% 1.61% Ratio of net investment income (loss) to average net assets........... (0.81)% 0.00% Portfolio turnover rate............................................... 171.75% 32.57% Average commission rate paid on portfolio transactions (3)............ $0.0564 $0.0546
(1) From inception of operations on September 11, 1996. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 6 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ------------------- ------------------- -- COLUMBIA REAL ESTATE EQUITY FUND, INC. -- --------------------------------------------------
1997 1996 1995 1994(1) NET ASSET VALUE, BEGINNING OF PERIOD $16.16 $12.71 $11.72 $12.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income............................................... .79 .77 .78 .49 Net realized and unrealized gains (losses) on investments........... 3.15 3.94 1.12 (.27) - --------------------------------------------------------------------------------------------------------------- Total from investment operations.................................. 3.94 4.71 1.90 .22 - --------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income).............................. (.62) (.52) (.49) (.31) Dividends (in excess of net investment income)...................... (.01) Distributions (from capital gains).................................. (.48) (.41) Distributions (in excess of capital gains).......................... (.03) (.12) (.14) Tax return of capital............................................... (.17) (.21) (.28) (.18) - --------------------------------------------------------------------------------------------------------------- Total distributions............................................... (1.30) (1.26) (.91) (.50) NET ASSET VALUE, END OF PERIOD $18.80 $16.16 $12.71 $11.72 TOTAL RETURN.......................................................... 24.74% 38.30% 16.86% 1.76%(2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).............................. $151,554 $68,073 $21,587 $17,402 Ratio of expenses to average net assets............................... 1.02% 1.06% 1.18% 1.14% Ratio of net investment income to average net assets.................. 4.87% 6.23% 6.71% 6.28% Portfolio turnover rate............................................... 33.55% 45.82% 53.91% 7.61% Average commission rate paid on portfolio transactions (3)............ $0.0588 $0.0594
(1) From inception of operations on March 16, 1994. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 7 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ------------------------ ------------------------ -- COLUMBIA BALANCED FUND, INC. -- ---------------------------------------
1997 1996 1995 1994 1993 1992 1991(1) NET ASSET VALUE, BEGINNING OF PERIOD $20.32 $20.08 $17.28 $17.91 $16.80 $16.05 $15.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income........................... .84 .76 .73 .65 .56 .58 .11 Net realized and unrealized gains (losses) on investments.................................... 2.92 1.58 3.54 (.64) 1.71 .82 1.10 - ---------------------------------------------------------------------------------------------------------------------------- Total from investment operations.............. 3.76 2.34 4.27 .01 2.27 1.40 1.21 - ---------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income).......... (.83) (.76) (.73) (.64) (.56) (.57) (.12) Dividends (in excess of net investment income)........................................ (.01) Distributions (from capital gains).............. (1.83) (1.34) (.74) (.59) (.08) (.04) - ---------------------------------------------------------------------------------------------------------------------------- Total distributions........................... (2.66) (2.10) (1.47) (.64) (1.16) (.65) (.16) NET ASSET VALUE, END OF PERIOD $21.42 $20.32 $20.08 $17.28 $17.91 $16.80 $16.05 TOTAL RETURN...................................... 18.74% 11.78% 25.08% 0.10% 13.62% 8.89% 7.80%(2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).......... $792,378 $672,593 $486,767 $249,670 $186,589 $90,230 $12,986 Ratio of expenses to average net assets........... 0.68% 0.66% 0.69% 0.72% 0.73% 0.81% 0.62% Ratio of net investment income to average net assets........................................... 3.83% 3.82% 4.05% 3.82% 3.32% 4.08% 3.41% Portfolio turnover rate........................... 148.91% 133.21% 108.04% 98.48% 107.60% 138.08% 179.80% Average commission rate paid on portfolio transactions (3)................................. $0.0610 $0.0596
(1) From inception of operations on September 12, 1991. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 8 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ----------------------- ----------------------- -- COLUMBIA DAILY INCOME COMPANY -- ------------------------------------------
1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income.............. .050 .048 .053 .036 .025 - ----------------------------------------------------------------------------------------- Total from investment operations...................... .050 .048 .053 .036 .025 - ----------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)........................... (.050) (.048) (.053) (.036) (.025) - ----------------------------------------------------------------------------------------- Total distributions.............. (.050) (.048) (.053) (.036) (.025) NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN......................... 5.11% 4.96% 5.49% 3.68% 2.51% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).......................... $1,169,096 $889,800 $800,656 $730,067 $544,500 Ratio of expenses to average net assets.............................. 0.63% 0.62% 0.64% 0.70% 0.75% Ratio of net investment income to average net assets.................. 4.99% 4.84% 5.34% 3.68% 2.49% 1992 1991 1990 1989 1988 NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income.............. .032 .055 .075 .085 .068 - ------------------------------------- ------------------------------------------------ Total from investment operations...................... .032 .055 .075 .085 .068 - ------------------------------------- ------------------------------------------------ LESS DISTRIBUTIONS: Dividends (from net investment income)........................... (.032) (.055) (.075) (.085) (.068) - ------------------------------------- ------------------------------------------------ Total distributions.............. (.032) (.055) (.075) (.085) (.068) NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN......................... 3.25% 5.66% 7.84% 8.89% 7.07% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).......................... $591,186 $737,584 $819,926 $703,704 $546,634 Ratio of expenses to average net assets.............................. 0.71% 0.69% 0.69% 0.73% 0.76% Ratio of net investment income to average net assets.................. 3.22% 5.53% 7.51% 8.49% 6.87%
- -------------------------------------------------------------------------------- - 9 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - -------------- -------------- -- COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC. -- ------------------------------------------------------------
1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $8.24 $8.34 $7.99 $8.36 $8.35 INCOME FROM INVESTMENT OPERATIONS: Net investment income................ .41 .41 .45 .37 .32 Net realized and unrealized gains (losses) on investments............. .05 (.10) .35 (.37) .17 - ------------------------------------------------------------------------------------------- Total from investment operations... .46 .31 .80 -- .49 - ------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.41) (.41) (.45) (.37) (.32) Distributions (from capital gains)... (.16) - ------------------------------------------------------------------------------------------- Total distributions................ (.41) (.41) (.45) (.37) (.48) NET ASSET VALUE, END OF PERIOD $8.29 $8.24 $8.34 $7.99 $8.36 TOTAL RETURN........................... 5.76% 3.85% 10.21% -0.03% 5.91% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $37,837 $40,776 $41,842 $33,512 $35,877 Ratio of expenses to average net assets................................ 0.87% 0.80% 0.79% 0.81% 0.75% Ratio of net investment income to average net assets.................... 4.99% 4.99% 5.45% 4.51% 3.74% Portfolio turnover rate................ 184.43% 179.38% 253.17% 253.80% 254.59% 1992 1991 1990 1989 1988 NET ASSET VALUE, BEGINNING OF PERIOD $8.47 $8.43 $8.30 $8.17 $8.30 INCOME FROM INVESTMENT OPERATIONS: Net investment income................ .39 .53 .61 .63 .56 Net realized and unrealized gains (losses) on investments............. .09 .50 .13 .13 (.13) - --------------------------------------- ------------------------------------------------ Total from investment operations... .48 1.03 .74 .76 .43 - --------------------------------------- ------------------------------------------------ LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.39) (.53) (.61) (.63) (.56) Distributions (from capital gains)... (.21) (.46) - --------------------------------------- ------------------------------------------------ Total distributions................ (.60) (.99) (.61) (.63) (.56) NET ASSET VALUE, END OF PERIOD $8.35 $8.47 $8.43 $8.30 $8.17 TOTAL RETURN........................... 5.81% 12.72% 9.29% 9.63% 5.34% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $35,479 $34,867 $22,628 $13,349 $9,112 Ratio of expenses to average net assets................................ 0.76% 0.76% 0.85% 0.85% 0.85% Ratio of net investment income to average net assets.................... 4.60% 6.18% 7.33% 7.66% 6.88% Portfolio turnover rate................ 289.05% 309.13% 221.86% 158.96% 393.59%
- -------------------------------------------------------------------------------- - 10 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---------------- ---------------- -- COLUMBIA FIXED INCOME SECURITIES FUND, INC. -- --------------------------------------------------------
1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $13.08 $13.51 $12.16 $13.44 $13.28 INCOME FROM INVESTMENT OPERATIONS: Net investment income................ .85 .85 .88 .83 .85 Net realized and unrealized gains (losses) on investments............. .36 (.43) 1.35 (1.28) .52 - ------------------------------------------------------------------------------------------- Total from investment operations... 1.21 0.42 2.23 (.45) 1.37 - ------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.85) (.85) (.88) (.83) (.85) Distributions (from capital gains)... (.03) (.36) - ------------------------------------------------------------------------------------------- Total distributions................ (.88) (.85) (.88) (.83) (1.21) NET ASSET VALUE, END OF PERIOD $13.41 $13.08 $13.51 $12.16 $13.44 TOTAL RETURN........................... 9.56% 3.37% 18.91% -3.36% 10.47% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $381,333 $356,421 $316,259 $252,090 $300,532 Ratio of expenses to average net assets................................ 0.66% 0.64% 0.65% 0.66% 0.66% Ratio of net investment income to average net assets.................... 6.43% 6.53% 6.80% 6.53% 6.14% Portfolio turnover rate................ 196.28% 178.25% 137.41% 139.81% 118.80% 1992 1991 1990 1989 1988 NET ASSET VALUE, BEGINNING OF PERIOD $13.59 $12.72 $12.75 $12.11 $12.23 INCOME FROM INVESTMENT OPERATIONS: Net investment income................ .95 1.00 1.03 1.04 1.04 Net realized and unrealized gains (losses) on investments............. .09 1.05 (.03) .64 (.12) - --------------------------------------- ------------------------------------------------ Total from investment operations... 1.04 2.05 1.00 1.68 .92 - --------------------------------------- ------------------------------------------------ LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.95) (1.00) (1.03) (1.04) (1.04) Distributions (from capital gains)... (.40) (.18) - --------------------------------------- ------------------------------------------------ Total distributions................ (1.35) (1.18) (1.03) (1.04) (1.04) NET ASSET VALUE, END OF PERIOD $13.28 $13.59 $12.72 $12.75 $12.11 TOTAL RETURN........................... 7.99% 16.84% 8.30% 14.35% 7.72% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $262,647 $207,271 $133,875 $110,525 $102,604 Ratio of expenses to average net assets................................ 0.66% 0.69% 0.73% 0.74% 0.77% Ratio of net investment income to average net assets.................... 7.03% 7.63% 8.20% 8.27% 8.44% Portfolio turnover rate................ 195.67% 158.95% 131.81% 114.00% 133.20%
- -------------------------------------------------------------------------------- - 11 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - --------------------- --------------------- -- COLUMBIA MUNICIPAL BOND FUND, INC. -- -----------------------------------------------
1997 1996 1995 1994 1993 NET ASSET VALUE, BEGINNING OF PERIOD $12.15 $12.37 $11.48 $12.71 $12.17 INCOME FROM INVESTMENT OPERATIONS: Net investment income................ .60 .61 .63 .64 .66 Net realized and unrealized gains (losses) on investments............. .39 (.16) .96 (1.23) .62 - ------------------------------------------------------------------------------------------- Total from investment operations... .99 .45 1.59 (.59) 1.28 - ------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income) (1)......................... (.60) (.61) (.63) (.64) (.66) Distributions (from capital gains)... (.07) (.06) (.07) (.08) - ------------------------------------------------------------------------------------------- Total distributions................ (.67) (.67) (.70) (.64) (.74) NET ASSET VALUE, END OF PERIOD $12.47 $12.15 $12.37 $11.48 $12.71 TOTAL RETURN........................... 8.36% 3.77% 14.15% -4.68% 10.73% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $409,148 $375,667 $383,796 $339,817 $430,367 Ratio of expenses to average net assets................................ 0.57% 0.56% 0.57% 0.57% 0.58% Ratio of net investment income to average net assets.................... 4.87% 5.00% 5.22% 5.36% 5.25% Portfolio turnover rate................ 16.88% 19.03% 21.45% 19.40% 9.92% 1992 1991 1990 1989 1988 NET ASSET VALUE, BEGINNING OF PERIOD $12.22 $11.65 $11.64 $11.42 $11.11 INCOME FROM INVESTMENT OPERATIONS: Net investment income................ .69 .72 .75 .76 .77 Net realized and unrealized gains (losses) on investments............. .07 .60 .02 .23 .34 - --------------------------------------- ------------------------------------------------ Total from investment operations... .76 1.32 .77 .99 1.11 - --------------------------------------- ------------------------------------------------ LESS DISTRIBUTIONS: Dividends (from net investment income) (1)......................... (.69) (.72) (.75) (.76) (.77) Distributions (from capital gains)... (.12) (.03) (.01) (.01) (.03) - --------------------------------------- ------------------------------------------------ Total distributions................ (.81) (.75) (.76) (.77) (.80) NET ASSET VALUE, END OF PERIOD $12.17 $12.22 $11.65 $11.64 $11.42 TOTAL RETURN........................... 6.46% 11.73% 6.89% 8.95% 10.19% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)........................ $341,924 $285,099 $207,690 $166,590 $140,842 Ratio of expenses to average net assets................................ 0.59% 0.59% 0.60% 0.61% 0.63% Ratio of net investment income to average net assets.................... 5.69% 6.07% 6.50% 6.59% 6.71% Portfolio turnover rate................ 17.82% 15.28% 6.57% 10.61% 10.04%
(1) 100% exempt from federal taxation. - -------------------------------------------------------------------------------- - 12 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ------------------------ ------------------------ -- COLUMBIA HIGH YIELD FUND, INC. -- -----------------------------------------
1997 1996 1995 1994 1993(1) NET ASSET VALUE, BEGINNING OF PERIOD $9.94 $9.88 $9.04 $9.94 $10.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income........................ .81 .81 .82 .80 .18 Net realized and unrealized gains (losses) on investments................................. .40 .07 .84 (.90) (.06) - ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations........... 1.21 .88 1.66 (.10) .12 - ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends (from net investment income)....... (.81) (.81) (.82) (.80) (.18) Distributions (from capital gains) (.30) (.01) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions........................ (1.11) (.82) (.82) (.80) (.18) NET ASSET VALUE, END OF PERIOD $10.04 $9.94 $9.88 $9.04 $9.94 TOTAL RETURN................................... 12.70% 9.43% 19.12% -0.92% 1.12%(2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)....... $39,278 $28,818 $23,471 $12,834 $5,940 Ratio of expenses to average net assets (3).... 1.00% 0.93% 1.00% 1.00% 1.00% Ratio of net investment income to average net assets........................................ 8.05% 8.29% 8.62% 8.69% 7.30% Portfolio turnover rate........................ 124.23% 62.27% 51.60% 36.67% 0.00%
(1) From inception of operations on September 15, 1993. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The ratio was 1.02% in 1997, 1.00% in 1996, 1.06% in 1995, 1.19% in 1994 and 2.03% in 1993, before voluntary reimbursement of certain expenses by the investment advisor. - -------------------------------------------------------------------------------- - 13 FUND DESCRIPTIONS ----------------------------------------------------------------- The Columbia Family of Funds consists of 12 no-load mutual funds designed to meet a wide range of financial and investment objectives. Each Fund is an open-end management investment company (that is, a "mutual fund") and, except for the Municipal Bond Fund, is diversified. Although the Municipal Bond Fund holds a large number of individual securities, it is not considered "diversified" under the Investment Company Act because of its concentration in Oregon municipal securities. Each Fund is managed by Columbia Funds Management Company (the "Advisor"). -- A TEAM APPROACH TO INVESTING -- Columbia Funds are managed by the Advisor using a team approach (please see "Fund Management"). Stocks and bonds are selected using a "top down, sector rotation" emphasis, supplemented by a bottoms up, company analysis. The top down analysis begins with an overall evaluation of the investment environment before focusing on individual security selection. As part of this review, the investment team considers such broad indicators as: - - economic growth, because industries and asset classes behave differently at various stages of a business cycle - - inflation, which is a major factor in determining the price investors are willing to pay for a given level of earnings (price/earnings ratio) - - interest rates, which provide information about the cost of money and the attractiveness of different asset classes - - Federal Reserve policy, which controls the availability of money to help regulate the economy - - corporate profits, which indicate the overall health and prosperity of companies whose stocks and bonds are publicly traded - - demographics, which refer to the characteristics and dynamics of the population - - money flows, which refer to the current and expected level of equity investments by major classes of investors. To ensure depth and breadth of analysis, each Columbia investment team member has responsibility for analyzing and researching specific market sectors or industries and bringing their findings to team meetings for review and discussion. Once individual sectors are identified for emphasis, securities within the targeted sectors are recommended based on fundamental and technical analysis. "S ECTOR ROTATION" REFERS TO THE DYNAMIC PROCESS OF EMPHASIZING OR DE-EMPHASIZING INVESTMENT IN INDUSTRY GROUPS OR ASSET CLASSES BASED ON THEIR RELATIVE ATTRACTIVENESS. Fundamental analysis employed for security selection is based on a thorough review of individual companies, including such factors as: - - financial condition - - quality of management - - industry dynamics - - earnings growth and profit margins - - sales trends - - potential for new product development - - dividend payment history and potential - - financial ratios -- including price/earnings and price/book ratios - - investment in research and development For fixed income securities, a top down analysis is also used to determine sector emphasis between different types of instruments used by a Fund (for example, corporate bonds, Treasuries, or mortgage pass-through securities) and desired levels of average quality, maturity and duration. These determinations are made in light of each Fund's individual investment objective. A top down, sector rotation emphasis is intended to give the investment team a better understanding of the long-term prospects of a particular security, based on the characteristics of the existing economy and investor temperament. In this way, Columbia's investment team - 14 FUND DESCRIPTIONS ----------------------------------------------------------------- is better able to anticipate and act upon market change, understand its effect on the risk and rewards of fund securities, and thereby generate consistent, competitive results over the long term. While top down, sector rotation is an important element of the Advisor's investment process, identifying individual companies with growth potential using fundamental analysis is also important to the process, especially when a Fund is researching investment in small to mid-size companies. Although the Funds will generally emphasize investments for long-term capital appreciation, a Fund may invest for short-term capital appreciation when management believes it is consistent with sound investment practices and the Fund's overall objective. These determinations will be made without a vote of the shareholders of the Fund. There is no assurance that the Funds will achieve their investment objectives. -- COLUMBIA COMMON -- STOCK FUND ------------------------- The Common Stock Fund was incorporated on June 13, 1991 under Oregon law and began offering shares to the public on October 1, 1991. -- INVESTMENT OBJECTIVE -- The investment objective of the Common Stock Fund is to provide growth of capital and dividend income for shareholders through a professionally managed, diversified portfolio consisting primarily (at least 65% of its assets under normal investing conditions) of common stocks. This objective may not be changed without a vote of a majority of the outstanding voting securities of the Common Stock Fund. The Common Stock Fund invests primarily in larger companies that are well established. Many of the common stocks that will make up the Fund's portfolio are expected to have a history of paying level or rising dividends. The Fund may invest up to one-third of its portfolio in common stocks issued by companies located in developed foreign countries, principally those companies located in North America, Western Europe, or Asia. -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS For information about the risks of investing in the Fund, including the risks of investing in foreign securities, please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Infor- mation." A description of other investment restrictions and certain investment practices of the Common Stock Fund is included in the Statement of Additional Information. The Fund's investment restrictions include a prohibition on investing more than 5% of its total assets at cost in either illiquid securities or the securities of companies that have a record of less than three years of continuous operation. -- COLUMBIA GROWTH FUND -- ------------------------------- The Growth Fund was incorporated on November 25, 1966 under Oregon law and began offering shares to the public on June 16, 1967. -- INVESTMENT OBJECTIVE -- The Growth Fund seeks to increase shareholders' capital by selecting investments, primarily common stocks, that the Advisor expects to increase in market value. This objective may not be changed without a vote of a majority of the outstanding voting securities of the Growth Fund. - 15 FUND DESCRIPTIONS ----------------------------------------------------------------- The Growth Fund seeks to achieve its objective by investing in companies that the Advisor expects to have above-average earnings growth over the long term. The Advisor believes that such companies typically have strong competitive positions within their industry groups. In addition, the Growth Fund may invest in common stocks issued by companies located in developed foreign countries, principally those located in North America, Western Europe, or Asia, provided that less than 10% of the value of its assets are so invested. -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS For information about the risks of investing in the Fund, including the risks of investing in foreign securities, please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Infor- mation." A description of other investment restrictions and certain investment practices of the Growth Fund is included in the Statement of Additional Information. The Fund's investment restrictions include a prohibition on investing more than 5% of its total assets at cost in either illiquid securities or the securities of companies that have a record of less than three years of continuous operation. -- COLUMBIA INTERNATIONAL -- STOCK FUND -------------------------------- The International Stock Fund was incorporated on June 29, 1992 under Oregon law and began offering shares to the public on October 1, 1992. -- INVESTMENT OBJECTIVE -- The International Stock Fund seeks to provide long-term capital appreciation by investing primarily in equity securities of companies based outside the United States. This objective may not be changed without a vote of a majority of the outstanding voting securities of the Fund. Under normal market conditions, the International Stock Fund will invest at least 65% of its total assets in equity securities (i.e., common stock and preferred stock), including securities convertible into equity securities, of issuers from at least three countries other than the United States. At least 75% of the Fund's equity securities will, under normal conditions, be invested in securities of well-capitalized, seasoned companies. The Fund considers a foreign company well capitalized if it has an aggregate market valuation of over $500 million. The International Stock Fund may invest in smaller, less seasoned companies when the Advisor believes they offer attractive opportunities consistent with the Fund's overall investment objective. An investment in a less seasoned company may involve greater risks than an investment in a larger, more established company. See "Risk Factors -- Investments in Small and Unseasoned Companies." In addition to investing in equity securities, the Fund may also enter into foreign currency exchange contracts and purchase other securities to protect against fluctuations in exchange rates. These securities are described below and under "Additional Information." The International Stock Fund may invest in companies located anywhere in the world but intends to invest principally in the following countries: Austria, Belgium, Denmark, Finland, France, Germany, Italy, The Netherlands, Norway, Spain, Sweden, Switzerland, the United Kingdom, Australia, Hong Kong, Japan, New Zealand, Singapore, Canada, and Mexico. Although the Fund intends to invest primarily in companies located outside the United States, it is permitted to invest up to 35% of its total assets in U.S. companies. The Fund may invest more heavily in U.S. companies (up to 35% of its total assets) when the Advisor believes foreign market or economic conditions or trends in currency exchange rates favor domestic securities. - 16 FUND DESCRIPTIONS ----------------------------------------------------------------- -- CURRENCY MANAGEMENT -- The value of the International Stock Fund will fluctuate as a result of changes in the exchange rates between the U.S. dollar and the currencies in which the foreign securities or bank deposits held by the Fund are denominated. To reduce or limit exposure to adverse changes in currency exchange rates (referred to as "hedging"), the Fund may enter into forward currency exchange contracts that, in effect, lock in a rate of exchange during the period of the forward contract. Forward contracts are usually entered into with currency traders, are not traded on securities exchanges, and usually have a term of less than one year, but can be renewed. A default on a contract would deprive the Fund of unrealized profits or force the Fund to cover its commitments for purchase or sale of currency, if any, at the market price. The Fund will enter into forward contracts only for hedging purposes and not for speculation. If required by the Investment Company Act or the Securities and Exchange Commission, the Fund may "cover" its commitment under forward contracts by segregating cash or liquid high-grade securities with the Fund's custodian in an amount not less than the current value of the Fund's total assets committed to the consummation of the contracts. Under normal market conditions, no more than 25% of the International Stock Fund's assets may be committed to the consummation of currency exchange contracts. The International Stock Fund may also purchase or sell foreign currencies on a "spot" (cash) basis or on a forward basis to lock in the U.S. dollar value of a transaction at the exchange rate or rates then prevailing. The Fund will use this hedging technique in an attempt to insulate itself against possible losses and gains resulting from a change in the relationship between the U.S. dollar and the relevant foreign currency during the period between the date a security is purchased or sold and the date on which payment is made or received. Hedging against adverse changes in exchange rates will not eliminate fluctuation in the prices of the International Stock Fund's portfolio securities or prevent loss if the prices of those securities decline. In addition, the use of forward contracts may limit potential gains from an appreciation in the U.S. dollar value of a foreign currency. Forecasting short-term currency market movements is very difficult, and there is no assurance that short-term hedging strategies used by the International Stock Fund will be successful. -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS For more information about the risks of investing in the Fund, including the risks of investing in foreign securities, please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the International Stock Fund is included in the Statement of Additional Information. The International Stock Fund's investment restrictions include a prohibition on investing more than 5% of its total assets in the securities of companies that have a record of less than 3 years of continuous operations or more than 10% of its total assets in illiquid securities. -- COLUMBIA SPECIAL FUND -- ------------------------------- The Special Fund was incorporated on July 18, 1985 under Oregon law and began offering shares to the public on November 20, 1985. -- INVESTMENT OBJECTIVE -- The investment objective of the Special Fund is to achieve capital appreciation for shareholders by investing in securities the Advisor believes are considered more volatile than the market as a whole (as measured - 17 FUND DESCRIPTIONS ----------------------------------------------------------------- by the S&P 500 Stock Index) and therefore carry more risk than the market as a whole. This objective may be changed by the Board of Directors without shareholder approval upon 30 days written notice. In the unlikely event the Fund changes its investment objective, shareholders should consider whether the Fund remains an appropriate investment. The Special Fund intends to invest primarily in small to mid-size companies (for example, companies with capitalizations that are less than the average for the companies included in the S&P 500 Stock Index). However, the Special Fund may invest in larger companies when the Advisor believes they offer comparable capital appreciation opportunities or to stabilize the Fund's portfolio. Management reserves the right to determine the percentage of the Special Fund's assets that will be invested in smaller companies. The Special Fund may also invest in special situations such as new issues; companies that may benefit from technological or product developments or new management; and companies involved in tender offers, leveraged buy-outs, or mergers. Up to one-third of the Fund's assets may be invested in foreign securities. The Special Fund may also invest in securities convertible into or exercisable for common stock (including preferred stock, warrants, and debentures), restricted securities, repurchase agreements, and certain options and financial futures contracts. -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS Investments in unseasoned companies and special situations may involve greater risks than more traditional equity investments because the securities may be more likely to experience unexpected fluctuations in price. For this reason, the Special Fund should only be used as part of a balanced investment portfolio. The Special Fund is designed for that portion of an investor's funds that can be appropriately invested in securities with greater risk but also greater potential for appreciation. For information about the risks of investing in the Fund, including portfolio turnover and the risks of investing in smaller companies and foreign securities, please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the Special Fund is included in the Statement of Additional Information. -- COLUMBIA SMALL CAP FUND -- ---------------------------------- The Small Cap Fund was incorporated on May 31, 1996 under Oregon law and began offering shares to the public on October 1, 1996. -- INVESTMENT OBJECTIVE -- The investment objective of the Small Cap Fund is to achieve significant capital appreciation by investing, in normal circumstances, at least 65 percent of the value of the Fund's total assets in common stocks, or securities convertible into common stocks, of "small cap" companies. A company is considered small cap if it has an aggregate market capitalization of less than $1 billion. Upon notice to shareholders, the definition of small cap may be modified if the Advisor determines, based on changes in market levels and accepted industry definitions, that a different market capitalization is more appropriate. There is no minimum aggregate market capitalization for a company to be considered an appropriate investment for the Fund. Additionally, the Fund may invest from time to time up to 35 percent of the value of its total assets in the securities of larger, more established companies when the Advisor believes they offer capital appreciation potential that is generally comparable to small cap securities. The Fund's investment objective may not be changed without shareholder approval. - 18 FUND DESCRIPTIONS ----------------------------------------------------------------- The Small Cap Fund may also invest in debt securities or preferred stock that are convertible into or exchangeable for small cap stocks. Convertible debt securities, typically unsecured, are interest bearing and represent a claim to the corporation's earnings and assets before common and preferred stock owners, generally on par with unsecured creditors. Convertible preferred stocks are securities that represent a claim to the corporation's earnings and assets before common stock owners but after bond owners. Investments by the Fund in convertible debt or preferred stock could be a substitute for an investment in the underlying common stock in circumstances where only the convertible security is available in quantities necessary to satisfy the Fund's investment needs (for example, in the case of a new issuance of convertible securities). In addition, such securities may be purchased if the conversion price of the convertible security is comparable to the price of the underlying common stock. In this case, a preferred position with respect to the corporation's earnings and assets may be preferable to holding common stock. The Small Cap Fund may invest up to 25% of its total assets in foreign securities or American Depository Receipts ("ADRs") for foreign securities. Subject to that limitation, the Fund may invest in companies located anywhere in the world but expects to invest principally in the following countries: Argentina, Australia, Brazil, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, and any country in Western Europe. For a discussion of the special risks involved with investing in foreign securities, see "Risk Factors -- Foreign Securities." -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS Investments in small cap companies may involve greater risks than investments in larger companies, with a corresponding effect on the Fund's net asset value. For this reason, the Fund is not intended to be used as the sole investment in your portfolio. The Fund is designed for that portion of a portfolio that can appropriately be invested in securities with greater risk but also greater potential for appreciation. For information about the risks of investing in the Fund, including portfolio turnover and the risks of investing in smaller companies and foreign securities, please refer to "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the Fund is included in the Statement of Additional Information. -- COLUMBIA REAL ESTATE -- EQUITY FUND ------------------------------ The Real Estate Fund was incorporated on December 29, 1993 under Oregon law and began offering shares to the public on April 1, 1994. -- INVESTMENT OBJECTIVE -- The Real Estate Fund seeks, with equal emphasis, capital appreciation and above-average current income by investing primarily in the equity securities of companies in the real estate industry. With respect to current income, the Fund seeks to provide a yield that exceeds the composite yield of securities comprising the S&P 500. The Fund's investment objective may not be changed without a vote of a majority of the outstanding shares of the Fund. Under normal conditions, the Real Estate Fund will invest at least 65% of its total assets in the equity securities of companies principally engaged in the real estate industry. A company is "principally engaged" in the real estate industry if at least 50% of its gross income or net profits are attributable to the ownership, construction, management, or sale of residential, commercial, or industrial real estate. These companies may include, among others: equity real estate investment - 19 FUND DESCRIPTIONS ----------------------------------------------------------------- trusts ("REITs"), which own primarily commercial income properties; mortgage REITs, which make construction, development, and long-term mortgage loans; and real estate brokers or developers. The Fund will not invest directly in real estate. Equity securities include common stock, preferred stock, and securities convertible into common stock. The Fund may invest up to 20% of its total assets in foreign real estate industry companies. The Real Estate Fund may also invest up to 35% of its total net assets in equity securities of companies outside the real estate industry and in non-convertible debt securities. The Fund's Advisor anticipates that investments outside the real estate industry will be primarily in securities of companies whose products and services are related to the real estate industry. They may include manufacturers and distributors of building supplies, financial institutions that make or service mortgages, or companies with substantial real estate assets relative to their stock market valuations, such as certain retailers and railroads. The types of non-convertible debt securities in which the Real Estate Fund may invest include corporate debt securities (bonds, debentures, and notes), asset-backed securities, bank obligations, collateralized bonds, loan and mortgage obligations, commercial paper, repurchase agreements, savings and loan obligations, and U.S. Government and agency obligations. The Fund will only invest in "investment-grade" debt securities, which are securities that, at the time of investment, are rated Baa or higher by Moody's Investors Services, Inc. ("Moody's") or BBB or higher by Standard & Poor's Corporation ("Standard & Poor's") or, if unrated, are believed by the Advisor to be equivalent to securities with those ratings. Although debt securities rated Baa by Moody's or BBB by Standard & Poor's are believed to have adequate capacity to pay principal and interest, they have speculative characteristics because they lack certain protective elements. In addition, the prices of securities rated Baa by Moody's or BBB by Standard & Poor's may be more sensitive to adverse economic changes than securities with a higher investment rating. The Fund will evaluate the appropriateness, in light of the then existing circumstances, of retaining any security whose credit rating drops below the rating it held when purchased by the Fund. The Real Estate Fund may invest without limit in shares of REITs, which pool investors' funds for investment primarily in income-producing real estate or real estate-related loans or interests. A REIT IS NOT TAXED ON INCOME DISTRIBUTED TO SHAREHOLDERS IF IT COMPLIES WITH SEVERAL REQUIREMENTS RELATING TO ITS ORGANIZATION, OWNERSHIP, ASSETS, AND INCOME, AND A REQUIREMENT THAT IT DISTRIBUTE TO ITS SHAREHOLDERS AT LEAST 95% OF ITS TAXABLE INCOME (OTHER THAN NET CAPITAL GAINS) FOR EACH TAXABLE YEAR. REITs are generally classified as equity REITs, mortgage REITs, and hybrid REITs. An equity REIT, which invests the majority of its assets directly in real properties -- such as shopping centers, malls, multi-family housing, and commercial properties -- derives its income primarily from rents and lease payments. An equity REIT can also realize capital gains by selling properties that have appreciated in value. A mortgage REIT, which invests the majority of its assets in real estate mortgages, derives its income primarily from interest payments. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs. -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS Although the Real Estate Fund does not invest in real estate directly, the Fund may be subject to risks similar to those associated with the direct ownership of real estate (in addition to stock market risk) because of its policy of concentration in the securities of companies in the real estate industry. For more information about the risks of investing in the Fund, including the risks of investing in real estate securities and foreign securities, - 20 FUND DESCRIPTIONS ----------------------------------------------------------------- please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the Real Estate Fund is included in the Statement of Additional Information. -- COLUMBIA BALANCED FUND -- --------------------------------- The Balanced Fund was incorporated on June 13, 1991 under Oregon law and began offering shares to the public on October 1, 1991. -- INVESTMENT OBJECTIVE -- The investment objective of the Balanced Fund is to provide shareholders with a high total return (growth of capital and income) by investing in common stocks and fixed income securities. This objective may not be changed without a vote of a majority of the outstanding voting securities of the Fund. The Advisor intends to use top down analysis to determine appropriate weightings between common stocks and fixed income securities, based on expected relative returns for those two classes of assets. The Advisor does not intend to try to time the markets, and changes between the asset classes normally will be made gradually. Under normal investing conditions, the assets of the Balanced Fund will be allocated within the following parameters: 35-65% in common stocks and 35-65% in fixed income securities. At least 25% of the Balanced Fund's assets will be invested at all times in nonconvertible fixed income securities. Individual security selection for each portion of the Balanced Fund is discussed separately below. -- COMMON STOCKS -- The Balanced Fund selects equity securities based on the same factors used to select securities for the Common Stock Fund. See "A Team Approach to Investing" and "Columbia Common Stock Fund -- Investment Objective." The Balanced Fund may invest up to one-third of its common stock portfolio in companies located in developed foreign countries, principally those located in North America, Western Europe, or Asia. Further information regarding securities in which the Balanced Fund may invest is provided in the Statement of Additional Information. -- FIXED INCOME SECURITIES -- The Balanced Fund seeks to provide shareholders with significant income through investment of a portion of its total assets in fixed income securities, consisting of the same type of securities that may form the portfolio for the Bond Fund. For information on the types of fixed income securities that will be held by the Balanced Fund and the effect of changes in interest rates on the values of such securities, see "Columbia Fixed Income Securities Fund -- Investment Objective." The Balanced Fund intends to use cash or cash equivalents to maintain liquidity and to partially protect against declines in value of common stocks and longer- term fixed income securities. All of the Balanced Fund's cash equivalent assets will be invested in short-term obligations maturing within one year. Cash equivalent investments by the Balanced Fund normally will not exceed 10% of the Fund's assets and may include: securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities and repurchase agreements relating to these securities; bank deposits and other financial institution obligations; commercial paper rated A-1 by Standard & Poor's, Prime 1 by Moody's, or, if not rated, issued by companies that, at the date of investment, have an outstanding debt issue rated AA or better by Standard & Poor's or Aa or better by Moody's; and other corporate obligations, including bonds and notes that, at the date of investment, are rated AA or better by Standard & Poor's or Aa or better by Moody's. - 21 FUND DESCRIPTIONS ----------------------------------------------------------------- -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS For more information about the risks of investing in the Fund, including the risks of investing in foreign securities, please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the Balanced Fund is included in the Statement of Additional Information. The Balanced Fund's investment restrictions include a prohibition on investing more than 5% of its total assets at cost in illiquid securities or the equity securities of companies that have a record of less than three years of continuous operations. -- COLUMBIA DAILY -- INCOME COMPANY ---------------------- The Money Market Fund was incorporated on July 22, 1974 under Oregon law and began offering shares to the public on October 1, 1974. -- INVESTMENT OBJECTIVE -- The investment objective of the Money Market Fund is to provide a high level of current income consistent with the maintenance of liquidity and the preservation of capital. This investment objective may not be changed without a vote of a majority of the outstanding voting securities of the Money Market Fund. Investments by the Money Market Fund are restricted to the following: 1. Securities issued or guaranteed as to principal and interest by the U.S. Government or issued or guaranteed by agencies or instrumentalities thereof and repurchase agreements relating to these securities. 2. Commercial paper which, if rated by Standard & Poor's or Moody's, is rated A-1 by Standard & Poor's and Prime 1 by Moody's or, if not rated, is determined to be of comparable quality by the Money Market Fund. 3. Other corporate debt securities with remaining maturities of less than 12 months, including bonds and notes, of an issuer that has received ratings from Standard & Poor's and Moody's for its other short-term debt obligations as described in paragraph 2 above, where such corporate debt securities are comparable in priority and security to the rated short-term debt obligations or, if no ratings are available, where such corporate debt securities are determined to be of comparable quality under procedures approved by the Money Market Fund. 4. Obligations of U.S. banks that are members of the Federal Reserve System and have capital surplus and undivided profits as of the date of their most recent published financial statements in excess of $100 million and are determined by the Money Market Fund to be of comparable quality to the obligations described in paragraphs 2 or 3 above. Currently, these obligations are certificates of deposit, bankers' acceptances, and letters of credit. All of the Money Market Fund's assets will be invested in short-term debt obligations maturing within one year. The average dollar-weighted maturity of the portfolio may not exceed 90 days. The Money Market Fund will buy and sell securities in an effort to improve current income return from its assets, trading holdings when there appear to be advantages from moving between particular instruments within the high-grade money market. The Money Market Fund may realize capital gains or losses from such trading. Further information regarding securities in which the Money Market Fund may invest and the rating systems used by the Money Market Fund in selecting investments is provided in the Statement of Additional Information. - 22 FUND DESCRIPTIONS ----------------------------------------------------------------- -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS A description of the investment restrictions and certain investment practices of the Money Market Fund is included in the Statement of Additional Information. The Money Market Fund's portfolio will be affected by general changes in interest rates, since these changes increase or decrease the value of the assets held. The value of these assets generally will vary inversely to changes in prevailing interest rates. If interest rates increase after an asset is purchased, the asset, if sold, may be sold at a price below its cost. The Money Market Fund's normal policy is to hold investments until maturity. The Money Market Fund anticipates that, except for efforts to improve current income, only heavy redemptions would cause it to sell securities below their purchase price. -- COLUMBIA U.S. GOVERNMENT -- SECURITIES FUND ----------------------------------- The Government Bond Fund was incorporated on October 16, 1986 under Maryland law and began offering shares to the public on November 6, 1986. The Government Bond Fund was reincorporated under Oregon law on April 29, 1988. -- INVESTMENT OBJECTIVE -- The Government Bond Fund seeks to provide shareholders with preservation of capital and a high level of income. This investment objective may not be changed without a vote of the majority of the outstanding voting securities of the Government Bond Fund. T O ACHIEVE ITS INVESTMENT OBJECTIVE, THE GOVERNMENT BOND FUND INVESTS SUBSTANTIALLY ALL ITS ASSETS IN DIRECT OBLIGATIONS OF THE U.S. GOVERNMENT. Direct obligations of the U.S. Government fall into three categories -- bills, notes, and bonds -- distinguished primarily by their maturity at the time of issuance. Treasury bills have maturities of one year or less at the time of issuance. Treasury notes currently have maturities of 1 to 10 years. Treasury bonds can be issued with any maturity of more than 10 years. Because the Government Bond Fund will restrict investments to obligations with a maturity of three years or less, the Government Bond Fund will not acquire Treasury bonds upon issuance, but may acquire previously issued Treasury bonds that will mature within three years of the purchase date. The Government Bond Fund may commit up to 25 percent of its total assets to when-issued and delayed-delivery purchases. Although the Government Bond Fund would have ownership rights to these obligations, it will not be required to pay for them until they are delivered to the Government Bond Fund, normally 15 to 45 days later. Descriptions of when-issued and delayed-delivery purchases are provided under "Additional Information." No security in the portfolio will have a maturity in excess of three years. Securities will be selected on the basis of the Advisor's assessment of interest rate trends. Generally, securities purchased will be of a shorter maturity when interest rates are expected to rise and of longer maturity when interest rates are expected to decline. Shifting the average maturity of the portfolio in response to anticipated changes in interest rates will generally be carried out through the sale of securities and the purchase of different securities within the desired maturity range. This may result in greater realized capital gains and losses than if the Government Bond Fund generally held all securities to maturity. - 23 FUND DESCRIPTIONS ----------------------------------------------------------------- -- INVESTMENT RESTRICTIONS AND -- RISK FACTORS The Government Bond Fund may invest up to 10% of its net assets in repurchase agreements for direct obligations of the U.S. Government. See "Additional Information." A description of the investment restrictions and certain investment practices of the Government Bond Fund is included in the Statement of Additional Information. The principal risk of an investment in the Government Bond Fund is interest rate risk, which is discussed under "Risk Factors." -- COLUMBIA FIXED INCOME -- SECURITIES FUND ------------------------------- The Bond Fund was incorporated on October 12, 1982 under Delaware law and began offering shares to the public on February 25, 1983. The Bond Fund was reincorporated under Oregon law on April 29, 1988. -- INVESTMENT OBJECTIVE -- The Bond Fund seeks to provide shareholders with a high level of income, consistent with preservation of capital. To achieve this objective, the Bond Fund invests in a broad range of fixed income securities, consisting of corporate debt securities (bonds, debentures, and notes), asset-backed securities, bank obligations, collateralized bonds, loan and mortgage obligations, commercial paper, preferred stocks, repurchase agreements, savings and loan obligations, and U.S. Government and agency obligations. Debt securities and preferred stocks may be convertible into, or exchangeable for, common stocks, and may have warrants attached. Information regarding these securities is provided in the Statement of Additional Information. This investment objective may not be changed without a vote of a majority of the outstanding voting securities of the Bond Fund. T O ACHIEVE ITS INVESTMENT OBJECTIVE, THE BOND FUND EXPECTS TO INVEST A MAJOR PORTION (NORMALLY AT LEAST 95%) OF ITS ASSETS IN INVESTMENT-GRADE DEBT SECURITIES. "Investment-grade" debt securities are considered to be those which, at the time of investment are: (a) rated Baa or higher by Moody's; (b) rated BBB or higher by Standard & Poor's; or (c) unrated, but believed by the Advisor to be equivalent to securities with those ratings. Up to 5% of the Bond Fund's assets may be invested in lower-grade securities (rated Ba or B by Moody's or BB or B by Standard & Poor's) when the Advisor believes these securities present attractive investment opportunities despite their speculative characteristics. For information on the risks of lower-rated securities, see "Risk Factors -- Lower-Rated Securities." Although bonds rated Baa or BBB are believed to have adequate capacity to pay principal and interest, they have speculative characteristics because they lack certain protective elements. In addition, the prices of bonds rated Baa or BBB may be more sensitive to adverse economic changes or individual corporate developments than bonds with higher investment ratings. The Fund will evaluate the appropriateness, in light of the then existing circumstances, of retaining any security whose credit rating drops below Baa or BBB after its purchase by the Bond Fund. Additional ratings information is provided under "Additional Information -- Bond Ratings." A portion of the Bond Fund's portfolio will ordinarily be invested in obligations issued by the U.S. Government and its agencies and instrumentalities (such as the Federal Home Loan Mortgage Corp., the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Housing Administration) and in short-term corporate obligations when the Advisor believes the issuer is financially - 24 FUND DESCRIPTIONS ----------------------------------------------------------------- sound. The Bond Fund may also invest in repurchase agreements, which are described under "Additional Information." The Bond Fund will usually invest some portion of its assets in collateralized mortgage obligations ("CMOs") issued by a U.S. agency or instrumentality, or in privately issued CMOs that carry an investment-grade rating. The holder of a CMO is entitled to interest and/or principal payments that are fully collateralized by a portfolio or pool of mortgages or mortgage-backed securities. CMOs are generally issued in different classes, with different priorities as to the receipt of interest and/or principal payments on the underlying mortgages. In addition to the interest rate risk carried by all fixed income securities, mortgage-related securities and CMOs are also subject to risks relating to cash flow uncertainty; that is, the risk that assumed prepayment rates on the underlying mortgages will increase or decrease. Changes in assumed prepayment rates have the effect of shortening or lengthening the effective maturity of the CMO held by the Fund, which may have an adverse effect on the value of the CMO. The Bond Fund will invest only in those CMOs whose characteristics and terms are consistent with the average maturity and market risk profile of the other fixed income securities held by the Fund. There are no limitations on the average maturity of the Bond Fund's portfolio. Securities will be selected on the basis of the Advisor's assessment of interest rate trends and the liquidity of various instruments under prevailing market conditions. Shifting the average maturity of the portfolio in response to anticipated changes in interest rates will generally be carried out through the sale of securities and the purchase of different securities within the desired maturity range. This may result in a greater level of realized capital gains and losses than if the Bond Fund held all securities to maturity. Portfolio decisions will be made solely on the basis of investment, rather than tax, considerations. Generally, the securities purchased will be of an intermediate maturity (less than 10 years) when interest rates are expected to rise and of a relatively long maturity (over 10 years) when interest rates are expected to decline. -- INVESTMENT RESTRICTIONS -- AND RISK FACTORS For information on the risks of investing in the Fund, please see "Risk Factors - -- Credit and Interest Rate Risk." For information on the investment by the Fund in repurchase agreements, illiquid securities, when- issued securities, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the Bond Fund is included in the Statement of Additional Information. -- COLUMBIA MUNICIPAL -- BOND FUND --------------------------- The Municipal Bond Fund was incorporated on October 31, 1983 under Delaware law and began offering shares to the public on July 2, 1984. The Municipal Bond Fund was reincorporated under Oregon law on April 29, 1988. -- INVESTMENT OBJECTIVE -- The Municipal Bond Fund seeks to provide shareholders with as high a level of income exempt from federal income taxes as is consistent with preservation of capital. Consistent with this primary objective, the Municipal Bond Fund seeks to provide shareholders with income exempt from State of Oregon income taxes, and it may concentrate up to 100% of its investments in obligations of Oregon issuers. These investment objectives may not be changed without a vote of a majority of the outstanding voting securities of the Municipal Bond Fund. The Municipal Bond Fund normally expects to invest substantially all of its assets in municipal securities, of which at least 60% are expected to pay interest that is - 25 FUND DESCRIPTIONS ----------------------------------------------------------------- exempt from Oregon income taxes. Municipal securities are debt obligations issued by or on behalf of states, territories, and possessions of the United States and their political subdivisions, agencies, authorities, and instrumentalities, the interest from which, in the opinion of bond counsel, is not includible in gross income for federal income tax purposes. The Municipal Bond Fund may invest temporarily in other securities for defensive purposes. All of the Municipal Bond Fund's bond portfolio will be invested in municipal securities which, at the time of investment, are either: - - general obligation bonds of Oregon or its political subdivisions; - - rated Baa or higher by Moody's or rated BBB or higher by Standard & Poor's; or - - not rated, but believed by its Advisor to be equivalent to securities with those ratings. Although bonds rated Baa or BBB are believed to have adequate capacity to pay principal and interest, they have speculative characteristics because they lack certain protective elements. In addition, the prices of bonds rated Baa or BBB may be more sensitive to adverse economic changes than bonds with a higher investment rating. The Fund will evaluate the appropriateness of retaining any security whose credit rating drops below Baa or BBB after its purchase by the Fund. Additional ratings information is provided under "Additional Information." A LTHOUGH THE MUNICIPAL BOND FUND'S PORTFOLIO WILL BE ACTIVELY MANAGED, THE FUND WILL GENERALLY PURCHASE PORTFOLIO SECURITIES FOR LONG-TERM HOLDINGS. From time to time, the Municipal Bond Fund may invest temporarily in securities that produce income subject to federal income tax. These investments may consist of obligations of the U.S. Government or its agencies or instrumentalities; obligations of U.S. banks (including certificates of deposit, bankers' acceptances, and letters of credit) that are members of the Federal Reserve System and that have capital surplus and undivided profits as of the date of their most recent published financial statement in excess of $100 million; commercial paper rated Prime 1 by Moody's, A-1 or better by Standard & Poor's, or, if not rated, issued by a company that, at the date of investment by the Municipal Bond Fund, has an outstanding debt issue rated AA or better by Standard & Poor's or Aa or better by Moody's; and repurchase agreements for any of these types of investments. Interest earned from these investments will be taxable to investors. Except for temporary defensive purposes, the Municipal Bond Fund will not invest more than 20% of its net assets in securities that produce income subject to federal income tax. The Municipal Bond Fund will generally have an average portfolio maturity of 10 years or longer, although average maturity may be expected to vary when the Advisor anticipates general movements in interest rates. Securities may be purchased or sold at a discount or premium depending upon market conditions at the time of the transaction. Although the Municipal Bond Fund intends to concentrate its investments in municipal securities that are exempt from State of Oregon income taxes, a portion of the interest earned on municipal securities held by the Municipal Bond Fund may be subject to State of Oregon income taxes. The Municipal Bond Fund expects to invest up to 25% of its assets in general obligation bonds of the State of Oregon, including bonds issued by divisions of the State of Oregon and backed by the full faith and credit of the State of Oregon, or any higher percentage permitted from time to time by the Internal Revenue Code. The Municipal Bond Fund expects to invest all or a portion of the balance of its assets in municipal securities of other Oregon issuers, for which there may not be an active trading market, and in obligations of Puerto Rico, Guam, and the possessions of the United States, the interest on which is exempt from State of Oregon - 26 FUND DESCRIPTIONS ----------------------------------------------------------------- income taxes. However, the Municipal Bond Fund may, for liquidity reasons, also invest in actively-traded municipal securities of issuers in other states, the interest on which will be subject to State of Oregon income taxes. -- SPECIAL INVESTMENT CONSIDERATIONS -- Subject to its investment restrictions, the Municipal Bond Fund may engage in a variety of securities transactions, some of which may present special risks as described below. Further information regarding these matters is provided under "Additional Information" and in the Statement of Additional Information. CONCENTRATION IN OREGON BONDS. The Municipal Bond Fund's intent is to concentrate its investments, to the extent possible, in obligations of Oregon issuers and other obligations, the interest on which is exempt from State of Oregon income taxes. This concentration may cause the Municipal Bond Fund's portfolio to be exposed to special risks that do not apply to funds that do not concentrate in obligations of one state. Only investors subject to Oregon personal income taxes will receive the state tax benefits resulting from the concentration in obligations of Oregon issuers. Because most issues of municipal bonds in Oregon, other than certain bonds issued by the State, are relatively small, the Advisor believes there is not an active trading market for municipal bonds of Oregon issuers other than general obligation bonds issued by the State of Oregon. Therefore, relatively small changes in the supply or demand for bonds of these other Oregon issuers can have a large impact on the market price of the bonds. If the Municipal Bond Fund were required to sell bonds held in its portfolio because of redemptions in large amounts or for other reasons, the sale could significantly reduce the market value of these securities, which could result in a reduction in the net asset value of the Fund's shares. To maintain sufficient liquidity in the Municipal Bond Fund's portfolio for normal redemptions, management intends to invest a significant portion of the Municipal Bond Fund's assets in general obligations of the State of Oregon and in municipal bonds of other issuers for which there is an active trading market. However, this strategy will not completely insulate the Municipal Bond Fund's investments from liquidity risk. Certain municipal securities purchased by the Municipal Bond Fund from Oregon issuers may rely in whole or in part on ad valorem real property taxes as a source of revenue for the payment of principal and interest. There are state constitutional and statutory limitations on the issuance of bonds payable from tax revenues. In November 1990, Oregon voters passed a statewide initiative (Measure 5) that limits ad valorem property taxes, subject to certain exceptions. These exceptions include ad valorem property taxes levied to pay general obligation indebtedness that is specifically approved by the voters, general obligation indebtedness outstanding at the time of the adoption of Measure 5, and general obligation indebtedness specifically authorized by other provisions of the Oregon Constitution. A new ad valorem property tax limitation constitutional amendment adopted by the voters in May 1997 (Measure 50) "rolls back" ad valorem property taxes and generally limits future property tax increases. As a result, there is expected to be a significant reduction in the amount of ad valorem property tax revenues available to local governments to fund operations that have traditionally been financed from these taxes. The State of Oregon does not impose any ad valorem property taxes to fund state operations, but it is expected that the State will provide financial support to school districts and certain units of local government adversely affected by Measure 5 or Measure 50. In addition, recent constitutional amendments relating to criminal sentencing are expected to require the State to undertake a major program of prison financing and expansion in the near future. Limitations on ad valorem property taxes and the revenue replacement efforts by the State are expected to continue to have a significant effect on the operating funds available to state and local - 27 FUND DESCRIPTIONS ----------------------------------------------------------------- governments. Limiting the ability of governments to issue new general obligation debt because of limits on property tax revenues could reduce the number of municipal bonds of Oregon issuers available for purchase by the Municipal Bond Fund and could adversely affect the market value of bonds issued by Oregon issuers generally. Because of the Municipal Bond Fund's concentration in obligations of Oregon issuers, unfavorable economic conditions in Oregon could adversely affect the market value of municipal bonds held by the Municipal Bond Fund or the ability of these issuers to make required payments. For example, proposed restrictions on the level of timber harvests on federal and private lands, if adopted, could have a generally negative economic effect, particularly in certain rural counties that receive significant direct revenues based on timber harvests. In addition, any restrictions on the use and control of river and stream waters to protect diminishing salmon runs could adversely affect electricity rates, agricultural development, commercial and recreational fishing industries, and the costs of river navigation. -- INVESTMENT RESTRICTIONS -- AND RISK FACTORS For additional information on the risks of investing in the Fund, please see "Risk Factors -- Credit and Interest Rate Risk." New issues of municipal bonds are usually offered on a when-issued basis, with delivery and payment normally taking place within 45 days after the date of the commitment to purchase. The Municipal Bond Fund may invest in repurchase agreements. Descriptions of repurchase agreements and when-issued and delayed-delivery purchases are provided under "Additional Information." A description of other investment restrictions and certain investment practices of the Municipal Bond Fund is included in the Statement of Additional Information. -- COLUMBIA HIGH YIELD FUND -- ----------------------------------- The Columbia High Yield Fund was incorporated on June 30, 1993 under Oregon law and began offering shares to the public on October 1, 1993. -- INVESTMENT OBJECTIVE -- The High Yield Fund's primary investment objective is to provide shareholders with a high level of current income by investing primarily in lower-rated fixed income securities. Capital appreciation is a secondary objective when consistent with the objective of high current income. The High Yield Fund may invest in the same types of fixed income securities as the Bond Fund. See "Columbia Fixed Income Securities Fund -- Investment Objective." The High Yield Fund's objective may not be changed without a vote of a majority of the outstanding voting securities of the Fund. To achieve its investment objective, the High Yield Fund generally will invest at least 65% of its total assets in high yielding fixed income securities rated Ba or lower by Moody's or BB or lower by Standard & Poor's. Because the Fund intends to invest primarily in "upper tier" noninvestment grade securities (that is, BB- or B-rated), no more than 10% of the Fund's total assets will be invested in fixed income securities rated Caa or lower by Moody's or CCC or lower by Standard & Poor's. The Fund may also invest in unrated fixed income securities when the Advisor believes the security is of comparable quality to that of securities eligible for purchase by the Fund. If the credit rating of a security drops below the rating it held when purchased by the Fund, the Fund will evaluate the appropriateness of retaining that security. T HE FUND INTENDS TO INVEST PRIMARILY IN "UPPER TIER" NONINVESTMENT-GRADE SECURITIES (THAT IS, BB- OR B-RATED). - 28 FUND DESCRIPTIONS ----------------------------------------------------------------- Securities rated Ba or less by Moody's or BB or less by Standard & Poor's are considered to be noninvestment grade. These types of bonds are commonly referred to as "junk bonds." They are subject to a high degree of risk, and are considered speculative by the major credit rating agencies with respect to the issuer's ability to meet principal and interest payments. The High Yield Fund is designed for investors who are willing to assume substantial risks of significant fluctuations in principal value in order to achieve a high level of current income. The Fund should represent only a portion of a balanced investment program. See "Risk Factors" for a description of the risks of investing in lower-rated securities and "Additional Information" for a description of corporate bond ratings. The table below shows the ratings assigned to the fixed income securities held by the High Yield Fund during 1997. These figures, expressed as a percentage of total net assets, are dollar-weighted averages of month-end holdings for 1997. The Fund did not hold any securities unrated by either Moody's or Standard & Poor's or securities rated above Baa/BBB or below B/B during 1997. -- 1997 HIGH YIELD FUND BOND RATINGS --
MOODY'S STANDARD & POOR'S - ----------------------- ----------------------- RATING AVERAGE RATING AVERAGE - ---------- ----------- ---------- ----------- BAA 0.4% BBB 7.7% BA 41.6% BB 43.8% B 50.6% B 41.0%
There are no limitations on the average maturity of the High Yield Fund's portfolio. Securities will be selected on the basis of the Advisor's assessment of interest rate trends and the liquidity of various instruments under prevailing market conditions. Shifting the average maturity of the portfolio in response to anticipated changes in interest rates generally will be carried out through the sale of securities and the purchase of different securities within the desired maturity range. This may result in greater realized capital gains and losses than if the Fund held all securities to maturity. Portfolio decisions will be made solely on the basis of investment, rather than tax, considerations. The High Yield Fund may invest in corporate debt securities or preferred stocks that are convertible into or exchangeable for common stock. The Fund may acquire common stock in the following circumstances: - - in connection with the purchase of a unit of securities that includes both fixed income securities and common stock - - when fixed income securities held by the Fund are converted by the issuer into common stock - - upon the exercise of warrants attached to fixed income securities held by the Fund - - when purchased as part of a corporate transaction in which the holders of common stock will receive newly issued fixed income securities Common stock acquired by the Fund in these circumstances may be held to permit orderly disposition or to establish long-term holding periods for income tax purposes. The High Yield Fund may invest up to 10% of its total assets in fixed income securities of foreign issuers, including foreign governments, denominated in U.S. dollars. Special tax considerations are associated with investing in lower-rated debt securities structured as zero coupon or pay-in-kind securities. A zero coupon security has no cash coupon payments. Instead, the issuer sells the security at a substantial discount from its maturity value. The interest equivalent received by the investor from holding this security to maturity is the difference between the maturity value and the purchase price. Pay-in-kind securities are securities that pay interest in either cash or additional securities, at the issuer's option, for a specified period. The price of pay-in-kind securities is expected to reflect the market value of the underlying debt plus an amount representing accrued interest - 29 FUND DESCRIPTIONS ----------------------------------------------------------------- since the last payment. Zero coupon and pay-in-kind securities are more volatile than cash pay securities. The High Yield Fund accrues income on these securities prior to the receipt of cash payments. The Fund intends to distribute substantially all of its income to its shareholders to qualify for pass-through treatment under the tax laws and may, therefore, need to use its cash reserves to satisfy distribution requirements. -- INVESTMENT RESTRICTIONS -- AND RISK FACTORS For information on the risks of investing in the Fund, including the specific risks of lower-rated securities, please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, loan transactions, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the High Yield Fund is included in the Statement of Additional Information. - 30 RISK FACTORS ----------------------------------------------------------------- An investment in any mutual fund, including any of the Columbia Funds, involves certain risks, some of which are explained under the description of each Fund. General market risk and other specific risks associated with different types of securities used by the Funds, including foreign securities, lower-rated bonds, and stocks of small companies, are discussed below. STOCK MARKET RISK. The principal risk associated with a stock mutual fund is that the stocks held by the fund will decline in value. Stock values may fluctuate in response to the activities and financial prospects of an individual company or in response to general market and economic conditions. Investments in smaller or unseasoned companies may be both more volatile and more speculative. See "Investments in Small and Unseasoned Companies." A LTHOUGH COMMON STOCKS HAVE HISTORICALLY PROVIDED LONG-TERM RETURNS THAT ARE GREATER THAN OTHER TYPES OF INVESTMENTS, STOCK RETURNS HAVE ALSO BEEN MORE VOLATILE OVER SHORTER PERIODS OF TIME. PORTFOLIO TURNOVER. Each Fund generally intends to purchase securities for long-term investment rather than short-term gains. When circumstances warrant, however, a Fund may sell securities without regard to the length of time they have been held. This may result in a higher portfolio turnover rate and increase a Fund's transaction costs, including brokerage commissions. To the extent short-term trades result in gains on securities held eighteen months or less, shareholders will be subject to taxes at ordinary income rates or at the higher of the two capital gains rates. See "Distributions and Taxes." Historical portfolio turnover rates for all Funds are shown in the "Financial Highlights" section. FOREIGN SECURITIES. The International Stock Fund, and to a much lesser extent the other Stock Funds and the Balanced Fund, are subject to the risks of investing in foreign securities. Foreign securities, which are generally denominated in foreign currencies, and forward currency exchange contracts involve risks not typically associated with investing in domestic securities. The value of a Fund's portfolio will be affected by changes in currency exchange rates and in currency exchange regulations to the extent the Fund holds foreign securities. Foreign securities may be subject to foreign taxes that would reduce their effective yield. Certain foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes is recoverable, the unrecovered portion of any foreign withholding taxes would reduce the income a Fund receives from its foreign investments. Foreign investments involve certain other risks, including possible political or economic instability of the country of the issuer, the difficulty of predicting international trade patterns, and the possibility of currency exchange controls. Foreign securities may also be subject to greater fluctuations in price than domestic securities. There may be less publicly available information about a foreign company than about a domestic company. Foreign companies generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those of domestic companies. There is generally less government regulation of stock exchanges, brokers, and listed companies abroad than in the United States. In addition, with respect to certain foreign countries, there is a possibility of the adoption of a policy to withhold dividends at the source, or of expropriation, nationalization, confiscatory taxation, or diplomatic developments that could affect investments in those countries. Finally, in the event of default on a foreign debt obligation, it may be more difficult for a Fund to obtain or enforce a judgment against the issuers of the obligation. The Funds will normally execute their portfolio securities transactions on the principal stock exchange on which the security is traded. - 31 RISK FACTORS ----------------------------------------------------------------- The International Stock Fund may invest a portion of its assets in developing countries or in countries with new or developing capital markets, such as countries in Eastern Europe, Latin America, South America or Southeast Asia. The considerations noted above regarding the risk of investing in foreign securities are generally more significant for these investments. These countries may have relatively unstable governments and securities markets in which only a small number of securities trade. Markets of developing or emerging countries may generally be more volatile than markets of developed countries. Investments in these markets may involve significantly greater risks, as well as the potential for greater gains. In addition to investing directly in foreign equity securities, the Funds may also purchase such securities in the form of American Depository Receipts ("ADRs") and Global Depository Receipts ("GDRs"). ADRs in registered form are dollar-denominated securities designed for use in the U.S. securities markets. ADRs are sponsored and issued by domestic banks and represent and may be converted into underlying foreign securities deposited with the domestic bank or a correspondent bank. ADRs do not eliminate the risks inherent in investing in the securities of foreign issuers. By investing in ADRs rather than directly in the foreign security, however, a Fund may avoid currency risks during the settlement period for either purchases or sales. There is a large, liquid market in the United States for most ADRs. GDRs are receipts representing an arrangement with a major foreign bank similar to that for ADRs. GDRs are not necessarily denominated in the currency of the underlying security. Additional costs may be incurred in connection with a Fund's foreign investments. Foreign brokerage commissions are generally higher than those in the United States. Expenses may also be incurred on currency conversions when a Fund moves investments from one country to another. Increased custodian costs as well as administrative difficulties may be experienced in connection with maintaining assets in foreign jurisdictions. REAL ESTATE SECURITIES. The Real Estate Fund may be subject to risks similar to those associated with the direct ownership of real estate (in addition to securities market risks) because of its policy of concentrating in the securities of companies in the real estate industry. These risks include declines in the value of real estate, risks related to general, local, and regional economic conditions, dependence on management skills and heavy cash flow, possible lack of availability of mortgage funds, overbuilding, extended vacancies of properties, increased competition, increases in property taxes and operating expenses, changes in zoning laws, losses due to costs resulting from the clean-up of environmental problems, liability to third parties for damages resulting from environmental problems, casualty or condemnation losses, natural disasters, limitations on rents, changes in neighborhood values and the appeal of properties to tenants, and changes in interest rates. These risks may be more significant to the extent the Fund's investments are concentrated in a particular geographic region. T HE REAL ESTATE FUND INVESTS IN SECURITIES ISSUED BY COMPANIES IN THE REAL ESTATE INDUSTRY. THE FUND WILL NOT INVEST IN REAL ESTATE DIRECTLY. In addition to these risks, equity REITs may be affected by changes in the value of the underlying property owned by the REIT, while mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon management skills, may not be diversified, and are subject to heavy cash flow dependency, defaults by borrowers, and self-liquidation. In addition, a REIT could fail to qualify for tax-free pass-through of income under the Internal Revenue Code or fail to maintain its exemption from registration under the Investment Company Act. The above factors may also adversely affect a borrower's or a lessee's ability to meets its obligations to the REIT. If a borrower or lessee defaults, a REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments. - 32 RISK FACTORS ----------------------------------------------------------------- INVESTMENTS IN SMALL AND UNSEASONED COMPANIES. Investments by the International Stock Fund, the Special Fund and the Small Cap Fund in small or unseasoned companies may be regarded as speculative. These companies may have limited or unprofitable operating histories, limited financial resources, and inexperienced management. In addition, they often face competition from larger or more established firms that have greater resources. Securities of small and young companies are frequently traded in the over-the-counter market or on regional exchanges where low trading volumes may result in erratic or abrupt price movements. To dispose of these securities, a Fund may have to sell them over an extended period of time or below the original purchase price. Because of these factors, an investment in these Funds may be subject to greater price fluctuations than an investment in a fund that invests primarily in larger, more established companies. SPECIAL SITUATIONS. Special situations are those in which the Advisor to the Special Fund and Small Cap Fund expects a substantial change in the market value of a company's securities due to a new development. An example would be a small company expected to emerge as a leader in a new business area. Other special situations include acquisitions, mergers, reorganizations, management changes, product developments, and the awarding of large contracts. Because these types of situations may involve major corporate changes and a high degree of uncertainty as to market effects, investments in special situations are characterized by higher risk as well as the potential for higher returns. CREDIT AND INTEREST RATE RISK. All fixed income securities are subject to two types of risk: credit risk and interest rate risk. Credit risk refers to the ability of the issuer to meet interest and principal payments when due. Generally, lower-rated (but higher yielding) bonds, such as those acquired by the High Yield Fund, are subject to greater credit risk than higher quality (but lower yielding) bonds, such as those held by the Bond Fund. See "Risk Factors -- Lower-Rated Securities." The ratings of fixed income securities by Moody's and Standard & Poor's are a generally accepted barometer of credit risk. See "Additional Information -- Bond Ratings." Interest rate risk refers to fluctuations in the net asset value of any portfolio of fixed income securities resulting from the inverse relationship between the price of fixed income securities and interest rates. W HEN INTEREST RATES RISE, BOND PRICES GENERALLY FALL AND, CONVERSELY, WHEN INTEREST RATES FALL, BOND PRICES GENERALLY RISE. The change in net asset value depends upon several factors, including a bond's maturity date. In general, bonds with longer maturities are more sensitive to interest rate changes than bonds with shorter maturities. LOWER-RATED SECURITIES. The lower-rated but higher yielding bonds purchased by the High Yield Fund may be issued in connection with corporate restructurings, such as leveraged buyouts, mergers, acquisitions, debt recapitalizations, or similar events. In addition, high yield bonds are often issued by smaller, less creditworthy companies or by companies with substantial debt. The securities ratings by Moody's and Standard & Poor's are based largely on the issuer's historical financial condition and the rating agency's investment analysis at the time of the rating. As a result, the rating assigned to a security does not necessarily reflect the issuer's current financial condition, which may be better or worse than the rating indicates. Credit ratings are only one factor the Advisor relies on in evaluating lower-rated fixed income securities. The analysis by the Advisor of a lower-rated security may also include consideration of the issuer's experience and managerial strength, changing financial condition, borrowing requirements or debt maturity schedules, regulatory concerns, and responsiveness to changes in business conditions and interest rates. The Advisor also - 33 RISK FACTORS ----------------------------------------------------------------- may consider relative values based on anticipated cash flow, interest or dividend coverage, balance sheet analysis, and earnings prospects. B ECAUSE OF THE NUMBER OF INVESTMENT CONSIDERATIONS INVOLVED IN INVESTING IN LOWER-RATED SECURITIES, ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE MAY BE MORE DEPENDENT UPON THE ADVISOR'S CREDIT ANALYSIS THAN IS THE CASE WITH INVESTING IN HIGHER QUALITY DEBT SECURITIES. The market for lower-rated debt securities is relatively new and until recently its growth has paralleled a long economic expansion. Past experience, therefore, may not provide an accurate indication of future performance of this market, particularly during an economic recession. An economic downturn or increase in interest rates is likely to have a greater negative effect on the ability of the issuers of the High Yield Fund's securities to pay principal and interest, meet projected business goals, and obtain additional financing. These circumstances also may result in a higher incidence of defaults compared to higher-rated securities. As a result, adverse changes in economic conditions and increases in interest rates may adversely affect the market for lower-rated debt securities, the value of such securities in the Fund's portfolio, and, therefore, the Fund's net asset value. As a result, investment in the Fund is more speculative than investment in a fund that invests primarily in higher-rated debt securities. Although the High Yield Fund intends generally to purchase lower-rated securities that have secondary markets, these markets may be less liquid and less active than markets for higher-rated securities. These factors may limit the ability of the Fund to sell lower-rated securities at their expected value. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of lower-rated debt securities, especially in a thinly traded market. If market quotations are not readily available for the Fund's lower-rated or nonrated securities, these securities will be valued by a method the Advisor believes accurately reflects fair value. Judgment plays a greater role in valuing lower-rated debt securities than it does in valuing securities for which more extensive quotations and last sale information are available. - 34 PERFORMANCE ----------------------------------------------------------------- This section is designed to help you understand terms used to describe Fund performance, such as "total return," "average annual total return," and "yield." For additional information on yield and total return calculations for each of the Funds, see the Statement of Additional Information. -- UNDERSTANDING "RETURN" -- "TOTAL RETURN" REFERS TO THE CHANGE IN VALUE OF AN INVESTMENT IN A FUND OVER A STATED PERIOD, ASSUMING THE REINVESTMENT OF ANY DIVIDENDS AND CAPITAL GAINS. "AVERAGE ANNUAL TOTAL RETURN" IS A HYPOTHETICAL RATE OF RETURN THAT, IF ACHIEVED ANNUALLY, WOULD HAVE PRODUCED THE SAME TOTAL RETURN IF PERFORMANCE HAD BEEN CONSTANT OVER THE ENTIRE PERIOD. AVERAGE ANNUAL TOTAL RETURNS SMOOTH OUT THE VARIATIONS IN PERFORMANCE BUT ARE NOT THE SAME AS ACTUAL ANNUAL RESULTS. -- YIELD -- The Money Market Fund, the Common Stock Fund, the Real Estate Fund, the Balanced Fund, and each of the Bond Funds will, from time to time, advertise or quote current yields. The current yield of the Money Market Fund refers to the net income generated by an investment in that Fund over a stated seven-day period. This income is then annualized. This means that the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The Money Market Fund may also advertise or quote its compound effective yield, which is calculated similarly, but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The compound effective yield will be slightly higher than the current yield because of the compounding effect of this assumed reinvestment. - -------------------------------------------------------------------------------- FUND PERFORMANCE - ----------------------------------------------------------------- The table below shows yield and total return performance information for the periods ended December 31, 1997.
AVERAGE ANNUAL TOTAL RETURN ----------------------------------- CURRENT SINCE YIELD 1 YEAR 5 YEAR 10 YEAR INCEPTION* Stock Funds Common Stock Fund............................... 1.48% 25.37% 18.66% N/A 18.11% Growth Fund..................................... N/A 26.32% 17.91% 16.81% 13.75% International Stock Fund........................ N/A 11.47% 12.19% N/A 11.59% Special Fund.................................... N/A 12.64% 15.48% 19.19% 18.38% Small Cap Fund.................................. N/A 34.10% N/A N/A 35.76% Real Estate Fund................................ 3.82%+ 24.74% N/A N/A 20.82% Balanced Fund Balanced Fund................................... 3.85% 18.74% 13.55% N/A 13.46% Bond Funds Government Bond Fund............................ 4.92% 5.76% 5.09% 6.79% 6.49% Bond Fund....................................... 6.35% 9.56% 7.53% 9.24% 9.66% Municipal Bond Fund............................. 4.17% 8.36% 6.26% 7.54% 9.04% High Yield Fund................................. 7.57%++ 12.70% N/A N/A 9.40% Money Market Fund Money Market Fund............................... 5.21%** 5.11% 4.35% 5.43% 7.29% Market Comparisons S&P 500 Stock Index............................. 33.36% 20.27% 18.04% N/A Russell 2000 Stock Index........................ 22.36% 16.40% 15.77% N/A Lehman Agg. Bond Index.......................... 9.65% 7.48% 9.18% N/A TOTAL RETURN --------------------------------------------- 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION* Stock Funds Common Stock Fund............................... 25.37% 135.28% N/A 185.31% Growth Fund..................................... 26.32% 127.87% 373.12% 5051.86% International Stock Fund........................ 11.47% 77.75% N/A 78.81% Special Fund.................................... 12.64% 105.35% 478.79% 670.54% Small Cap Fund.................................. 34.10% N/A N/A 44.32% Real Estate Fund................................ 24.74% N/A N/A 105.15% Balanced Fund Balanced Fund................................... 18.74% 88.80% N/A 121.60% Bond Funds Government Bond Fund............................ 5.76% 28.17% 92.95% 102.32% Bond Fund....................................... 9.56% 43.76% 141.96% 295.12% Municipal Bond Fund............................. 8.36% 35.48% 106.80% 221.62% High Yield Fund................................. 12.70% N/A N/A 47.17% Money Market Fund Money Market Fund............................... 5.11% 23.70% 69.67% 411.81% Market Comparisons S&P 500 Stock Index............................. 33.36% 151.67% 425.33% N/A Russell 2000 Stock Index........................ 22.36% 113.71% 332.54% N/A Lehman Agg. Bond Index.......................... 9.65% 43.42% 140.59% N/A
* INCEPTION DATES: COMMON STOCK FUND 10/1/91; GROWTH FUND 6/16/67; INTERNATIONAL STOCK FUND 10/1/92; SPECIAL FUND 11/20/85; SMALL CAP FUND 10/1/96; REAL ESTATE FUND 4/1/94; BALANCED FUND 10/1/91; GOVERNMENT BOND FUND 11/6/86; BOND FUND 2/25/83; MUNICIPAL BOND FUND 7/2/84; HIGH YIELD FUND 10/1/93; MONEY MARKET FUND 10/1/74. ** COMPOUND YIELD 5.35%. + SOME PORTION OF THE NET INVESTMENT INCOME OF THE REAL ESTATE FUND USED TO CALCULATE CURRENT YIELD IS A TAX RETURN OF CAPITAL. SEE "DISTRIBUTIONS AND TAXES." ++ WITHOUT THE REIMBURSEMENT OF CERTAIN EXPENSES BY THE HIGH YIELD FUND'S ADVISOR, THE CURRENT YIELD WOULD HAVE BEEN 7.55%. - 35 PERFORMANCE ----------------------------------------------------------------- The current yield for the Common Stock Fund, the Real Estate Fund, the Balanced Fund, and each of the Bond Funds represents the annualization of the Fund's net investment income over a recent 30-day period divided by that Fund's net asset value at the end of that period. -- PERFORMANCE COMPARISONS -- The Funds may compare their performance to other mutual funds and to the mutual fund industry as a whole, as quoted by ranking services such as Lipper Analytical Services, Inc. or Morningstar, Inc., or as reported in financial publications such as BARRON'S, BUSINESS WEEK, FORBES, MONEY MAGAZINE, and THE WALL STREET JOURNAL. The Funds may also compare their performance to that of a recognized stock or bond index, such as the S&P 500 Stock Index, the Russell 2000 Stock Index, the Lehman Aggregate Bond Index, and other relevant indices. Unmanaged indices may assume the reinvestment of dividends, but generally do not reflect deductions for administrative and management costs and expenses. P ERFORMANCE INFORMATION ON THE FUNDS DOES NOT GUARANTEE FUTURE RESULTS. SHARE PRICE AND RETURNS WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES OF A FUND (EXCEPT, UNDER NORMAL CIRCUMSTANCES, FOR THE MONEY MARKET FUND). In addition, the Funds may also compare their performance to other income-producing securities such as: (i) money market funds; (ii) various bank products (such as certificates of deposit and money market deposit accounts); and (iii) U.S. Treasury bills or notes. There are differences between these income-producing alternatives and the Funds other than their yields. For example, the yields of the Funds are not fixed and will fluctuate. In addition, your investment is not insured and its yield is not guaranteed. Although the yields of bank money market deposit accounts will fluctuate, principal will not fluctuate and is insured by the Federal Deposit Insurance Corporation up to $100,000. Bank passbook savings accounts normally offer a fixed rate of interest, and their principal and interest are also guaranteed and insured up to $100,000. Bank certificates of deposit offer fixed or variable rates for a set term. Principal and fixed rates are guaranteed and insured. There is no fluctuation in principal value. Withdrawal of these deposits before maturity will normally be subject to a penalty. - 36 FUND MANAGEMENT ----------------------------------------------------------------- -- BOARD OF DIRECTORS -- Each Fund is managed under the supervision of its Board of Directors, which has responsibility for overseeing decisions relating to the investment policies and objectives of the Fund. The Board of Directors of each Fund meets quarterly to review the Fund's investment policies, performance, expenses, and other business matters. -- INVESTMENT ADVISOR -- Each Fund has contracted with Columbia Funds Management Company (the "Advisor") to provide investment advisory services. The Advisor, subject to general oversight responsibility of each Fund's Board of Directors, is responsible for the overall management of the Fund's business affairs. The Advisor or its predecessor has acted in this capacity since 1967. The Advisor is an indirect wholly owned subsidiary of Fleet Financial Group, Inc. ("Fleet"), a publicly owned multibank holding company registered under the Bank Holding Company Act of 1956 with total assets of approximately $85 billion at December 31, 1997. The address of the Advisor is 1300 S.W. Sixth Avenue, P.O. Box 1350, Portland, Oregon 97207-1350. Under each investment advisory contract, the Advisor provides research, advice, and supervision with respect to investment matters and determines what securities to purchase or sell and what portion of the Fund's assets to invest. The Advisor provides office space and pays all executive salaries and expenses of each Fund (other than the expense of clerical services relating to the administration of the Fund). The investment advisory fee of each Fund is accrued daily and paid monthly based on the following fee schedule: -- ADVISOR FEE SCHEDULE --
ANNUAL RATE (AS A PERCENTAGE OF DAILY NET FUND ASSETS) - --------------------- ----------------------------- BALANCED FUND 0.50% ON ALL ASSETS GOVERNMENT BOND FUND BOND FUND MUNICIPAL BOND FUND - ---------------------------------------------------- MONEY MARKET FUND 0.50% ON FIRST $500 MILLION 0.45% ON NEXT $500 MILLION 0.40% ON ASSETS OVER $1 BILLION - ---------------------------------------------------- COMMON STOCK FUND 0.60% ON ALL ASSETS HIGH YIELD FUND - ---------------------------------------------------- GROWTH FUND 0.75% ON FIRST $200 MILLION 0.625% ON NEXT $300 MILLION 0.50% ON ASSETS OVER $500 MILLION - ---------------------------------------------------- REAL ESTATE FUND 0.75% ON ALL ASSETS - ---------------------------------------------------- SPECIAL FUND 1.00% ON FIRST $500 MILLION 0.75% ON ASSETS OVER $500 MILLION - ---------------------------------------------------- INTERNATIONAL STOCK 1.00% ON ALL ASSETS FUND SMALL CAP FUND
The advisory fees for the Small Cap Fund, the Real Estate Fund, the Special Fund, and the International Stock Fund, while comparable to the fees paid by other mutual funds with similar investment objectives, are higher than the fees paid by most mutual funds. For the year ended December 31, 1997, the investment advisory fees incurred by the Funds, expressed as a percentage of average net assets, were as follows: Common Stock Fund 0.60% Growth Fund 0.58% International Stock Fund 1.00% Special Fund 0.84% Small Cap Fund 1.00% Real Estate Fund 0.75% Balanced Fund 0.50% Money Market Fund 0.48% Government Bond Fund 0.50% Bond Fund 0.50% Municipal Bond Fund 0.50% High Yield Fund 0.60%
- 37 FUND MANAGEMENT ----------------------------------------------------------------- The Advisor has entered into an agreement with Columbia Management Co. ("CMC"), under which CMC provides the Advisor with statistical and other factual information, advice regarding economic factors and trends, and advice as to occasional transactions in specific securities. CMC, upon receipt of specific instructions from the Advisor, also contacts brokerage firms to conduct securities transactions for the Funds. The Advisor pays CMC a fee for these services. A Fund's expenses are not increased by this arrangement, and no amounts are paid by a Fund to CMC under this agreement. CMC is an indirect wholly owned subsidiary of Fleet. Each Fund assumes the following costs and expenses: costs relating to corporate matters; cost of services to shareholders; transfer and dividend paying agent fees; custodian fees; legal, auditing, and accounting expenses; disinterested directors' fees; taxes and governmental fees; interest; brokers' commissions; transaction expenses; cost of stock certificates and any other expenses (including clerical expenses) of issue, sale, repurchase, or redemption of its shares; expenses of registering or qualifying its shares for sale; transfer taxes; all expenses of preparing its registration statements, prospectuses, and reports; and the cost of printing and delivering to shareholders its prospectuses and reports. Information on each Fund's expenses as a percentage of its average net assets is located under "Fund Expenses" and "Financial Highlights." The Advisor may use its broker-dealer affiliates and other firms that sell Fund shares to carry out a Fund's transactions, provided that the Fund receives brokerage services and commission rates comparable to those of other broker-dealers. Third-party administrators of tax-qualified retirement plans and other financial institutions ("Financial Intermediaries") may establish omnibus accounts with the Funds and provide sub-transfer agency, recordkeeping, or other services to participants and beneficial owners in the omnibus accounts. In recognition that these arrangements reduce or eliminate the need for the Fund's transfer agent to provide such services, the Funds and the Advisor may pay the Financial Intermediary a sub-transfer agent or recordkeeping fee. All Financial Intermediaries enter into an agreement with the Funds that authorizes them to accept purchase and redemption orders on behalf of the Funds. The Fund will be deemed to have received a purchase or redemption order when an authorized Financial Intermediary or its delegate accepts the order. The order will be priced at the Fund's net asset value next computed after it is accepted by the Financial Intermediary or its delegate. T HE ADVISOR HAS VOLUNTARILY AGREED TO ASSUME THE ORDINARY RECURRING EXPENSES OF THE HIGH YIELD FUND FOR 1997 TO THE EXTENT THESE EXPENSES, TOGETHER WITH THE FUND'S ADVISORY FEE, EXCEED 1% OF THE FUND'S AVERAGE NET ASSETS FOR THOSE PERIODS. -- COLUMBIA INVESTMENT TEAM -- The Advisor uses an investment team approach to analyze investment themes and strategies for the Funds. Thomas L. Thomsen, President, Chief Investment Officer and Director of the Advisor, supervises the Investment Team in establishing these broad investment themes and strategies and determining portfolio guidelines for each of the Funds. Prior to joining the Investment Team in 1978, Mr. Thomsen was a Senior Investment Officer for the Treasury Department of the State of Oregon (1974-1978) and a Fixed Income Portfolio Manager for First National Bank of Oregon (1969-1973). Members of the Investment Team are responsible for the analysis of particular industries or types of fixed income securities and for recommendations on individual securities within those industries or asset categories. See "Fund Descriptions -- A Team Approach to Investing." Investment decisions for a Fund are then made by the Investment Team and, for most Funds, a portfolio manager who is principally responsible for investment decisions on behalf of the Fund. COMMON STOCK FUND. The Common Stock Fund is managed by the Columbia Investment Team. Based - 38 FUND MANAGEMENT ----------------------------------------------------------------- on an analysis of macro-economic factors and the investment environment, the Asset Allocation Committee is responsible for determining the sector or industry weightings within the Fund. Individual members of the Investment Team then select securities within the sectors or asset classes over which they have research and analytic responsibility. See "Fund Descriptions -- A Team Approach to Investing." GROWTH FUND. Alexander S. Macmillan (since 1992), a Vice President of the Advisor and a Chartered Financial Analyst. Prior to joining the Investment Team in 1989, Mr. Macmillan was a Vice President and Portfolio Manager for Gardner & Preston Moss (1982-1989). Mr. Macmillan received a Masters of Business Administration from the Amos Tuck School at Dartmouth College in 1980. INTERNATIONAL STOCK FUND. James M. McAlear (since inception of the Fund in 1992), a Vice President of the Advisor. Prior to joining the Investment Team in 1992, Mr. McAlear was a Senior Vice President of IDS International, Inc. (1985-1992) and an Executive Director for Merrill Lynch Europe (1972-1985). Mr. McAlear received an M.A. in Economics from Michigan State University in 1964. SPECIAL FUND. Alan J. Folkman (since 1997). Mr. Folkman also served as portfolio manager of the Special Fund from its inception in 1985 through June 1994. SMALL CAP FUND. Richard J. Johnson (since inception of the Fund in 1996), a Vice President of the Advisor and a Chartered Financial Analyst. Before joining Columbia, Mr. Johnson served as a Portfolio Manager and Analyst at Provident Investment Counsel (1990-1994). A 1980 graduate of Occidental College, Mr. Johnson received a Masters of Business Administration from the Anderson School of Management at UCLA in 1990. REAL ESTATE FUND. David W. Jellison (since inception of the Fund in 1994), a Vice President of the Advisor and a Chartered Financial Analyst. Prior to joining the Investment Team in 1992, Mr. Jellison was a Senior Research Associate for RCM Capital Management (1987-1992). Mr. Jellison received a Master of Management from the J. L. Kellogg Graduate School of Management of Northwestern University in 1984. BALANCED FUND. The Balanced Fund is managed by the Columbia Investment Team. The Asset Allocation Committee is responsible for determining the Fund's portfolio weightings in stocks, bonds and cash investments based on an analysis of macro-economic factors and the investment environment. That committee is also responsible for deciding the sector or industry weightings of the equity portion of the Fund. The Investment Team members responsible for the Columbia Bond Funds determine the sector emphasis between different types of fixed income securities. Individual members of the Investment Team select the securities within the sector or asset classes over which they have research and analytic responsibility. See "Fund Descriptions -- A Team Approach to Investing." MONEY MARKET FUND. Leonard A. Aplet (since 1988), a Vice President of the Advisor and a Chartered Financial Analyst. Mr. Aplet received a Masters of Business Administration from the University of California at Berkeley prior to joining the Investment Team in 1987. GOVERNMENT BOND FUND. Jeffrey L. Rippey (since 1987), a Vice President of the Advisor and a Chartered Financial Analyst. Prior to joining the Investment Team in 1981, Mr. Rippey worked in the Trust Department of Rainier National Bank (1978-1981). BOND FUND. Leonard A. Aplet and Jeffrey L. Rippey (both since 1989). MUNICIPAL BOND FUND. Greta R. Clapp (since 1992), a Vice President of the Advisor and a Chartered Financial Analyst. Prior to joining the Investment Team in 1991, Ms. Clapp received her Masters of Business Administration from the University of Michigan (1990) and was an Assistant Vice President and Portfolio Manager at The Putnam Companies (1985-1988). HIGH YIELD FUND. Jeffrey L. Rippey (since inception of the Fund in 1993). - 39 FUND MANAGEMENT ----------------------------------------------------------------- -- PERSONAL TRADING -- Members of the Investment Team and other personnel of the Funds or the Advisor are permitted to trade securities for their own or family accounts, subject to the rules of the Code of Ethics adopted by the Funds and the Advisor. The Funds have adopted the recommendations of the Investment Company Institute, an organization composed of members of the mutual fund industry, relating to restrictions on personal trading. For more information on the Code of Ethics and specific trading restrictions, see the Statement of Additional Information. T HE RULES THAT GOVERN PERSONAL TRADING BY INVESTMENT PERSONNEL ARE BASED ON THE PRINCIPLE THAT EMPLOYEES OWE A FIDUCIARY DUTY TO CONDUCT THEIR TRADES IN A MANNER THAT IS NOT DETRIMENTAL TO THE FUNDS OR THEIR SHAREHOLDERS. -- OTHER SERVICE PROVIDERS -- TRANSFER AGENT. Columbia Trust Company acts as transfer agent and dividend paying agent for the Funds. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350, Portland, Oregon 97207-1350. The transfer agent is an indirect wholly owned subsidiary of Fleet. DISTRIBUTOR. Provident Distributors, Inc. ("PDI") is the principal underwriter of the Funds' shares. PDI's address is Four Falls Corporate Center, 6th Floor, West Conshohocken, PA 19428-2961. Columbia Financial Center Incorporated ("Columbia Financial"), an indirect wholly owned subsidiary of Fleet, has entered into a Broker-Dealer Agreement to sell shares of the Funds. You may invest or redeem in a Fund through Columbia Financial. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350, Portland, Oregon 97207-1350. PDI and Columbia Financial do not charge any fees or commissions to investors of the Funds for the sale of shares of a Fund. CUSTODIANS. United States National Bank of Oregon, 321 S.W. Sixth Avenue, Portland, Oregon 97208, serves as general custodian for all Funds other than the International Stock Fund. Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York, NY 11201, serves as general custodian for the International Stock Fund and provides custody services to those other Funds that may hold foreign securities. -- OTHER INFORMATION -- VOTING RIGHTS. Each Fund is a separate corporation. All shares of each Fund have equal voting, redemption, dividend, and liquidation rights. All issued and outstanding shares of each Fund are fully paid and nonassessable. Shares have no preemptive or conversion rights. Fractional shares have the same rights proportionately as full shares. The shares of each Fund do not have cumulative voting rights, which means that holders of more than 50 percent of the shares of a Fund voting for the election of directors can elect all of the directors. SHAREHOLDER MEETINGS. The Funds are not required to hold annual shareholder meetings. Special meetings may be called, however, as required or deemed desirable for purposes such as electing directors, changing fundamental investment policies, or approving an investment management agreement. The holders of not less than 10% of the shares of a Fund may request in writing that a special meeting be called for a specified purpose. If such a special meeting is called to vote on the removal of one or more directors of a Fund, shareholders of the Fund will be assisted in communications with other shareholders of the Fund. COMBINED PROSPECTUS. Although each Fund is offering only its own shares, it is possible that one Fund might become liable for a misstatement in this Prospectus relating to another Fund. The Board of Directors of each Fund has considered this factor in approving the use of this single Prospectus. - 40 INVESTOR SERVICES ----------------------------------------------------------------- This section is designed to provide you with information about opening an account and conducting transactions with Columbia Funds. In addition, information is provided on the different types of accounts and services offered by the Funds as well as the policies relating to those services. -- HOW TO OPEN A NEW ACCOUNT -- Please complete and sign a Columbia Funds application and make your check payable to COLUMBIA FUNDS for the minimum required investment. See "Minimum Investments." Please be sure to include a tax identification number on your application or it may be rejected and returned to you. The completed application and a check should be mailed to: Columbia Financial Center P.O. Box 1350 Portland, Oregon 97207-1350 Attn.: New Accounts -- HOW TO PURCHASE SHARES -- Shares of each Fund are offered at the share price, or net asset value ("NAV"), next determined (normally 4 p.m., New York time) after an order is accepted. See "Processing Your Order" and "Determining Your Share Price." Shares can be purchased in the following ways: IN PERSON: Investments can be made in person by visiting Columbia Funds at 1301 S.W. Fifth Avenue, Portland, Oregon between 7:30 a.m. and 5:00 p.m. on any business day that the New York Stock Exchange (NYSE) is open for business. BY MAIL: Send a check, with either a completed Investment Slip from the bottom of a confirmation statement, or a letter indicating the account number and registration, to: Columbia Financial Center P.O. Box 1350 Portland, Oregon 97207-1350 Attn.: Investments BY WIRE: You may have your bank wire federal funds. Call the Funds for instructions and notification that money is being wired: Portland area 222-3606 Nationwide (toll-free) 1-800-547-1707 BY TELEPHONE: You may make additional investments in a Fund by telephone from a predesignated bank account ("Televest"). The minimum investment that can be made by Televest is $100. Shareholders must complete the appropriate sections of the application or call the Funds to request a Televest form. An investment using Televest is processed on the day the Fund receives your investment from your bank, usually the business day following the day of your telephone call. -- MINIMUM INVESTMENTS -- ALL FUNDS HAVE A MINIMUM INITIAL INVESTMENT REQUIREMENT OF $1,000 EXCEPT THE SPECIAL FUND AND THE SMALL CAP FUND, WHICH HAVE A $2,000 MINIMUM. THESE MINIMUMS ARE WAIVED FOR ACCOUNTS USING THE AUTOMATIC INVESTMENT PLAN. SUBSEQUENT INVESTMENTS (OTHER THAN THROUGH THE AUTOMATIC INVESTMENT PLAN) MUST BE AT LEAST $100 AND SHOULD ALWAYS IDENTIFY YOUR NAME, THE FUND'S NAME, AND YOUR ACCOUNT NUMBER. MANAGEMENT OF EACH FUND MAY, AT ITS SOLE DISCRETION, WAIVE THE MINIMUM PURCHASE AND ACCOUNT SIZE REQUIREMENTS FOR CERTAIN GROUP PLANS OR ACCOUNTS OPENED BY AGENTS OR FIDUCIARIES (SUCH AS A BANK TRUST DEPARTMENT, INVESTMENT ADVISOR, OR SECURITIES BROKER), FOR INDIVIDUAL RETIREMENT PLANS OR IN OTHER CIRCUMSTANCES. BY AUTOMATIC INVESTMENT: Investments in a Fund may be made automatically from your bank under Columbia's Automatic Investment Plan ("AIP"). Shareholders whose bank is a member of the National - 41 INVESTOR SERVICES ----------------------------------------------------------------- Automated Clearing House Association may choose to have amounts of $50 or more automatically transferred from a bank checking account to a designated Fund on or about the 5th or 20th, or both, of each month. Shareholders must complete the AIP section of the application or a separate AIP form to participate in the AIP. If you stop investing in a Fund using an AIP, your account may be closed if you fail to reach or maintain a minimum account balance. See "Account Privileges -- Involuntary Redemptions." BY EXCHANGE: You may purchase shares of any Fund with the proceeds from a redemption of shares of any other Columbia Fund with the same account number. See "How to Exchange Shares." THROUGH YOUR BROKER-DEALER OR BANK: You may purchase or redeem shares of a Fund through your broker, bank, or other financial institution, which may charge a commission or fee for assisting in handling your order and which may be required to be registered as a broker or dealer under federal or state securities laws. CLOSING A FUND TO NEW INVESTORS: The Advisor to the Funds reserves the right at its discretion to close a Fund to new investors. A number of factors may be considered in making such a decision, including the total assets and flow of new investments into the Fund. If a Fund is closed, shareholders who maintain open accounts with the Fund may make additional investments in the Fund. Once a shareholder's account in that Fund is closed, however, additional investments may not be possible. -- PAYING FOR YOUR SHARES -- Payment for Fund shares is subject to the following policies: - - Checks should be drawn on U.S. banks and made payable to COLUMBIA FUNDS - - Never send cash or cash equivalents; the Funds will not accept responsibility for their receipt - - The Funds reserve the right to reject any order - - If your order is canceled because your check did not clear the bank or the Funds were unable to debit your predesignated bank account, you will be responsible for any losses or fees imposed by your bank or attributable to a loss in value of the shares purchased - - The Funds may reject any third party checks used to make an investment or open a new account -- HOW TO REDEEM (SELL) SHARES -- You may redeem all or a portion of your investment in a Fund on any business day that the NYSE is open for business. All redemptions of shares of a Fund will be at the share price (NAV) computed after receipt of a valid redemption request. In every case, sufficient full and fractional shares will be redeemed to cover the amount of the redemption request. If certificates for Fund shares have been issued to you, they must be returned to the Fund and properly endorsed before a redemption of these shares may be processed. Redemptions from a Columbia-sponsored IRA or retirement plan require the completion of certain additional forms to ensure compliance with IRS regulations. If a redemption request cannot be processed for any of these reasons, the redemption request will be returned to you and no redemption will be made until a valid request is submitted. Shares can be redeemed in the following ways: IN WRITING: You may redeem shares of a Fund by providing a written instruction to the Fund at the address below. A signature guarantee may be required. Please see "Signature Requirements." Columbia Financial Center P.O. Box 1350 Portland, Oregon 97207-1350 Attn.: Redemptions - 42 INVESTOR SERVICES ----------------------------------------------------------------- SIGNATURE REQUIREMENTS: Redemption requests must be signed by each shareholder required to sign on the account. Accounts in the names of corporations, fiduciaries, and institutions may require additional documentation. Please contact Columbia Funds if your account falls into one of these categories. To protect you and the Funds against fraud, a SIGNATURE GUARANTEE is also required in any of the following situations: - - The redemption request exceeds $50,000 - - You request a check made payable to anyone other than the shareholder(s) of record or other predesignated party - - You request that proceeds be sent to an address other than the address of record or to an account other than a previously designated bank account - - You would like the check mailed to an address that has changed in the last 10 days - - You wish to transfer or change ownership of the account The Funds reserve the right to require a signature guarantee in other circumstances or to reject an order for certain legal reasons. You may obtain a signature guarantee from an eligible guarantor institution such as a bank, broker-dealer, credit union, savings and loan association, national securities exchange or trust company. A notary public cannot provide a signature guarantee. BY TELEPHONE: You may redeem shares by telephone unless you decline this service by checking the appropriate box on the application. Proceeds from telephone redemptions may be mailed only to the registered name and address on your account or transferred to the bank designated on the application or to another Columbia Fund with an identical account number. A maximum of $50,000 may be redeemed by telephone and mailed to your registered address. There is no such limitation on telephone redemptions transferred to your bank. Telephone redemptions may be made by calling the Funds between 7:30 a.m. and 5:00 p.m., Pacific Time, at: Portland area 222-3606 Nationwide (toll-free) 1-800-547-1707 You may experience some difficulty in implementing a telephone redemption during periods of drastic economic or financial market changes. Telephone redemption privileges may be modified or terminated at any time without notice to shareholders. Please see "Account Privileges -- Telephone Redemptions." BY DRAFT -- MONEY MARKET FUND ONLY: Redemption by draft is available to Money Market Fund investors who complete the appropriate section of the application. The Money Market Fund will provide you with free drafts issued by the Money Market Fund's bank. You may make drafts payable to any person for amounts of $500 or more. Your investment will continue to earn income until your draft is presented to the Money Market Fund's bank for collection. Redemptions are by draft and, therefore, payment is subject to the Money Market Fund's approval. The redemption by draft service may be terminated by the bank or the Money Market Fund upon written notice to the other. The processing of drafts against the Money Market Fund's account is subject to the bank's rules and regulations. THESE ARRANGEMENTS DO NOT ESTABLISH A CHECKING OR OTHER ACCOUNT BETWEEN YOU AND THE BANK FOR THE PURPOSE OF FEDERAL DEPOSIT INSURANCE OR OTHERWISE. The agreements and procedures described above relate solely to the bank's intermediary status for redemption of investments in the Money Market Fund. YOUR DRAFT WILL NOT BE PAID UNLESS SUFFICIENT COLLECTED FUNDS ARE AVAILABLE IN YOUR MONEY MARKET FUND ACCOUNT. SEE "PAYMENT OF REDEMPTION PROCEEDS." - 43 INVESTOR SERVICES ----------------------------------------------------------------- BY AUTOMATIC WITHDRAWAL: If your account value in any Fund is $5,000 or more, you may elect to receive automatic cash withdrawals of $50 or more from that Fund in accordance with either of the following withdrawal options: - - Income earned; you may elect to receive any dividends or capital gains distributions on your shares, provided such dividends and distributions exceed $25 - - Fixed amount; you may elect to receive a monthly or quarterly fixed amount of $50 or more Automatic withdrawals will be made within seven days after the end of the month or quarter to which they relate. To the extent redemptions for automatic withdrawals exceed dividends declared on shares in your account, the number of shares in your account will be reduced. If the value of your account falls below the Fund minimum, your account is subject to being closed on 60 days written notice. The minimum withdrawal amount has been established for administrative convenience and should not be considered as recommended for all investors. For tax reporting, a capital gain or loss may be realized on each fixed-amount withdrawal. An automatic withdrawal plan may be modified or terminated at any time upon prior notice by the Fund or the shareholder. -- PAYMENT OF REDEMPTION PROCEEDS -- Redemption proceeds are normally transmitted in the manner specified in the redemption request on the business day following the effective date of the redemption. Proceeds transmitted over the Automated Clearing House (ACH) system are usually credited to a shareholder's account on the second business day following the redemption request. Except as provided by rules of the Securities and Exchange Commission, redemption proceeds must be transmitted to you within seven days of the redemption date. REDEMPTION OF RECENTLY PURCHASED SHARES. Although you may redeem shares of a Fund (other than the Money Market Fund) that you have recently purchased by check, the Fund may hold the redemption proceeds until payment for the purchase of such shares has cleared, which may take up to 15 days from the date of purchase. No interest is paid on the redemption proceeds after the redemption date and before the proceeds are sent to you. If you request the redemption (by draft or other means) of Money Market Fund shares recently purchased by check, the redemption will not be effective, and proceeds will not be transmitted, unless the purchase of those shares has cleared. These holding periods do not apply to the redemption of shares purchased by bank wire or with a cashiers or certified check. There is no charge for redemption payments that are mailed. Amounts transferred by wire must be at least $1,000, and the bank wire cost for each redemption will be charged against your account. Your bank may also impose an incoming wire charge. -- HOW TO EXCHANGE SHARES -- You may use proceeds from the redemption of shares of any Fund to purchase shares of other Funds offering shares for sale in your state of residence. There is no charge for this exchange privilege. Before making an exchange, you should read the portions of the Prospectus relating to the Fund or Funds into which the shares are to be exchanged. The shares of the Fund to be acquired will be purchased at the NAV next determined after acceptance of the purchase order by that Fund in accordance with its policy for accepting investments. The exchange of shares of one Fund for shares of another Fund is treated, for federal income tax purposes, as a sale on which you may realize a taxable gain or loss. Certain restrictions may apply to exchange transactions. See "Account Privileges -- Exchange Privilege." - 44 INVESTOR SERVICES ----------------------------------------------------------------- -- PROCESSING YOUR ORDER -- Orders received by a Fund other than the Money Market Fund will be processed the day they are received. Since the Money Market Fund invests in obligations normally requiring payment in federal funds, purchase orders will not be processed unless received in federal funds or until converted by the Fund into federal funds. Checks or negotiable U.S. bank drafts require one day to convert into federal funds. Checks drawn on banks that are not members of the Federal Reserve System may take longer to convert into federal funds. Prior to conversion into federal funds, your money will not be invested or working for you. Information about federal funds is available from any U.S. bank that is a member of the Federal Reserve System. Orders received before the close of regular trading on the NYSE (normally 4 p.m. New York time) will be entered at the Fund's share price computed that day. Orders received after the close of regular trading on the NYSE will be entered at the Fund's share price next determined. All investments will be credited to your account in full and fractional shares computed to the third decimal place. The Funds reserve the right to reject any order. Shares purchased will be credited to your account on the record books of the applicable Fund. The Funds will not issue share certificates except on request. Certificates for fractional shares will not be issued. -- DETERMINING YOUR SHARE PRICE -- The share price, or NAV, of each Fund is determined by the Advisor, under procedures approved by the Fund's Board of Directors, as of the close of regular trading (normally 4 p.m. New York time) on each day the NYSE is open for business and at other times determined by the Board of Directors. The NAV is computed by dividing the value of all assets of the Fund, less its liabilities, by the number of shares outstanding. Portfolio securities will be valued according to the market value obtained from the broadest and most representative markets. These market quotations, depending on local convention or regulation, may be the last sale price, last bid, or the mean between the last bid and asked price as of, in each case, the close of the applicable exchange or other designated time. Securities for which market quotations are not readily available and other assets will be valued at fair value as determined in good faith under procedures established by and under the general supervision of the Board of Directors of each Fund. These procedures may include valuing portfolio securities by reference to other securities with comparable ratings, interest rates, and maturities and by using pricing services. Fair value for debt securities for which market quotations are not readily available and with remaining maturities of less than 60 days is based on cost adjusted for amortization of discount or premium and accrued interest (unless the Board of Directors believes unusual circumstances indicate another method of determining fair value should be used). Trading in securities on many foreign securities exchanges and over-the-counter markets is completed at various times before the close of the NYSE. In addition, trading of these foreign securities may not take place on all NYSE business days. Trading may take place in various foreign markets on Saturday or on other days the NYSE is not open for business and on which a Fund's NAV is therefore not calculated. The calculation of a Fund's NAV may not take place contemporaneously with the determination of the prices of a Fund's portfolio foreign securities. Events affecting the values of portfolio foreign securities that occur between the time the prices are determined and the close of the NYSE will not be reflected in a Fund's calculation of NAV unless the Board of Directors or the Advisor if so delegated, determines that the event would materially affect the NAV. Assets of foreign securities are translated from the local currency into U.S. dollars at the prevailing exchange rates. Municipal Bond Fund portfolio securities for which market quotations are readily available will be valued at - 45 INVESTOR SERVICES ----------------------------------------------------------------- the bid price. Management of the Municipal Bond Fund believes that, although substantially all of the Municipal Bond Fund's securities are readily marketable, a significant portion of the Municipal Bond Fund's portfolio will not have reliable market quotations readily available on a timely basis for the daily valuation of the Fund's portfolio. -- INVESTOR INQUIRIES -- If you have any questions about this Prospectus, the Funds or your account, please call the Funds at: Portland area 222-3606 Nationwide (toll-free) 1-800-547-1707 or visit or write the Funds at: Columbia Financial Center 1301 S.W. Fifth Avenue Portland, Oregon 97201 www.columbiafunds.com -- ACCOUNT PRIVILEGES -- EXCHANGE PRIVILEGE. Telephone exchange privileges are available to you automatically unless you decline this service by checking the appropriate box on the application. Telephone exchanges may be made from one Fund into another Fund only within the same account number. To prevent the abuse of the exchange privilege to the disadvantage of other shareholders, each Fund reserves the right to terminate the exchange privilege of any shareholder who makes more than four exchanges out of a Fund during the calendar year. The exchange privilege may be modified or terminated at any time, and any Fund may discontinue offering its shares generally or in any particular state without notice to shareholders. TELEPHONE REDEMPTIONS. The Funds do not accept responsibility for the authenticity of telephone instructions, and, accordingly, shareholders who have approved telephone redemptions assume the risk of any losses due to fraudulent telephone instructions that a Fund reasonably believes to be genuine. The Funds employ certain procedures to determine whether telephone instructions are genuine, including requesting personal shareholder information prior to acting on telephone instructions, providing written confirmations of each telephone transaction, and recording all telephone instructions. A Fund may be liable for losses due to fraudulent telephone instructions if it fails to follow these procedures. For your protection, the ability to redeem by telephone and have the proceeds mailed to your registered address may be suspended for up to 30 days following an account address change. INVOLUNTARY REDEMPTIONS. Upon 60 days prior written notice, a Fund may redeem all of your shares without your consent if: - - Your account balance falls below $500. However, if you wish to maintain the account, you may during the 60-day notice period either: (i) add to your account to bring it to the required minimum, or (ii) establish an Automatic Investment Plan with a minimum monthly investment of $50. - - You are a U.S. shareholder and fail to provide the Fund with a certified taxpayer identification number. - - You are a foreign shareholder and fail to provide the Fund with a current Form W-8, "Certificate of Foreign Status." The Funds also reserve the right to close a shareholder account if the shareholder's actions are deemed to be detrimental to the Fund or its shareholders. If a Fund redeems shares, payment will be made promptly at the current net asset value. A redemption may result in a realized capital gain or loss. TAXPAYER IDENTIFICATION NUMBER. Federal law requires each Fund to withhold 31% of dividends and redemption proceeds paid to certain shareholders who have not complied with certain tax regulations. The Funds will generally not accept an investment to establish a new account that does not comply with these regulations. You will be asked to certify on your account - 46 INVESTOR SERVICES ----------------------------------------------------------------- application that the social security number or tax identification number provided is correct and that you are not subject to 31% backup withholding for previous underreporting of income to the Internal Revenue Service. SHAREHOLDER STATEMENTS AND REPORTS. The Funds will send a separate confirmation of each nonroutine transaction that affects your account balance or registration. Routine, pre-authorized transactions are confirmed in the monthly or quarterly account statements provided to shareholders. The types of pre- authorized transactions that will be confirmed on your account statement include: - - Periodic share purchases through an Automatic Investment Plan - - Reinvestment of dividends and capital gains distributions - - Automatic withdrawals or exchanges between Funds Each Fund will mail to its shareholders on or before January 31 of each year a summary of the federal income tax status of the Fund's distributions for the preceding year. Financial reports on the Funds, which include a listing of each Fund's portfolio securities, are mailed semiannually to shareholders. To reduce Fund expenses, only one such report and the annually updated prospectus will be mailed to accounts with the same Tax Identification Number. In addition, shareholders or multiple accounts at the same mailing address can eliminate duplicate enclosures for statements mailed to that address by filing a SAVMAIL form with the Funds. For a SAVMAIL form or to receive additional copies of any shareholder report or prospectus, please call an Investor Services Representative at 1-800-547-1707. -- IRAS, SEP IRAS, AND -- RETIREMENT PLANS Investors may invest in each Fund other than the Municipal Bond Fund through Columbia's Traditional, Roth, Education, SIMPLE, or SEP IRA programs, or Columbia's Prototype Money Purchase Pension and Profit Sharing Plan. Please contact Columbia Funds for further information and application forms. Investments may also be made in these Funds in connection with established retirement plans. -- PRIVATE MANAGEMENT ACCOUNTS -- Columbia Trust Company offers Private Management Accounts that provide investment management tailored to the specific investment objectives of individuals, institutions, trusts, and estates, using the Funds as investment vehicles. The annual fee for this service is: - - .75% on the first $500,000, - - .50% on the next $500,000, and - - .25% on assets over $1 million The minimum fee for this service is $1,000 and the maximum fee is $15,000. These fees are in addition to investment advisory fees paid by each Fund to the Advisor. For additional information, please call Columbia Trust Company at 503-222-3600. - 47 DISTRIBUTIONS AND TAXES ----------------------------------------------------------------- -- DISTRIBUTIONS -- Each Fund is required to distribute to shareholders each year all of its net investment income and any net realized capital gains. Net investment income (income from dividends, interest and any net realized short-term capital gains) is distributed by a Fund as a dividend. Any net long-term capital gains realized on the sale of portfolio securities by a Fund are distributed as capital gains distributions. Distributions are paid as follows:
DIVIDENDS CAPITAL GAINS ---------------- ---------------- Growth Fund Declared and Declared and International Stock Fund paid in December paid in December Special Fund Small Cap Fund - -------------------------------------------------------------------- Common Stock Fund Declared and Declared and Real Estate Fund paid each paid in December Balanced Fund calendar quarter - -------------------------------------------------------------------- Money Market Fund Declared and Declared and paid daily paid daily (if any) - -------------------------------------------------------------------- Bond Funds Declared daily Declared and and paid monthly paid in December - --------------------------------------------------------------------
If you redeem all of your shares of a Columbia Bond Fund, the undistributed dividends on the redeemed shares will be paid at that time. All dividends paid on the Money Market Fund will be reinvested automatically in additional shares at net asset value, which, in effect, compounds the shareholder's income daily. The Money Market Fund expects normally to have positive net investment income each day. However, if a sharp rise in interest rates or some other factor causes it to have negative net investment income, the Money Market Fund will reduce the number of shares outstanding. Each shareholder account will contribute that day to the Money Market Fund that amount of shares representing the account's negative net income. Through this procedure, the Money Market Fund intends to maintain its net asset value at a constant one dollar per share. -- DISTRIBUTION OPTIONS -- Unless you select a different option, all dividends and capital gains distributions are reinvested in additional shares at a price equal to the NAV at the close of business on the reinvestment date. You may elect at any time, by notifying the Funds, to receive your distributions in cash or to reinvest them in another Columbia Fund. If you elect to receive dividends and/or capital gains distributions in cash and such dividend or capital gains distribution is returned to the Fund as undeliverable to your address of record, your distribution option shall be converted to having all dividends and capital gains distributions reinvested in additional shares. No interest will accrue on any dividend or capital gains distribution returned to the Fund as undeliverable. -- TAXATION OF DISTRIBUTIONS -- The tax character of distributions from a Fund is the same whether they are paid in cash or reinvested in additional shares. Dividends declared in October, November, or December to shareholders of record as of a date in one of those months and paid the following January will be reportable as if received by the shareholders on December 31. This section provides only a brief summary of the major tax considerations affecting each Fund and its shareholders and is not a complete or detailed explanation of tax matters. Investors should consult their tax advisors concerning the tax consequences of investing in the Funds. FEDERAL INCOME TAXES -- EXCLUDING THE MUNICIPAL BOND FUND. Distributions from the Funds (other than the Municipal Bond Fund) of net investment income or net realized short-term capital gains are generally taxable to shareholders as ordinary income. Distributions designated as the excess of net long-term capital gain over net short-term capital loss are taxable to shareholders at the applicable long-term capital gains rate, regardless of the length of time the shareholder held the Fund's shares. A portion of any dividends received from the Growth Fund, the International - 48 DISTRIBUTIONS AND TAXES ----------------------------------------------------------------- Stock Fund (to the extent dividends from U.S. companies constitute a portion of that Fund's investment income), the Special Fund, the Small Cap Fund, the Common Stock Fund, and the Balanced Fund may be eligible for the dividends received deduction available to corporate shareholders. To the extent the Real Estate Fund's income is derived from interest and distributions from REITs, distributions from the Fund will not qualify for the dividends received deduction. A portion of the income distributions from the Real Estate Fund will include a tax return of capital because of the nature of the distributions received by the Fund from its holdings in REITs. A tax return of capital is a nontaxable distribution that reduces the tax cost basis of your shares in the Fund. The effect of a return of capital is to defer your tax liability on that portion of your income distributions until you sell your shares of the Fund. Information on the tax status of distributions by the Funds is mailed to shareholders each year on or before January 31. FEDERAL INCOME TAXES -- MUNICIPAL BOND FUND. The Municipal Bond Fund expects to distribute all of its net investment income and realized capital gains to shareholders. Distributions from the Municipal Bond Fund will have the following federal income tax consequences for shareholders. - - Distributions properly designated by the Municipal Bond Fund as representing net tax-exempt interest received on municipal bonds, including municipal bonds of Puerto Rico, Guam, and certain other possessions of the United States, ("exempt-interest dividends") will not be includible by shareholders in gross income for federal income tax purposes. For purposes of this "Distributions and Taxes" section, municipal bonds are those obligations that pay interest that is not includible in gross income under Section 103 of the Internal Revenue Code (the "Code"). - - Distributions representing net taxable interest received from sources other than municipal bonds, representing the excess of net short-term capital gain over net long-term capital loss, or representing taxable accrued market discount on the sale or redemption of municipal bonds, will be taxable to shareholders as ordinary income. - - Distributions properly designated by the Municipal Bond Fund as representing the excess of net long-term capital gain over net short-term capital loss will be taxable to shareholders at the applicable long-term capital gains rate, regardless of the length of time the shareholder held the Fund's shares. For noncorporate taxpayers, the highest rate that applies to long-term capital gains is lower than the highest rate that applies to ordinary income. Dividends attributable to interest on certain private activity bonds issued after August 7, 1986 must be included in alternative minimum taxable income for the purpose of determining liability, if any, for corporate and individual alternative minimum taxes. The Municipal Bond Fund does not expect to invest in any such bonds, although it may do so in the future. Additional information regarding special tax treatment that applies to corporations that receive exempt-interest dividends is provided in the Statement of Additional Information. The Municipal Bond Fund expects that none of its distributions will qualify for the dividends received deduction for corporations. Interest on indebtedness incurred or continued by a shareholder to purchase or carry shares of the Municipal Bond Fund will not be deductible. STATE INCOME TAXES -- EXCLUDING THE MUNICIPAL BOND FUND. In addition to federal taxes, shareholders of the Funds may be subject to state and local taxes on distributions from the Funds. Shareholders should consult with their tax advisors concerning state and local tax consequences of investing in the Funds. Individuals, trusts, and estates resident in Oregon will generally not be subject to Oregon personal income taxes on dividends properly designated by the Government - 49 DISTRIBUTIONS AND TAXES ----------------------------------------------------------------- Bond Fund as derived from interest on U.S. Government obligations. The laws of other states may differ, and persons subject to tax in other states should consult their personal tax advisors. STATE INCOME TAXES -- MUNICIPAL BOND FUND. Individuals, trusts, and estates resident in Oregon will not be subject to the Oregon personal income tax on distributions from the Municipal Bond Fund that are derived from tax-exempt interest paid on the municipal bonds of Oregon and its political subdivisions and certain other issuers (including Puerto Rico and Guam). However, such individuals, trusts, and estates will be subject to the Oregon personal income tax on distributions derived from other types of income received by the Municipal Bond Fund. Furthermore, it is expected that corporations subject to the Oregon corporation excise or income tax will be subject to that tax on the income from the Fund, including income that is exempt for federal purposes. Local taxes and the tax consequences to nonresidents and part-year residents are beyond the scope of this discussion. For further information, please consult your tax advisor. The exemption of certain interest income for federal income tax purposes will not necessarily result in a similar exemption under the laws of a particular state or local taxing authority. Each shareholder should consult a tax advisor in this regard. Capital gains distributed to shareholders will generally be subject to state and local taxes. "BUYING A DIVIDEND." If you buy shares of a Fund before it pays a distribution, you will pay the full price of the shares and receive a portion of the purchase price back in the form of a taxable distribution. The Fund's NAV and your cost basis in the purchased shares is reduced by the amount of the distribution. The impact of this tax result is most significant when shares are purchased shortly before an annual distribution of capital gains or other earnings. This tax result is extremely unlikely in the case of the Money Market Fund, which distributes its earnings daily and has few or no capital gains. -- TAXATION OF THE FUNDS -- Each Fund intends to qualify as a regulated investment company under the Code. By qualifying and meeting certain other requirements, a Fund generally will not be subject to federal income taxes to the extent it distributes to its shareholders its net investment income and realized capital gains. Each Fund intends to make sufficient distributions to relieve itself from liability for federal income taxes. -- FOREIGN TAXATION -- Investment income received by the International Stock Fund and derived from foreign securities may be subject to foreign income taxes withheld by the foreign company. The United States has entered into tax treaties with many foreign countries that entitle a fund to a reduced rate of tax or an exemption from tax on this income. It is impossible to determine the effective rate of foreign tax in advance because the amount of the International Stock Fund's assets to be invested within various countries will fluctuate and the extent to which foreign tax refunds will be recovered is uncertain. The International Stock Fund intends to operate so as to qualify for treaty-reduced tax rates where applicable. If the International Stock Fund has paid withholding or other taxes to foreign governments during the year, the Fund may qualify for and make an election under the Code so that shareholders will be required to treat as taxable income their pro rata portion of the income taxes paid by the International Stock Fund to foreign countries and may, subject to limitations, be able to claim a credit or deduction for the same amount. Although the International Stock Fund intends to meet the requirements of the Code to "pass through" these foreign taxes, there can be no assurance the International Stock Fund will be able to do so. - 50 ADDITIONAL INFORMATION ----------------------------------------------------------------- -- REPURCHASE AGREEMENTS -- The Funds may use repurchase agreements to invest cash, generally on a short-term basis. Repurchase agreements involve the purchase of a security by the Fund and a simultaneous agreement by the seller (generally a bank or dealer) to repurchase the security from the Fund at a specified date or upon demand. These securities involve the risk that the seller will fail to repurchase the security, as agreed. In that case, the Fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. Each Fund will enter into repurchase agreements only with those banks or securities dealers who are deemed creditworthy based on criteria adopted by its Board of Directors. There is no limit on the portion of a Fund's assets that may be invested in repurchase agreements with maturities of seven days or less. -- ILLIQUID SECURITIES -- No illiquid securities will be acquired if, upon purchase, more than 5% of the value of the Common Stock Fund's, the Growth Fund's, or the Balanced Fund's, or more than 10% of the International Stock Fund's, the Special Fund's, the Small Cap Fund's, the Real Estate Fund's, or the High Yield Fund's, net assets would consist of these securities. "Illiquid securities" are securities that may not be sold or disposed of in the ordinary course of business within seven days at approximately the price used to determine a Fund's net asset value. Under current interpretations of the Staff of the Securities and Exchange Commission, the following securities in which a Fund may invest will be considered illiquid: - - repurchase agreements maturing in more than seven days - - restricted securities (securities whose public resale is subject to legal restrictions) - - options, with respect to specific securities, not traded on a national securities exchange that are not readily marketable - - any other securities in which a Fund may invest that are not readily marketable The International Stock Fund, the Small Cap Fund, the High Yield Fund, and the Real Estate Fund may purchase without limit, however, certain restricted securities that can be resold to qualifying institutions pursuant to a regulatory exemption under SEC Rule 144A ("Rule 144A securities"). If a dealer or institutional trading market exists for Rule 144A securities, such securities may be deemed to be liquid and thus treated as exempt from those Fund's liquidity restrictions. Under the supervision of the Boards of Directors of the Funds, the Advisor determines the liquidity of Rule 144A securities and, through reports from the Advisor, the Boards of Directors monitor trading activity in these securities. In reaching liquidity decisions, the Advisor will consider, among other things, the following factors: - - the frequency of trades and price quotes for the security - - the number of dealers willing to purchase or sell the security and the number of other potential purchasers - - dealer undertakings to make a market in the security - - the nature of the security and the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers, and the procedures for transfer) Because institutional trading in Rule 144A securities is relatively new, it is difficult to predict accurately how these markets will develop. If institutional trading in Rule 144A securities declines, the liquidity of these Funds could be adversely affected to the extent any of them are invested in such securities. - 51 ADDITIONAL INFORMATION ----------------------------------------------------------------- -- OPTIONS AND FINANCIAL -- FUTURES TRANSACTIONS Each of the International Stock Fund, the Special Fund, the Common Stock Fund, the Growth Fund, the Small Cap Fund, the Balanced Fund, the Real Estate Fund, and the High Yield Fund may invest up to 5% of its net assets in premiums on put and call exchange-traded options. A call option gives the holder (buyer) the right to purchase a security at a specified price (the exercise price) at any time until a certain date (the expiration date). A put option gives the buyer the right to sell a security at the exercise price at any time until the expiration date. These Funds may also purchase options on securities indices and foreign currencies. Options on securities indices are similar to options on a security except that, rather than the right to take or make delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, on exercise of the option, an amount of cash if the closing level of the securities index on which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. A Fund may enter into closing transactions, exercise its options, or permit the options to expire. These Funds may only write call options on securities or securities indices that are covered. A call option on a security is covered if written on a security the Fund owns or if the Fund has an absolute and immediate right to acquire that security without additional cash consideration upon conversion or exchange of other securities held by the Fund. If additional cash consideration is required, that amount will be held in a segregated account by the Fund's custodian bank. A call option on a securities index is covered if the Fund owns securities whose price changes, in the opinion of the Advisor, are expected to be substantially similar to those of the index. Call options may also be covered in any other manner in accordance with the rules of the exchange upon which the option is traded and applicable laws and regulations. These Funds may write such options on up to 25% of their net assets. These Funds may also engage in financial futures transactions, including foreign currency financial futures transactions. Financial futures contracts are commodity contracts that obligate the long or short holder to take or make delivery of a specified quantity of a financial instrument, such as a security, or the cash value of a securities index, during a specified future period at a specified price. Each Fund's investment restrictions do not limit the percentage of the Fund's assets that may be invested in financial futures transactions. Each Fund, however, does not intend to enter into financial futures transactions for which the aggregate initial margin exceeds 5% of the net assets of the Fund after taking into account unrealized profits and unrealized losses on any such transactions it has entered into. A Fund may engage in futures transactions only on commodities exchanges or boards of trade. The Funds will not engage in transactions in index options, financial futures contracts, or related options for speculation, but only as an attempt to hedge against market conditions affecting the values of securities that a Fund owns or intends to purchase. When a Fund purchases a put on a stock index or on a stock index future not held by the Fund, the put protects the Fund against a decline in the value of its securities to the extent that the stock index moves in a similar pattern to the prices of the securities held. The correlation, however, between stock indices and price movements of the stocks in which a Fund will generally invest may be imperfect. Each Fund expects, nonetheless, that the use of put options that relate to such indices will, in certain circumstances, protect against declines in values of specific portfolio securities or a Fund's portfolio generally. Although the purchase of a put option may partially protect a Fund from a decline in the value of a particular security or its portfolio generally, the cost of a put will reduce the potential return on the security or the portfolio if either increases in value. Upon entering into a futures contract, a Fund would be required to deposit with its custodian in a segregated account cash or certain U.S. Government securities in - 52 ADDITIONAL INFORMATION ----------------------------------------------------------------- an amount known as the "initial margin." This amount, which is subject to change, is in the nature of a performance bond or a good faith deposit on the contract and would be returned to the Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. The principal risks of options and futures transactions are: - - imperfect correlation between movements in the prices of options, currencies, or futures contracts and movements in the prices of the securities or currencies hedged or used for cover - - lack of assurance that a liquid secondary market will exist for any particular option, futures, or foreign currency contract at any particular time - - the need for additional skills and techniques beyond those required for normal portfolio management - - losses on futures contracts resulting from market movements not anticipated by the investment advisor - - possible need to defer closing out certain options or futures contracts in order to continue to qualify for beneficial tax treatment afforded "regulated investment companies" under the Internal Revenue Code -- TEMPORARY INVESTMENTS -- When, as a result of market conditions, a Fund determines that a temporary defensive position is warranted to help preserve capital, the Fund may without limit temporarily retain cash or invest in prime commercial paper, high-grade debt securities, securities of the U.S. Government and its agencies and instrumentalities, and high-quality money market instruments, including repurchase agreements. Temporary investments by the International Stock Fund, including cash, may be denominated in U.S. dollars or a foreign currency. When a Fund assumes a temporary defensive position, it is not invested in securities designed to achieve its stated investment objective. -- WHEN-ISSUED SECURITIES -- When-issued, delayed delivery and forward transactions generally involve the purchase of a security with payment and delivery at some time in the future (i.e., beyond normal settlement). The Funds do not earn interest on such securities until settlement and bear the risk of market value fluctuations in between the purchase and settlement dates. New issues of stocks and bonds, private placements and U.S. Government securities may be sold in this manner. To the extent a Fund engages in when-issued and delayed-delivery transactions, it will do so to acquire portfolio securities consistent with its investment objectives and policies and not for investment leverage. The Funds may use spot and forward foreign currency exchange transactions to reduce the risk associated with fluctuations in exchange rates when securities are purchased or sold on a when-issued or delayed-delivery basis. -- PURCHASE OF INVESTMENT -- COMPANIES SECURITIES The International Stock Fund may purchase securities of closed-end investment companies that invest in equity securities of a foreign country or countries. Purchasing the shares of this type of investment company may be the only or most efficient way to invest in certain countries. The International Stock Fund may not invest more than 10% of its total assets in other investment companies. See the Statement of Additional Information for a discussion of additional investment limitations on these types of investments. The return on investment in these securities will be reduced by the operating expenses of those closed-end investment companies. - 53 ADDITIONAL INFORMATION ----------------------------------------------------------------- -- DOLLAR ROLL TRANSACTIONS -- The Balanced Fund and the Bond Fund may enter into dollar roll transactions with selected banks and broker-dealers. Dollar roll transactions consist of the sale by the Fund of mortgage-backed securities, together with a commitment to purchase similar, but not identical, securities at a future date, at the same price. In addition, the Fund is paid a fee as consideration for entering into the commitment to purchase. Dollar rolls may be renewed after cash settlement and initially involve only a firm commitment agreement by the Fund to buy a security. The Balanced Fund and the Bond Fund will not use such transactions for leveraging purposes, and accordingly, if required by the Securities and Exchange Commission or any applicable law, will segregate cash, U.S. Government securities, or other high grade debt obligations in an amount sufficient to meet their purchase obligations under these transactions. -- LOAN TRANSACTIONS -- The Bond Fund, the Real Estate Fund, and the High Yield Fund may lend their portfolio securities to qualified institutional investors for the short-term purpose of realizing additional income. The aggregate value of all securities loaned may not exceed 33-1/3% of a Fund's total assets, and such loans will be collateralized by cash, cash equivalents, or an irrevocable letter of credit in accordance with regulations adopted by the Securities and Exchange Commission. While there may be delays in recovery of loaned securities or even a loss of rights in collateral supplied if the borrower fails financially, loans will be made only to firms deemed by a Fund's management to have a satisfactory credit rating. For more information on loan transactions, see the Statement of Additional Information. - 54 ADDITIONAL INFORMATION ----------------------------------------------------------------- -- BOND RATINGS -- Moody's bond ratings: AAA -- Best quality; smallest degree of investment risk. AA -- High quality by all standards; Aa and Aaa are known as high-grade bonds. A -- Many favorable investment attributes; considered upper medium-grade obligations. BAA -- Medium-grade obligations; neither highly protected nor poorly secured. Interest and principal appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. BA -- Speculative elements; future payments of interest and principal cannot be considered well assured. Protection of interest and principal payments may be very moderate and not well safeguarded during both good and bad times over the future. B -- Generally lacking characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. CAA -- Poor standing, may be in default; elements of danger with respect to principal or interest. CA -- Speculative to a high degree; often in default or have other marked shortcomings. C -- Lowest rated class of bonds; extremely poor prospects of ever attaining any real investment standing. Standard & Poor's bond ratings: AAA -- Highest rating; extremely strong capacity to pay principal and interest. AA -- Also high-quality with a very strong capacity to pay principal and interest; differ from AAA issues only by a small degree. A -- Strong capacity to pay principal and interest; somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB -- Adequate capacity to pay principal and interest; normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest than for higher-rated bonds. Bonds rated AAA, AA, A, and BBB are considered investment-grade bonds. BB -- Less near-term vulnerability to default than other speculative grade debt; face major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. B -- Greater vulnerability to default but presently have the capacity to meet interest payments and principal repayments; adverse business, financial, or economic conditions would likely impair capacity or willingness to pay interest and repay principal. CCC -- Current identifiable vulnerability to default and dependent upon favorable business, financial, and economic conditions to meet timely payments of interest and repayments of principal. In the event of adverse business, financial, or economic conditions, they are not likely to have the capacity to pay interest and repay principal. CC -- Typically subordinated to senior debt that is assigned an actual or implied CCC rating. C -- Typically subordinated to senior debt that is assigned an actual or implied CCC-debt rating. C1 -- No interest is being paid. Bonds rated BB, B, CCC, CC, and C are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. - 55 NOTES COLUMBIA FUNDS -- 1301 S.W. Fifth Avenue, Portland, Oregon 97201 -- -- DIRECTORS -- ------------------------------------------- JAMES C. GEORGE J. JERRY INSKEEP, JR. THOMAS R. MACKENZIE RICHARD L. WOOLWORTH -- INVESTMENT ADVISOR -- ------------------------------------------- COLUMBIA FUNDS MANAGEMENT COMPANY 1300 S.W. SIXTH AVENUE PORTLAND, OREGON 97201 -- LEGAL COUNSEL -- ------------------------------------------- STOEL RIVES L.L.P. 900 S.W. FIFTH AVENUE, SUITE 2300 PORTLAND, OREGON 97201 -- AUDITORS -- ------------------------------------------- COOPERS & LYBRAND L.L.P. 1300 S.W. FIFTH AVENUE, SUITE 2700 PORTLAND, OREGON 97201 -- TRANSFER AGENT -- ------------------------------------------- COLUMBIA TRUST COMPANY 1301 S.W. FIFTH AVENUE PORTLAND, OREGON 97201 THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. THE MANAGERS' VIEWS CONTAINED IN THIS REPORT ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER CONSIDERATIONS. PORTFOLIO CHANGES SHOULD NOT BE CONSIDERED RECOMMENDATIONS FOR ACTION BY INDIVIDUAL INVESTORS. FUNDS DISTRIBUTED BY PROVIDENT DISTRIBUTORS, INC. - -------------------------------------------------------------------------------- COLUMBIA COMMON STOCK FUND, INC. COLUMBIA GROWTH FUND, INC. COLUMBIA INTERNATIONAL STOCK FUND, INC. COLUMBIA SPECIAL FUND, INC. COLUMBIA SMALL CAP FUND, INC. COLUMBIA REAL ESTATE EQUITY FUND, INC. COLUMBIA BALANCED FUND, INC. COLUMBIA DAILY INCOME COMPANY COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC. COLUMBIA FIXED INCOME SECURITIES FUND, INC. COLUMBIA MUNICIPAL BOND FUND, INC. COLUMBIA HIGH YIELD FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION Columbia Financial Center 1301 S.W. Fifth Avenue P.O. Box 1350 Portland, Oregon 97207 1-800-547-1707 This Statement of Additional Information contains information relating to 12 mutual funds: Columbia Common Stock Fund, Inc. (the "Common Stock Fund"), Columbia Growth Fund, Inc. (the "Growth Fund"), Columbia International Stock Fund, Inc. (the "International Stock Fund"), Columbia Special Fund, Inc. (the "Special Fund"), Columbia Small Cap Fund, Inc. (the "Small Cap Fund"), Columbia Real Estate Equity Fund, Inc. (the "Real Estate Fund"), Columbia Balanced Fund, Inc. (the "Balanced Fund"), Columbia Daily Income Company (the "Money Market Fund"), Columbia U.S. Government Securities Fund, Inc. (the "Government Bond Fund"), Columbia Fixed Income Securities Fund, Inc. (the "Bond Fund"), Columbia Municipal Bond Fund, Inc. (the "Municipal Bond Fund"), and Columbia High Yield Fund, Inc. (the "High Yield Fund"). The terms Fund or Funds when used in this Statement of Additional Information refer to these funds. Each of the Funds is an open-end investment company of the management type. Each Fund is a diversified fund except for the Municipal Bond Fund, which is a nondiversified fund due to its concentration in Oregon municipal bonds. Each Fund is a separate Oregon corporation and has a specific investment objective. This Statement of Additional Information is not a Prospectus. It relates to a Prospectus dated February 23, 1998 (the "Prospectus") and should be read in conjunction with the Prospectus. Copies of the Prospectus are available without charge upon written request to any of the Funds or by calling 1-800-547-1707. February 23, 1998 1 - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Investment Advisory and Other Fees Paid to Affiliates . . . . . . . . . . . . 4 Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Custodians. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Accounting Services and Financial Statements. . . . . . . . . . . . . . . . . 9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Yield and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Additional Information Regarding Certain Investments by the Funds . . . . . .41 - -------------------------------------------------------------------------------- MANAGEMENT - -------------------------------------------------------------------------------- The directors and officers of the Funds are listed below, together with their principal business occupations. All principal business occupations have been held for more than five years, except that positions with the High Yield Fund, the Real Estate Fund, and the Small Cap Fund have been held since July 1993, January 1994, and August 1996, respectively, and except as otherwise indicated. J. JERRY INSKEEP, JR.,*+ Chairman, President, and Director of each Fund; Chairman, President, and Trustee of CMC Fund Trust ("CMC Trust"); Consultant for Fleet Financial Group, Inc. ("Fleet") (since December 1997); formerly Chairman and a Director of Columbia Funds Management Company (the "Advisor"), Columbia Management Co., and Columbia Trust Company (the "Trust Company"); formerly a Director of Columbia Financial Center Incorporated ("Columbia Financial"). Mr. Inskeep's business address is 1300 S.W. Sixth Avenue, P.O. Box 1350, Portland, Oregon 97207. JAMES C. GEORGE, Director of each Fund (since June 1994); Trustee of CMC Trust (since December 1997). Mr. George, the former Investment Manager of the Oregon State Treasury (1966-1992), is an investment consultant. Mr. George's business address is 1001 S.W. Fifth Avenue, Portland, Oregon 97204. THOMAS R. MACKENZIE, Director of each Fund; Trustee of CMC Trust (since December 1997); Chairman of the Board of Directors of Group Mackenzie (architecture, planning, interior design, engineering). Mr. Mackenzie's business address is 0690 S.W. Bancroft Street, Portland, Oregon 97201. ROBERT J. MOORMAN*, Secretary of each Fund and CMC Trust (since January 1998); Attorney with Stoel Rives LLP. Mr. Moorman's business address is 900 S.W. Fifth Avenue, Suite 2300, Portland, Oregon 97204-1268. 2 RICHARD L. WOOLWORTH,+ Director of each Fund; Trustee of CMC Trust; Chairman of Blue Cross and Blue Shield of Oregon; Chairman and Chief Executive Officer of the Regence Group, health insurers. Mr. Woolworth's business address is 200 S.W. Market Street, Portland, Oregon 97201. *Mr. Inskeep and Mr. Moorman are "interested persons" as defined by the Investment Company Act of 1940 and receive no directors fees or salaries from the Funds. +Members of the Executive Committee. The Executive Committee has all powers of the Board of Directors when the Board is not in session, except as limited by law. The following table sets forth compensation received by the disinterested directors for 1997. No officer of the Funds received any compensation from the Funds in 1997. COMPENSATION TABLE Compensation Aggregate Compensation From from Fund Director Fund, per Director Complex -------- --------------------------- ------------- Thomas R. James C. Common Stock Fund - $2,198 $ 20,000 Mackenzie, George Growth Fund - $3,928 International Stock Fund - $484 Special Fund - $4,844 Small Cap Fund- $166 Real Estate Fund - $364 Balanced Fund - $2,460 Money Market Fund - $2,862 Government Bond Fund - $128 Bond Fund - $1,184 Municipal Bond Fund - $1,268 High Yield Fund - $114 Richard L. Woolworth* Common Stock Fund - $2,308 $ 29,000** Growth Fund - $4,124 International Stock Fund - $508 Special Fund - $5,086 Small Cap Fund- $174 Real Estate Fund - $382 Balanced Fund - $2,583 Money Market Fund - $3,007 Government Bond Fund - $134 Bond Fund - $1,243 Municipal Bond Fund - $1,331 High Yield Fund - $120 * Includes compensation received by Mr. Woolworth for serving on each Fund's Executive Committee. ** Includes compensation Mr. Woolworth received as a Trustee of CMC Trust. The investment advisor for CMC Trust is Columbia Management Co., an affiliate of the Advisor. Provident Distributors, Inc. ("PDI"), a registered securities broker and a member of the National Association of Securities Dealers, Inc., is authorized under a distribution agreement with each Fund to sell shares of the Fund. Columbia Financial has entered into a Broker-Dealer agreement with PDI to distribute the Funds' shares. PDI and Columbia Financial do not charge any fees or commissions to investors or the Funds for the sale of shares of a Fund. At January 31, 1998, officers and directors of each of the respective Funds owned of record or beneficially the aggregate number of shares of each of the respective Funds as set forth below.
PERCENTAGE OF TOTAL SHARES FUND SHARES* OUTSTANDING ---- ---------- ------------- Common Stock Fund 254,871 0.7% Growth Fund 134,724 0.3% International Stock Fund 81,993 0.8% Special Fund 253,504 0.4% Small Cap Fund 65,737 1.0% Real Estate Fund 101,832 1.2% Balanced Fund 267,948 0.7% Money Market Fund 16,822,235 1.6% Government Bond Fund 65,804 1.4% Bond Fund 106,670 0.4% Municipal Bond Fund 945,833 2.8% High Yield Fund 102,931 2.3%
- ----------------------- * Includes shares held by the Advisor and Columbia Management Co. At January 31, 1998, to the knowledge of the Funds, no person owned of record or beneficially more than 5 percent of the outstanding shares of any Fund except the following record owners: Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, California 94104, which owned 2,309,990 shares of the Bond Fund (7.97 percent of the total shares outstanding), 2,145,785 shares of the Growth Fund (5.49 percent of the total shares outstanding), 4,659,593 shares of the Special Fund (7.82 percent of the total shares outstanding) and 2,380,179 shares of the Common Stock Fund (6.28 percent of the total shares outstanding); Standard Insurance Co., P.O. Box 711, Portland, Oregon 97207, which owned 519,198 shares of the Government Bond Fund (11.35 percent of the total shares outstanding) and 3,738,922 shares of the Special Fund (6.27 percent of the total shares outstanding); Wells Fargo Bank, as Trustee, 3 P.O. Box 9800, Calabasas, CA 91302, which owned 2,484,158 shares of the Balanced Fund (6.4 percent of the total shares outstanding); and Bankers Trust Co. of CA as Trustee, 300 S. Grand Ave., Los Angeles, CA 90071, which owned 6,936,652 shares of the Common Stock Fund (18.29 percent of the total shares outstanding). - -------------------------------------------------------------------------------- INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES - -------------------------------------------------------------------------------- Information regarding services performed by the Advisor for the Funds and the formula for calculating the fees are set forth in the Prospectus under "Fund Management." Advisory fees paid by each of the Funds for each of the last three years were:
FUND 1997 1996 1995 ---- ---- ---- ---- Common Stock Fund $4,158,273 $2,686,585 $1,453,843 Growth Fund $7,019,161 $5,711,080 $4,483,699 International Stock Fund $1,504,787 $1,157,227 $1,013,873 Special Fund $12,373,140 $12,880,541 $10,125,466 Small Cap Fund $547,892 $40,273* --- Real Estate Fund $864,343 $232,413 $138,673 Balanced Fund $3,826,628 $2,935,512 $1,871,284 Money Market Fund $4,296,685 $4,009,904 $3,611,202 Government Bond Fund $194,230 $206,591 $187,343 Bond Fund $1,821,809 $1,668,004 $1,413,769 Municipal Bond Fund $1,952,213 $1,881,542 $1,840,676 High Yield Fund $211,632 $150,432 $109,022
- ----------------------- * For that portion of the year the Fund was in operation. The Advisor is an indirect wholly owned subsidiary of Fleet Financial Group, Inc., a publicly owned multibank holding company registered under the Bank Holding Company Act of 1956 with assets of approximately $85 billion at December 31, 1997. The Advisor has entered into an agreement with Columbia Management Co. pursuant to which Columbia Management Co. provides the Advisor with statistical and other factual information, advice regarding economic factors and trends, and advice as to occasional transactions in specific securities. Columbia Management Co., upon receipt of specific instructions from the Advisor, contacts brokerage firms to effect securities transactions for the Funds. The Advisor pays Columbia Management Co. a fee for this service. No amounts are paid by the Funds to Columbia Management Co. pursuant to the agreement, and Fund expenses are not increased as a result of this agreement. Columbia Management Co. is an indirect wholly owned subsidiary of Fleet Financial Group, Inc. 4 The Trust Company, which is an indirect wholly owned subsidiary of Fleet, acts as custodian of certain Individual Retirement Accounts (IRAs) and sponsor of Prototype Money Purchase Pension and Profit Sharing Plans that invest in the Funds. The Trust Company charges account holders an annual fee of $25 per IRA account (fee is waived for accounts over $25,000), a retirement plan setup fee of $100 and an annual retirement plan fee of $50. The Trust Company also acts as transfer agent and dividend crediting agent for each of the Funds pursuant to a transfer agent agreement with each Fund. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350, Portland, Oregon 97207. It issues certificates for shares of the Funds upon request and records and disburses dividends. During 1997, each Fund paid the Trust Company a per-account fee of $1.50 per month for each shareholder account existing at any time during the month. In addition, each Fund pays the Trust Company for extra administrative services performed at cost in accordance with a schedule set forth in the agreements and reimburses the Trust Company for certain out-of-pocket expenses incurred in carrying out its duties under the agreements. Fees paid to the Trust Company for services performed in 1997 under the transfer agent agreements were $424,958 for the Common Stock Fund, $857,591 for the Growth Fund, $313,943 for the International Stock Fund, $979,562 for the Special Fund, $73,575 for the Small Cap Fund, $131,357 for the Real Estate Fund, $511,482 for the Balanced Fund, $648,992 for the Money Market Fund, $45,009 for the Government Bond Fund, $249,777 for the Bond Fund, $112,418 for the Municipal Bond Fund, and $38,316 for the High Yield Fund. Effective January 1, 1998, each Fund pays the Trust Company a per-account fee of $1.66 per month for each shareholder account existing at any time during the month. Many existing computer programs use only two digits to identify a year in the date field. These programs do not take into effect the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the year 2000. This could impact the ability of the Advisor and the service providers for the Funds to provide services to the Funds. The Advisor has evaluated its systems and the systems of service providers for the Funds to assess the effect of the year 2000 issue on the ability of the Advisor and these parties to provide services to the Funds subsequent to year 2000. The Advisor has undertaken a project to determine the corrective action necessary to ensure that the technology systems will be ready for the year 2000 ("Year 2000 Ready Project"). The Advisor has completed a substantial portion of its Year 2000 Ready Project and expects to complete the remainder by December 1998. Testing of compliance with its Year 2000 Ready Project should be completed by the end of the third quarter of 1999. - -------------------------------------------------------------------------------- PORTFOLIO TRANSACTIONS - -------------------------------------------------------------------------------- Each Fund will not generally invest in securities for short-term capital appreciation but, when business and economic conditions, market prices, or a Fund's investment policy warrant, individual security positions may be sold without regard to the length of time they have been held. The historical portfolio turnover rate for each Fund is disclosed in the Prospectus under "Financial Highlights." Securities owned by the Funds may be purchased with brokerage commissions or on a principal basis without brokerage commissions. The Funds may also purchase securities from underwriters, the price of which will include a commission or concession paid by the issuer to the underwriter. The purchase price of securities purchased from dealers serving as market makers will include the spread between the bid and asked prices. Each Fund that may purchase foreign securities pursuant to its 5 investment policy anticipates that its brokerage transactions involving securities of companies domiciled in countries other than the United States will normally be conducted on the principal stock exchanges of those countries. In most international markets, commission rates are not negotiable and may be higher than negotiated commission rates available in the United States. There is generally less government supervision and regulation of foreign stock exchanges and broker-dealers than in the United States. Prompt execution of orders at the most favorable price will be the primary consideration of the Funds in transactions where brokerage fees are involved. Research, statistical, and other services also may be taken into consideration in selecting broker-dealers. These services may include: advice concerning the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or the purchasers or sellers of securities; and furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategies, and performance of accounts. While the Funds have no arrangements or formulas as to either the allocation of brokerage transactions or commission rates paid thereon, a commission in excess of the amount of commission another broker or dealer would have charged for effecting that transaction may be paid by a Fund if management of that Fund determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services provided, viewed in terms of either that particular transaction or management's overall responsibilities with respect to that Fund. Allocation of transactions to obtain research services for the Advisor enables the Advisor to supplement its own research and analysis with the statistics, information, and views of others. While it is not possible to place a dollar value on these services, it is the opinion of the Advisor that the receipt of such services will not reduce the overall expenses for its research or those of its affiliated companies. The fees paid to the Advisor by a Fund would not be reduced as a result of the receipt of such information and services by a Fund. The receipt of research services from brokers or dealers might be useful to the Advisor and its affiliates in rendering investment management services to the Funds or other clients; and, conversely, information provided by brokers or dealers who have executed orders on behalf of other clients might be useful to the Advisor in carrying out its obligations to a Fund. Total brokerage commissions paid by each of the respective Funds for each of the last three years were:
FUND 1997 1996 1995 ---- ---- ---- ---- Common Stock Fund $1,328,730 $1,266,686 $686,464 Growth Fund $2,168,003 $1,606,969 $1,718,227 International Stock Fund $864,293 $724,559 $925,886 Special Fund $6,140,893 $4,280,666 $5,161,705 Small Cap Fund $225,828 $19,164 * --- Real Estate Fund $194,113 $114,020 $47,879 Balanced Fund $737,793 $572,539 $472,821
-------- * For that portion of the year the Fund was in operation. No brokerage commissions were paid by the Money Market Fund, the Government Bond Fund, the Bond Fund, the Municipal Bond Fund, or the High Yield Fund during the last three years. Of the commissions paid in the fiscal year ending in 1997, the Common Stock Fund paid $18,636, the Growth Fund paid $35,592, the Special Fund paid $114,259, the Small Cap Fund paid $21,457, the Real Estate Fund paid $11,568 and the Balanced Fund paid $7,128 in commissions as a result of research provided by brokerage firms. Provided each Fund's Board of Directors is satisfied that the Fund is receiving the most favorable price and execution available, the Advisor may consider the sale of the Fund's shares as a factor in the selection of brokerage firms to execute its portfolio transactions. The placement of portfolio transactions with brokerage firms who sell shares of a Fund is subject to rules adopted by the National Association of Securities Dealers. The Advisor may use research services provided by and place agency transactions with affiliated broker-dealers, if the commissions are fair and reasonable and comparable to commissions charged by non-affiliated, qualified brokerage firms. The Board of Directors of each Fund will from time to time review whether the recapture for the benefit of the Fund of some portion of the brokerage commissions or similar fees paid by the Fund 6 on portfolio transactions is legally permissible and, if so, determine, in the exercise of its business judgment, whether it would be advisable for the Fund to seek such recapture. Although the officers and directors of each Fund are the same, investment decisions for each Fund are made independently from those of the other Funds or accounts managed by any affiliate of the Advisor. The same security is sometimes held in the portfolio of more than one fund or account. Simultaneous transactions are inevitable when several funds or accounts are managed by the same investment advisor, particularly when the same security is suitable for the investment objective of more than one fund or account. In the event of simultaneous transactions, allocations among the Funds or accounts will be made on an equitable basis. Since 1967, the Advisor and the Funds have had a Code of Ethics (the "Code") that sets forth general and specific standards relating to the securities trading activities of all employees of the Advisor and the Funds. The purpose of the Code is to ensure that all employees conduct their personal transactions in a manner that does not interfere with the portfolio transactions of the Funds or take unfair advantage of their relationship with the Advisor or the Funds. The specific standards included in the Code (as amended) include, among others, a requirement that all employee trades be pre-cleared; a prohibition on investing in initial public offerings; required pre-approval on private placements; a prohibition on portfolio managers trading in a security seven days before or after a trade in the same security by a Fund over which the manager exercises investment discretion; and a prohibition on realizing any profit on the trading of a security held less than 60 days. Certain securities and transactions, such as mutual fund shares or U. S. Treasuries and purchases of options on securities indexes or securities under an automatic dividend reinvestment plan, are exempt from the restrictions in the Code because they present little or no potential for abuse. Certain transactions involving the stocks of large capitalization companies are exempt from the seven day black-out period and short-term trading prohibitions because such transactions are highly unlikely to affect the price of these stocks. In addition to the trading restrictions, the Code contains reporting obligations that are designed to ensure compliance and allow the Advisor's Ethics Committee to monitor that compliance. The Advisor and the Funds have also adopted a Policy and Procedures Designed to Detect and Prevent Insider Trading (the "Insider Trading Policy"). The Insider Trading Policy prohibits any employee of the Advisor or the Funds from trading, either personally or on behalf of others (including the Funds), on material nonpublic information. All employees are required to certify each year that they have read and complied with the provisions of the Code and the Insider Trading Policy. - -------------------------------------------------------------------------------- REDEMPTIONS - -------------------------------------------------------------------------------- Information regarding redemptions is set forth in the Prospectus under "Investor Services -- How to Redeem (Sell) Shares." As discussed under "Investor Services -- Account Privileges -- Telephone Redemptions" in the Prospectus, the Funds do not accept responsibility for the authenticity of telephone instructions relating to redemptions and, accordingly, shareholders who have approved telephone redemption assume the risk of any losses due to fraudulent telephone instructions that a Fund reasonably believes to be genuine. The Funds employ certain procedures to determine if telephone instructions are 7 genuine, including requesting personal shareholder information prior to acting on telephone instructions, providing written confirmations of each telephone transaction, and recording all telephone instructions. A Fund may be liable for losses due to fraudulent telephone instructions if it fails to follow these procedures. A Fund may suspend the determination of net asset value and the right of redemption for any period (1) when the New York Stock Exchange is closed, other than customary weekend and holiday closings, (2) when trading on the New York Stock Exchange is restricted, (3) when an emergency exists as a result of which disposal of securities owned by the Fund is not reasonably practicable or it is not reasonably practicable for the Fund to determine the value of its net assets, or (4) as the Securities and Exchange Commission may by order permit for the protection of security holders, provided that applicable rules and regulations of the Securities and Exchange Commission which govern as to whether the conditions prescribed in (2) or (3) exist are complied with. The New York Stock Exchange observes the following holidays: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. In the case of suspension of the right to redeem, shareholders may withdraw their redemption request or receive payment based upon the net asset value computed upon the termination of the suspension. - -------------------------------------------------------------------------------- CUSTODIANS - -------------------------------------------------------------------------------- United States National Bank of Oregon ("USNB" or "Custodian"), 321 S.W. Sixth Avenue, Portland, Oregon 97208, acts as the general Custodian for each Fund, except the International Stock Fund. USNB provides custody services to the International Stock Fund with respect to domestic securities held by that Fund. Morgan Stanley Trust Company ("Morgan Stanley" or "Custodian"), One Pierrepont Plaza, Brooklyn, New York 11201, acts as the general Custodian for the International Stock Fund and provides custody services to those Funds that invest in foreign securities. The Custodians hold all securities and cash of the Funds, receive and pay for securities purchased, deliver (against payment) securities sold, receive and collect income from investments, make all payments covering expenses of the Funds, and perform other administrative duties, all as directed by authorized officers of the Funds. The Custodians do not exercise any supervisory function in the purchase and sale of portfolio securities or payment of dividends. Portfolio securities purchased in the United States are maintained in the custody of the Fund's Custodian. Portfolio securities purchased outside the United States are maintained in the custody of foreign banks, trust companies, or depositories that have sub-custodian arrangements with Morgan Stanley (the "foreign sub-custodians"). Each of the domestic and foreign custodial institutions holding portfolio securities of the Funds has been approved by the Board of Directors of the Funds or, in the case of foreign securities, by Morgan Stanley, as a delegate of the Board of Directors, all in accordance with regulations under the Investment Company Act of 1940. The Advisor determines whether it is in the best interest of the Funds and their shareholders to maintain Fund assets in each of the countries in which the Funds invest ("Prevailing Market Risk"). The Board of Directors has delegated to Morgan Stanley the responsibility to evaluate the foreign sub-custodians 8 in those countries. The review of Prevailing Market Risk includes an assessment of the risk of holding a Fund's assets in a country, including risks of expropriation or imposition of exchange controls. In evaluating the foreign sub-custodians, Morgan Stanley will review the operational capability and reliability of the foreign sub-custodian. With respect to foreign investments and the selection of foreign sub-custodians, however, there can be no assurance that the Funds, and the value of their shares, will not be adversely affected by acts of foreign governments, financial or operational difficulties of the foreign sub-custodians, difficulties and costs of obtaining jurisdiction over, or enforcing judgments against, the foreign sub-custodians, or the application of foreign law to a Fund's foreign sub-custodial arrangement. Accordingly, an investor should recognize that the risks involved in holding assets abroad are greater than those associated with investing in the United States. - -------------------------------------------------------------------------------- ACCOUNTING SERVICES AND FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The financial statements of each Fund for the year ended December 31, 1997, the selected per share data and ratios under the caption "Financial Highlights," and the report of Coopers & Lybrand L.L.P., independent accountants, are included in the 1997 Annual Report to Shareholders of the Funds. A copy of the 1997 Annual Report to Shareholders accompanies this Statement of Additional Information and is incorporated herein by reference. Coopers & Lybrand L.L.P., 1300 S.W. Fifth Avenue, Suite 2700, Portland, Oregon 97201, in addition to examining the financial statements of the Funds, assists in the preparation of the tax returns of the Funds and in certain other matters. - -------------------------------------------------------------------------------- TAXES - -------------------------------------------------------------------------------- FEDERAL INCOME TAXES Each Fund intends and expects to meet continuously the tests for qualification as a regulated investment company under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund believes it satisfies the tests to qualify as a regulated investment company. To qualify as a regulated investment company for any taxable year, each Fund must, among other things: (a) derive at least 90 percent of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities, or foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies (the "90 Percent Test"); and 9 (b) diversify its holdings so that, at the end of each quarter, (i) 50 percent or more of the value of the assets of the Fund is represented by cash, government securities, and other securities limited, in respect of any one issuer of such other securities, to an amount not greater than 5 percent of the value of the assets of the Fund and 10 percent of the outstanding voting securities of such issuer, and (ii) not more than 25 percent of the value of the assets of the Fund is invested in the securities (other than government securities) of any one issuer or of two or more issuers that the Fund "controls" within the meaning of Section 851 of the Code and that meet certain requirements (the "Diversification Test"). In addition, a Fund must file, or have filed, a proper election with the Internal Revenue Service. Part I of Subchapter M of the Code will apply to a Fund during a taxable year only if it meets certain additional requirements. Among other things, the Fund must: (a) have a deduction for dividends paid (without regard to capital gain dividends) at least equal to the sum of 90 percent of its investment company taxable income (computed without any deduction for dividends paid) and 90 percent of its tax-exempt interest in excess of certain disallowed deductions (unless the Internal Revenue Service waives this requirement), and (b) either (i) have been subject to Part I of Subchapter M for all taxable years ending after November 8, 1983 or (ii) as of the close of the taxable year have no earnings and profits accumulated in any taxable year to which Part I of Subchapter M did not apply. A regulated investment company that meets the requirements described above is taxed only on its "investment company taxable income," which generally equals the undistributed portion of its ordinary net income and any excess of net short-term capital gain over net long-term capital loss. In addition, any excess of net long-term capital gain over net short-term capital loss that is not distributed is taxed to a Fund at corporate capital gain tax rates. The policy of each Fund is to apply capital loss carry-forwards as a deduction against future capital gains before making a capital gain distribution to shareholders. Under rules that are beyond the scope of this discussion, certain capital losses and certain net foreign currency losses resulting from transactions occurring in November and December of a taxable year may be taken into account either in that taxable year or in the following taxable year. If any net long-term capital gains in excess of net short-term capital losses are retained by a Fund, requiring federal income taxes to be paid thereon by the Fund, the Fund may elect to treat such capital gains as having been distributed to shareholders. In the case of such an election, shareholders will be taxed on such amounts as long-term capital gains, will be able to claim their proportional share of the federal income taxes paid by the Fund on such gains as credits against their own federal income tax liabilities, and generally will be entitled to increase the adjusted tax basis of their shares in the Fund by the differences between their pro rata shares of such gains and their tax credits. SPECIAL ASPECTS OF 90 PERCENT TEST WITH RESPECT TO FOREIGN CURRENCY. For purposes of the 90 Percent Test, foreign currency gains that are not directly related to a Fund's principal business of investing in stocks or securities (or options and futures with respect to stock or securities) may be excluded from qualifying income by regulation. No such regulations, however, have been issued. Unless an exception applies, a Fund may be required to recognize some income with respect to foreign currency contracts under the mark-to-market rules of Section 1256 even though that income is not realized. Special rules under Sections 1256 and 988 of the Code determine the character of any income, gain, or loss on foreign currency contracts. 10 Two possible exceptions to marking-to-market relate to hedging transactions and mixed straddles. A hedging transaction is defined for purposes of Section 1256 as a transaction (1) that a Fund properly identifies as a hedging transaction, (2) that is entered into in the normal course of business primarily to reduce the risk of price changes or currency fluctuations with respect to the Fund's investments, and (3) results in ordinary income or loss. A mixed straddle is a straddle where (1) at least one (but not all) of the straddle positions are Section 1256 contracts and (2) the Fund properly identifies each position forming part of the straddle. A straddle for these purposes generally is offsetting positions with respect to personal property. A Fund holds offsetting positions generally if there is a substantial diminution of the Fund's risk of loss from holding a position by reason of its holding one or more other positions. MUNICIPAL BOND FUND. In certain cases, Subchapter M permits the character of tax-exempt interest received and distributed by a regulated investment company to flow through for federal tax purposes as tax-exempt interest to its shareholders, provided that 50 percent or more of the value of its assets at the end of each quarter is invested in municipal bonds. For purposes of this Statement of Additional Information, the term "municipal bonds" refers to obligations that pay interest that is tax-exempt under Section 103 of the Code. For purposes of this Statement of Additional Information, the term "tax-exempt interest" refers to interest that is not includable in gross income for federal income tax purposes. As discussed below, however, tax-exempt interest may result in an increase in the taxes of the recipient because of the alternative minimum tax, the environmental tax, the branch profits tax, or under other provisions of the Code that are beyond the scope of this Statement of Additional Information. The Municipal Bond Fund intends to have at least 50 percent of the value of its total assets at the close of each quarter of its taxable year consist of obligations the interest on which is not includable in gross income for federal income tax purposes under Section 103 of the Code. As a result, the Municipal Bond Fund's dividends payable from net tax-exempt interest earned from municipal bonds should qualify as exempt-interest dividends. Distributions properly designated by the Municipal Bond Fund as representing net tax-exempt interest received on municipal bonds (including municipal bonds of Guam, Puerto Rico, and certain other possessions of the United States) will not be includable by shareholders in gross income for federal income tax purposes (except for shareholders who are, or are related to, "substantial users," as discussed below). Distributions representing net taxable interest received by the Municipal Bond Fund from sources other than municipal bonds, representing the excess of net short-term capital gain over net long-term capital loss, or representing taxable accrued market discount on the sale or redemption of municipal bonds will be taxable to shareholders as ordinary income. Any loss realized upon the redemption of shares of the Municipal Bond Fund six months or less from the date of purchase of the shares and following receipt of an exempt-interest dividend will be disallowed to the extent of such exempt-interest dividend. Section 852(b)(4) of the Code contains special rules on the computation of a shareholder's holding period for this purpose. Interest on indebtedness incurred or continued by shareholders to purchase or carry shares of the Municipal Bond Fund will not be deductible for federal income tax purposes. Under rules issued by the Internal Revenue Service, the purchase of such shares may be considered to have been made with borrowed funds even though the borrowed funds are not directly traceable to the purchase of shares. Special rules that are beyond the scope of this Statement of Additional Information limit the deduction of interest paid by financial institutions. Investors with questions regarding these issues should consult their tax advisors. 11 Dividends attributable to interest on certain private activity bonds issued after August 7, 1986 will be items of tax preference and must be included in alternative minimum taxable income for the purpose of determining liability, if any, for the 26-28% alternative minimum tax for individuals and the 20% alternative minimum tax for corporations. Furthermore, the alternative minimum taxable income for corporations includes an adjustment equal to 75 percent of the excess of "adjusted current earnings" over the corporation's other federal alternative minimum taxable income (computed without regard to "adjusted current earnings" and without regard to any "alternative tax net operating loss"). See Section 56(g) of the Code. For the purpose of alternative minimum tax for corporations, ALL exempt-interest dividends, less any interest expense incurred to purchase or carry shares paying exempt interest dividends, must be taken into account as "adjusted current earnings." In addition, exempt-interest dividends paid to corporate investors may be subject to tax under the environmental tax, which applies at the rate of 0.12% on the excess of the "modified alternative minimum taxable income" of the corporation over $2 million. See Section 59A of the Code. In some cases, exempt-interest dividends paid by the Municipal Bond Fund may indirectly affect the amount of Social Security benefits or railroad retirement benefits that are taxable income to an investor. See Section 86 of the Code. Certain foreign corporations may be subject to the "branch profits tax" under Section 884 of the Code. The receipt of dividends from the Municipal Bond Fund may increase the liability of the foreign corporation under the branch profits tax, even if such dividends are generally tax-exempt. "Substantial users" (or persons related thereto) of facilities financed by certain governmental obligations are not allowed to exclude from gross income interest on such obligations. No investigation as to the substantial users of the facilities financed by bonds in the Municipal Bond Fund's portfolio will be made by the Municipal Bond Fund. Potential investors who may be, or may be related to, substantial users of such facilities should consult their tax advisors before purchasing shares of the Municipal Bond Fund. At the respective times of issuance of the municipal bonds, opinions relating to the validity thereof and to the exemption of interest thereon from federal income tax generally were or will be rendered by bond counsel engaged by the respective issuing authorities. The Municipal Bond Fund will not make any review of the issuance of the municipal bonds or of the basis for such opinions. An opinion concerning tax-exempt interest generally assumes continuing compliance with applicable standards and restrictions. Certain circumstances or actions by an issuer after the date of issuance can cause interest on municipal bonds to become includable in gross income. In some cases, the interest on such bonds could become taxable from the date of issuance. The Municipal Bond Fund will not monitor any issuers or any municipal bonds to attempt to ensure that the interest remains tax-exempt. If the Municipal Bond Fund declares dividends attributable to taxable interest it has received, it intends to designate as taxable the same percentage of the day's dividend that the actual taxable income earned on that day bears to total income earned on that day. Thus, the percentage of the dividend designated as taxable, if any, may vary from day to day. Shares of the Municipal Bond Fund generally would not be a suitable investment for a tax-exempt institution, a tax-exempt retirement plan, or an individual retirement account. To the extent that 12 such an entity or account is tax-exempt, no additional benefit would result from receiving tax-exempt dividends. From time to time, proposals have been introduced before Congress to restrict or eliminate the federal income tax exemption for interest on municipal bonds. Similar proposals may be introduced in the future. If such a proposal were enacted, the availability of municipal bonds for investment by the Municipal Bond Fund and the value of portfolio securities held by the Municipal Bond Fund would be affected. OTHER FUNDS. Shareholders of Funds other than the Municipal Bond Fund are taxed on distributions of net investment income, or of any excess of net short-term capital gain over net long-term capital loss, as ordinary income. Income distributions to corporate shareholders from the Common Stock Fund, the Growth Fund, the International Stock Fund, the Special Fund, and the Balanced Fund may qualify, in whole or part, for the federal income tax dividends-received deduction, depending on the amount of qualifying dividends received by the Fund. Qualifying dividends may include those paid to a Fund by domestic corporations but do not include those paid by foreign corporations. The dividends-received deduction equals 70 percent of qualifying dividends received from a Fund by a shareholder. However, distributions from the Money Market Fund, the Bond Fund, the Government Bond Fund and the High Yield Fund are unlikely to so qualify because the income of these Funds consists largely or entirely of interest rather than dividends. In addition, to the extent the Real Estate Fund's income is derived from interest and distributions from real estate investment trusts ("REITS"), distributions from that Fund will not qualify for the dividends-received deduction. Distributions of any excess of net long-term capital gain over net short-term capital loss from a Fund are ineligible for the dividends-received deduction. GENERAL CONSIDERATIONS. Distributions properly designated by any Fund as representing the excess of net long-term capital gain over net short-term capital loss are taxable to shareholders at the applicable long-term capital gains rate, regardless of the length of time the shares of the Fund have been held by shareholders. For noncorporate taxpayers, the highest rate that applies to long-term capital gains is lower than the highest rate that applies to ordinary income. Any loss that is realized and allowed on redemption of shares of the Fund 6 months or less from the date of purchase of the shares and following the receipt of a capital gain dividend will be treated as a long-term capital loss to the extent of the capital gain dividend. For this purpose, Section 852(b)(4) of the Code contains special rules on the computation of a shareholder's holding period. A portion of the income distributions from the Real Estate Fund will include a tax return of capital because of the nature of the distributions received by the Fund from its holdings in REITs. A tax return of capital is a nontaxable distribution that reduces the tax cost basis of your shares in the Real Estate Fund. The effect of a return of capital is to defer your tax liability on that portion of your income distributions until you sell your shares of the Real Estate Fund. Distributions of taxable net investment income and net realized capital gains will be taxable as described above, whether paid in shares or in cash. Each distribution is accompanied by a brief explanation of the form and character of the distribution. Within 60 days after the close of each calendar year, each Fund issues to each shareholder a statement of the federal income tax status of all distributions, including a statement of the prior calendar year's distributions which the Fund has designated to be 13 treated as long-term capital gain and, in the case of the Municipal Bond Fund, as tax-exempt interest, or in the case of the Real Estate Fund, as a tax return of capital. A distribution may be taxable to a shareholder even if the distribution reduces the net asset value of the shares held below their cost (and is in an economic sense a return of the shareholder's capital). This tax result is most likely when shares are purchased shortly before an annual distribution of capital gains or other earnings. This tax result is extremely unlikely in the case of the Money Market Fund, which distributes its earnings daily and has few or no capital gains. Each Fund is generally required to obtain from its shareholders a certification of the shareholder's taxpayer identification number and certain other information. Each Fund generally will not accept an investment to establish a new account that does not comply with this requirement. If a shareholder fails to certify such number and other information, or upon receipt of certain notices from the Internal Revenue Service, the Fund may be required to withhold 31 percent of any reportable interest or dividends, or redemption proceeds, payable to the shareholder, and to remit such sum to the Internal Revenue Service, for credit toward the shareholder's federal income taxes. A shareholder's failure to provide a social security number or other tax identification number may subject the shareholder to a penalty of $50 imposed by the Internal Revenue Service. In addition, that failure may subject the Fund to a separate penalty of $50. This penalty will be charged against the shareholder's account, which will be closed. Closure of the account may result in a capital gain or loss. If a Fund declares a dividend in October, November, or December payable to shareholders of record on a certain date in such a month and pays the dividend during January of the following year, the shareholders will be taxed as if they had received the dividend on December 31 of the year in which the dividend was declared. Thus, a shareholder may be taxed on the dividend in a taxable year prior to the year of actual receipt. A special tax may apply to a Fund if it fails to make enough distributions during the calendar year. The required distributions for each calendar year generally equal the sum of (a) 98 percent of the ordinary income for the calendar year plus (b) 98 percent of the capital gain net income for the one-year period that ends on October 31 during the calendar year (or for the calendar year itself if the Fund so elects), plus (c) an adjustment relating to any shortfall for the prior taxable year. If the actual distributions are less than the required distributions, a tax of 4 percent applies to the shortfall. The Code allows the deduction by certain individuals, trusts, and estates of "miscellaneous itemized deductions" only to the extent that such deductions exceed 2 percent of adjusted gross income. The limit on miscellaneous itemized deductions will NOT apply, however, with respect to the expenses incurred by any "publicly offered regulated investment company." Each Fund believes that it is a publicly offered regulated investment company because its shares are continuously offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act of 1933, as amended). Therefore, the limit on miscellaneous itemized deductions should not apply to expenses incurred by any of the Funds. The Funds may purchase zero coupon bonds and payment-in-kind ("PIK") bonds. With respect to zero coupon bonds, a Fund recognizes original-issue-discount income ratably over the life of the bond even though the Fund receives no payments on the bond until the bond matures. With respect to PIK bonds, a Fund recognizes interest income equal to the fair market value of the bonds distributed as 14 interest. Because a Fund must distribute 90 percent of its income to remain qualified as a registered investment company, a Fund may be forced to liquidate a portion of its portfolio to generate cash to distribute to its shareholders with respect to original-issue-discount income from zero coupon bonds and interest income from PIK bonds. FOREIGN INCOME TAXES The International Stock Fund invests in the securities of foreign corporations and issuers. To a lesser extent, the Common Stock Fund, the Growth Fund, the Special Fund, the Balanced Fund, and the High Yield Fund may also invest in such foreign securities. Foreign countries may impose income taxes, generally collected by withholding, on foreign-source dividends and interest paid to a Fund. These foreign taxes will reduce a Fund's distributed income. The Funds generally expect to incur, however, no foreign income taxes on gains from the sale of foreign securities. The United States has entered into income tax treaties with many foreign countries to reduce or eliminate the foreign taxes on certain dividends and interest received from corporations in those countries. The Funds intend to take advantage of such treaties where possible. It is impossible to predict with certainty in advance the effective rate of foreign taxes that will be paid by a Fund since the amount invested in particular countries will fluctuate and the amounts of dividends and interest relative to total income will fluctuate. U.S. FOREIGN TAX CREDITS OR DEDUCTIONS FOR SHAREHOLDERS OF THE INTERNATIONAL STOCK FUND. Section 853 of the Code allows a regulated investment company to make a special election relating to foreign income taxes if more than 50 percent of the value of the company's total assets at the close of its taxable year consists of stock or securities in foreign corporations. The International Stock Fund generally expects, if necessary, to qualify for and to make the election permitted under Section 853 of the Code. Although the International Stock Fund intends to meet the requirements of the Code to "pass through" such foreign taxes, there can be no assurance that the Fund will be able to do so. The International Stock Fund will elect under Section 853 of the Code only if it believes that it is in the best interests of its shareholders to do so. None of the other Columbia Funds that may invest in foreign securities will qualify under Section 853 of the Code. As a result of the Section 853 election, shareholders of the International Stock Fund will be required to include in income their proportionate share of (1) any dividend paid by the International Stock Fund that represents foreign-source income (in addition to any other taxable distributions received from the Fund) and (2) the foreign income taxes paid by the International Stock Fund. Each shareholder may choose to claim either a credit or a deduction for his or her proportionate share of the foreign income taxes paid by the International Stock Fund. A shareholder's use of the credits resulting from the Fund's election will be subject to the limits of Section 904 of the Code. In general, those limits will prevent a shareholder from using foreign tax credits to reduce U.S. taxes on U.S. source income. No deduction for foreign taxes may be claimed under the Code by individual shareholders who do not itemize deductions on their federal income tax returns. Each shareholder should discuss the use of foreign tax credits, the Section 904 limits and the deduction for foreign income taxes with the shareholder's tax advisor. Each year, the International Stock Fund will provide a statement to each shareholder showing the amount of foreign taxes for which a credit or a deduction may be available. 15 INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. If a Fund invests in certain non-U.S. corporations that receive at least 75 percent of their annual gross income from passive sources (such as sources that produce certain interest, dividends, royalties, capital gains, or rental income) or hold at least 50 percent of their assets in such passive sources ("PFIC"), the Fund could be subject to federal income tax and additional interest charges on "excess distributions" received from such companies or gain from the sale of stock in such companies, even if all income or gain actually received by a Fund is distributed to its shareholders in a timely manner. A Fund would not be able to pass through to its shareholders any credit or deduction for such tax. Pursuant to the Taxpayer Relief Act of 1997, a Fund could elect to "mark-to-market" stock in a PFIC. Pursuant to such an election, the Fund would include in income each year an amount equal to the excess, if any, of the fair market value of the PFIC stock as of the close of the taxable year over the Fund's adjusted basis in the PFIC stock. The Fund would be allowed a deduction for the excess, if any, of the adjusted basis of the PFIC stock over the fair market value of the PFIC stock as of the close of the taxable year, but only to the extent of any net mark-to-market gain included by the Fund for prior taxable years. The Fund's adjusted basis in the PFIC stock would be increased or decreased to reflect the amounts included in, or deducted from, income pursuant to this election. Amounts included in income pursuant to this election, as well as gain realized on the sale or any other disposition of the PFIC stock, would be treated as ordinary income. The deductible portion of any mark-to-market loss, as well as loss realized on the sale or other disposition of PFIC stock to the extent that such loss does not exceed the net mark-to-market gain previously included by the Fund, would be treated as ordinary loss. A Fund generally would not be subject to the deferred tax and interest charge provisions discussed above with respect to PFIC stock for which a mark-to-market election has been made. INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS THAT INVEST IN REMICS. The Real Estate Fund may invest in REITs that hold residual interests in real estate mortgage investment conduits ("REMICs"). Under Treasury regulations that have not yet been issued, but may apply retroactively, a portion of the Real Estate Fund's income from a REIT that is attributable to the REIT's residual interest in a REMIC (referred to in the Code as an "excess inclusion") will be subject to federal income tax in all events. These regulations are also expected to provide that excess exclusion income of a regulated investment company, such as the Real Estate Fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC residual interest directly. In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on unrelated business income, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a foreign shareholder, will not qualify for any reduction in U.S. federal withholding tax. In addition, if at any time during any taxable year a "disqualified organization" (as defined in the Code) is a record holder of a share in a regulated investment company, then the regulated investment company will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the highest federal income tax rate imposed on corporations. The Real Estate Fund does not intend to invest in REITs, a substantial portion of the assets of which consists of residual interests in REMICs. STATE INCOME TAXES MUNICIPAL BOND FUND. Individuals, trusts, and estates resident in Oregon will not be subject to the Oregon personal income tax on distributions from the Municipal Bond Fund that are derived from tax-exempt interest paid on the municipal bonds of Oregon and its political subdivisions and certain other issuers (including Puerto Rico and Guam). However, these individuals, trusts, and estates will be subject to the Oregon personal income tax on distributions from the Municipal Bond Fund that are derived from other types of income, including interest on the municipal bonds of states other than 16 Oregon. Furthermore, it is expected that corporations subject to the Oregon corporation excise or income tax will be subject to that tax on income from the Municipal Bond Fund, including income that is exempt for federal purposes. Shares of the Municipal Bond Fund will not be subject to Oregon property tax. Local taxes and the tax consequences to nonresidents and part-year residents are beyond the scope of this discussion. The exemption of certain interest income for federal income tax purposes will not necessarily result in a similar exemption under the laws of a particular state or local taxing authority. Each shareholder should consult a tax advisor in this regard. Capital gains distributed to shareholders will generally be subject to state and local taxes. The Municipal Bond Fund will report annually to its shareholders the percentage and source, on a state-by-state basis, of interest income on municipal bonds received by the Municipal Bond Fund during the preceding year. Oregon generally taxes corporations on interest income from municipal bonds. The Municipal Bond Fund is a corporation. However, ORS 317.309(2) provides that a regulated investment company may deduct from such interest income the exempt-interest dividends that are paid to shareholders. The Municipal Bond Fund expects to distribute its interest income so that it will not be liable for Oregon corporation excise or income taxes. GOVERNMENT BOND FUND. Individuals, trusts, and estates resident in Oregon will not be subject to Oregon personal income tax on dividends properly designated by the Government Bond Fund as derived from interest on U.S. government obligations. See ORS 316.683. If a shareholder pays deductible interest on debt incurred to carry shares of the Government Bond Fund, the amount of the tax-exempt dividends for state tax purposes will be reduced. If a shareholder sells shares of the Government Bond Fund at a loss after holding them for six months or less, the loss will be disallowed for state purposes to the extent of any state tax-exempt dividend received by the shareholder. The laws of other states may differ, and persons subject to tax in other states should consult their personal tax advisors. OTHER FUNDS. The state tax consequences of investments in the Funds, other than Oregon state tax consequences with respect to the Municipal Bond Fund and the Government Bond Fund, are beyond the scope of the tax discussions in the Prospectus and this Statement of Additional Information. ADDITIONAL INFORMATION The foregoing summary and the summary included in the Prospectus under "Taxes" of tax consequences of investment in the Funds are necessarily general and abbreviated. No attempt has been made to present a complete or detailed explanation of tax matters. Furthermore, the provisions of the statutes and regulations on which they are based are subject to change by legislative or administrative action. Local taxes are beyond the scope of this discussion. Prospective investors in the Funds are urged to consult their own tax advisors regarding specific questions as to federal, state, or local taxes. This discussion applies only to general U.S. shareholders. Foreign investors and U.S. shareholders with particular tax issues or statuses should consult their own tax advisors regarding the special rules that may apply to them. 17 - -------------------------------------------------------------------------------- YIELD AND PERFORMANCE - -------------------------------------------------------------------------------- The Funds will from time to time advertise or quote their respective yields and total return performance. These figures represent historical data and are calculated according to Securities and Exchange Commission ("SEC") rules standardizing such computations. The investment return and principal value (except, under normal circumstances, for the Money Market Fund) will fluctuate so that shares when redeemed may be worth more or less than their original cost. THE MONEY MARKET FUND Current yield is calculated by dividing the net change in the value of an account of one share during an identified seven-calendar-day period by the value of the one share account at the beginning of the same period ($1.00) and multiplying that base period return by 365/7, I.E.: net change in value of account of one share x 365 = Current - ------------------------------------------- --- value of account at beginning of period 7 Yield Compounded effective yield is calculated by daily compounding of the base period return referred to above. This calculation is made by adding 1 to the base period return, raising the sum to a number equal to 365 divided by 7, and subtracting 1 from the result, I.E.: 365 --- (base period return + 1) 7 -1 = Compounded Effective Yield 18 The determination of net change in the value of an account for purposes of the Money Market Fund yield calculations reflects the value of additional shares purchased with income dividends from the original share and income dividends declared on both the original share and the additional shares. The determination of net change does not reflect realized gains or losses from the sale of securities or unrealized appreciation or depreciation. The Money Market Fund includes unrealized appreciation or depreciation, as well as realized gains or losses, in the determination of actual daily dividends. Therefore, the quoted yields as calculated above may differ from the actual dividends paid. THE COMMON STOCK FUND, THE REAL ESTATE FUND, THE BALANCED FUND, AND THE BOND FUNDS Current yields of the Common Stock Fund, the Real Estate Fund, the Balanced Fund, the Government Bond Fund, the Bond Fund, the Municipal Bond Fund, and the High Yield Fund are calculated by dividing the net investment income per share earned during an identified 30-day period by the maximum offering price per share on the last day of the same period, according to the following formula: 6 Yield = 2 [( a-b + 1) -1] --- cd Where: a = dividends and interest earned during the period. b = expenses accrued for the period. c = the average daily number of shares outstanding during the period that were entitled to receive dividends. d = the maximum offering price per share on the last day of the period. The Funds use generally accepted accounting principles in determining actual income paid, and these principles differ in some instances from SEC rules for computing income for the above yield calculations. Therefore, the quoted yields as calculated above may differ from the actual dividends paid. The Municipal Bond Fund may publish a tax equivalent yield for Oregon shareholders that represents the yield that an investor must receive on a fully taxable investment to achieve the same after-tax results at the highest then existing marginal combined Oregon and federal income tax rates, calculated according to the following formula: Tax Equivalent Yield = a + c + e --- --- 1-b 1-d Where: a = that portion of the current yield of the Fund that is exempt from federal and Oregon income tax. b = highest then-existing marginal combined Federal and Oregon income tax rate. 19 c = that portion of the current yield of the Fund that is only exempt from federal gross income tax. d = highest then-existing federal income tax rate. e = that portion of the current yield of the Fund that is not tax exempt. The Municipal Bond Fund may also publish a tax equivalent yield for nonresidents of Oregon that represents the yield that an investor must receive on a fully taxable investment to achieve the same after-tax results of the highest then-existing marginal federal income tax rate, calculated according to the following formula: Tax Equivalent Yield = a + c --- 1-b Where: a = that portion of the current yield of the Fund that is exempt from federal income tax. b = highest then-existing marginal federal income tax rate. c = that portion of the current yield of the Fund that is not tax exempt. The Government Bond Fund may publish a tax equivalent yield for Oregon shareholders that represents the yield that an investor must receive on a fully taxable investment to achieve the same after-tax results at the highest then existing marginal Oregon income tax rate, calculated according to the following formula: Tax Equivalent Yield = a + c --- 1-b Where: a = that portion of the current yield of the Fund that is exempt from Oregon income tax. b = highest then existing marginal Oregon income tax rate. c = that portion of the current yield of the Fund that is not exempt from Oregon income tax. The Funds may also publish average annual total return quotations for recent 1, 5, and 10-year periods (or a fractional portion thereof) computed by finding the average annual compounded rates of return over the 1, 5, and 10-year periods that would equate the initial amount invested to the ending redeemable value, according to the following formula: n P(1+T) = ERV 20 Where: P = a hypothetical initial payment of $1000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1000 payment made at the beginning of the 1, 5, and 10-year periods (or fractional portion thereof) Total return figures may also be published for recent 1, 5, and 10-year periods where the total return figures represent the percentage return for the 1, 5, and 10-year periods that would equate the initial amount invested to the ending redeemable value. If a Fund's registration statement under the Investment Company Act of 1940 has been in effect less than 1, 5, or 10 years, the time period during which the registration statement has been in effect will be substituted for the periods stated. The Funds may compare their performance to other mutual funds with similar investment objectives and to the mutual fund industry as a whole, as quoted by ranking services and publications of general interest. For example, these services or publications may include Lipper Analytical Services, Inc., Schabacker's Total Investment Service, Barron's, Business Week, Changing Times, The Financial Times, Financial World, Forbes, Investor's Daily, Money, Morningstar, Inc., Personal Investor, The Economist, The Wall Street Journal, and USA Today. These ranking services and publications rank the performance of the Funds against all other funds over specified periods and against funds in specified categories. The Funds may also compare their performance to that of a recognized stock or bond index including the Standard & Poor's 500, Dow Jones, Russell, and Nasdaq stock indices, the NAREIT Equity Index, and the Shearson Lehman and Salomon bond indices, or, with respect to the International Stock Fund, a suitable international index, such as the Morgan Stanley Capital International Europe, Australia, Far East Index or the FT-S&P Actuaries Europe-Pacific Index. The comparative material found in advertisements, sales literature, or in reports to shareholders may contain past or present performance ratings. This is not to be considered representative or indicative of future results or future performance. Unmanaged indices may assume the reinvestment of dividends, but generally do not reflect deductions for administrative and management costs and expenses. In addition, the Funds may also compare their performance to other income-producing securities such as (i) money market funds; (ii) various bank products (based on average rates of bank and thrift institution certificates of deposit, money market deposit accounts, and other accounts as reported by the Bank Rate Monitor and other financial reporting services, including newspapers); and (iii) U.S. treasury bills or notes. There are differences between these income-producing alternatives and the Funds other than their yields, some of which are summarized below. The yields of the Funds are not fixed and will fluctuate. The principal value of your investment in each Fund (except, under normal circumstances, the Money Market Fund) at redemption may be more or less than its original cost. In addition, your investment is not insured and its yield is not guaranteed. Although the yields of bank money market deposit and other similar accounts will fluctuate, principal will not fluctuate and is insured by the Federal Deposit Insurance Corporation up to $100,000. Bank 21 passbook savings accounts normally offer a fixed rate of interest, and their principal and interest are also guaranteed and insured. Bank certificates of deposit offer fixed or variable rates for a set term. Principal and fixed rates are guaranteed and insured up to $100,000. There is no fluctuation in principal value. Withdrawal of these deposits prior to maturity will normally be subject to a penalty. - -------------------------------------------------------------------------------- INVESTMENT RESTRICTIONS - -------------------------------------------------------------------------------- The Prospectus sets forth the investment objectives and certain restrictions applicable to each Fund. The following is a list of investment restrictions applicable to each Fund. If a percentage limitation is adhered to at the time of an investment by a Fund, a later increase or decrease in percentage resulting from any change in value or net assets will not result in a violation of the restriction. A Fund may not change these restrictions without the approval of a majority of its shareholders, which means the vote at any meeting of shareholders of a Fund of (i) 67 percent or more of the shares present or represented by proxy at the meeting (if the holders of more than 50 percent of the outstanding shares are present or represented by proxy) or (ii) more than 50 percent of the outstanding shares, whichever is less. COLUMBIA COMMON STOCK FUND, INC. The Common Stock Fund may not: 1. Buy or sell commodities. However, the Common Stock Fund may invest in futures contracts relating to broadly based stock indices, subject to the restrictions in paragraph 15. 2. Concentrate investments in any industry. However, the Common Stock Fund may (a) invest up to 25 percent of the value of the total assets in any one industry and (b) invest for temporary defensive purposes up to 100 percent of the value of the total assets in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 3. Buy or sell real estate. However, the Common Stock Fund may purchase or hold readily marketable securities issued by companies, such as real estate investment trusts, which operate in real estate or interests therein. 4. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). 5. Purchase a repurchase agreement with a maturity greater than seven days or a security that is subject to legal or contractual restrictions on resale or for which there are no readily available market quotations if, as a result of such purchase, more than 5 percent of the assets of the Common Stock Fund (taken at current value) is invested in such securities. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the outstanding voting securities of that issuer to be held in the Common Stock Fund. 22 7. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the value of the total assets of the Common Stock Fund at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its agencies and instrumentalities), with reference to 75 percent of the assets of the Common Stock Fund. 8. Purchase securities of other open-end investment companies. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities of other issuers, except that the Common Stock Fund may acquire portfolio securities under circumstances where, if the securities are later publicly offered or sold by the Common Stock Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 11. Borrow money in excess of 5 percent of its net asset value. Any borrowing must only be temporarily from banks and for extraordinary or emergency purposes. 12. Invest its funds in the securities of any company if the purchase, at the time thereof, would cause more than 5 percent of the value of the Common Stock Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years' continuous operation. 13. Invest in companies for the purpose of exercising control or management. 14. Engage in short sales of securities except to the extent that it owns an equal amount of the securities sold short or other securities convertible into an equivalent amount of such securities ("short sales against the box"). Such transactions may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event, no more than 5 percent of the value of the Common Stock Fund's net assets taken at market may, at any time, be held as collateral for such sales. 15. Buy and sell puts and calls as securities, stock index futures or options on stock index futures, or financial futures or options on financial futures, unless such options are written by other persons and the options or futures are offered through the facilities of a national securities association or are listed on a national securities or commodities exchange. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. Some of the policies described above prohibit particular practices. Other policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the portion of the Common Stock Fund's assets that may be so invested. During the last year, the Common Stock Fund did not engage in any of these permitted practices and has no current intention of doing so in the foreseeable future. 23 COLUMBIA GROWTH FUND, INC. The Growth Fund may not: 1. Buy or sell commodities or commodity contracts. 2. Concentrate more than 25 percent of its investments in any one industry. 3. Buy or sell real estate. (However, the Growth Fund may buy readily marketable securities such as Real Estate Investment Trusts.) 4. Make loans, except through the purchase of a portion of an issue of publicly distributed debt securities. 5. Hold more than 5 percent of the voting securities of any one company. 6. Purchase the securities of any issuer if the purchase at the time thereof would cause more than 5 percent of the assets of the Growth Fund (taken at value) to be invested in the securities of that issuer, except U.S. Government bonds. 7. Purchase securities of any issuer when those officers and directors of the Growth Fund who individually own 1/2 of 1 percent of the securities of that issuer together own 5 percent or more. 8. Purchase securities of other open-end investment companies. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities issued by others except as it may be deemed to be an underwriter of restricted securities. 11. Borrow money in excess of 5 percent of its net asset value. Any borrowing must only be temporarily from banks for extraordinary or emergency purposes. 12. Invest more than 5 percent of its total assets at cost in the securities of companies which (with predecessor companies) have a record of less than three years of continuous operation and equity securities which are not readily marketable. 13. Invest in companies for purposes of control or management. 14. Buy securities on margin or make short sales. 15. Invest more than 5 percent of the value of its assets in securities which are subject to legal or contractual restrictions on resale or are otherwise not saleable. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. 24 Some of the policies described above prohibit particular practices. Other policies (paragraphs 11, 12, and 15) permit specified practices but limit the portion of the Growth Fund's assets that may be so invested. During the last year, the Growth Fund did not engage in any of these permitted practices and has no current intention of doing so in the foreseeable future. COLUMBIA INTERNATIONAL STOCK FUND, INC. The International Stock Fund may not: 1. Buy or sell commodities. However, the International Stock Fund may invest in futures contracts or options on such contracts relating to broadly based stock indices, subject to the restrictions in paragraph 15, and may enter into foreign currency transactions. 2. Concentrate investments in any industry. However, the International Stock Fund may (a) invest up to 25 percent of the value of its assets in any one industry and (b) invest for temporary defensive purposes up to 100 percent of the value of its assets in securities issued or guaranteed by the United States or its agencies or instrumentalities. 3. Buy or sell real estate. However, the International Stock Fund may purchase or hold readily marketable securities issued by companies, such as real estate investment trusts, which operate in real estate or interests therein. 4. Make loans to other persons, except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue and except to the extent the entry into repurchase agreements in accordance with the Fund's investment restrictions may be deemed a loan. 5. Purchase a repurchase agreement with a maturity greater than seven days or a security that is subject to legal or contractual restrictions on resale or for which there are no readily available market quotations if, as a result of such purchase, more than 10 percent of the assets of the Fund (taken at current value) is invested in such securities. Certain restricted securities that can be resold to qualifying institutions pursuant to a regulatory exemption under Rule 144A of the Securities Act of 1933 and for which a dealer or institutional trading market exists may be deemed to be liquid securities by the Board of Directors of the International Stock Fund and, therefore, are not subject to the above investment restriction. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 10 percent of the outstanding voting securities of that issuer to be held by the International Stock Fund. 7. Purchase the securities of any issuer (including any foreign government issuer) if the purchase, at the time thereof, would cause more than 5 percent of the value of the total assets of the Fund at market value to be invested in the securities of that issuer (other than obligations of the U.S. government and its agencies and instrumentalities), with reference to 75 percent of the assets of the International Stock Fund. 8. Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization, or by purchase in the open market of securities of closed- 25 end investment companies where no underwriter or dealer's commission or profit, other than customary broker's commission, is involved and only if immediately thereafter not more than (i) 3 percent of the total outstanding voting stock of such company is owned by the Fund, (ii) 5 percent of the International Stock Fund's total assets would be invested in any one such company, and (iii) 10 percent of the International Stock Fund's total assets would be invested in such securities. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities of other issuers, except that the International Stock Fund may acquire portfolio securities in circumstances where, if the securities are later publicly offered or sold by the International Stock Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 11. Borrow money, except temporarily for extraordinary or emergency purposes. For all amounts borrowed, the Fund will maintain an asset coverage of 300 percent. The International Stock Fund will not make any additional investments while borrowings exceed 5 percent of the Fund's total assets. 12. Invest its funds in the securities of any company if the purchase would cause more than 5 percent of the value of the International Stock Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years continuous operation. 13. Invest in companies for the purpose of exercising control or management. 14. Engage in short sales of securities except to the extent that it owns an equal amount of the securities sold short or other securities convertible into an equivalent amount of such securities ("short sales against the box"). Such transactions may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event, no more than 5 percent of the value of the International Stock Fund's net assets taken at market may, at any time, be held as collateral for such sales. 15. Buy and sell puts and calls as securities, stock index futures or options on stock index futures, or financial futures or options on financial futures, unless such options are written by other persons and the options or futures are offered through the facilities of a recognized securities association or are listed on a recognized securities or commodities exchange or similar entity. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. Some of the policies described above prohibit particular practices. Other policies (paragraphs 5, 8, 11, 12, and 14) permit specified practices but limit the portion of the International Stock Fund's assets that may be so invested. Subject to the investment restriction, the International Stock Fund expects to engage in the practices described in paragraphs 5 (restricted securities) and 8 (investment companies). The International Stock Fund has no intention of engaging in the other permitted practices in the foreseeable future. 26 COLUMBIA SPECIAL FUND, INC. The Special Fund may not: 1. Buy or sell commodities. However, the Special Fund may invest in futures contracts relating to broadly based stock indices, subject to the restrictions in paragraph 15. 2. Concentrate investments in any industry. However, the Special Fund may (a) invest up to 25 percent of the value of the total assets in any one industry and (b) invest for temporary defensive purposes up to 100 percent of the value of the total assets in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 3. Buy or sell real estate. However, the Special Fund may purchase or hold readily marketable securities issued by companies such as real estate investment trusts, which operate in real estate or interests therein. 4. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). 5. Purchase a repurchase agreement with a maturity greater than seven days or a security that is subject to legal or contractual restrictions on resale or for which there are no readily available market quotations if, as a result of such purchase, more than 10 percent of the assets of the Special Fund (taken at current value) is invested in such securities. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 10 percent of the outstanding voting securities of that issuer to be held in the Special Fund. 7. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the value of the total assets of the Special Fund at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its agencies and instrumentalities), with reference to 75 percent of the assets of the Special Fund. 8. Purchase securities of other open-end investment companies. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities of other issuers, except that the Special Fund may acquire portfolio securities under circumstances where, if the securities are later publicly offered or sold by the Special Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 11. Borrow money in excess of 5 percent of its net assets value. Any borrowing must only be temporarily from banks and for extraordinary or emergency purposes. 12. Invest its funds in the securities of any company if the purchase, at the time thereof, would cause more than 10 percent of the value of the Special Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years' continuous operation. 27 13. Invest in companies for the purpose of exercising control or management. 14. Engage in short sales of securities except to the extent that it owns an equal amount of the securities sold short or other securities convertible into an equivalent amount of such securities ("short sales against the box"). Such transactions may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event, no more than 10 percent of the value of the Special Fund's net assets taken at market may, at any time, be held as collateral for such sales. 15. Buy and sell puts and calls as securities, stock index futures or options on stock index futures, or financial futures or options on financial futures, unless such options are written by other persons and the options or futures are offered through the facilities of a national securities association or are listed on a national securities or commodities exchange. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. Some of the policies described above prohibit particular practices. Other policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the portion of the Special Fund's assets that may be so invested. Other than paragraph 12, the Special Fund did not engage in any of these permitted practices during the last year and has no current intention of doing so in the foreseeable future. COLUMBIA SMALL CAP FUND, INC. The Small Cap Fund may not: 1. Buy or sell commodities. However, the Small Cap Fund may invest in futures contracts relating to broadly based stock indices, subject to the restrictions in paragraph 15. 2. Concentrate investments in any industry. However, the Small Cap Fund may (a) invest up to 25 percent of the value of the total assets in any one industry and (b) invest for temporary defensive purposes up to 100 percent of the value of the total assets in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 3. Buy or sell real estate. However, the Small Cap Fund may purchase or hold readily marketable securities issued by companies such as real estate investment trusts, which operate in real estate or interests therein. 4. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). 5. Purchase a repurchase agreement with a maturity greater than seven days or a security that is subject to legal or contractual restrictions on resale or for which there are no readily available market quotations if, as a result of such purchase, more than 10 percent of the assets of the Fund (taken at current value) is invested in such securities. 28 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 10 percent of the outstanding voting securities of that issuer to be held in the Small Cap Fund. 7. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the value of the total assets of the Small Cap Fund at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its agencies and instrumentalities), with reference to 75 percent of the assets of the Fund. 8. Purchase securities of other open-end investment companies. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities of other issuers, except that the Small Cap Fund may acquire portfolio securities under circumstances where, if the securities are later publicly offered or sold by the Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 11. Borrow money in excess of 5 percent of its net asset value. Any borrowing must only be temporarily from banks and for extraordinary or emergency purposes. 12. Invest its funds in the securities of any company if the purchase, at the time thereof, would cause more than 10 percent of the value of the Small Cap Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years' continuous operation. 13. Invest in companies for the purpose of exercising control or management. 14. Engage in short sales of securities except to the extent that it owns an equal amount of the securities sold short or other securities convertible into an equivalent amount of such securities ("short sales against the box"). Such transactions may only be made to protect a profit in or to attempt to minimize a loss with respect to securities held by the Fund. In any event, no more than 10 percent of the value of the Fund's net assets taken at market may, at any time, be held as collateral for such sales. 15. Buy and sell puts and calls as securities, stock index futures or options on stock index futures, or financial futures or options on financial futures, unless such options or futures are offered through the facilities of a national securities association or are listed on a national securities or commodities exchange. The Fund may write call options that are covered in accordance with rules established by the Securities and Exchange Commission. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. Some of the policies described above prohibit particular practices. Other policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the portion of the Fund's assets that may be so invested. Other than paragraph 14, the Fund did not engage in any of these permitted practices during the last year. Subject to the investment restriction, the Fund expects to engage in the practices described in paragraph 12. The Fund has no current intention of engaging in the other permitted practices in the foreseeable future. 29 COLUMBIA REAL ESTATE EQUITY FUND, INC. The Real Estate Fund may not: 1. Buy or sell commodities or commodity futures contracts. 2. Buy or sell real estate. However, the Real Estate Fund may purchase or hold readily marketable securities issued by companies, such as real estate investment trusts, that operate in real estate or interests therein, and participation interests in pools of real estate mortgage loans. 3. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). The Real Estate Fund may lend portfolio securities to broker-dealers or other institutional investors if, as a result thereof, the aggregate value of all securities loaned does not exceed 33 1/3% of its total assets. 4. Purchase illiquid securities, including restricted securities and repurchase agreements of more than seven days maturity, if upon the purchase more than 10 percent of the value of the Real Estate Fund's net assets would consist of these securities. "Illiquid securities" are securities that may not be sold or disposed of in the ordinary course of business within seven days at approximately the price used to determine the Real Estate Fund's net asset value and include restricted securities that are subject to legal or contractual restrictions on resale. Certain restricted securities that can be resold to qualifying institutions pursuant to a regulatory exemption under Rule 144A of the Securities Act of 1933 and for which a dealer or institutional trading market exists may be deemed to be liquid securities by the Board of Directors of the Real Estate Fund and, in that event, will not be subject to the above investment restriction. 5. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 10% of the outstanding voting securities of that issuer to be held in the Real Estate Fund. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5% of the value of its total assets at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its instrumentalities), with reference to 75% of the assets of the Real Estate Fund. 7. Purchase or retain securities of an issuer if those officers or directors of the Real Estate Fund or the Advisor who individually own more than 1/2 of 1% of the outstanding securities of that issuer together own more than 5% of such securities. 8. Purchase securities of other open-end investment companies. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities of other issuers, except the Real Estate Fund may acquire portfolio securities in circumstances where, if the securities are later publicly offered or sold by the Real Estate Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 30 11. Borrow money except as a temporary measure for extraordinary or emergency purposes. The Real Estate Fund's borrowings may not exceed 5% of its gross assets valued at the lesser of cost or market value, nor may it pledge, mortgage, or hypothecate assets if the market value of such assets exceeds 10% of the gross assets, valued at cost, of the Real Estate Fund. 12. Invest in the securities of any company if the purchase, at the time thereof, would cause more than 5% of the value of the Real Estate Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years of continuous operation. 13. Invest in companies to exercise control or management. 14. Buy any securities or other property on margin, except for short-term credits necessary for clearing transactions and except that margin payments and other deposits in connection with transactions in options, futures, and forward contracts shall not be deemed to constitute purchasing securities on margin. 15. Engage in short sales of securities except to the extent that it owns other securities convertible into an equivalent amount of such securities. These short sales may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event no more than 10% of the Real Estate Fund's net assets valued at market may, at any time, be held as collateral for such sales. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Real Estate Fund may own securities of companies engaged in those businesses. 17. Concentrate investments in any one industry, except that the Real Estate Fund will invest at least 65% of the value of its total assets in securities of companies principally engaged in the real estate industry. Some of the practices described above prohibit particular practices. Certain policies described in paragraphs 3, 4, 5, 11, 12, and 15 permit specified practices but limit the portion of the Real Estate Fund's assets that may be so invested. During the last year, the Real Estate Fund did not engage in any of these permitted practices, other than paragraphs 11 and 12, and has no current intention of doing so in the foreseeable future. COLUMBIA BALANCED FUND, INC. The Balanced Fund may not: 1. Buy or sell commodities. However, the Balanced Fund may invest in futures contracts relating to broadly based stock indices, subject to the restrictions in paragraph 15 2. Concentrate investments in any industry. However, the Balanced Fund may (a) invest up to 25 percent of the value of the total assets in any one industry and (b) invest for temporary defensive purposes up to 100 percent of the value of the total assets in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 31 3. Buy or sell real estate. However, the Balanced Fund may purchase or hold readily marketable securities issued by companies such as real estate investment trusts, which operate in real estate or interests therein. 4. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). 5. Purchase a repurchase agreement with a maturity greater than seven days or a security that is subject to legal or contractual restrictions on resale or for which there are no readily available market quotations if, as a result of such purchase, more than 5 percent of the assets of the Balanced Fund (taken at current value) is invested in such securities. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the outstanding voting securities of that issuer to be held in the Balanced Fund. 7. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the value of the total assets of the Balanced Fund at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its agencies and instrumentalities), with reference to 75 percent of the assets of the Balanced Fund. 8. Purchase securities of other open-end investment companies. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities of other issuers, except that the Balanced Fund may acquire portfolio securities under circumstances where, if the securities are later publicly offered or sold by the Balanced Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 11. Borrow money in excess of 5 percent of its net assets value. Any borrowing must only be temporarily from banks and for extraordinary or emergency purposes. 12. Invest its funds in the securities of any company if the purchase, at the time thereof, would cause more than 5 percent of the value of the Balanced Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years' continuous operation. 13. Invest in companies for the purpose of exercising control or management. 14. Engage in short sales of securities except to the extent that it owns an equal amount of the securities sold short or other securities convertible into an equivalent amount of such securities ("short sales against the box"). Such transactions may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event, no more than 5 percent of the value of the Balanced Fund's net assets taken at market may, at any time, be held as collateral for such sales. 15. Buy and sell puts and calls as securities, stock index futures or options on stock index futures, or financial futures or options on financial futures, unless such options are written by other 32 persons and the options or futures are offered through the facilities of a national securities association or are listed on a national securities or commodities exchange. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. Some of the policies described above prohibit particular practices. Other policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the portion of the Balanced Fund's assets that may be so invested. Subject to the investment restriction, the Balanced Fund expects to engage in the practices described in paragraph 5 (restricted securities). (See the Prospectus for additional information.) The Balanced Fund has no intention of engaging in the other permitted practices in the foreseeable future. COLUMBIA DAILY INCOME COMPANY The Money Market Fund may not: 1. Borrow money to improve portfolio yield except as a temporary measure to avoid disruptive redemptions, and not for investment purposes. Borrowings will not exceed 33 1/3 percent of total assets and will be repaid from the proceeds of sales of the Money Market Fund's shares or as maturities allow. 2. Underwrite securities issued by others except as it may be deemed to be an underwriter in a sale of restricted securities. 3. Invest more than 5 percent of its assets (exclusive of obligations issued or guaranteed as to principal and interest by the U.S. Government or any agency or instrumentality thereof) in the securities of any one issuer. The Money Market Fund may invest up to 100 percent of its total assets in obligations of U.S. banks which are members of the Federal Reserve System. However, the Money Market Fund will not invest more than 25 percent of its assets in any other single industry. 4. Buy or sell real estate. 5. Buy or sell commodities or commodity contracts. 6. Make loans to others (the purchase of obligations in which the Money Market Fund is authorized to invest will not constitute loans) except that the Money Market Fund may purchase and simultaneously resell for later delivery obligations issued or guaranteed as to principal and interest by the United States Government or any agency or instrumentality thereof if no more than 10 percent of the Money Market Fund's total assets would be subject to such repurchase agreements maturing in more than seven days. 7. Purchase common stocks, preferred stocks, warrants, or other equity securities. 8. Purchase securities on margin. 9. Sell securities short. 33 10. Write or purchase put or call options. 11. Purchase a security which is subject to legal or contractual restrictions on resale or for which there is no readily available market, except that 10 percent of the Money Market Fund's total assets may be invested in repurchase agreements maturing in more than seven days. 12. Invest in companies to exercise control or management. 13. Invest in the securities of other investment companies, except those acquired as part of a merger, consolidation, or acquisition of assets. Some of the policies described above prohibit particular practices. Other policies (paragraphs 1, 6, and 11) permit specified practices but limit the portion of the Money Market Fund's assets that may be so invested. Other than paragraph 1, the Money Market Fund has not engaged in these permitted practices during the last year and has no current intention of doing so in the foreseeable future. INVESTMENT RESTRICTIONS UNDER RULE 2a-7 Rule 2a-7 under the Investment Company Act of 1940 requires that all portfolio securities of a money market fund have at the time of purchase a maximum remaining maturity (as defined in the rule) of 13 months and that the fund maintain a dollar-weighted average portfolio maturity of not more than 90 days. The Money Market Fund, however, will be invested in short-term debt obligations maturing within 12 months. Rule 2a-7 further requires that investments by a money market fund must present minimal credit risk and, if rated, must be rated within one of the two highest rating categories for short-term debt obligations by at least two major rating agencies assigning a rating to the securities or issuer or, if only one rating agency has assigned a rating, by that agency. Purchases of securities which are unrated or rated by only one rating agency must be approved or ratified by the board of directors of the fund. Securities that are rated (or that have been issued by an issuer that is rated with respect to a class of short-term debt obligations, or any security within that class, comparable in priority and quality with such securities) in the highest category by at least two major rating agencies are designated "First Tier Securities." Securities rated in the top two categories by at least two major rating agencies, but which are not rated in the highest category by two or more major rating agencies, are designated "Second Tier Securities." Securities which are unrated may be purchased only if they are deemed to be of comparable quality to rated securities. Under Rule 2a-7, a fund may not invest more than the greater of 1 percent of its total assets or one million dollars, measured at the time of investment, in the securities of a single issuer that were Second Tier Securities when acquired by the fund. In addition, a money market fund may not under Rule 2a-7 invest more than 5 percent of its total assets in securities that were Second Tier Securities when acquired. The Money Market Fund may not invest more than 5 percent of its total assets in the securities of any one issuer, except this limitation shall not apply to U.S. Government securities and repurchase agreements thereon. The Money Market Fund may, however, invest more than 5 percent of its total assets in the First Tier Securities of a single issuer for up to three business days, although the Money Market Fund may not make more than one such investment at any one time. 34 Investment policies by the Money Market Fund are in certain circumstances more restrictive than the restrictions under Rule 2a-7. In particular, investments by the Money Market Fund are restricted to the following: 1. Securities issued or guaranteed as to principal and interest by the U.S. Government or issued or guaranteed by agencies or instrumentalities thereof and repurchase agreements relating to these securities. 2. Commercial paper which, if rated by Standard & Poor's Corporation ("S&P") or Moody's Investor Services, Inc. ("Moody's"), is rated A-1 by S&P and Prime 1 by Moody's or, if not rated, is determined to be of comparable quality by the Board of Directors of the Money Market Fund. 3. Other corporate debt securities with remaining maturities of less than 12 months, including bonds and notes, of an issuer that has received ratings from S&P and Moody's for its other short-term debt obligations as described in paragraph 2 above, where such corporate debt securities are comparable in priority and security to the rated short-term debt obligations or, if no ratings are available, where such corporate debt securities are determined to be of comparable quality under procedures approved by the Board of Directors of the Money Market Fund. 4. Obligations of U.S. banks that are members of the Federal Reserve System and have capital surplus and undivided profits as of the date of their most recent published financial statements in excess of $100 million and are determined by the Board of Directors of the Money Market Fund to be of comparable quality to the obligations described in paragraphs 2 or 3 above. Currently these obligations are certificates of deposit, bankers' acceptances, and letters of credit. COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC. The Government Bond Fund may not: 1. Issue senior securities, bonds, or debentures. 2. Buy securities on margin, make short sales, or write put or call options. 3. Borrow money in excess of five percent of its net asset value. Any borrowing must only be temporarily from banks or other lending institutions for extraordinary or emergency purposes. 4. Pledge, hypothecate, or transfer in any manner, as security for indebtedness, any securities owned by the Government Bond Fund, except as necessary in connection with borrowings described in subparagraph 3 above. Any such pledge, hypothecation, or transfer may not exceed 10 percent of the Government Bond Fund's total assets, at the lesser of cost or market value. 5. Underwrite securities of other issuers or acquire securities that must be registered under the Securities Act of 1933, as amended, before they may be sold to the public. 6. Purchase securities that are other than direct obligations of the U.S. Government and repurchase agreements with respect to those obligations. 35 7. Invest more than 10 percent of total assets in repurchase agreements. 8. Purchase or sell real estate or real estate contracts, including futures contracts. 9. Purchase or sell commodities or commodities contracts, including futures contracts. 10. Purchase securities with maturities in excess of three years from the date of purchase. 11. Make loans to other persons except by purchase of debt obligations in which the Government Bond Fund may invest and repurchase agreements with respect to those obligations. 12. Purchase securities of other investment companies. Some of the policies described above prohibit particular practices. Other policies (paragraphs 3, 4, and 7) permit specified practices but limit the portion of the Government Bond Fund's assets that may be so invested. Other than the practices indicated in paragraphs 3 and 7, the Government Bond Fund has not engaged in any of these permitted practices during the last year and has no current intention of doing so in the foreseeable future. COLUMBIA FIXED INCOME SECURITIES FUND, INC. The Bond Fund may not: 1. Buy or sell commodities or commodity futures contracts. 2. Concentrate investments in any industry. However, it may (a) invest up to 25 percent of the value of its total assets in any one industry, (b) invest up to 100 percent of the value of its total assets in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and (c) invest for defensive purposes up to 80 percent of the value of its total assets in certificates of deposit (C/D's) and bankers' acceptances with maturities not greater than one year. C/D's and banker's acceptances will be limited to domestic banks which have total assets in excess of one billion dollars and are subject to regulatory supervision by the U.S. Government or state governments. Commitments to purchase securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities on a "when-issued" basis may not exceed 20 percent of the total assets of the Bond Fund. Emphasis on investments in securities of a particular industry will be shifted whenever the Advisor determines that such action is desirable for investment reasons. The Board of Directors will periodically review these decisions of the Advisor. 3. Buy or sell real estate. However, the Bond Fund may purchase or hold readily marketable securities issued by companies such as real estate investment trusts, which operate in real estate or interests therein, and participation interests in pools of real estate mortgage loans. 4. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). The Bond Fund may lend portfolio securities to broker-dealers or other institutional investors if, as a result thereof, the aggregate value of all securities loaned does not exceed 33 1/3 percent of its total assets. 36 5. Purchase a repurchase agreement with a maturity greater than seven days or a security that is subject to legal or contractual restrictions on resale or for which there are no readily available market quotations, if, as a result of such purchase, more than 10 percent of its total assets (taken at current value) are invested in such securities. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 10 percent of the outstanding voting securities of that issuer to be held in the Bond Fund. 7. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the value of its total assets at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its instrumentalities), with reference to 75 percent of the assets of the Bond Fund. 8. Purchase or retain securities issued by an issuer, any of whose officers or directors or security holders is an officer or director of the Bond Fund or of its advisor if, or so long as, the officers and directors of the Bond Fund and of its advisor together own beneficially more than 5 percent of any class of securities of the issuer. 9. Purchase securities of other open-end investment companies. 10. Issue senior securities, bonds, or debentures. 11. Underwrite securities of other issuers, except the Bond Fund may acquire portfolio securities in circumstances where, if the securities are later publicly offered or sold by the Bond Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 12. Borrow money except as a temporary measure for extraordinary or emergency purposes. Its borrowings may not exceed 5 percent of the value of the gross assets of the Bond Fund taken at the lesser of cost or market value, nor may it pledge, mortgage, or hypothecate assets taken at market to an extent greater than 10 percent of the value of the gross assets taken at cost of the Bond Fund. 13. Invest in the securities of any company if the purchase, at the time thereof, would cause more than 5 percent of the value of the Bond Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years of continuous operation. 14. Invest in companies to exercise control or management. 15. Buy any securities or other property on margin, or purchase or sell puts or calls, or combinations thereof. 16. Engage in short sales of securities except to the extent that it owns other securities convertible into an equivalent amount of such securities. These short sales may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event no more than 10 percent of the value of the Bond Fund's net assets taken at market may, at any time, be held as collateral for such sales. 37 Some of the practices described above prohibit particular practices. Other policies (paragraphs 2, 4, 5, 12, 13, and 16) permit specified practices but limit the portion of the Bond Fund's assets that may be so invested. Subject to the investment restriction, the Bond Fund expects to engage in the practices described in paragraph 5 (restricted securities). (See the Prospectus for additional information.) The Bond Fund has no intention of engaging in the other permitted practices in the foreseeable future. COLUMBIA MUNICIPAL BOND FUND, INC. The Municipal Bond Fund may not: 1. Buy or sell real estate, but this shall not prevent the Municipal Bond Fund from investing in municipal obligations secured by real estate or interests therein. 2. Make loans to other persons except by purchase of debt securities constituting all or part of an issue or through the loan of portfolio securities and as otherwise permitted by the Municipal Bond Fund's investment restrictions. 3. Purchase more than 10 percent of the voting securities of any issuer. 4. Buy or sell commodities or commodity future contracts. 5. Purchase securities of other investment companies if, as a result of the purchase, more than 10 percent of the assets of the Municipal Bond Fund is invested in such securities. 6. Issue senior securities, bonds, or debentures. 7. Sell securities short or buy any securities or other property on margin, except for short-term credits necessary for clearing transactions. 8. Lend portfolio securities to broker-dealers or other institutional investors if, as a result, the aggregate value of all securities loaned exceeds 33 1/3 percent of the total assets of the Municipal Bond Fund. 9. Underwrite securities of other issuers, except that the Municipal Bond Fund may acquire portfolio securities in circumstances where, if the securities are later publicly offered or sold by the Municipal Bond Fund, it might be deemed an underwriter for purposes of the Securities Act of 1933. 10. Borrow money except temporarily for extraordinary or emergency purposes; nor may it pledge, mortgage, or hypothecate assets having a market value greater than 10 percent of the cost of the gross assets of the Municipal Bond Fund. For amounts borrowed, the Municipal Bond Fund shall maintain an asset coverage of 300 percent for all borrowings. This restriction means that the Municipal Bond Fund may not borrow money in an amount exceeding 50 percent of its gross assets. The Municipal Bond Fund will not make any additional investments while borrowings exceed 5 percent of the value of the Fund's total assets. 11. Invest more than 25 percent of its assets in a single industry. 38 Some of the policies described above prohibit particular practices. Other policies (paragraphs 5, 8, and 10) permit specified practices but limit the portion of the Municipal Bond Fund's assets that may be so invested. Other than the practices indicated in paragraph 5, the Municipal Bond Fund has not engaged in any of these permitted practices during the last year and has no current intention of doing so in the foreseeable future. COLUMBIA HIGH YIELD FUND, INC. The High Yield Fund may not: 1. Buy or sell commodities or commodity futures contracts. 2. Concentrate investments in any industry. However, it may (a) invest up to 25 percent of the value of its total assets in any one industry, (b) invest up to 100 percent of the value of its total assets in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, and (c) invest for defensive purposes up to 80 percent of the value of its total assets in certificates of deposit (CD's) and bankers' acceptances with maturities not greater than one year. CD's and banker's acceptances will be limited to domestic banks which have total assets in excess of $1 billion and are subject to regulatory supervision by the U.S. Government or state governments. Commitments to purchase securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities on a "when-issued" basis may not exceed 20 percent of the total assets of the High Yield Fund. Emphasis on investments in securities of a particular industry will be shifted whenever the Advisor determines that such action is desirable for investment reasons. The Board of Directors will periodically review these decisions of the Advisor. 3. Buy or sell real estate. However, the High Yield Fund may purchase or hold readily marketable securities issued by companies, such as real estate investment trusts, that operate in real estate or interests therein, and participation interests in pools of real estate mortgage loans. 4. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). The High Yield Fund may lend portfolio securities to broker-dealers or other institutional investors if, as a result thereof, the aggregate value of all securities loaned does not exceed 33 1/3 percent of its total assets. 5. Purchase illiquid securities, including restricted securities and repurchase agreements of more than seven days maturity, if upon the purchase more than 10 percent of the value of the High Yield Fund's net assets would consist of these securities. "Illiquid securities" are securities that may not be sold or disposed of in the ordinary course of business within seven days at approximately the price used to determine the Fund's net asset value and include restricted securities that are subject to legal or contractual restrictions on resale. Certain restricted securities that can be resold to qualifying institutions pursuant to a regulatory exemption under Rule 144A of the Securities Act of 1933 and for which a dealer or institutional trading market exists may be deemed to be liquid securities by the Board of Directors of the Fund and, therefore, are not subject to the above investment restriction. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 10 percent of the outstanding voting securities of that issuer to be held in the High Yield Fund. 39 7. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the value of its total assets at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its instrumentalities), with reference to 75 percent of the assets of the High Yield Fund. 8. Purchase or retain securities of an issuer if those officers or directors of the High Yield Fund or the Advisor who individually own more than 1/2 of 1% of the outstanding securities of that issuer together own more than 5% of such securities. 9. Purchase securities of other open-end investment companies. 10. Issue senior securities, bonds, or debentures. 11. Underwrite securities of other issuers, except the High Yield Fund may acquire portfolio securities in circumstances where, if the securities are later publicly offered or sold by the Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 12. Borrow money except as a temporary measure for extraordinary or emergency purposes. Its borrowings may not exceed 5 percent of the gross assets of the High Yield Fund valued at the lesser of cost or market value, nor may it pledge, mortgage, or hypothecate assets valued at market to an extent greater than 10 percent of the gross assets valued at cost of the Fund. 13. Invest in the securities of any company if the purchase, at the time thereof, would cause more than 5 percent of the value of the High Yield Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years of continuous operation. 14. Invest in companies to exercise control or management. 15. Buy any securities or other property on margin, except for short-term credits necessary for clearing transactions and except that margin payments and other deposits in connection with transactions in options, futures, and forward contracts shall not be deemed to constitute purchasing securities on margin. 16. Engage in short sales of securities except to the extent that it owns other securities convertible into an equivalent amount of such securities. These short sales may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event no more than 10 percent of the High Yield Fund's net assets valued at market may, at any time, be held as collateral for such sales. 17. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. Some of the practices described above prohibit particular practices. Certain policies described in paragraphs 4, 5, 12, 13, and 16 permit specified practices but limit the portion of the High Yield Fund's assets that may be so invested. Except for the practices described in paragraph 5, the Fund has no current intention of engaging in any of these permitted practices in the foreseeable future. 40 OTHER RESTRICTIONS To permit the sale of shares of a Fund in certain states, a Fund may make commitments more restrictive than the fundamental restrictions described above. If the Board of Directors of that Fund determines that a commitment is no longer in the best interests of that Fund and its shareholders, it will revoke the commitment, terminate sales of its shares in the state(s) involved, and notify the affected shareholders. - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUNDS - -------------------------------------------------------------------------------- INVESTMENTS BY THE BALANCED FUND, THE BOND FUND, AND THE HIGH YIELD FUND Securities held in the portfolios of the Balanced Fund, the Bond Fund, and the High Yield Fund may include a variety of fixed income debt securities, such as bonds, debentures, notes, equipment trust certificates, short-term obligations (those having maturities of 12 months or less), such as prime commercial paper and bankers' acceptances, domestic certificates of deposit, obligations of or guaranteed by the U.S. Government and its agencies or instrumentalities, Government National Mortgage Association (GNMA) mortgage-backed certificates and other similar securities representing ownership in a pool of loans ("pass-through securities"), and repurchase agreements with banks or securities dealers relating to these securities. Portfolio securities may have variable or "floating" interest rates. Information regarding certain of these securities is included below. Investments may also be made in fixed income preferred stocks. Debt securities and preferred stocks may be convertible into, or exchangeable for, common stocks, and may have warrants attached. Depending on prevailing market conditions, debt securities may be purchased at a discount from face value, producing a yield of more than the coupon rate, or at a premium over face value, producing a yield of less than the coupon rate. In making investment decisions, a Fund's advisor will consider factors other than current yield, such as preservation of capital, maturity, and yield to maturity. Common stocks acquired through exercise of conversion rights or warrants or acceptance of exchange or similar offers will not be retained in the portfolio. Orderly disposition of these equity securities will be made consistent with management's judgment as to the best obtainable price. To achieve its investment objective, each of the Balanced Fund and the Bond Fund expects to invest a major portion (normally at least 95 percent) of its fixed income assets in investment grade debt securities. "Investment grade" debt securities are considered to be those which at the time of the investment are (a) rated Baa or higher by Moody's Investor Services, Inc. (Moody's), (b) rated BBB or higher by Standard & Poor's Corporation (S&P), or (c) unrated, but believed by the Advisor for the Balanced Fund and the Bond Fund to be equivalent to securities with those ratings. See the Prospectus under "Additional Information -- Bond Ratings" for information regarding investment-grade securities. Up to five percent of such of the Balanced Fund's and Bond Fund's assets may be invested in lower grade securities (rated Ba or B by Moody's or BB or B by S&P) when the Balanced Fund's or Bond Fund's 41 Advisor believes these securities present attractive investment opportunities notwithstanding their speculative characteristics. See the Prospectus under "Risk Factors" for a description of the risks of investing in lower-rated securities and under "Additional Information" for a description of corporate bond ratings. To achieve its investment objective, the High Yield Fund generally will invest at least 65% of its total assets in high yielding fixed income securities rated Ba or lower by Moody's or BB or lower by S&P. No more than 10% of the Fund's total assets may be invested in fixed income securities rated Caa or lower by Moody's or CCC or lower by S&P. The High Yield Fund may also invest in unrated fixed income securities when the Fund's Advisor believes the security is of comparable quality to that of securities eligible for purchase by the Fund. Securities rated Ba or less by Moody's or BB or less by S&P, commonly referred to as "junk bonds," are considered noninvestment grade securities, subject to a high degree of risk, and considered speculative by the major credit rating agencies with respect to the issuer's ability to meet principal and interest payments. The High Yield Fund is designed for investors who are willing to assume substantial risks of significant fluctuations in principal value in order to achieve a high level of current income. The High Yield Fund should represent only a portion of a balanced investment program. See the Prospectus under "Risk Factors" for a description of the risks of investing in lower-rated securities and under "Additional Information" for a description of corporate bond ratings. GOVERNMENT SECURITIES Government securities may be either direct obligations of the U.S. Government or may be the obligations of an agency or instrumentality of the United States. TREASURY OBLIGATIONS. The U.S. Treasury issues a variety of marketable securities that are direct obligations of the U.S. Government. These securities fall into three categories - bills, notes, and bonds - distinguished primarily by their maturity at time of issuance. Treasury bills have maturities of one year or less at the time of issuance, Treasury notes currently have maturities of 1 to 10 years, and Treasury bonds can be issued with any maturity of more than 10 years. OBLIGATIONS OF AGENCIES AND INSTRUMENTALITIES. Agencies and instrumentalities of the U.S. Government are created to fill specific governmental roles. Their activities are primarily financed through securities whose issuance has been authorized by Congress. Agencies and instrumentalities include Export Import Bank, Federal Housing Administration, Government National Mortgage Association, Tennessee Valley Authority, Banks for Cooperatives, Farmers Home Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Home Loan Mortgage Corp., U.S. Postal System, and Federal Finance Bank. Although obligations of "agencies" and "instrumentalities" are not direct obligations of the U.S. Treasury, payment of the interest or principal on these obligations is generally backed directly or indirectly by the U.S. Government. This support can range from the backing of the full faith and credit of the United States to U.S. Treasury guarantees, or to the backing solely of the issuing instrumentality itself. MORTGAGE-BACKED CERTIFICATES GNMA (Government National Mortgage Association) Certificates ("Certificates") are mortgage-backed securities. The Certificates evidence part ownership of a pool of mortgage loans. The Certificates 42 which the Bond Fund may purchase are of the "modified pass-through" type. "Modified pass-through" Certificates entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of fees paid to the servicing agent and GNMA, regardless of whether or not the mortgagor actually makes the payment. THE GNMA GUARANTEE. The National Housing Act authorizes GNMA to guarantee the timely payment of principal of and interest on securities backed by a group (or pool) of mortgages insured by the FHA or guaranteed by the VA. The GNMA guarantee is backed by the full faith and credit of the United States. GNMA is also empowered to borrow without limitation from the U.S. Treasury to make any payments required under its guarantee. THE LIFE OF GNMA CERTIFICATES. The average life of GNMA Certificates is likely to be substantially less than the original maturity of the mortgage pools underlying the securities. Regular payments and prepayments of principal by mortgagors and mortgage foreclosures will result in the return of the greater part of principal invested well before the maturity of the mortgages in the pool. (Because of the GNMA guarantee, foreclosures impose no risk to principal investment.) Because prepayment rates of individual mortgage pools will vary widely, it is not possible to predict accurately the average life of a particular issue of GNMA Certificates. However, statistics published by the FHA are normally used as an indicator of the expected average life of GNMA Certificates. These statistics indicate that the average life of single-family dwelling mortgages with 25-30 year maturities, the type of mortgages backing the vast majority of GNMA Certificates, is approximately 12 years. For this reason, it is standard practice to treat GNMA Certificates as 30-year mortgage-backed securities which prepay fully in the 12th year. YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of interest of GNMA Certificates is lower than the interest rate paid on the VA-guaranteed or FHA-insured mortgages underlying the Certificates, but only by the amount of the fees paid to GNMA and the servicing agent. For the most common type of mortgage pool, containing single-family dwelling mortgages, GNMA receives an annual fee of 0.06 of 1 percent of the outstanding principal for providing its guarantee, and the issuer is paid an annual fee of 0.44 of 1 percent for assembling the mortgage pool and for passing through monthly payments of interest and principal to Certificate holders. The coupon rate by itself, however, does not indicate the yield which will be earned on the Certificates for the following reasons: 1. Certificates may be issued at a premium or discount rather than at par. 2. After issuance, certificates may trade in the secondary market at a premium or discount. 3. Interest is earned monthly, rather than semi-annually as for traditional bonds. Monthly payment has the effect of raising the effective yield earned on GNMA Certificates. 4. The actual yield of each GNMA Certificate is influenced by the prepayment experience of the mortgage pool underlying the Certificate. That is, if borrowers pay off their mortgages early, the principal returned to Certificate holders may be reinvested at more or less favorable rates. 43 In quoting yields for GNMA Certificates, the standard practice is to assume that the Certificates will have a 12-year life. Compared on this basis, GNMA Certificates have historically yielded roughly .50 of 1 percent more than high-grade corporate bonds and 1 percent more than U.S. Government and U.S. Government Agency bonds. As the life of individual pools may vary widely, however, the actual yield earned on any issue of GNMA Certificates may differ significantly from the yield estimated on the assumption of a 12-year life. MARKET FOR GNMA CERTIFICATES. Since the inception of the GNMA Mortgage-Backed Securities program in 1970, the amount of GNMA Certificates outstanding has grown rapidly. The size of the market and the active participation in the secondary market by securities dealers and many types of investors make the GNMA Certificates a highly liquid instrument. Prices of GNMA Certificates are readily available from securities dealers and depend on, among other things, the level of market interest rates, the Certificate's coupon rate, and the prepayment experience of the pool of mortgages backing each Certificate. OTHER PASS-THROUGH CERTIFICATES. The Funds may invest in other pass-through securities. These are mortgage-backed securities for which the payments on the underlying mortgages are passed from the mortgage holder through the servicing agent, net of fees paid to the servicing agent, to the Fund. These securities may be "modified pass-through certificates" (like GNMA certificates), whereby the Fund would receive interest and principal payments regardless of whether the mortgagors make the payments, or they may be "straight pass-through certificates", whereby the Bond Fund would receive interest and principal only to the extent actually collected by the servicing agent. The servicing agent may be an instrumentality or agency of the U.S. Government or may be an institution such as a bank or savings and loan association. The underlying mortgages may be conventional mortgages as well as mortgages guaranteed by federal agencies or instrumentalities. Straight pass-through securities involve additional risks because payments are not guaranteed. However, this risk may be mitigated to the extent that the underlying mortgages are guaranteed by a federal agency or instrumentality or by a private insurance company. Examples of pass-through securities that the Funds may purchase are: Federal National Mortgage Association; Federal Home Loan Mortgage Corporation (Participation Certificates); Conventional Mortgage Pass-Through Certificates (CONNIE MAC); Residential Funding Corp. Participation Certificates and Federal Housing Administration Insured Project Pass-Through Pools. FLOATING OR VARIABLE RATE SECURITIES Floating or variable rate securities have interest rates that periodically change according to the rise and fall of a specified interest rate index or a specific fixed-income security that is used as a benchmark. The interest rate typically changes every six months, but for some securities the rate may fluctuate weekly, monthly, or quarterly. The index used is often the rate for 90 or 180-day Treasury Bills. Variable-rate and floating-rate securities may have interest rate ceilings or caps that fix the interest rate on such a security if, for example, a specified index exceeds a predetermined interest rate. If an interest rate on a security held by a Fund becomes fixed as a result of a ceiling or cap provision, the interest income received by the Fund will be limited by the rate of the ceiling or cap. In addition, the principal values of these types of securities will be adversely affected if market interest rates continue to exceed the ceiling or cap rate. 44 COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") CMOs are obligations fully collateralized by a portfolio of mortgages or mortgage-related securities. Payments of principal and interest on the mortgages are passed through to the holders of the CMOs on the same schedule as they are received, although certain classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which a Fund invests, the investment may be subject to a greater or lesser risk of prepayment than other types of mortgage-related securities. Changes in assumed prepayment rates have the effect of shortening or lengthening the effective maturity of the CMO held by a Fund. CMOs may also be less marketable than other securities. A Fund will only invest in CMOs issued by agencies or instrumentalities of the U.S. Government or privately-issued CMOs carrying investment-grade ratings. In addition, a Fund will invest only in those CMOs whose characteristics and terms are consistent with the average maturity and market risk profile of the other fixed income securities held by the Fund. INVESTMENTS BY COLUMBIA MUNICIPAL BOND FUND, INC. Municipal bonds are issued to obtain funds for various public purposes. The two principal classifications of municipal bonds are "general obligation" bonds and "revenue" or "special tax" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of principal and interest. Revenue and special tax bonds are payable only from the revenue derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other tax. Industrial development, pollution control, or other private activity bonds backed by private corporations do not generally have the pledge of the credit of the issuing body but are secured only by the credit of the corporation benefiting from the facilities being financed. For the purpose of the Municipal Bond Fund's investment restrictions, identification of the "issuer" of municipal bonds that are not general obligation bonds is made by the Advisor on the basis of the characteristics of the obligation as described above, the most significant of which is the source of funds for payment of principal and interest on such bonds. The Municipal Bond Fund may invest more than 25 percent of its assets in industrial development bonds or private activity bonds. The yields of municipal bonds are dependent on a variety of factors, including general money market conditions, general conditions of the municipal bond market, size of the offering, the maturity of the obligation, whether interest on the obligation is subject to alternative minimum tax, and rating of the issue. The ratings of Moody's and S&P represent their opinions of the quality of the municipal bonds they undertake to rate. These ratings, however, are general and not absolute standards of quality. Consequently, municipal bonds with the same maturity, coupon, and rating may have different yields, while municipal bonds of the same maturity and coupon with different ratings may have the same yield. The yield on municipal bonds is generally lower than on corporate issues, but the interest paid is not includable in gross income for federal income tax purposes. The Municipal Bond Fund's investment restrictions permit it to borrow money temporarily for extraordinary or emergency purposes in an amount not exceeding 50 percent of its gross assets. During any period in which large borrowings are outstanding, the interest paid by the Municipal Bond Fund on such borrowings would reduce the yield to shareholders. Accordingly, in the event of large borrowings 45 the yield to shareholders is expected to be lower than that of mutual funds that restrict borrowings to a lower percentage of assets. SECURITIES RATING AGENCIES Subsequent to its purchase by a Fund, an issue may cease to be rated, or its rating may be reduced below the criteria set forth for that Fund. Neither event would require the elimination of bonds from the Fund's portfolio, but the Advisor will consider that event in its determination of whether the Fund should continue to hold such security in its portfolio. To the extent the ratings accorded by S&P or Moody's for securities may change as a result of changes in such organizations or changes in the rating systems, the Funds will attempt to use comparison ratings as standards for its investments in bonds in accordance with the policies described herein. COMMERCIAL PAPER RATINGS. A1 and Prime 1 are the highest commercial paper ratings issued by S&P and Moody's respectively. Commercial paper rated A1 by S&P has the following characteristics: (1) liquidity ratios are adequate to meet cash requirements; (2) long-term senior debt is rated A or better; (3) the issuer has access to at least two additional channels of borrowing; (4) basic earnings and cash flow have an upward trend with allowance made for unusual circumstances; (5) typically, the issuer's industry is well established and the issuer has a strong position within the industry; and (6) the reliability and quality of management are unquestioned. Among the factors considered by Moody's in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer's industry or industries and an appraisal of speculative-type risks which may be inherent in certain areas; (3) evaluation of the issuer's products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of 10 years; (7) financial strength of a parent company and the relationships which exist with the issuer; and (8) recognition by the management of obligations which may be present or may rise as a result of public interest questions and preparation to meet such obligations. BOND RATINGS. See the Prospectus under "Additional Information -- Bond Ratings" for a description of the ratings used by Moody's and S&P. LOAN TRANSACTIONS Loan transactions involve the lending of securities to a broker-dealer or institutional investor for its use in connection with short sales, arbitrage, or other securities transactions. Loans of portfolio securities of a Fund that is permitted under its investment restrictions to make loans will be made (if at all) in strictest conformity with applicable federal and state rules and regulations. The purpose of a qualified loan transaction is to afford a Fund the opportunity to continue to earn income on the securities loaned and at the same time to earn income on the collateral held by it. Management of the Funds understands that it is the view of the Staff of the Securities and Exchange Commission that a Fund is permitted to engage in loan transactions only if the following conditions are met: (1) the Fund must receive at least 100 percent collateral in the form of cash, cash 46 equivalents, E.G., U.S. Treasury bills or notes, or an irrevocable letter of credit; (2) the borrower must increase the collateral whenever the market value of the securities loaned (determined on a daily basis) rises above the level of the collateral; (3) the Fund must be able to terminate the loan, after notice, at any time; (4) the Fund must receive reasonable interest on the loan or a flat fee from the borrower, as well as amounts equivalent to any dividends, interest, or other distributions on the securities loaned and any increase in market value; (5) the Fund may pay only reasonable custodian fees in connection with the loan; (6) voting rights on the securities loaned may pass to the borrower; however, if a material event affecting the investment occurs, the Directors must be able to terminate the loan and vote proxies or enter into an alternative arrangement with the borrower to enable the Directors to vote proxies. Excluding items (1) and (2), these practices may be amended from time to time as regulatory provisions permit. While there may be delays in recovery of loaned securities or even a loss of rights in collateral supplied if the borrower fails financially, loans will be made only to firms deemed by a Fund's management to be of good standing and will not be made unless, in the judgment of the Fund's management, the consideration to be earned from such loans would justify the risk. Such loan transactions are referred to in this section as "qualified loan transactions." CERTIFICATES OF DEPOSIT Certificates of Deposit are receipts issued by a U.S. bank in exchange for the deposit of funds. The U.S. bank agrees to pay the amount deposited, plus interest, to the bearer of the receipt on the date specified on the certificate. Because the certificate is negotiable, it can be traded in the secondary market before maturity. Under current FDIC regulations, $100,000 is the maximum insured amount of Certificates of Deposit issued to a Fund by any one bank. Therefore, Certificates of Deposit purchased by a Fund may not be fully insured. BANKERS' ACCEPTANCES Time drafts are drawn on a U.S. bank by an exporter or importer to obtain a stated amount of funds to pay for specific merchandise or, less frequently, foreign exchange. The draft is then "accepted" by the U.S. bank (the drawee) which in effect unconditionally guarantees to pay the face value of the instrument on its maturity date. The face of the instrument specifies the dollar amount involved, the maturity date and the nature of the underlying transaction. LETTERS OF CREDIT Letters of Credit are issued by banks and authorize the beneficiary to draw drafts upon such banks for acceptance and payment under specified conditions. COMMERCIAL PAPER Commercial paper is an unsecured short-term note of indebtedness issued in bearer form by business or banking firms to finance their short-term credit needs. 47 WARRANTS Warrants are in effect longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant, and various other investment factors. Each Fund's investment restrictions do not limit the percentage of the Fund's assets that may be invested in warrants, but each Fund does not intend to invest more than 5 percent of its assets in warrants or more than 2 percent of its assets in warrants that are not listed on the New York Stock Exchange or American Stock Exchange. DOLLAR ROLL TRANSACTIONS The Balanced Fund and the Bond Fund may enter into "dollar roll" transactions, which consist of the sale by the Fund to a bank or broker-dealer (the "counterparty") of GNMA certificates or other mortgage-backed securities together with a commitment to purchase from the counterparty similar, but not identical, securities at a future date and at the same price. The counterparty receives all principal and interest payments, including prepayments, made on the security while it is the holder. The Fund receives a fee from the counterparty as consideration for entering into the commitment to purchase. Dollar rolls may be renewed over a period of several months with a new purchase and repurchase price fixed and a cash settlement made at each renewal without physical delivery of securities. Moreover, the transaction may be preceded by a firm commitment agreement pursuant to which the Balanced Fund or the Bond Fund agrees to buy a security on a future date. The Balanced Fund and the Bond Fund will not use such transactions for leveraging purposes and, accordingly, will segregate cash, U.S. Government securities or other high grade debt obligations in an amount sufficient to meet their purchase obligations under the transactions. The Funds will also maintain asset coverage of at least 300% for all outstanding firm commitments, dollar rolls and other borrowings. Dollar rolls may be treated for purposes of the Investment Company Act of 1940 (the "1940 Act") as borrowings of the Fund because they involve the sale of a security coupled with an agreement to repurchase. Like all borrowings, a dollar roll involves costs to the Fund. For example, while the Fund receives a fee as consideration for agreeing to repurchase the security, the Fund forgoes the right to receive all principal and interest payments while the counterparty holds the security. These payments to the counterparty may exceed the fee received by the Fund, thereby effectively charging the Fund interest on its borrowing. Further, although the Fund can estimate the amount of expected principal prepayment over the term of the dollar roll, a variation in the actual amount of prepayment could increase or decrease the cost of the Fund's borrowing. 48 The entry into dollar rolls involves potential risks of loss which are different from those related to the securities underlying the transactions. For example, if the counterparty becomes insolvent, the Fund's right to purchase from the counterparty might be restricted. Additionally, the value of such securities may change adversely before the Fund is able to purchase them. Similarly, the Fund may be required to purchase securities in connection with a dollar roll at a higher price than may otherwise be available on the open market. Since, as noted above, the counterparty is required to deliver a similar, but not identical security to the Fund, the security which the Fund is required to buy under the dollar roll may be worth less than an identical security. Finally, there can be no assurance that the Balanced Fund's or the Bond Fund's use of the cash that it receives from a dollar roll will provide a return that exceeds borrowing costs. 49 [LOGO] COLUMBIA FUNDS PROSPECTUS AND 1997 ANNUAL REPORT February 23, 1998 COLUMBIA SPECIAL FUND COLUMBIA SPECIAL FUND, INC. ------------------------------- PROSPECTUS -- FEBRUARY 23, 1998 ---------------------------------------------- This Prospectus contains information relating to Columbia Special Fund, Inc. (the "Fund"), a mutual fund managed by Columbia Funds Management Company (the "Advisor"). The Fund seeks significant capital appreciation by investing in securities, primarily common stocks the Advisor considers more volatile and carry a greater degree of risk than the market as a whole (as measured by the Standard & Poor's 500 Index). Because the Fund is no-load, you pay no sales charges to invest in it. This Prospectus contains information you should know about the Fund before investing. Please keep it for future reference. A Statement of Additional Information about the Fund dated February 23, 1998 has been filed with the Securities and Exchange Commission and is available along with other related materials on the SEC's Internet Web site (www.sec.gov). For a printed copy of the Statement of Additional Information, please call the Fund at 1-800-547-1707. The Statement of Additional Information is legally a part of (incorporated by reference into) this Prospectus. THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SECURITIES OF THE FUND ONLY IN THOSE STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED FOR SALE. THE FUND WILL NOT ACCEPT APPLICATIONS FROM PERSONS RESIDING IN STATES WHERE THE FUND'S SHARES ARE NOT REGISTERED. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, THE ADVISOR, OR ANY FLEET BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE FUND INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC"), NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS ------------------------- FUND EXPENSES..................................................................1 FINANCIAL HIGHLIGHTS...........................................................1 FUND DESCRIPTION...............................................................2 RISK FACTORS...................................................................4 PERFORMANCE....................................................................6 FUND MANAGEMENT................................................................7 Board of Directors...........................................................7 Investment Advisor...........................................................7 Investment Team..............................................................8 Personal Trading.............................................................8 Other Service Providers......................................................8 Other Information............................................................9 INVESTOR SERVICES.............................................................10 How to Open a New Account...................................................10 How to Purchase Shares......................................................10 Paying for Your Shares......................................................11 How to Redeem (Sell) Shares.................................................11 Payment of Redemption Proceeds..............................................13 How to Exchange Shares......................................................13 Processing Your Order.......................................................13 Determining Your Share Price................................................13 Investor Inquiries..........................................................14 Account Privileges..........................................................14 IRAs and Retirement Plans...................................................16 Private Management Accounts.................................................16 DISTRIBUTIONS AND TAXES.......................................................17 ADDITIONAL INFORMATION........................................................18 1997 ANNUAL REPORT............................................................21 FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL: 222-3606 IN PORTLAND OR 1-800-547-1707 NATIONWIDE. YOU MAY ALSO VISIT THE FUND'S WEB SITE AT WWW.COLUMBIAFUNDS.COM. FUND EXPENSES ----------------------------------------------------------------- The following information is provided to assist you in understanding the various costs and expenses that an investor in the Fund will bear directly or indirectly. "Annual Fund Operating Expenses" are the expenses incurred by the Fund for 1997. Expenses paid by the Fund include management fees as well as audit, transfer agent, custodian and legal fees and other business operating expenses. For more information about Fund expenses, see "Fund Description -- No Sales Load or 12b-1 Fees" and "Fund Management." -- SHAREHOLDER TRANSACTION COSTS -- SALES LOAD IMPOSED ON PURCHASES......... NONE SALES LOAD IMPOSED ON REINVESTED DIVIDENDS............................... NONE REDEMPTION FEES*........................ NONE EXCHANGE FEES........................... NONE *WIRE REDEMPTIONS MAY BE SUBJECT TO A FEE OF UP TO $5, IN ADDITION TO ANY CHARGES BY YOUR BANK.
-- ANNUAL FUND OPERATING EXPENSES -- (AS A PERCENTAGE OF AVERAGE NET ASSETS) MANAGEMENT FEES....................... 0.84% 12B-1 FEES............................ NONE OTHER OPERATING EXPENSES.............. 0.14% TOTAL FUND OPERATING EXPENSES....... 0.98%
Based on the expense ratio above, you would pay the following expenses on a $1,000 investment (assuming a 5% annual return and redemption at the end of each time period). 1 YEAR 3 YEARS 5 YEARS 10 YEARS - --------- --------- --------- --------- $10 $31 $54 $120 THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR PERFORMANCE; ACTUAL EXPENSES AND PERFORMANCE MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- The table below provides information for a share of the Fund outstanding throughout the periods presented and has been audited by Coopers & Lybrand L.L.P., independent accountants, as stated in their report on page 34 of this Prospectus and Annual Report. Additional information about the performance of the Fund for 1997, including a discussion by the investment advisor to the Fund, is contained on page 23. - ---- ---- -- COLUMBIA SPECIAL FUND, INC. (1) -- -------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 NET ASSET VALUE, BEGINNING OF PERIOD $ 19.85 $ 21.44 $ 18.69 $ 19.51 $ 18.79 $ 17.45 $ 12.12 $13.85 $11.32 $9.26 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................ .01 (.06) .03 .08 .01 (.03) (.01) .01 .07 .03 Net realized and unrealized gains (losses) on investments........... 2.50 2.85 5.45 .36 4.04 2.41 6.11 (1.72) 3.52 3.90 - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations.......... 2.51 2.79 5.48 .44 4.05 2.38 6.10 (1.71) 3.59 3.93 - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income).... (.02) (.07) (.02) (.01) Dividends (in excess of net investment income)............... (.01) Distributions (from capital gains)........ (2.10) (4.38) (2.68) (1.16) (3.32) (1.04) (.77) (1.05) (1.87) Distributions (in excess of capital gains)................ (.03) (.03) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions....... (2.10) (4.38) (2.73) (1.26) (3.33) (1.04) (.77) (.02) (1.06) (1.87) NET ASSET VALUE, END OF PERIOD $ 20.26 $ 19.85 $ 21.44 $ 18.69 $ 19.51 $ 18.79 $ 17.45 $12.12 $13.85 $11.32 TOTAL RETURN............. 12.64% 13.07% 29.53% 2.29% 21.68% 13.70% 50.46% -12.39% 31.92% 42.55% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).......... $1,249,718 $1,585,284 $1,384,415 $889,526 $772,741 $470,663 $264,358 $121,592 $95,939 $30,471 Ratio of expenses to average net assets...... 0.98% 0.94% 0.98% 1.05% 1.12% 1.19% 1.22% 1.32% 1.35% 1.38% Ratio of net investment income (loss) to average net assets.............. 0.04% (0.29)% 0.16% 0.40% 0.01% (0.25)% (0.16)% 0.05% 0.18% 0.06% Portfolio turnover rate.................... 166.46% 150.07% 182.99% 178.91% 154.68% 116.75% 114.53% 147.04% 124.29% 244.36% Average commission rate paid on portfolio transactions (2)........ $0.0585 $0.0553
(1) As of December 31, 1991, historical per share data has been restated to reflect a 3 for 1 stock split to shareholders of record on January 31, 1992. (2) The average commission rate paid by the Fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- - 1 FUND DESCRIPTION ----------------------------------------------------------------- The Fund is an open-end, diversified management investment company (that is, a "mutual fund") and is managed by Columbia Funds Management Company (the "Advisor"). -- NO SALES LOAD OR 12B-1 FEES -- MANY MUTUAL FUNDS CHARGE FEES TO COMPENSATE SALES REPRESENTATIVES FOR PROMOTING AND SELLING THEIR FUNDS. THERE ARE FUNDS, HOWEVER, THAT CHARGE NO SALES FEES WHEN YOU BUY SHARES. WITH THESE FUNDS, ALL OF YOUR MONEY, INSTEAD OF JUST A PORTION, IS INVESTED. IN ADDITION, SOME "NO-LOAD" MUTUAL FUNDS CHARGE AN ANNUAL 12B-1 FEE AGAINST FUND ASSETS TO HELP PAY FOR THE SALE OF FUND SHARES. THE FUND IS SOLD WITHOUT SALES LOADS OR 12B-1 FEES; ALL THE MONEY YOU PAY TO BUY SHARES IS INVESTED IN THE FUND. -- A TEAM APPROACH TO INVESTING -- The Fund is managed by the Advisor using a team approach (please see "Fund Management"). Stocks are selected using a "top down, sector rotation" emphasis supplemented by a bottoms up, company analysis. The top down analysis begins with an overall evaluation of the investment environment before focusing on individual security selection. As part of this review, the investment team considers such broad indicators as: - - economic growth, because industries and asset classes behave differently at various stages of a business cycle - - inflation, which is a major factor in determining the price investors are willing to pay for a given level of earnings (price/earnings ratio) - - interest rates, which provide information about the cost of money and the attractiveness of different asset classes - - Federal Reserve policy, which controls the availability of money to help regulate the economy - - corporate profits, which indicate the overall health and prosperity of companies whose stock is publicly traded - - demographics, which refer to the characteristics and dynamics of the population - - money flows, which refer to the current and expected level of equity investments by major classes of investors To ensure depth and breadth of analysis, each Columbia investment team member has responsibility for analyzing and researching specific market sectors or industries and bringing their findings to team meetings for review and discussion. Once individual sectors are identified for emphasis, securities within the targeted sectors are recommended based on fundamental and technical analysis. "S ECTOR ROTATION" REFERS TO THE DYNAMIC PROCESS OF EMPHASIZING OR DE-EMPHASIZING INVESTMENT IN INDUSTRY GROUPS OR ASSET CLASSES BASED ON THEIR RELATIVE ATTRACTIVENESS. Fundamental analysis employed for security selection is based on a thorough review of individual companies, including such factors as: - - financial condition - - quality of management - - industry dynamics - - earnings growth and profit margins - - sales trends - - potential for new product development - - dividend payment history and potential - - financial ratios -- including price/earnings and price/book ratios - - investment in research and development Top down, sector rotation emphasis is intended to give the investment team a better understanding of the long-term prospects of a particular security, based on the characteristics of the existing economy and investor temperament. In this way, Columbia's investment team is better able to anticipate and act upon market change, understand its effect on the risk and rewards of fund securities, and thereby generate consistent, competitive results over the long term. - 2 FUND DESCRIPTION ----------------------------------------------------------------- While top down, sector rotation is an important element of the Advisor's investment process, identifying individual companies with growth potential using fundamental analysis is also important to the process, especially when a company is researching investment in small to mid-size companies. Although the Fund will generally emphasize investments for long-term capital appreciation, the Fund may invest for short-term capital appreciation when management believes it is consistent with sound investment practices and the Fund's overall objective. These determinations will be made without a vote of the shareholders of the Fund. There is no assurance that the Fund will achieve its investment objectives. -- COLUMBIA SPECIAL FUND -- ------------------------------- The Fund was incorporated on July 18, 1985 under Oregon law and began offering shares to the public on November 20, 1985. -- INVESTMENT OBJECTIVE -- The investment objective of the Fund is to achieve capital appreciation for shareholders by investing in securities the Advisor believes are considered more volatile than the market as a whole (as measured by the S&P 500 Stock Index) and therefore carry more risk than the market as a whole. This objective may be changed by the Board of Directors without shareholder approval upon 30 days written notice. In the unlikely event the Fund changes its investment objective, shareholders should consider whether the Fund remains an appropriate investment. The Fund intends to invest primarily in small to mid-size companies (for example, companies with capitalizations that are less than the average for the companies included in the S&P 500 Stock Index). However, the Fund may invest in larger companies when the Advisor believes they offer comparable capital appreciation opportunities or to stabilize the Fund's portfolio. Management reserves the right to determine the percentage of the Fund's assets that will be invested in smaller companies. The Fund may also invest in special situations such as new issues; companies that may benefit from technological or product developments or new management; and companies involved in tender offers, leveraged buy-outs, or mergers. Up to one-third of the Fund's assets may be invested in foreign securities. The Fund may also invest in securities convertible into or exercisable for common stock (including preferred stock, warrants, and debentures), restricted securities, repurchase agreements, and certain options and financial futures contracts. -- INVESTMENT RESTRICTIONS -- Investments in unseasoned companies and special situations may involve greater risks than more traditional equity investments because the securities may be more likely to experience unexpected fluctuations in price. For this reason, the Fund should only be used as part of a balanced investment portfolio. The Fund is designed for that portion of an investor's funds that can be appropriately invested in securities with greater risk but also greater potential for appreciation. For information about the risks of investing in the Fund, including portfolio turnover and the risks of investing in smaller companies and foreign securities, please see "Risk Factors." For information on the investment by the Fund in repurchase agreements, illiquid securities, when-issued securities, options, and temporary investments, please see "Additional Information." A description of other investment restrictions and certain investment practices of the Fund is included in the Statement of Additional Information. - 3 RISK FACTORS ----------------------------------------------------------------- An investment in any mutual fund, including the Fund, involves certain risks, some of which are explained under "Fund Description." General market risk and other specific risks associated with different types of securities used by the Fund, including foreign securities, and stocks of small companies, are discussed below. STOCK MARKET RISK. The principal risk associated with a stock mutual fund is that the stocks held by the fund will decline in value. Stock values may fluctuate in response to the activities and financial prospects of an individual company or in response to general market and economic conditions. Investments in smaller or unseasoned companies may be both more volatile and more speculative. See "Investments in Small and Unseasoned Companies." A LTHOUGH COMMON STOCKS HAVE HISTORICALLY PROVIDED LONG-TERM RETURNS THAT ARE GREATER THAN OTHER TYPES OF INVESTMENTS, STOCK RETURNS HAVE ALSO BEEN MORE VOLATILE OVER SHORTER PERIODS OF TIME. PORTFOLIO TURNOVER. Because the Fund focuses on the performance of its portfolio as a whole, individual security positions may be sold without regard to the length of time they have been held. This may result in a higher portfolio turnover rate and increase the Fund's transaction costs, including brokerage commissions. To the extent short-term trades result in gains on securities held eighteen months or less, shareholders will be subject to taxes at ordinary income rates or at the higher of the two capital gains rates. See "Distributions and Taxes." Historical portfolio turnover rates for the Fund are shown in the "Financial Highlights" section. FOREIGN SECURITIES. Foreign securities, which are generally denominated in foreign currencies, and forward currency exchange contracts involve risks not typically associated with investing in domestic securities. The value of the Fund's portfolio will be affected by changes in currency exchange rates and in currency exchange regulations to the extent the Fund holds foreign securities. Foreign securities may be subject to foreign taxes that would reduce their effective yield. Certain foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes is recoverable, the unrecovered portion of any foreign withholding taxes would reduce the income the Fund receives from its foreign investments. Foreign investments involve certain other risks, including possible political or economic instability of the country of the issuer, the difficulty of predicting international trade patterns, and the possibility of currency exchange controls. Foreign securities may also be subject to greater fluctuations in price than domestic securities. There may be less publicly available information about a foreign company than about a domestic company. Foreign companies generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those of domestic companies. There is generally less government regulation of stock exchanges, brokers, and listed companies abroad than in the United States. In addition, with respect to certain foreign countries, there is a possibility of the adoption of a policy to withhold dividends at the source, or of expropriation, nationalization, confiscatory taxation, or diplomatic developments that could affect investments in those countries. Finally, in the event of default on a foreign debt obligation, it may be more difficult for the Fund to obtain or enforce a judgment against the issuers of the obligation. The Fund will normally execute its portfolio securities transactions on the principal stock exchange on which the security is traded. Additional costs may be incurred in connection with the Fund's foreign investments. Foreign brokerage commissions are generally higher than those in the United States. Expenses may also be incurred on currency conversions when the Fund moves investments from one country to another. Increased custodian costs as well as administrative difficulties may be experienced in connection with maintaining assets in foreign jurisdictions. - 4 RISK FACTORS ----------------------------------------------------------------- INVESTMENTS IN SMALL AND UNSEASONED COMPANIES. Investments by the Fund in small or unseasoned companies may be regarded as speculative. These companies may have limited or unprofitable operating histories, limited financial resources, and inexperienced management. In addition, they often face competition from larger or more established firms that have greater resources. Securities of small and young companies are frequently traded in the over-the-counter market or on regional exchanges where low trading volumes may result in erratic or abrupt price movements. To dispose of these securities, the Fund may have to sell them over an extended period of time or below the original purchase price. Because of these factors, an investment in the Fund may be subject to greater price fluctuations than an investment in a fund that invests primarily in larger, more established companies. SPECIAL SITUATIONS. Special situations are those in which the Advisor expects a substantial change in the market value of a company's securities due to a new development. An example would be a small company expected to emerge as a leader in a new business area. Other special situations include acquisitions, mergers, reorganizations, management changes, product developments, and the awarding of large contracts. Because these types of situations may involve major corporate changes and a high degree of uncertainty as to market effects, investments in special situations are characterized by higher risk as well as the potential for higher returns. - 5 PERFORMANCE ----------------------------------------------------------------- This section is designed to help you understand terms used to describe Fund performance, such as "total return" and "average annual total return." For additional information on total return calculations for the Fund, see the Statement of Additional Information. -- UNDERSTANDING "RETURN" -- "TOTAL RETURN" REFERS TO THE CHANGE IN VALUE OF AN INVESTMENT IN THE FUND OVER A STATED PERIOD, ASSUMING THE REINVESTMENT OF ANY DIVIDENDS AND CAPITAL GAINS. "AVERAGE ANNUAL TOTAL RETURN" IS A HYPOTHETICAL RATE OF RETURN THAT, IF ACHIEVED ANNUALLY, WOULD HAVE PRODUCED THE SAME TOTAL RETURN IF PERFORMANCE HAD BEEN CONSTANT OVER THE ENTIRE PERIOD. AVERAGE ANNUAL TOTAL RETURNS SMOOTH OUT THE VARIATIONS IN PERFORMANCE BUT ARE NOT THE SAME AS ACTUAL ANNUAL RESULTS. The average annual returns for the Fund for the following periods ended December 31, 1997 were: 12.64% for one year, 15.48% for five years, 19.19% for 10 years and 18.38% since inception on November 20, 1985. -- PERFORMANCE COMPARISONS -- The Fund may compare its performance to other mutual funds and to the mutual fund industry as a whole, as quoted by ranking services such as Lipper Analytical Services, Inc. or Morningstar, Inc., or as reported in financial publications such as BARRON'S, BUSINESS WEEK, FORBES, MONEY MAGAZINE, and THE WALL STREET JOURNAL. The Fund may also compare its performance to that of a recognized stock or bond index, such as the S&P 500 Stock Index, the Russell 2000 Stock Index, the Lehman Aggregate Bond Index, and other relevant indices. Unmanaged indices may assume the reinvestment of dividends, but generally do not reflect deductions for administrative and management costs and expenses. P ERFORMANCE INFORMATION ON THE FUND DOES NOT GUARANTEE FUTURE RESULTS. SHARE PRICE AND RETURNS WILL FLUCTUATE, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. - 6 FUND MANAGEMENT ----------------------------------------------------------------- -- BOARD OF DIRECTORS -- The Fund is managed under the supervision of its Board of Directors, which has responsibility for overseeing decisions relating to the investment policies and objectives of the Fund. The Board of Directors of the Fund meets quarterly to review the Fund's investment policies, performance, expenses, and other business matters. -- INVESTMENT ADVISOR -- The Fund has contracted with Columbia Funds Management Company (the "Advisor") to provide investment advisory services. The Advisor, subject to general oversight responsibility of the Fund's Board of Directors, is responsible for the overall management of the Fund's business affairs. The Advisor or its predecessor has acted in this capacity since 1967, and also provides investment management services to each of the following Columbia Funds: Columbia Common Stock Fund, Columbia International Stock Fund, Columbia Growth Fund, Columbia Small Cap Fund, Columbia Real Estate Equity Fund, Columbia Balanced Fund, Columbia Daily Income Company, Columbia U.S. Government Securities Fund, Columbia Fixed Income Securities Fund, Columbia Municipal Bond Fund, and Columbia High Yield Fund. The Advisor is an indirect wholly owned subsidiary of Fleet Financial Group, Inc. ("Fleet"), a publicly owned multibank holding company registered under the Holding Company Act of 1956 with total assets of approximately $85 billion at December 31, 1997. The address of the Advisor is 1300 S.W. Sixth Avenue, P.O. Box 1350, Portland, Oregon 97207-1350. Under the investment advisory contract with the Fund, the Advisor provides research, advice, and supervision with respect to investment matters and determines what securities to purchase or sell and what portion of the Fund's assets to invest. The Advisor provides office space and pays all executive salaries and expenses and ordinary office expenses of the Fund (other than the expenses of clerical services relating to the administration of the Fund). The investment advisory fee of the Fund is accrued daily and paid monthly. The investment advisory fee of the Fund equals the annual rate of 1% of daily net assets up to $500,000,000 and 0.75 of 1% of daily net assets in excess of $500,000,000. While comparable to the advisory fees paid by other mutual funds with a similar investment objective, the advisory fee paid by the Fund is higher than the advisory fees paid by most mutual funds. For the year ended December 31, 1997, the investment advisory fee incurred by the Fund, expressed as a percentage of average net assets, was 0.84%. The Advisor has entered into an agreement with Columbia Management Co. ("CMC"), under which CMC provides the Advisor with statistical and other factual information, advice regarding economic factors and trends, and advice as to occasional transactions in specific securities. CMC, upon receipt of specific instructions from the Advisor, also contacts brokerage firms to conduct securities transactions. The Advisor pays CMC a fee for these services. The Fund's expenses are not increased by this arrangement, and no amounts are paid by the Fund to CMC under this agreement. CMC is an indirect wholly owned subsidiary of Fleet. The Fund assumes the following costs and expenses: costs relating to corporate matters; cost of services to shareholders; transfer and dividend paying agent fees; custodian fees; legal, auditing, and accounting expenses; disinterested directors' fees; taxes and governmental fees; interest; brokers' commissions; transaction expenses; cost of stock certificates and any other expenses (including clerical expenses) of issue, sale, repurchase, or redemption of its shares; expenses of registering or qualifying its shares for sale; transfer taxes; all expenses of preparing its registration statements, prospectuses, and reports; and the cost of printing and delivering to shareholders its prospectuses and reports. - 7 FUND MANAGEMENT ----------------------------------------------------------------- Information on the Fund's expenses, as a percentage of its average net assets, is located under "Fund Expenses" and "Financial Highlights." The Advisor may use its broker-dealer affiliates and other firms that sell the Fund's shares to carry out the Fund's brokerage transactions, provided that the Fund receives brokerage services and commission rates comparable to other broker-dealers. Third-party administrators of tax-qualified retirement plans and other financial institutions ("Financial Intermediaries") may establish omnibus accounts with the Fund and provide sub-transfer agency, recordkeeping, or other services to participants and beneficial owners in the omnibus accounts. In recognition that these arrangements reduce or eliminate the need for the Fund's transfer agent to provide such services, the Fund and the Advisor may pay the Financial Intermediary a sub-transfer agent or recordkeeping fee. All Financial Intermediaries enter into an agreement with the Fund that authorizes them to accept purchase and redemption orders on behalf of the Fund. The Fund will be deemed to have received a purchase or redemption order when an authorized Financial Intermediary or its delegate accepts the order. The order will be priced at the Fund's net asset value next computed after it is accepted by the Financial Intermediary or its delegate. -- COLUMBIA INVESTMENT TEAM -- The Advisor uses an investment team approach to analyze investment themes and strategies for the Fund. Thomas L. Thomsen, President, Chief Investment Officer and Director of the Advisor, supervises the Investment Team in establishing these broad investment strategies and determining portfolio guidelines for the Fund. Prior to joining the Investment Team in 1978, Mr. Thomsen was a Senior Investment Officer for the Treasury Department of the State of Oregon (1974-1978) and a Fixed Income Portfolio Manager for First National Bank of Oregon (1969-1973). Members of the Investment Team are responsible for the analysis of particular industries or types of fixed income securities and for recommendations on individual securities within those industries or asset categories. See "Fund Description -- A Team Approach to Investing." Investment decisions for the Fund are then made by the Investment Team and Alan J. Folkman, the portfolio manager who has been responsible for investment decisions on behalf of the Fund since 1997. Mr. Folkman, a Senior Vice President, joined the Advisor in 1975 and has over 30 years of investment management experience. -- PERSONAL TRADING -- Members of the Investment Team and other personnel of the Fund or the Advisor are permitted to trade securities for their own or family accounts, subject to the rules of the Code of Ethics adopted by the Fund and the Advisor. T HE RULES THAT GOVERN PERSONAL TRADING BY INVESTMENT PERSONNEL ARE BASED ON THE PRINCIPLE THAT EMPLOYEES OWE A FIDUCIARY DUTY TO CONDUCT THEIR TRADES IN A MANNER THAT IS NOT DETRIMENTAL TO THE FUND OR ITS SHAREHOLDERS. The Fund has adopted the recommendations of the Investment Company Institute, an organization composed of members of the mutual fund industry, relating to restrictions on personal trading. For more information on the Code of Ethics and specific trading restrictions, see the Statement of Additional Information. -- OTHER SERVICE PROVIDERS -- TRANSFER AGENT. Columbia Trust Company acts as transfer agent and dividend paying agent for the Fund. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350, - 8 FUND MANAGEMENT ----------------------------------------------------------------- Portland, Oregon 97207-1350. The Advisor is the principal shareholder, and certain officers of the Fund are minority shareholders, of Columbia Trust Company. DISTRIBUTOR. Provident Distributors, Inc. ("PDI") is the principal underwriter of the Fund's shares. PDI's address is Four Falls Corporate Center, 6th Floor, West Conshohocken, PA 19428-2961. Columbia Financial Center Incorporated ("Columbia Financial"), an indirect wholly owned subsidiary of Fleet, has entered into a Broker-Dealer Agreement with PDI to sell shares of the Fund. You may invest money or redeem shares in the Fund through Columbia Financial. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350, Portland, Oregon 97207-1350. PDI and Columbia Financial do not charge any fees or commissions to investors or the Fund for the sale of shares of the Fund. CUSTODIANS. United States National Bank of Oregon, 321 S.W. Sixth Avenue, Portland, Oregon 97208, serves as general custodian for the Fund. Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York, NY 11201, provides custody services to the extent the Fund holds foreign securities. -- OTHER INFORMATION -- VOTING RIGHTS. The Fund is a separate corporation. All shares of the Fund have equal voting, redemption, dividend, and liquidation rights. All issued and outstanding shares of the Fund are fully paid and nonassessable. Shares have no preemptive or conversion rights. Fractional shares have the same rights proportionately as full shares. The shares of the Fund do not have cumulative voting rights, which means that holders of more than 50 percent of the shares of the Fund voting for the election of directors can elect all of the directors. SHAREHOLDER MEETINGS. The Fund is not required to hold annual shareholder meetings. Special meetings may be called, however, as required or deemed desirable for purposes such as electing directors, changing fundamental investment policies, or approving an investment management agreement. The holders of not less than 10% of the shares of the Fund may request in writing that a special meeting be called for a specified purpose. If such a special meeting is called to vote on the removal of one or more directors of the Fund, shareholders of the Fund will be assisted in communications with other shareholders of the Fund. - 9 INVESTOR SERVICES ----------------------------------------------------------------- This section is designed to provide you with information about opening an account and conducting transactions directly with the Fund. In addition, information is provided on the different types of accounts and services offered by the Fund as well as the policies relating to those services. If you are investing in the Fund through your employer's retirement plan, your plan administrator or employee benefits office can provide you with information about how to invest in the Fund. -- HOW TO OPEN A NEW ACCOUNT -- Please complete and sign a Fund application and make your check payable to the Fund for the minimum required investment. See "Minimum Investments." Please be sure to include a tax identification number on your application or it may be rejected and returned to you. The completed application and a check should be mailed to: Columbia Financial Center P.O. Box 1350 Portland, Oregon 97207-1350 Attn.: New Accounts -- HOW TO PURCHASE SHARES -- Shares of the Fund are offered at the share price, or net asset value ("NAV"), next determined (normally 4 p.m., New York time) after an order is accepted. See "Processing Your Order" and "Determining Your Share Price." Shares can be purchased in the following ways: IN PERSON: Investments can be made in person by visiting the Fund at 1301 S.W. Fifth Avenue, Portland, Oregon between 7:30 a.m. and 5:00 p.m. on any business day that the New York Stock Exchange (NYSE) is open for business. BY MAIL: Send a check, with either a completed Investment Slip from the bottom of a confirmation statement, or a letter indicating the account number and registration, to: Columbia Financial Center P.O. Box 1350 Portland, Oregon 97207-1350 Attn.: Investments BY WIRE: You may have your bank wire federal funds. Call the Fund for instructions and notification that money is being wired: Portland area 222-3606 Nationwide (toll-free) 1-800-547-1707 BY TELEPHONE: You may make additional investments in the Fund by telephone from a predesignated bank account ("Televest"). The minimum investment that can be made by Televest is $100. Shareholders must complete the appropriate sections of the application or call the Fund to request a Televest form. An investment using Televest is processed on the day the Fund receives your investment from your bank, usually the business day following the day of your telephone call. -- MINIMUM INVESTMENTS -- THE FUND HAS A MINIMUM INITIAL INVESTMENT REQUIREMENT OF $2,000. THIS MINIMUM IS WAIVED FOR ACCOUNTS USING THE AUTOMATIC INVESTMENT PLAN. SUBSEQUENT INVESTMENTS (OTHER THAN THROUGH THE AUTOMATIC INVESTMENT PLAN) MUST BE AT LEAST $100 AND SHOULD ALWAYS IDENTIFY YOUR NAME, THE FUND'S NAME, AND YOUR ACCOUNT NUMBER. MANAGEMENT OF THE FUND MAY, AT ITS SOLE DISCRETION, WAIVE THE MINIMUM PURCHASE AND ACCOUNT SIZE REQUIREMENTS FOR CERTAIN GROUP PLANS OR ACCOUNTS OPENED BY AGENTS OR FIDUCIARIES (SUCH AS A BANK TRUST DEPARTMENT, INVESTMENT ADVISOR, OR SECURITIES BROKER), FOR INDIVIDUAL RETIREMENT PLANS OR IN OTHER CIRCUMSTANCES. - 10 INVESTOR SERVICES ----------------------------------------------------------------- BY AUTOMATIC INVESTMENT: Investments in the Fund may be made automatically from your bank under Columbia's Automatic Investment Plan ("AIP"). Shareholders whose bank is a member of the National Automated Clearing House Association may choose to have amounts of $50 or more automatically transferred from a bank checking account to the Fund on or about the 5th or 20th, or both, of each month. Shareholders must complete the AIP section of the application or a separate AIP form to participate in the AIP. If you stop investing in the Fund using an AIP, your account may be closed if you fail to reach or maintain a minimum account balance. See "Account Privileges -- Involuntary Redemptions." BY EXCHANGE: You may purchase shares of the Fund with the proceeds from a redemption of shares of any other Columbia Fund with the same account number. See "How to Exchange Shares." THROUGH YOUR BROKER-DEALER OR BANK: You may purchase or redeem shares of the Fund through your broker, bank, or other financial institution, which may charge a commission or fee for assisting in handling your order and which may be required to be registered as a broker or dealer under federal or state securities laws. CLOSING THE FUND TO NEW INVESTORS: The Advisor reserves the right at its discretion to close the Fund to new investors. A number of factors may be considered in making such a decision, including the total assets and flow of new investments into the Fund. If the Fund is closed, shareholders who maintain open accounts with the Fund may make additional investments in the Fund. Once a shareholder's account in the Fund is closed, however, additional investments may not be possible. -- PAYING FOR YOUR SHARES -- Payment for Fund shares is subject to the following policies: - - Checks should be drawn on U.S. banks and made payable to the Fund - - Never send cash or cash equivalents; the Fund will not accept responsibility for their receipt - - The Fund reserves the right to reject any order - - If your order is canceled because your check did not clear the bank or the Fund was unable to debit your predesignated bank account, you will be responsible for any losses or fees imposed by your bank or attributable to a loss in value of the shares purchased - - The Fund may reject any third party checks used to make an investment or open a new account -- HOW TO REDEEM (SELL) SHARES -- You may redeem all or a portion of your investment in the Fund on any business day that the NYSE is open for business. All redemptions of shares of the Fund will be at the share price (NAV) computed after receipt of a valid redemption request. In every case, sufficient full and fractional shares will be redeemed to cover the amount of the redemption request. If certificates for Fund shares have been issued to you, they must be returned to the Fund and properly endorsed before a redemption of these shares may be processed. Redemptions from a Columbia-sponsored IRA or retirement plan require the completion of certain additional forms to ensure compliance with IRS regulations. If a redemption request cannot be processed for any of these reasons, the redemption request will be returned to you and no redemption will be made until a valid request is submitted. Shares can be redeemed in the following ways: - 11 INVESTOR SERVICES ----------------------------------------------------------------- IN WRITING: You may redeem shares of the Fund by providing a written instruction to the Fund at the address shown below. A signature guarantee may be required. Please see "Signature Requirements." Columbia Financial Center P.O. Box 1350 Portland, Oregon 97207-1350 Attn.: Redemptions SIGNATURE REQUIREMENTS: Redemption requests must be signed by each shareholder required to sign on the account. Accounts in the names of corporations, fiduciaries, and institutions may require additional documentation. Please contact the Fund if your account falls into one of these categories. To protect you and the Fund against fraud, a SIGNATURE GUARANTEE is also required in any of the following situations: - - The redemption request exceeds $50,000 - - You request a check made payable to anyone other than the shareholder(s) of record or other predesignated party - - You request that proceeds be sent to an address other than the address of record or an account other than a previously designated bank account - - You would like the check mailed to an address that has changed in the last 10 days - - You wish to transfer or change ownership of the account The Fund reserves the right to require a signature guarantee in other circumstances or to reject an order for certain legal reasons. You may obtain a signature guarantee from an eligible guarantor institution such as a bank, broker-dealer, credit union, savings and loan association, national securities exchange or trust company. A notary public cannot provide a signature guarantee. BY TELEPHONE: You may redeem shares by telephone unless you decline this service by checking the appropriate box on the application. Proceeds from telephone redemptions may be mailed only to the registered name and address on your account or transferred to the bank designated on the application or to another Columbia Fund with an identical account number. A maximum of $50,000 may be redeemed by telephone and mailed to your registered address. There is no such limitation on telephone redemptions transferred to your bank. Telephone redemptions may be made by calling the Fund between 7:30 a.m. and 5:00 p.m., Pacific Time, at: Portland area 222-3606 Nationwide (toll-free) 1-800-547-1707 You may experience some difficulty in implementing a telephone redemption during periods of drastic economic or financial market changes. Telephone redemption privileges may be modified or terminated at any time without notice to shareholders. Please see "Account Privileges -- Telephone Redemptions." BY AUTOMATIC WITHDRAWAL: If your account value in the Fund is $5,000 or more, you may elect to receive automatic cash withdrawals of $50 or more from the Fund in accordance with either of the following withdrawal options: - - Income earned; you may elect to receive any dividends or capital gains distributions on your shares, provided such dividends and distributions exceed $25 - - Fixed amount; you may elect to receive a monthly or quarterly fixed amount of $50 or more Automatic withdrawals will be made within seven days after the end of the month or quarter to which they relate. To the extent redemptions for automatic withdrawals exceed dividends declared on shares in your account, the number of shares in your account will be reduced. If - 12 INVESTOR SERVICES ----------------------------------------------------------------- the value of your account falls below the Fund minimum, your account is subject to being closed on 60 days written notice. The minimum withdrawal amount has been established for administrative convenience and should not be considered as recommended for all investors. For tax reporting, a capital gain or loss may be realized on each fixed-amount withdrawal. An automatic withdrawal plan may be modified or terminated at any time upon prior notice by the Fund or the shareholder. -- PAYMENT OF REDEMPTION PROCEEDS -- Redemption proceeds are normally transmitted in the manner specified in the redemption request on the business day following the effective date of the redemption. Proceeds transmitted over the Automated Clearing House (ACH) system are usually credited to a shareholder's account on the second business day following the redemption request. Except as provided by rules of the Securities and Exchange Commission, redemption proceeds must be transmitted to you within seven days of the redemption date. REDEMPTION OF RECENTLY PURCHASED SHARES. Although you may redeem shares of the Fund that you have recently purchased by check, the Fund may hold the redemption proceeds until payment for the purchase of such shares has cleared, which may take up to 15 days from the date of purchase. No interest is paid on the redemption proceeds after the redemption date and before the proceeds are sent to you. This holding period does not apply to the redemption of shares purchased by bank wire or with a cashiers or certified check. There is no charge for redemption payments that are mailed. Amounts transferred by wire must be at least $1,000, and the bank wire cost for each redemption will be charged against your account. Your bank may also impose an incoming wire charge. -- HOW TO EXCHANGE SHARES -- You may use proceeds from the redemption of shares of the Fund to purchase shares of other Columbia Funds offering shares for sale in your state of residence. There is no charge for this exchange privilege. Before making an exchange, you should read the Prospectus relating to the Columbia Fund or Funds into which the shares are to be exchanged. The shares of the Columbia Fund to be acquired will be purchased at the NAV next determined after acceptance of the purchase order by that Fund in accordance with its policy for accepting investments. The exchange of shares of the Fund for shares of another Columbia Fund is treated, for federal income tax purposes, as a sale on which you may realize a taxable gain or loss. Certain restrictions may apply to exchange transactions. See "Account Privileges -- Exchange Privilege." -- PROCESSING YOUR ORDER -- Orders received by the Fund will be processed the day they are received. Orders received before the close of regular trading on the NYSE (normally 4 p.m. New York time) will be entered at the Fund's share price computed that day. Orders received after the close of regular trading on the NYSE will be entered at the Fund's share price next determined. All investments will be credited to your account in full and fractional shares computed to the third decimal place. The Fund reserves the right to reject any order. Shares purchased will be credited to your account on the record books of the Fund. The Fund will not issue share certificates except on request. Certificates for fractional shares will not be issued. -- DETERMINING YOUR SHARE PRICE -- The share price, or NAV, of the Fund is determined by the Advisor, under procedures approved by the Fund's Board of Directors, as of the close of regular trading (normally 4 p.m. New York time) on each day the - 13 INVESTOR SERVICES ----------------------------------------------------------------- NYSE is open for business and at other times determined by the Board of Directors. The NAV is computed by dividing the value of all assets of the Fund, less its liabilities, by the number of shares outstanding. Portfolio securities will be valued according to the market value obtained from the broadest and most representative markets. These market quotations, may be the last sale price, or in the absence of any recorded sales, the closing bid price as of, in each case, the close of the applicable exchange or other designated time. Securities for which market quotations are not readily available and other assets will be valued at fair value as determined in good faith under procedures established by and under the general supervision of the Board of Directors of the Fund. These procedures may include valuing portfolio securities by reference to other securities with comparable ratings, interest rates, and maturities and by using pricing services. Fair value for debt securities for which market quotations are not readily available and with remaining maturities of less than 60 days is based on cost adjusted for amortization of discount or premium and accrued interest (unless the Board of Directors believes unusual circumstances indicate another method of determining fair value should be used). Trading in securities on many foreign securities exchanges and over-the-counter markets is completed at various times before the close of the NYSE. In addition, trading of these foreign securities may not take place on all NYSE business days. Trading may take place in various foreign markets on Saturday or on other days the NYSE is not open for business and on which the Fund's NAV is therefore not calculated. The calculation of the Fund's NAV may not take place contemporaneously with the determination of the prices of the Fund's portfolio foreign securities. Events affecting the values of portfolio foreign securities that occur between the time the prices are determined and the close of the NYSE will not be reflected in the Fund's calculation of NAV unless the Board of Directors determines that the event would materially affect the NAV. Assets of foreign securities are translated from the local currency into U.S. dollars at the prevailing exchange rates. -- INVESTOR INQUIRIES -- If you have any questions about this Prospectus, the Fund or your account, please call the Fund at: Portland area 222-3606 Nationwide (toll-free) 1-800-547-1707 or write or visit the Fund at: Columbia Financial Center 1301 S.W. Fifth Avenue Portland, Oregon 97201 www.columbiafunds.com -- ACCOUNT PRIVILEGES -- EXCHANGE PRIVILEGE. Telephone exchange privileges are available to you automatically unless you decline this service by checking the appropriate box on the application. Telephone exchanges may be made from the Fund into another Columbia Fund only within the same account number. To prevent the abuse of the exchange privilege to the disadvantage of other shareholders, the Fund reserves the right to terminate the exchange privilege of any shareholder who makes more than four exchanges out of the Fund during the calendar year. The exchange privilege may be modified or terminated at any time, and the Fund may discontinue offering its shares generally or in any particular state without notice to shareholders. TELEPHONE REDEMPTIONS. The Fund does not accept responsibility for the authenticity of telephone instructions, and, accordingly, shareholders who have approved telephone redemptions assume the risk of any losses due to fraudulent telephone instructions that the Fund reasonably believes to be genuine. The Fund employs certain procedures to determine whether telephone instructions are genuine, including requesting personal shareholder information prior to acting on - 14 INVESTOR SERVICES ----------------------------------------------------------------- telephone instructions, providing written confirmations of each telephone transaction, and recording all telephone instructions. The Fund may be liable for losses due to fraudulent telephone instructions if it fails to follow these procedures. For your protection, the ability to redeem by telephone and have the proceeds mailed to your registered address may be suspended for up to 30 days following an account address change. INVOLUNTARY REDEMPTIONS. Upon 60 days prior written notice, the Fund may redeem all of your shares without your consent if: - - Your account balance falls below $500. However, if you wish to maintain the account, you may during the 60-day notice period either: (i) add to your account to bring it to the required minimum, or (ii) establish an Automatic Investment Plan with a minimum monthly investment of $50. - - You are a U.S. shareholder and fail to provide the Fund with a certified taxpayer identification number. - - You are a foreign shareholder and fail to provide the Fund with a current Form W-8, "Certificate of Foreign Status." The Fund also reserves the right to close a shareholder's account if the shareholder's actions are deemed to be detrimental to the Fund or its shareholders. If the Fund redeems shares, payment will be made promptly at the current net asset value. A redemption may result in a realized capital gain or loss. TAXPAYER IDENTIFICATION NUMBER. Federal law requires the Fund to withhold 31% of dividends and redemption proceeds paid to certain shareholders who have not complied with certain tax regulations. The Fund will generally not accept an investment to establish a new account that does not comply with these regulations. You will be asked to certify on your account application that the social security number or tax identification number provided is correct and that you are not subject to 31% backup withholding for previous underreporting of income to the Internal Revenue Service. SHAREHOLDER STATEMENTS AND REPORTS. The Fund will send a separate confirmation of each nonroutine transaction that affects your account balance or registration. Routine, pre-authorized transactions are confirmed in the monthly or quarterly account statements provided to shareholders. The types of pre-authorized transactions that will be confirmed on your account statement include: - - Periodic share purchases through an Automatic Investment Plan - - Reinvestment of dividends and capital gains distributions - - Automatic withdrawals or exchanges between the Fund and another Columbia Fund The Fund will mail to its shareholders on or before January 31 of each year a summary of the federal income tax status of the Fund's distributions for the preceding year. Financial reports on the Fund, which include a listing of the Fund's portfolio securities, are mailed semiannually to shareholders. To reduce Fund expenses, only one such report and the annually updated prospectus will be mailed to accounts with the same Tax Identification Number. In addition, shareholders or multiple accounts at the same mailing address can eliminate duplicate enclosures for statements mailed to that address by filing a SAVMAIL form with the Fund. For a SAVMAIL form or to receive additional copies of any shareholder report or prospectus, please call an Investor Services Representative at 1-800-547-1707. - 15 INVESTOR SERVICES ----------------------------------------------------------------- -- IRAS AND RETIREMENT PLANS -- Investors may invest in the Fund through Columbia's Traditional, Roth, Education, SIMPLE, or SEP IRA programs, or Columbia's Prototype Money Purchase Pension and Profit Sharing Plan. Please contact the Fund for further information and application forms. Investments may also be made in the Fund in connection with established retirement plans. -- PRIVATE MANAGEMENT ACCOUNTS -- Columbia Trust Company offers Private Management Accounts that provide investment management tailored to the specific investment objectives of individuals, institutions, trusts, and estates, using the Fund and other Columbia Funds as investment vehicles. The annual fee for this service is: - - .75% on the first $500,000 - - .50% on the next $500,000 - - .25% on assets over $1 million The minimum fee for this service is $1,000 and the maximum fee is $15,000. These fees are in addition to investment advisory fees paid by the Fund and other Columbia Funds to the Advisor. For additional information, please call Columbia Trust Company at 503-222-3600. - 16 DISTRIBUTIONS AND TAXES ----------------------------------------------------------------- -- DISTRIBUTIONS -- The Fund is required to distribute to shareholders each year all of its net investment income and any net realized capital gains. Net investment income (income from dividends, interest and any net realized short-term capital gains) is distributed by the Fund as a dividend. Any net long-term capital gains realized on the sale of portfolio securities by the Fund are distributed as capital gains distributions. Dividends and capital gains distributions are declared and paid in December. -- DISTRIBUTION OPTIONS -- Unless you select a different option, all dividends and capital gains distributions are reinvested in additional shares at a price equal to the NAV at the close of business on the reinvestment date. You may elect at any time, by notifying the Fund, to receive your distributions in cash or to reinvest them in another Columbia Fund. If you elect to receive dividends and/or capital gains distributions in cash and such dividend or capital gains distribution is returned to the Fund as undeliverable to your address of record, your distribution option shall be converted to having all dividends and capital gains distributions reinvested in additional shares. No interest will accrue on any dividend or capital gains distribution returned to the Fund as undeliverable. -- TAXATION OF DISTRIBUTIONS -- The tax character of distributions from the Fund is the same whether they are paid in cash or reinvested in additional shares. Dividends declared in October, November, or December to shareholders of record as of a date in one of those months and paid the following January will be reportable as if received by the shareholders on December 31. This section provides only a brief summary of the major tax considerations affecting the Fund and its shareholders and is not a complete or detailed explanation of tax matters. Investors should consult their tax advisors concerning the tax consequences of investing in the Fund. FEDERAL INCOME TAXES. Distributions from the Fund of net investment income or net realized short-term capital gains are generally taxable to shareholders as ordinary income. Distributions designated as the excess of net long-term capital gain over net short-term capital loss are taxable to shareholders at the applicable long-term capital gains rate, regardless of the length of time the shareholder held the Fund's shares. A portion of any dividends received from the Fund may be eligible for the dividends received deduction available to corporate shareholders. Information on the tax status of distributions by the Fund is mailed to shareholders each year on or before January 31. STATE INCOME TAXES. In addition to federal taxes, shareholders of the Fund may be subject to state and local taxes on distributions from the Fund. Shareholders should consult with their tax advisors concerning state and local tax consequences of investing in the Fund. "BUYING A DIVIDEND." If you buy shares of the Fund before it pays a distribution, you will pay the full price of the shares and receive a portion of the purchase price back in the form of a taxable distribution. The Fund's NAV and your cost basis in the purchased shares is reduced by the amount of the distribution. The impact of this tax result is most significant when shares are purchased shortly before an annual distribution of capital gains or other earnings. -- TAXATION OF THE FUND -- The Fund intends to qualify as a regulated investment company under the Internal Revenue Code. By qualifying and meeting certain other requirements, the Fund generally will not be subject to federal income taxes to the extent it distributes to its shareholders its net investment income and realized capital gains. The Fund intends to make sufficient distributions to relieve itself from liability for federal income taxes. - 17 ADDITIONAL INFORMATION ----------------------------------------------------------------- -- REPURCHASE AGREEMENTS -- The Fund may use repurchase agreements to invest cash, generally on a short-term basis. Repurchase agreements involve the purchase of a security by the Fund and a simultaneous agreement by the seller (generally a bank or dealer) to repurchase the security from the Fund at a specified date or upon demand. These securities involve the risk that the seller will fail to repurchase the security, as agreed. In that case, the Fund will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. The Fund will enter into repurchase agreements only with those banks or securities dealers who are deemed creditworthy based on criteria adopted by its Board of Directors. There is no limit on the portion of the Fund's assets that may be invested in repurchase agreements with maturities of seven days or less. -- ILLIQUID SECURITIES -- No illiquid securities will be acquired if, upon purchase, more than 10% of the Fund's net assets would consist of these securities. "Illiquid securities" are securities that may not be sold or disposed of in the ordinary course of business within seven days at approximately the price used to determine the Fund's net asset value. Under current interpretations of the Staff of the Securities and Exchange Commission, the following securities in which the Fund may invest will be considered illiquid: - - repurchase agreements maturing in more than seven days - - restricted securities (securities whose public resale is subject to legal restrictions) - - options, with respect to specific securities, not traded on a national securities exchange that are not readily marketable - - any other securities in which a Fund may invest that are not readily marketable -- OPTIONS AND FINANCIAL -- FUTURES TRANSACTIONS The Fund, may invest up to 5% of its net assets in premiums on put and call exchange-traded options. A call option gives the holder (buyer) the right to purchase a security at a specified price (the exercise price) at any time until a certain date (the expiration date). A put option gives the buyer the right to sell a security at the exercise price at any time until the expiration date. The Fund may also purchase options on securities indices and foreign currencies. Options on securities indices are similar to options on a security except that, rather than the right to take or make delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, on exercise of the option, an amount of cash if the closing level of the securities index on which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The Fund may enter into closing transactions, exercise its options, or permit the options to expire. The Fund may only write call options on securities or securities indices that are covered. A call option on a security is covered if written on a security the Fund owns or if the Fund has an absolute and immediate right to acquire that security without additional cash consideration upon conversion or exchange of other securities held by the Fund. If additional cash consideration is required, that amount will be held in a segregated account by the Fund's custodian bank. A call option on a securities index is covered if the Fund owns securities whose price changes, in the opinion of the Advisor, are expected to be substantially similar to those of the index. Call options may also be covered in any other manner in accordance with the rules of the exchange upon which the option is traded and applicable laws and regulations. The Fund may write such options on up to 25% of its net assets. The Fund may also engage in financial futures transactions, including foreign currency financial futures transactions. Financial futures contracts are commodity contracts that obligate the long or short holder to take - 18 ADDITIONAL INFORMATION ----------------------------------------------------------------- or make delivery of a specified quantity of a financial instrument, such as a security, or the cash value of a securities index, during a specified future period at a specified price. The Fund's investment restrictions do not limit the percentage of the Fund's assets that may be invested in financial futures transactions. The Fund, however, does not intend to enter into financial futures transactions for which the aggregate initial margin exceeds 5% of the net assets of the Fund after taking into account unrealized profits and unrealized losses on any such transactions it has entered into. The Fund may engage in futures transactions only on commodities exchanges or boards of trade. The Fund will not engage in transactions in index options, financial futures contracts, or related options for speculation, but only as an attempt to hedge against market conditions affecting the values of securities that the Fund owns or intends to purchase. When the Fund purchases a put on a stock index or on a stock index future not held by the Fund, the put protects the Fund against a decline in the value of its securities to the extent that the stock index moves in a similar pattern to the prices of the securities held. The correlation, however, between stock indices and price movements of the stocks in which the Fund will generally invest may be imperfect. The Fund expects, nonetheless, that the use of put options that relate to such indices will, in certain circumstances, protect against declines in values of specific portfolio securities or the Fund's portfolio generally. Although the purchase of a put option may partially protect the Fund from a decline in the value of a particular security or its portfolio generally, the cost of a put will reduce the potential return on the security or the portfolio if either increases in value. Upon entering into a futures contract, the Fund would be required to deposit with its custodian in a segregated account cash or certain U.S. Government securities in an amount known as the "initial margin." This amount, which is subject to change, is in the nature of a performance bond or a good faith deposit on the contract and would be returned to the Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. The principal risks of options and futures transactions are: - - imperfect correlation between movements in the prices of options, currencies, or futures contracts and movements in the prices of the securities or currencies hedged or used for cover - - lack of assurance that a liquid secondary market will exist for any particular option, futures, or foreign currency contract at any particular time - - the need for additional skills and techniques beyond those required for normal portfolio management - - losses on futures contracts resulting from market movements not anticipated by the investment advisor - - possible need to defer closing out certain options or futures contracts in order to continue to qualify for beneficial tax treatment afforded "regulated investment companies" under the Internal Revenue Code -- TEMPORARY INVESTMENTS -- When, as a result of market conditions, the Fund determines that a temporary defensive position is warranted to help preserve capital, the Fund may without limit temporarily retain cash or invest in prime commercial paper, high-grade debt securities, securities of the U.S. Government and its agencies and instrumentalities, and high-quality money market instruments, including repurchase agreements. When the Fund assumes a temporary defensive position, it is not invested in securities designed to achieve its stated investment objective. - 19 ADDITIONAL INFORMATION ----------------------------------------------------------------- -- WHEN-ISSUED SECURITIES -- When-issued, delayed delivery and forward transactions generally involve the purchase of a security with payment and delivery at some time in the future (i.e., beyond normal settlement). The Fund does not earn interest on such securities until settlement and bears the risk of market value fluctuations in between the purchase and settlement dates. New issues of stocks and bonds, private placements and U.S. government securities may be sold in this manner. To the extent the Fund engages in when-issued and delayed-delivery transactions, it will do so to acquire portfolio securities consistent with its investment objectives and policies and not for investment leverage. The Fund may use spot and forward foreign currency exchange transactions to reduce the risk associated with fluctuations in exchange rates when securities are purchased or sold on a when-issued or delayed-delivery basis. - 20 1997 ANNUAL REPORT --------------------------------------------------------- An Overview of the Markets A LOOK BACK AT 1997 The year was ushered in with favorable economic conditions. While the GDP exceeded expectations in the first quarter, it was not accompanied by higher inflation. The Fed, nevertheless, responded to the quickly growing economy by raising short-term interest rates .25% at the end of March. This action set the tone for a dramatic increase in stock market volatility in the second quarter that continued throughout much of the year. Immediately after the rate hike, both the S&P 500 and NASDAQ gave up most of their year-to-date gains, only to have investors bid prices right back up. By the end of the second quarter, the S&P 500 had gained 20.59%, led by a narrow group of large company stocks. GROSS DOMESTIC PRODUCT VS. INFLATION IN 1997 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROSS DOMESTIC PRODUST VS. INFLATION IN 1997 GDP INFLATION (SEASONALLY ADJUSTED ANNUAL RATE) 1QTR 4.90% 2QTR 3.30% 3QTR 3.10% 4QTR 4.30%
In the third quarter, the market began to broaden as investors gained confidence about continued moderate economic growth and low inflation. Investors moved away from large capitalization stocks to seek values in smaller cap companies and issues overseas. Meanwhile, continuing earnings growth, expanding profit margins, subdued inflation and low interest rates all suggested that the stock market would prolong its historic bull run for a 13th consecutive year. Although it appeared that the economy was approaching full utilization, there were no signs of excess or imbalance that suggested the Fed might tighten rates in the near term. 30-YEAR TREASURY YIELDS OVER THE LAST SIX YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1/3/92 7.48 1/10/92 7.39 1/17/92 7.61 1/24/92 7.71 1/31/92 7.76 2/7/92 7.76 2/14/92 7.9 2/21/92 7.94 2/28/92 7.79 3/6/92 7.93 3/13/92 8.07 3/20/92 8.05 3/27/92 7.94 4/3/92 7.88 4/10/92 7.89 4/17/92 7.94 4/24/92 8.04 5/1/92 8.01 5/8/92 7.89 5/15/92 7.82 5/22/92 7.82 5/29/92 7.84 6/5/92 7.85 6/12/92 7.88 6/19/92 7.83 6/26/92 7.78 7/3/92 7.63 7/10/92 7.63 7/17/92 7.68 7/24/92 7.57 7/31/92 7.46 8/7/92 7.39 8/14/92 7.32 8/21/92 7.35 8/28/92 7.42 9/4/92 7.28 9/11/92 7.29 9/18/92 7.32 9/25/92 7.36 10/2/92 7.33 10/9/92 7.52 10/16/92 7.53 10/23/92 7.64 10/30/92 7.62 11/6/92 7.76 11/13/92 7.56 11/20/92 7.53 11/27/92 7.59 12/4/92 7.49 12/11/92 7.44 12/18/92 7.42 12/25/92 7.36 1/1/93 7.4 1/8/93 7.46 1/15/93 7.35 1/22/93 7.29 1/29/93 7.2 2/5/93 7.16 2/12/93 7.12 2/19/93 7.01 2/26/93 6.89 3/5/93 6.74 3/12/93 6.86 3/19/93 6.81 3/26/93 6.94 4/2/93 7.05 4/9/93 6.85 4/16/93 6.75 4/23/93 6.79 4/30/93 6.92 5/7/93 6.84 5/14/93 6.94 5/21/93 7.03 5/28/93 6.98 6/4/93 6.91 6/11/93 6.81 6/18/93 6.81 6/25/93 6.7 7/2/93 6.66 7/9/93 6.64 7/16/93 6.54 7/23/93 6.7 7/30/93 6.56 8/6/93 6.53 8/13/93 6.35 8/20/93 6.22 8/27/93 6.13 9/3/93 5.94 9/10/93 5.88 9/17/93 6.04 9/24/93 6.05 10/1/93 5.99 10/8/93 5.92 10/15/93 5.79 10/22/93 5.98 10/29/93 5.97 11/5/93 6.21 11/12/93 6.15 11/19/93 6.34 11/26/93 6.26 12/3/93 6.25 12/10/93 6.19 12/17/93 6.28 12/24/93 6.21 12/31/93 6.35 1/7/94 6.23 1/14/94 6.3 1/21/94 6.28 1/28/94 6.22 2/4/94 6.36 2/11/94 6.41 2/18/94 6.63 2/25/94 6.71 3/4/94 6.84 3/11/94 6.9 3/18/94 6.92 3/25/94 7.02 4/1/94 7.25 4/8/94 7.26 4/15/94 7.29 4/22/94 7.23 4/29/94 7.31 5/6/94 7.54 5/13/94 7.49 5/20/94 7.3 5/27/94 7.39 6/3/94 7.27 6/10/94 7.31 6/17/94 7.45 6/24/94 7.52 7/1/94 7.61 7/8/94 7.69 7/15/94 7.54 7/22/94 7.56 7/29/94 7.4 8/5/94 7.48 8/12/94 7.48 8/19/94 7.49 8/26/94 7.7 9/2/94 7.77 9/9/94 7.79 9/16/94 7.82 9/23/94 7.91 9/30/94 7.83 10/7/94 7.98 10/28/94 7.96 11/4/94 8.16 11/11/94 8.15 11/18/94 8.13 11/25/94 7.93 12/2/94 7.91 12/9/94 7.86 12/16/94 7.85 12/23/94 7.83 12/30/94 7.88 1/6/95 7.86 1/13/95 7.79 1/20/95 7.89 1/27/95 7.73 2/3/95 7.63 2/10/95 7.67 2/17/95 7.59 2/24/95 7.53 3/3/95 7.54 3/10/95 7.46 3/17/95 7.37 3/24/95 7.36 3/31/95 7.43 4/7/95 7.39 4/14/95 7.34 4/21/95 7.33 4/28/95 7.34 5/5/95 7.02 5/12/95 6.99 5/19/95 6.92 5/26/95 6.75 6/2/95 6.53 6/9/95 6.73 6/16/95 6.62 6/23/95 6.5 6/30/95 6.62 7/7/95 6.52 7/14/95 6.6 7/21/95 6.96 7/28/95 6.9 8/4/95 6.91 8/11/95 6.99 8/18/95 6.9 8/25/95 6.7 9/1/95 6.62 9/8/95 6.59 9/15/95 6.48 9/22/95 6.58 9/29/95 6.5 10/6/95 6.42 10/13/95 6.3 10/20/95 6.36 10/27/95 6.36 11/3/95 6.28 11/10/95 6.34 11/17/95 6.23 11/24/95 6.25 12/1/95 6.09 12/8/95 6.05 12/15/95 6.1 12/22/95 6.06 12/29/95 5.95 1/5/96 6.04 1/12/96 6.15 1/19/96 5.97 1/26/96 6.04 2/2/96 6.16 2/9/96 6.1 2/16/96 6.24 2/23/96 6.4 3/1/96 6.37 3/8/96 6.71 3/15/96 6.74 3/22/96 6.66 3/29/96 6.67 4/5/96 6.82 4/12/96 6.8 4/19/96 6.79 4/26/96 6.79 5/3/96 7.12 5/10/96 6.93 5/17/96 6.83 5/24/96 6.83 5/31/96 6.99 6/7/96 7.03 6/14/96 7.09 6/21/96 7.1 6/28/96 6.87 7/5/96 7.19 7/12/96 7.03 7/19/96 6.97 7/26/96 7.01 8/2/96 6.74 8/9/96 6.69 8/16/96 6.77 8/23/96 6.96 8/30/96 7.12 9/6/96 7.11 9/13/96 6.95 9/20/96 7.04 9/27/96 6.91 10/4/96 6.74 10/11/96 6.84 10/18/96 6.8 10/25/96 6.82 11/1/96 6.68 11/8/96 6.51 11/15/96 6.46 11/22/96 6.44 11/29/96 6.35 12/6/96 6.51 12/13/96 6.57 12/20/96 6.61 12/27/96 6.56 1/3/97 6.73 1/10/97 6.84 1/17/97 6.82 1/24/97 6.89 1/31/97 6.79 2/7/97 6.7 2/14/97 6.52 2/21/97 6.64 2/28/97 6.8 3/7/97 6.81 3/14/97 6.94 3/21/97 6.97 3/28/97 7.09 4/4/97 7.12 4/11/97 7.17 4/18/97 7.05 4/25/97 7.14 5/2/97 6.87 5/9/97 6.89 5/16/97 6.9 5/23/97 6.99 5/30/97 6.91 6/6/97 6.77 6/13/97 6.72 6/20/97 6.66 6/27/97 6.74 7/4/97 6.63 7/11/97 6.53 7/18/97 6.53 7/25/97 6.45 8/1/97 6.45 8/8/97 6.64 8/15/97 6.55 8/22/97 6.65 8/29/97 6.61 9/5/97 6.64 9/12/97 6.59 9/19/97 6.38 9/26/97 6.37 9/30/97 6.4 10/6/97 6.26 10/13/97 6.43 10/20/97 6.42 10/27/97 6.13 11/3/97 6.21 11/10/97 6.14 11/17/97 6.07 11/24/97 6.07 12/1/97 6.04 12/8/97 6.14 12/15/97 5.97 12/22/97 5.89 12/29/97 5.92 1/5/98 5.74
In the fourth quarter, currency devaluations in Southeast Asia rocked investment communities worldwide and market volatility picked up dramatically in late October. The financial crisis in Asian markets was aggravated by overlending and the large amount of debt held by many private companies. At the same time, Japan, which represents a significant percentage of the world markets, showed renewed signs of a slowdown and this created little relief for international investors. As a result of this turbulence, a flight to safety prompted investors to migrate back to more liquid, large capitalization stocks and to U.S. Treasuries, pushing the yield of the long bond below 6% for the first time in almost two years. MARKET OUTLOOK The U.S. equity markets continue to trade at valuation levels that are historically high, but many positive factors support these valuations. The Fed remains vigilant, poised to tighten if economic growth or inflation heat up, but ready to provide liquidity if the economy slows or international concerns intensify. The current scenario -- expectations for modest increases in corporate profits, low inflation and declining interest rates -- is generally positive for the stock market. 21 AN OVERVIEW OF THE MARKETS ----------------------------------------------------------------- At this point, however, we believe that some caution is warranted. Increased risk in the equity markets is evidenced by continued higher volatility and a preference for greater liquidity. Concerns are growing that 1998 earnings may not rise sufficiently to justify current prices. The potential for much slower growth in emerging countries (particularly in Southeast Asia and Latin America) is dimming earnings prospects for many multinational companies. INVESTMENT STRATEGY We have positioned our equity portfolios to favor domestic growth over cyclical issues. Areas that merit particular emphasis, we believe, include retail issues, health care and consumer staple stocks. Continuing strength in consumer confidence and the low level of inflation support an overweighting in these issues in spite of somewhat high valuations. We have increased utility stock holdings to take advantage of their stable relative earnings and high dividend yields. Energy issues have been deemphasized because of slowing world growth and falling commodity prices. CONSUMER CONFIDENCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
JAN-80 85.9 FEB-80 85.3 Mar-80 80.8 Apr-80 60.5 May-80 50.1 Jun-80 56.1 Jul-80 65.4 Aug-80 70.8 Sep-80 80.3 Oct-80 84.2 Nov-80 87.2 Dec-80 78.6 Jan-81 74.4 Feb-81 69 Mar-81 77.8 Apr-81 81.6 May-81 86.9 Jun-81 83 Jul-81 83.5 Aug-81 85.7 Sep-81 75.6 Oct-81 66.9 Nov-81 66.6 Dec-81 64.9 Jan-82 62.3 Feb-82 56.7 Mar-82 57 Apr-82 61.4 May-82 56.7 Jun-82 63.2 Jul-82 56.9 Aug-82 58.1 Sep-82 54.3 Oct-82 57.4 Nov-82 59.5 Dec-82 59 Jan-83 67.6 Feb-83 79.4 Mar-83 83.1 Apr-83 87.7 May-83 87.5 Jun-83 89 Jul-83 91.2 Aug-83 91.1 Sep-83 92.1 Oct-83 96.7 Nov-83 103.6 Dec-83 103.9 Jan-84 101 Feb-84 101.1 Mar-84 106.1 Apr-84 104.8 May-84 105.8 Jun-84 100.4 Jul-84 103.1 Aug-84 100 Sep-84 99.1 Oct-84 105.4 Nov-84 97 Dec-84 102 Jan-85 103.1 Feb-85 96.1 Mar-85 104.4 Apr-85 99.6 May-85 102.6 Jun-85 103.2 Jul-85 100.9 Aug-85 96 Sep-85 96.1 Oct-85 98.1 Nov-85 98.2 Dec-85 96.9 Jan-86 96 Feb-86 95.1 Mar-86 100 Apr-86 100.2 May-86 100 Jun-86 97.5 Jul-86 91.7 Aug-86 89.7 Sep-86 85.8 Oct-86 89.7 Nov-86 93.2 Dec-86 85.4 Jan-87 91.8 Feb-87 95.8 Mar-87 97.4 Apr-87 103 May-87 102.1 Jun-87 105.8 Jul-87 110.7 Aug-87 115.7 Sep-87 115.1 Oct-87 100.8 Nov-87 107.7 Dec-87 109.9 Jan-88 114.9 Feb-88 112.7 Mar-88 115.7 Apr-88 120.2 May-88 115.7 Jun-88 113.5 Jul-88 119.7 Aug-88 110.7 Sep-88 116.9 Oct-88 112.9 Nov-88 119.3 Dec-88 115.8 Jan-89 120.7 Feb-89 117.4 Mar-89 116.6 Apr-89 116.7 May-89 117.5 Jun-89 120.4 Jul-89 114.7 Aug-89 116.3 Sep-89 117 Oct-89 115.1 Nov-89 113.1 Dec-89 106.5 Jan-90 106.7 Feb-90 107.9 Mar-90 107.3 Apr-90 102.4 May-90 101.8 Jun-90 84.7 Jul-90 85.6 Aug-90 62.6 Sep-90 61.7 Oct-90 61.2 Nov-90 55.1 Dec-90 59.4 Jan-91 81 Feb-91 79.4 Mar-91 76.4 Apr-91 78 May-91 78 Jun-91 77.7 Jul-91 76.1 Aug-91 72.9 Sep-91 60.1 Oct-91 52.7 Nov-91 52.7 Dec-91 52.5 Jan-92 50.4 Feb-92 47.3 Mar-92 56.5 Apr-92 65.1 May-92 71.9 Jun-92 72.6 Jul-92 61.2 Aug-92 59 Sep-92 57.3 Oct-92 54.6 Nov-92 65.6 Dec-92 78.1 Jan-93 76.7 Feb-93 68.5 Mar-93 63.2 Apr-93 67.6 May-93 61.9 Jun-93 58.6 Jul-93 59.2 Aug-93 59.3 Sep-93 63.8 Oct-93 60.5 Nov-93 71.9 Dec-93 79.8 Jan-94 82.6 Feb-94 79.6 Mar-94 86.7 Apr-94 92.1 May-94 88.9 Jun-94 92.5 Jul1994 91.3 Aug-94 90.4 Sep-94 89.5 Oct1994 89.1 Nov-94 100.4 Dec-94 103.4 Jan-95 101.4 Feb-95 99.4 Mar-95 100.2 Apr-95 104.6 May-95 102 Jun-95 92.8 Jul-95 101.4 Aug-95 102.4 Sep-95 97.3 Oct-95 96.3 Nov-95 101.6 Dec-95 99.2 Jan-96 88.4 Feb-96 98 Mar-96 98.4 Apr-96 104.8 May-96 103.5 Jun-96 100.1 Jul-96 107 Aug-96 112 Sep-96 111.8 Oct-96 107.3 Nov-96 109.5 Dec-96 114.2 Jan-97 118.7 Feb-97 118.9 Mar-97 118.5 Apr-97 118.5 May-97 127.9 Jun-97 129.9 Jul-97 126.3 Aug-97 127.6 Sep-97 130.2 Oct-97 123.3 Nov-97 128.3 Dec-97 134.5
REIT valuations remain attractive relative to the broader market, and expectations for double-digit total returns are not unreasonable, with lower volatility than the S&P. As we look to the year ahead, we continue to believe that economic indicators support prospects for a healthy economy. However, peaking profit margins and slowing world growth should, we believe, lead to moderating corporate earnings growth. We anticipate the recent high level of market volatility to continue, so we remain focused on companies that are expected to maintain competitive strength in their industries and deliver dependable earnings growth. So that you may evaluate how the Fund performed given this economic and financial market backdrop, the following page contains a discussion of the Fund's investment activity during 1997, along with a graph illustrating the growth of $10,000 over ten years. The Fund compares its performance to a relevant benchmark. Unlike the Fund, however, this benchmark index is not actively managed and has no operating expenses, portfolio transaction costs or cash flows. We hope that you find this information useful, and we look forward to helping you meet your investment goals and needs in the years to come. THE INVESTMENT TEAM COLUMBIA FUNDS MANAGEMENT COMPANY FEBRUARY 1998 22 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA SPECIAL FUND -- --------------------------- The Special Fund generated a total return of 12.64% for the 1997 year. During the fourth quarter, small- and mid-cap stocks underperformed the large-cap S&P 500 Stock Index. This came after an unusually strong third quarter of outperformance, which was fueled by a market rotation away from highly valued large cap stocks. The Fund's performance was adversely affected during the year by an early emphasis in the paper and metal sectors. We believed that these economically sensitive industries would offer value by benefiting from stronger than expected economic growth. In addition, we chose to de-emphasize finance stocks throughout the year in anticipation that these fully priced securities would disappoint if interest rates increased due to the strong TOP TEN HOLDINGS
% of Net Assets American Stores Co. 3.3 Safeway, Inc. 3.0 Kroger, Co. 3.0 Meyer (Fred), Inc. 2.9 Nordstrom, Inc. 2.5 Service Corp, International 2.4 ESC Medical Systems Ltd. 2.2 FIserv, Inc. 2.2 Quality Food Centers, Inc. 2.1 Abercrombie & Fitch Co. (Class A) 2.0
[AS OF DECEMBER 31, 1997] world economic growth. The demand for basic materials was reduced by the international slowdown, and this prompted a decline in domestic and foreign interest rates. In turn, investors fled from companies with less predictable earnings to those with more consistent growth. As the year came to a close, we sharply reduced our weightings in paper, metals and machinery from a total of 24% of the portfolio to 7%. We increased areas of steady growth like business and consumer services, consumer staples and health care from 30% of the portfolio to 46%. We also added to REITs and are currently maintaining a below-market weighting in technology. The long-term strategy of the Special Fund has always been to maintain a core of growth stocks while anticipating and recognizing changes in the market. This has enabled us to invest in sectors and themes that benefit from these changes. As we begin 1998, we are emphasizing consistent growth stocks, domestic companies, and risk management. This supports our outlook for low inflation, a reduced rate of corporate profit growth and the likelihood of greater stock market volatility. SECTORS OF EMPHASIS
% of Net Assets Consumer Non-Durables 25.0 Consumer Staples 16.3 Business & Consumer Services 15.7 Health Care 14.0
[AS OF DECEMBER 31, 1997] GROWTH OF $10,000 OVER 10 YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA Special Fund S&P 500 Russell 2000 12/31/87 $10,000 $10,000 $10,000 12/31/88 $14,255 $11,655 $12,502 12/31/89 $18,805 $15,339 $14,535 12/31/90 $16,475 $14,871 $11,699 12/31/91 $24,789 $19,403 $17,094 12/31/92 $28,185 $20,881 $20,240 12/31/93 $34,295 $22,986 $24,062 12/31/94 $35,080 $23,289 $23,624 12/31/95 $45,440 $32,041 $30,345 12/31/96 $51,379 $39,398 $35,349 12/31/97 $57,879 $52,533 $43,254 Average Annual Total Returns As of December 31, 1997 CSF S&P 500 Russell 2000 1 Year 12.64% 33.36% 22.36% 5 Years 15.48% 20.27% 16.40% Since Inception 19.19% 18.04% 15.77% Past Performance is not predictive of future performance.
23 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - -------------------------- -------------------------- -- COLUMBIA SPECIAL FUND, INC. -- --------------------------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (97.5%) BUILDING & FORESTRY PRODUCTS (2.1%) Longview Fibre Co. ................................................................... 815,000 $ 12,377,812 Willamette Industries, Inc. .......................................................... 420,500 13,534,844 -------------- 25,912,656 -------------- BUSINESS & CONSUMER SERVICES (15.7%) *AccuStaff, Inc. ..................................................................... 400,000 9,200,000 *Corrections Corporation of America................................................... 450,000 16,678,125 DENTSPLY International, Inc. ......................................................... 550,000 16,775,000 *Dollar Thrifty Automotive Group, Inc. ............................................... 500,000 10,250,000 *FIserv, Inc. ........................................................................ 555,000 27,264,375 Hertz Corp. (Class A)................................................................. 484,000 19,481,000 McKesson Corp. ....................................................................... 174,100 18,835,444 *NovaCare Employee Services, Inc. .................................................... 450,000 3,600,000 *Romac International, Inc. ........................................................... 465,000 11,363,437 Service Corporation Int'l. ........................................................... 800,000 29,550,000 ServiceMaster Co. .................................................................... 450,000 13,162,500 *StaffMark, Inc. ..................................................................... 337,500 10,673,438 Unitog Co. ........................................................................... 415,000 9,233,750 -------------- 196,067,069 -------------- CHEMICAL (0.8%) IMC Global, Inc. ..................................................................... 300,000 9,825,000 -------------- CONSUMER DURABLE (1.4%) *Furniture Brands International, Inc. ................................................ 850,000 17,425,000 -------------- CONSUMER NON-DURABLE (25.0%) +*Abercrombie & Fitch Co. (Class A)................................................... 800,000 25,000,000 *AnnTaylor Stores Corp. .............................................................. 1,240,000 16,585,000 *Consolidated Stores Corp. ........................................................... 450,000 19,771,875 +*Gadzooks, Inc. ..................................................................... 700,000 14,700,000 *Helen of Troy Ltd. .................................................................. 1,010,000 16,286,250 *Landry's Seafood Restaurants, Inc. .................................................. 1,000,000 24,000,000 Liz Claiborne, Inc. .................................................................. 450,000 18,815,625 *Meyer (Fred), Inc. .................................................................. 1,000,000 36,375,000 Nordstrom, Inc. ...................................................................... 525,000 31,696,875 *Papa John's International, Inc. ..................................................... 600,000 20,925,000 *Planet Hollywood International, Inc. (Class A)....................................... 1,375,000 18,218,750 *Polo Ralph Lauren Corp. (Class A).................................................... 600,000 14,587,500 St. John Knits, Inc. ................................................................. 600,000 24,000,000 +*Vans, Inc. ......................................................................... 860,000 13,007,500 *Zale Corp. .......................................................................... 790,000 18,170,000 -------------- 312,139,375 -------------- CONSUMER STAPLES (16.3%) American Stores Co. .................................................................. 2,015,000 41,433,437 SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Hannaford Brothers Co. ............................................................... 200,000 $ 8,687,500 *Kroger Co. .......................................................................... 1,000,000 36,937,500 Libbey, Inc. ......................................................................... 350,000 13,256,250 Newell Co. ........................................................................... 400,000 17,000,000 *Quality Food Centers, Inc. .......................................................... 400,000 26,800,000 *Safeway, Inc. ....................................................................... 600,000 37,950,000 Sunbeam Corp. ........................................................................ 400,000 16,850,000 *Whole Foods Market, Inc. ............................................................ 100,000 5,112,500 -------------- 204,027,187 -------------- HEALTH (14.0%) *American Oncology Resources, Inc. ................................................... 600,000 9,600,000 *ATL Ultrasound, Inc. ................................................................ 100,000 4,600,000 *Dura Pharmaceuticals, Inc. .......................................................... 213,000 9,771,375 *Elan Corp. plc ADR................................................................... 150,000 7,678,125 *ESC Medical Systems Ltd. ............................................................ 706,500 27,376,875 *Inhale Therapeutic Systems........................................................... 100,000 2,600,000 *MedPartners, Inc. ................................................................... 50,000 1,118,750 Mentor Corp. ......................................................................... 600,000 21,900,000 Omnicare, Inc. ....................................................................... 300,000 9,300,000 *PAREXEL International Corp. ......................................................... 230,000 8,510,000 *PhyCor, Inc. ........................................................................ 300,000 8,100,000 +*ResMed, Inc. ....................................................................... 500,000 14,062,500 *Serologicals Corp. .................................................................. 500,000 13,000,000 *Sofamor Danek Group, Inc. ........................................................... 200,000 13,012,500 *Transkaryotic Therapies, Inc. ....................................................... 155,000 5,444,375 *Watson Pharmaceuticals, Inc. ........................................................ 600,000 19,462,500 -------------- 175,537,000 -------------- MACHINERY & CAPITAL SPENDING (1.9%) Applied Power, Inc. (Class A)......................................................... 134,500 9,280,500 General Cable Corp. .................................................................. 100,000 3,618,750 Parker-Hannifin Corp. ................................................................ 250,000 11,468,750 -------------- 24,368,000 -------------- METAL MINING & STEEL (2.8%) *Getchell Gold Corp. ................................................................. 800,000 19,200,000 +Schnitzer Steel Industries, Inc. (Class A)........................................... 550,000 15,434,375 -------------- 34,634,375 -------------- POLLUTION CONTROL (3.9%) *Air & Water Technologies Corp. (Class A)............................................. 1,200,100 1,350,112 *Culligan Water Technologies, Inc. ................................................... 400,000 20,100,000 *Ionics, Inc. ........................................................................ 343,000 13,419,875 +*Osmonics, Inc. ..................................................................... 869,000 13,741,063 -------------- 48,611,050 --------------
24 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - -------------------------- -------------------------- -- COLUMBIA SPECIAL FUND, INC. -- --------------------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) REAL ESTATE SECURITIES (6.5%) Apartment Investment & Management Co. (Class A)....................................... 114,000 $ 4,189,500 Colonial Properties Trust............................................................. 135,000 4,066,875 Equity Office Properties Trust........................................................ 123,000 3,882,187 Equity Residential Properties Trust................................................... 80,000 4,045,000 First Industrial Realty Trust, Inc. .................................................. 115,000 4,154,375 General Growth Properties, Inc. ...................................................... 111,000 4,009,875 Liberty Property Trust................................................................ 153,000 4,370,063 Macerich Co. ......................................................................... 150,000 4,275,000 Mack-Cali Realty Corp. ............................................................... 101,000 4,141,000 Manufactured Home Communities, Inc. .................................................. 150,000 4,050,000 Public Storage, Inc. ................................................................. 145,000 4,259,375 *Security Capital Group, Inc. (Class B)............................................... 350,000 11,375,000 Security Capital Industrial Trust..................................................... 163,000 4,054,625 Security Capital Pacific Trust........................................................ 160,000 3,880,000 Simon DeBartolo Group, Inc. .......................................................... 122,000 3,987,875 Spieker Properties, Inc. ............................................................. 100,000 4,287,500 *Trammell Crow Co. ................................................................... 24,000 618,000 TriNet Corporate Realty Trust, Inc. .................................................. 105,000 4,062,188 Vornado Realty Trust.................................................................. 90,000 4,224,375 -------------- 81,932,813 -------------- TECHNOLOGY (4.6%) *Apple Computer, Inc. ................................................................ 1,000,000 13,125,000 *FlexiInternational Software, Inc. ................................................... 25,000 387,500 *FORE Systems, Inc. .................................................................. 600,000 9,150,000 +*Integrated Measurement Systems, Inc. ............................................... 300,000 5,137,500 *Loral Space & Communications Corp. .................................................. 650,000 13,934,375 *VIASOFT, Inc. ....................................................................... 360,000 15,210,000 -------------- 56,944,375 -------------- TRANSPORTATION (1.6%) +*Celadon Group, Inc. ................................................................ 500,000 6,750,000 *Trans World Airlines, Inc. .......................................................... 1,300,000 13,162,500 -------------- 19,912,500 --------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- UTILITIES/ELECTRIC/GAS (0.9%) United Water Resources, Inc. ......................................................... 575,000 $ 11,248,438 -------------- Total Common Stocks (Cost $1,080,385,133) ............................................................... 1,218,584,838 -------------- REPURCHASE AGREEMENTS (7.4%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $65,646,574. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999................................................................ $ 65,623,788 65,623,788 J.P. Morgan Securities, Inc. 6.521% dated 12/31/1997, due 01/02/1998 in the amount of $27,009,648. Collateralized by U.S. Treasury Notes 3.625% to 7.500% due 08/31/2000 to 02/15/2005......................................................... 27,000,000 27,000,000 -------------- Total Repurchase Agreements (Cost $92,623,788) .................................................................. 92,623,788 -------------- TOTAL INVESTMENTS (104.9%) (Cost $1,173,008,921).................................................................... 1,311,208,626 RECEIVABLES LESS LIABILITIES (-4.9%)...................................................... (61,490,829) -------------- NET ASSETS (100.0%)....................................................................... $1,249,717,797 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. + Affiliated issuers (Note 1) The accompanying notes are an integral part of the financial statements. 25 STATEMENT OF ASSETS AND LIABILITIES -----------------------------------------------------------------
COLUMBIA SPECIAL December 31, 1997 FUND, INC. ------------ ASSETS: Investments at identified cost............................ $1,080,385,133 - ------------------------------------------------------------ ------------ Investments at value (Notes 1 and 2)...................... $1,218,584,838 Temporary cash investments, at cost (Note 1).............. 92,623,788 Receivable for: Interest................................................ 539,653 Dividends............................................... 812,476 Investments sold........................................ 140,743 Capital stock sold...................................... 1,600,359 ------------ Total assets.............................................. 1,314,301,857 ------------ LIABILITIES: Payable for: Capital stock redeemed.................................. 54,827,406 Dividends and distributions............................. 5,565,501 Investments purchased................................... 2,906,000 Investment management fee (Note 4)...................... 954,989 Accrued expenses........................................ 330,164 ------------ Total liabilities......................................... 64,584,060 ------------ NET ASSETS APPLICABLE TO OUTSTANDING SHARES................. $1,249,717,797 ------------ ------------ Net assets consist of: Undistributed net investment income....................... $ 360,073 Unrealized appreciation on investments.................... 138,199,705 Undistributed net realized loss from investments.......... (812,034) Capital shares (Note 3)................................... 616,718 Capital paid in (Note 3).................................. 1,111,353,335 ------------ $1,249,717,797 ------------ ------------ SHARES OF CAPITAL STOCK OUTSTANDING (NOTE 3)................ 61,671,768 ------------ ------------ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (1)........................................................ $ 20.26 ------------ ------------
(1) The net asset value per share is computed by dividing net assets applicable to outstanding shares by shares of capital stock outstanding. The accompanying notes are an integral part of the financial statements. 26 STATEMENT OF OPERATIONS -----------------------------------------------------------------
COLUMBIA SPECIAL Year Ended December 31, 1997 FUND, INC. ------------ INVESTMENT INCOME: Income: Interest........................................... $ 5,470,977 Dividends.......................................... 9,434,285 ------------ Total income..................................... 14,905,262 ------------ Expenses: Investment management fees (Note 4)................ 12,373,140 Shareholder servicing costs (Note 4)............... 1,402,637 Reports to shareholders............................ 297,099 Accounting expense................................. 45,504 Financial information and subscriptions............ 26,041 Custodian fees..................................... 58,659 Bank transaction and checking fees................. 50,531 Registration fees.................................. 55,075 Legal, insurance and auditing fees................. 54,489 Other.............................................. 10,314 ------------ Total expenses................................... 14,373,489 ------------ Net investment income (Note 1)....................... 531,773 ------------ REALIZED GAIN AND UNREALIZED APPRECIATION FROM INVESTMENT TRANSACTIONS: Net realized gain from investments (Note 2)(1)....... 122,678,842 Net unrealized appreciation on investments during the period (Note 1)..................................... 49,916,627 ------------ Net gain on investments (Note 1)..................... 172,595,469 ------------ Net increase in net assets resulting from operations.......................................... $173,127,242 ------------ ------------
(1) The net realized gain includes $7,023,101 loss from affiliated issuers. (Note 1) The accompanying notes are an integral part of the financial statements. 27 STATEMENTS OF CHANGES IN NET ASSETS -----------------------------------------------------------------
COLUMBIA SPECIAL Years Ended December 31, FUND, INC. ------------------------------ 1997 1996 -------------- -------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)................... $ 531,773 $ (4,487,503) Net realized gain from investments (Note 2)..... 122,678,842 295,204,950 Change in net unrealized appreciation (depreciation) on investments.............. 49,916,627 (112,950,905) -------------- -------------- Net increase in net assets resulting from operations............... 173,127,242 177,766,542 Distributions to shareholders: From net realized gain from investment transactions............. (122,678,842) (289,460,071) In excess of net realized gain from investment transactions............. (154,157)* Capital share transactions, net (Note 3)............... (385,860,660) 312,562,708 -------------- -------------- Net increase (decrease) in net assets............... (335,566,417) 200,869,179 NET ASSETS: Beginning of period......... 1,585,284,214 1,384,415,035 -------------- -------------- End of period (1)........... $1,249,717,797 $1,585,284,214 -------------- -------------- -------------- -------------- - ------------------------------ -------------- --------------
(1) Includes undistributed net investment income of: $ 360,073 $ -- * On a tax basis, there was no return of capital.
The accompanying notes are an integral part of the financial statements. 28 NOTES TO FINANCIAL STATEMENTS ----------------------------------------------------------------- -- 1. SIGNIFICANT ACCOUNTING POLICIES -- Columbia Special Fund, Inc. (CSF) is an open-end, diversified investment company registered under the Investment Company Act of 1940, as amended. The policies described below are consistently followed by CSF in the preparation of its financial statements in conformity with generally accepted accounting principles. INVESTMENT VALUATION. The values of CSF equity investments are based on the last sale prices reported by the principal securities exchanges on which the investments are traded, or, in the absence of recorded sales, at the closing bid prices on such exchanges or over-the-counter markets. Temporary cash investments in short-term securities (principally repurchase agreements) are valued at cost, which approximates market. AFFILIATED ISSUERS. Under the Investment Company Act of 1940, as amended, an issuer is an "affiliated issuer" of CSF if CSF holds 5% or more of that issuer's outstanding voting securities. CSF had investments in such affiliated issuers at December 31, 1997 as follows:
DIVIDEND INCOME BALANCE OF JANUARY 1, BALANCE OF GROSS SHARES HELD VALUE 1997- SHARES HELD PURCHASES GROSS DECEMBER DECEMBER DECEMBER DECEMBER 31, & SALES & 31, 31, 31, NAME OF ISSUER 1996 ADDITIONS REDUCTIONS 1997 1997 1997 - ----------------------------------- ------------ --------- ---------- ----------- ----------- ---------- Abercrombie & Fitch Co............. -- 800,000 800,000 $25,000,000 Celadon Group, Inc................. 580,000 80,000 500,000 6,750,000 Gadzooks, Inc...................... -- 700,000 700,000 14,700,000 Harmonic Lightwaves, Inc........... 540,000 540,000 -- -- Integrated Measurement Syst........ 170,000 290,000 160,000 300,000 5,137,500 Osmonics, Inc...................... 400,000 469,000 869,000 13,741,063 Resmed, Inc........................ 605,000 105,000 500,000 14,062,500 Schnitzer Steel Industries......... 500,000 50,000 550,000 15,434,375 $107,500 United Dental Care................. 487,500 487,500 -- -- Vans, Inc.......................... -- 860,000 860,000 13,007,500 ----------- ---------- $107,832,938 $107,500 ----------- ---------- ----------- ----------
INTEREST AND DIVIDEND INCOME. Interest income is recorded on the accrual basis and dividend income is recorded on the ex-dividend date. SHAREHOLDER DISTRIBUTIONS. CSF distributes net investment income and any net realized gains annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for deferral of losses from wash sales and return of capital received from Real Estate Investment Trusts. 29 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED -- USE OF ESTIMATES. The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FEDERAL INCOME TAXES. CSF has made no provision for federal income taxes on net investment income or net realized gains from sales of securities, since it is the intention of CSF to comply with the provisions of the Internal Revenue Code available to certain investment companies, and to make distributions of income and security profits sufficient to relieve it from substantially all federal income taxes. OTHER. Investment transactions are accounted for on the date the investments are purchased or sold. The cost of investments sold is determined by the use of the specific identification method for both financial reporting and income tax purposes. Realized gains and losses from investment transactions and unrealized appreciation or depreciation of investments are reported on the basis of identified costs. CSF, through its custodian, receives delivery of underlying securities collateralizing repurchase agreements (included in temporary cash investments). Market values of these securities are required to be at least 100% of the cost of the repurchase agreements. CSF's investment advisor determines that the value of the underlying securities is at all times at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. 30 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 2. INVESTMENT TRANSACTIONS -- Aggregate purchases and sales, net realized gain and unrealized appreciation (depreciation) of investments, excluding temporary cash investments, as of and for the period ended December 31, 1997, were as follows:
COLUMBIA SPECIAL FUND, INC. (CSF) -------------- PURCHASES: Investment securities other than U.S. Government obligations............... $2,285,721,068 -------------- -------------- SALES: Investment securities other than U.S. Government obligations............... $2,727,547,308 -------------- -------------- NET REALIZED GAIN: Investment securities other than U.S. Government obligations............... $ 122,678,842 -------------- -------------- UNREALIZED APPRECIATION (DEPRECIATION) AS OF DECEMBER 31, 1997: Appreciation.......................... $ 199,310,779 Depreciation.......................... (61,111,074 ) -------------- Net unrealized appreciation......... $ 138,199,705 -------------- -------------- UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES AS OF DECEMBER 31, 1997: Appreciation.......................... $ 199,396,129 Depreciation.......................... (62,132,757 ) -------------- Net unrealized appreciation......... $ 137,263,372 -------------- -------------- For federal income tax purposes, the cost of investments owned at December 31, 1997............................... $1,081,321,466 -------------- --------------
- -------------------------------------------------------------------------------- The net realized gain includes proceeds of $672,539 from shareholder class action suits related to securities held. 31 NOTES TO FINANCIAL STATEMENTS ----------------------------------------------------------------- -- 3. CAPITAL STOCK --
COLUMBIA SPECIAL FUND, INC. (CSF) ---------------------------- 1997 1996 ------------- ------------- SHARES: Shares sold.............................................................. 17,301,738 25,624,116 Shares issued for reinvestment of dividends.............................. 5,787,116 13,826,136 ------------- ------------- 23,088,854 39,450,252 Less shares redeemed..................................................... (41,278,382) (24,162,690) ------------- ------------- Net increase (decrease) in shares........................................ (18,189,528) 15,287,562 ------------- ------------- ------------- ------------- AMOUNTS: Sales.................................................................... $ 365,659,534 $ 593,195,434 Reinvestment of dividends................................................ 117,246,979 273,619,242 ------------- ------------- 482,906,513 866,814,676 Less redemptions......................................................... (868,767,173) (554,251,968) ------------- ------------- Net increase (decrease).................................................. $(385,860,660) $ 312,562,708 ------------- ------------- ------------- ------------- Capital stock authorized (shares)........................................ 100,000,000 Par Value................................................................ $.01
32 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES --
COLUMBIA SPECIAL FUND, INC. (CSF) ---------- Investment management fees incurred..... $12,373,140 Investment management fee computation basis (percentage of daily net assets per annum)............................. 1% to $500,000,000 daily net assets; 0.75 of 1% in excess of $500,000,000 Transfer agent fee (included in shareholder servicing costs)........... $979,562 Fees earned by directors not affiliated with the Fund's investment advisor, transfer agent, or Columbia Management Co..................................... $14,774 Value of investments held at December 31, 1997 by: Columbia Management Co................ $2,232,560 Columbia Funds Management Company..... $769,764
The investment advisor of CSF is Columbia Funds Management Company (CFMC). The transfer agent for CSF is Columbia Trust Company (CTC), a majority owned subsidiary of CFMC. The transfer agent is compensated based on a per account fee. On December 10, 1997, CFMC, CTC and Columbia Management Company (CMC), an affiliated company, became indirect subsidiaries of Fleet Financial Group, Inc. (Fleet), a publicly owned multi-bank holding company registered under the Bank Holding Company Act of 1956. Prior to that date, certain officers and directors of CSF were also officers and directors of CFMC, CTC and CMC. Those individuals did not receive any compensation or other payment from CSF. As a result of federal banking regulations, no officers or directors of CSF are officers or directors of CFMC, CTC or CMC following the transaction with Fleet. J. Jerry Inskeep, Jr., an officer and director of CSF, is affiliated with Fleet, but receives no compensation or other payment from CSF. As a result of the transaction with Fleet, directors of CSF were required to approve new contracts for investment advisory and transfer agent services between CSF and CFMC and CTC, respectively. The new contracts are the same in all material respects to the corresponding previous contracts. Shareholders of CSF were required to approve the new investment advisory contract. The proxy voting results of the contract's approval by shareholders of CSF is set forth at the end of this 1997 Annual Report. 33 REPORT OF INDEPENDENT ACCOUNTANTS ----------------------------------------------------------------- TO THE SHAREHOLDERS AND BOARD OF DIRECTORS, COLUMBIA SPECIAL FUND, INC. (CSF) We have audited the accompanying statement of assets and liabilities of CSF, including the schedule of investments, as of December 31, 1997, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of CSF's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodians and brokers. 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 CSF as of December 31, 1997, 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 periods indicated therein, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Portland, Oregon February 12, 1998 34 PROXY VOTING RESULTS ----------------------------------------------------------------- On December 4, 1997, CSF held a Special Meeting of Shareholders to approve a new investment advisory contract with the Advisor. The need to approve a new investment advisory contract was caused by the change in control of the Advisor resulting from the acquisition of the Advisor by Fleet Financial Group, Inc. A new investment advisory contract was approved by CSF as shown below:
TOTAL OUTSTANDING FOR AGAINST ABSTENTION ------------ --------- ---------- ----------- Columbia Special Fund.............. 66,728,987 35,764,587 603,044 1,097,275
NOTES COLUMBIA FUNDS -- 1301 S.W. Fifth Avenue, Portland, Oregon 97201 -- -- DIRECTORS -- ------------------------------------------- JAMES C. GEORGE J. JERRY INSKEEP, JR. THOMAS R. MACKENZIE RICHARD L. WOOLWORTH -- INVESTMENT ADVISOR -- ------------------------------------------- COLUMBIA FUNDS MANAGEMENT COMPANY 1300 S.W. SIXTH AVENUE PORTLAND, OREGON 97201 -- LEGAL COUNSEL -- ------------------------------------------- STOEL RIVES L.L.P. 900 S.W. FIFTH AVENUE, SUITE 2300 PORTLAND, OREGON 97201 -- AUDITORS -- ------------------------------------------- COOPERS & LYBRAND L.L.P. 1300 S.W. FIFTH AVENUE, SUITE 2700 PORTLAND, OREGON 97201 -- TRANSFER AGENT -- ------------------------------------------- COLUMBIA TRUST COMPANY 1301 S.W. FIFTH AVENUE PORTLAND, OREGON 97201 THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. THE MANAGERS' VIEWS CONTAINED IN THIS REPORT ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER CONSIDERATIONS. PORTFOLIO CHANGES SHOULD NOT BE CONSIDERED RECOMMENDATIONS FOR ACTION BY INDIVIDUAL INVESTORS. THE FUND IS DISTRIBUTED BY PROVIDENT DISTRIBUTORS, INC. Part B Reg. Nos. 2-99207/811-4362 - -------------------------------------------------------------------------------- COLUMBIA SPECIAL FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION Columbia Financial Center 1301 S.W. Fifth Avenue P.O. Box 1350 Portland, Oregon 97207 1-800-547-1707 This Statement of Additional Information contains information relating to Columbia Special Fund, Inc. (the "Fund"), an open-end, diversified investment company of the management type. The Fund is an Oregon corporation and has a specific investment objective. This Statement of Additional Information is not a Prospectus. It relates to a Prospectus dated February 23, 1998 (the "Prospectus") and should be read in conjunction with the Prospectus. Copies of the Prospectus are available without charge upon written request to the Fund or by calling 1-800-547-1707. - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Investment Advisory and Other Fees Paid to Affiliates . . . . . . . . . . . .3 Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Custodians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Accounting Services and Financial Statements . . . . . . . . . . . . . . . . .6 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Additional Information Regarding Certain Investments by the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . 12 February 23, 1998 1 - -------------------------------------------------------------------------------- MANAGEMENT - -------------------------------------------------------------------------------- The directors and officers of the Fund are listed below, together with their principal business occupations. All principal business occupations have been held for more than five years, except that positions with Columbia High Yield Fund, Inc., Columbia Real Estate Equity Fund, Inc., and Columbia Small Cap Fund, Inc., have been held since July 1993, January 1994, and August 1996, respectively, and except as otherwise indicated. The term "Columbia Funds" refers to Columbia Common Stock Fund, Inc., Columbia Balanced Fund, Inc., Columbia Growth Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia International Stock Fund, Inc., Columbia High Yield Fund, Inc., Columbia Fixed Income Fund, Inc., Columbia Daily Income Company, Columbia Municipal Bond Fund, Inc., Columbia Small Cap Fund, Inc., and Columbia U.S. Government Securities Fund, Inc. J. JERRY INSKEEP, JR.,*+ Chairman, President, and Director of the Fund and each of the Columbia Funds; Chairman, President, and Trustee of CMC Fund Trust ("CMC Trust"); Consultant for Fleet Financial Group, Inc. ("Fleet") (since December 1997); formerly Chairman and Director of Columbia Funds Management Company (the "Advisor"), Columbia Management Co., and Columbia Trust Company (the "Trust Company"); formerly a Director of Columbia Financial Center Incorporated ("Columbia Financial"). Mr. Inskeep's business address is 1300 S.W. Sixth Avenue, P.O. Box 1350, Portland, Oregon 97207. JAMES C. GEORGE, Director of the Fund and each of the Columbia Funds (since June 1994); Trustee of CMC Trust (since December 1997). Mr. George, the former Investment Manager of the Oregon State Treasury (1966-1992), is an investment consultant. Mr. George's business address is 1001 S.W. Fifth Avenue, Portland, Oregon 97204. THOMAS R. MACKENZIE, Director of the Fund and each of the Columbia Funds; Trustee of CMC Trust (since December 1997); Chairman of the Board of Directors of Group Mackenzie (architecture, planning, interior design, engineering). Mr. Mackenzie's business address is 0690 S.W. Bancroft Street, Portland, Oregon 97201. ROBERT J. MOORMAN,* Secretary of the Fund and each of the Columbia Funds and CMC Trust (since January 1998); Attorney with Stoel Rives LLP. Mr. Moorman's business address is 900 S.W. Fifth Avenue, Suite 2300, Portland, Oregon 97204-1268. RICHARD L. WOOLWORTH,+ Director of the Fund and each of the Columbia Funds; Trustee of CMC Trust; Chairman of Blue Cross and Blue Shield of Oregon; Chairman and Chief Executive Officer of the Regence Group, health insurers. Mr. Woolworth's business address is 200 S.W. Market Street, Portland, Oregon 97201. *Mr. Inskeep and Mr. Moorman are "interested persons" as defined by the Investment Company Act of 1940 and receive no directors fees or salaries from the Fund. +Members of the Executive Committee. The Executive Committee has all powers of the Board of Directors when the Board is not in session, except as limited by law. The following table sets forth compensation received by the disinterested directors for 1997. No officer of the Fund received any compensation from the Funds in 1997. COMPENSATION TABLE
Compensation from Director Compensation from the Fund Fund Complex -------- -------------------------- ----------------- Thomas R. Mackenzie $4,844 $20,000 James C. George $4,844 $20,000 Richard L. Woolworth* $5,086* $29,000**
*Includes compensation received by Mr. Woolworth for serving on the Fund's and each Columbia Funds' Executive Committee. **Includes compensation Mr. Woolworth received as a Trustee of CMC Trust. The Investment Advisor for CMC Trust is Columbia Management Co., an affiliate of the Advisor. Provident Distributors, Inc. ("PDI"), a registered securities broker and member of the National Association of Securities Dealer, Inc., is authorized under a distribution agreement with the Fund to sell shares of the Fund. Columbia Financial has entered into a Broker-Dealer Agreement with PDI to distribute the Fund's shares. PDI and Columbia Financial do not charge any fees or commissions to investors or the Fund for sale of shares of a Fund. At January 31, 1998, officers and directors of the Fund, in the aggregate, owned of record or beneficially less than 1% of the total outstanding shares of the Fund. At January 31, 1998, to the knowledge of the Fund, no person owned of record or beneficially more than 5 percent of the outstanding shares of the Fund except for the following record owners: Charles Schwab & Co., Inc., 2 101 Montgomery Street, San Francisco, California 94104, which owned 4,659,593 shares of the Fund (7.82 percent of the total shares outstanding) and Standard Insurance Co., P.O. Box 711, Portland, Oregon 97207, which owned 3,738,922 shares of the Fund (6.27 percent of the total shares outstanding). - -------------------------------------------------------------------------------- INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES - -------------------------------------------------------------------------------- Information regarding services performed by the Advisor for the Fund and the formula for calculating the fees are set forth in the Prospectus under "Fund Management." Advisory fees paid by the Fund were $12,373,140 for 1997, $12,880,541 for 1996, and $10,125,466 for 1995. The Advisor is an indirect wholly owned subsidiary of Fleet Financial Group, Inc., a publicly owned multibank holding company registered under the Bank Holding Company Act of 1956 with assets of approximately $85 billion at December 31, 1997. The Advisor has entered into an agreement with Columbia Management Co. pursuant to which Columbia Management Co. provides the Advisor with statistical and other factual information, advice regarding economic factors and trends, and advice as to occasional transactions in specific securities. Columbia Management Co., upon receipt of specific instructions from the Advisor, contacts brokerage firms to effect securities transactions for the Fund. The Advisor pays Columbia Management Co. a fee for this service. No amounts are paid by the Fund to Columbia Management Co. pursuant to the agreement, and Fund expenses are not increased as a result of this agreement. Columbia Management Co. is an indirect wholly owned subsidiary of Fleet Financial Group, Inc. The Trust Company, which is an indirect wholly owned subsidiary of Fleet, acts as custodian of certain Individual Retirement Accounts (IRAs) and sponsor of Prototype Money Purchase Pension and Profit Sharing Plans that invest in the Fund. The Trust Company charges account holders an annual fee of $25 per IRA account (fee is waived for accounts over $25,000), a retirement plan setup fee of $100 and an annual retirement plan fee of $50. The Trust Company also acts as transfer agent and dividend crediting agent for the Fund pursuant to a transfer agent agreement with the Fund. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350, Portland, Oregon 97207. It issues certificates for shares of the Fund upon request and records and disburses dividends. In addition, the Fund pays the Trust Company for extra administrative services performed at cost in accordance with a schedule set forth in the agreement and reimburses the Trust Company for certain out-of-pocket expenses incurred in carrying out its duties under the agreement. Fees paid by the Fund to the Trust Company for services performed for 1997 under the transfer agent agreement were $979,562. During 1997, the Fund paid the Trust Company a per-account fee of $1.50 per month for each shareholder account existing at any time during the month. Effective January 1, 1998, the Fund pays the Trust Company a per account fee of $1.66 per month for each shareholder account existing at any time during the month. Many existing computer programs use only two digits to identify a year in the date field. These programs do not take into effect the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the year 2000. This could impact the ability of the Advisor and the service providers for the Fund to provide services to the Fund. The Advisor has evaluated its systems and the systems of service providers for the Fund to assess the effect of the year 2000 issue on the ability of the Advisor and these parties to provide services to the Fund subsequent to year 2000. The Advisor has undertaken a project to determine the corrective action necessary to ensure that the systems will be ready for the year 2000 ("Year 2000 Ready Project"). The Advisor has completed a substantial portion of its Year 2000 Ready Project and expects to complete the remainder by December 1998. Testing of compliance with its Year 2000 Ready Project should be completed by the end of the third quarter of 1999. 3 - -------------------------------------------------------------------------------- PORTFOLIO TRANSACTIONS - -------------------------------------------------------------------------------- The Fund will not generally invest in securities for short-term capital appreciation but, when business and economic conditions, market prices, or the Fund's investment policy warrant, individual security positions may be sold without regard to the length of time they have been held. The rate of portfolio turnover for the Fund is disclosed in the Prospectus under "Financial Highlights." Securities owned by the Fund may be purchased with brokerage commissions or on a principal basis without brokerage commissions. The Fund may also purchase securities from underwriters, the price of which will include a commission or concession paid by the issuer to the underwriter. The purchase price of securities purchased from dealers serving as market makers will include the spread between the bid and asked prices. Brokerage transactions involving securities of companies domiciled in countries other than the United States will normally be conducted on the principal stock exchanges of those countries. In most international markets, commission rates are not negotiable and may be higher than negotiated commission rates available in the United States. There is generally less government supervision and regulation of foreign stock exchanges and broker-dealers than in the United States. Prompt execution of orders at the most favorable price will be the primary consideration of the Fund in transactions where brokerage fees are involved. Research, statistical, and other services also may be taken into consideration in selecting broker-dealers. These services may include: advice concerning the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or the purchasers or sellers of securities; and furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategies, and performance of accounts. While the Fund has no arrangements or formulas as to either the allocation of brokerage transactions or commission rates paid thereon, a commission in excess of the amount of commission another broker or dealer would have charged for effecting that transaction may be paid by the Fund if management of the Fund determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services provided, viewed in terms of either that particular transaction or management's overall responsibilities with respect to the Fund. Allocation of transactions to obtain research services for the Advisor enables the Advisor to supplement its own research and analysis with the statistics, information, and views of others. While it is not possible to place a dollar value on these services, it is the opinion of the Advisor that the receipt of such services will not reduce the overall expenses for its research or those of its affiliated companies. The fees paid to the Advisor by the Fund would not be reduced as a result of the receipt of such information and services by the Fund. The receipt of research services from brokers or dealers might be useful to the Advisor and its affiliates in rendering investment management services to the Fund or other clients; and, conversely, information provided by brokers or dealers who have executed orders on behalf of other clients might be useful to the Advisor in carrying out its obligations to the Fund. Total brokerage commissions paid by the Fund for each of the last three years were $6,140,893 for 1997, $4,280,666 for 1996, and $5,161,705 for 1995. Of the commissions paid in the fiscal year ending in 1997, the Fund paid $114,259 in commissions as a result of research provided by brokerage firms. Provided the Fund's Board of Directors is satisfied that the Fund is receiving the most favorable price and execution available, the Advisor may consider the sale of the Fund's shares as a factor in the selection of brokerage firms to execute its portfolio transactions. The placement of portfolio transactions with brokerage firms who sell shares of the Fund is subject to rules adopted by the National Association of Securities Dealers. The Advisor may use research provided by and place agency transactions with affiliated broker dealers, if the commissions are fair and reasonable and comparable to commissions charged by non-affiliated, qualified brokerage firms. The Board of Directors of the Fund will from time to time review whether the recapture for the benefit of the Fund of some portion of the brokerage commissions or similar fees paid by the Fund on portfolio transactions is legally permissible and, if so, determine, in the exercise of its business judgment, whether it would be advisable for the Fund to seek such recapture. Although the officers and directors of the Fund and each of the Columbia Funds are the same, investment decisions for the Fund are made independently from those of the other Columbia Funds or accounts managed by Columbia Management Co. The same security is sometimes held in the portfolio of more than one fund or account. Simultaneous transactions are inevitable when several funds or accounts are managed by the same investment advisor, particularly when the same security is suitable for the investment objective of more than one 4 fund or account. In the event of simultaneous transactions, allocations among the Fund, the Columbia Funds, or accounts will be made on an equitable basis. Since 1967, the Advisor and the Fund have had a Code of Ethics (the "Code") that sets forth general and specific standards relating to the securities trading activities of all employees of the Advisor and the Fund. The purpose of the Code is to ensure that all employees conduct their personal transactions in a manner that does not interfere with the portfolio transactions of the Fund or take unfair advantage of their relationship with the Advisor or the Fund. The specific standards included in the Code (as amended) include, among others, a requirement that all employee trades be pre-cleared; a prohibition on investing in initial public offerings; required pre-approval on private placements; a prohibition on portfolio managers trading in a security seven days before or after a trade in the same security by the Fund over which the manager exercises investment discretion; and a prohibition on realizing any profit on the trading of a security held less than 60 days. Certain securities and transactions, such as mutual fund shares or U. S. Treasuries and purchases of options on securities indexes or securities under an automatic dividend reinvestment plan, are exempt from the restrictions in the Code because they present little or no potential for abuse. Certain transactions involving the stocks of large capitalization companies are exempt from the seven day black-out period and short-term trading prohibitions because such transactions are highly unlikely to affect the price of these stocks. In addition to the trading restrictions, the Code contains reporting obligations that are designed to ensure compliance and allow the Advisor's Ethics Committee to monitor that compliance. The Advisor and the Fund have also adopted a Policy and Procedures Designed to Detect and Prevent Insider Trading (the "Insider Trading Policy"). The Insider Trading Policy prohibits any employee of the Advisor or the Fund from trading, either personally or on behalf of others (including the Fund), on material nonpublic information. All employees are required to certify each year that they have read and complied with the provisions of the Code and the Insider Trading Policy. - -------------------------------------------------------------------------------- REDEMPTIONS - -------------------------------------------------------------------------------- Information regarding redemptions is set forth in the Prospectus under "Investor Services -- How to Redeem (Sell) Shares." As discussed under "Investor Services -- Account Privileges -- Telephone Redemptions" in the Prospectus, the Fund does not accept responsibility for the authenticity of telephone instructions relating to redemptions and, accordingly, shareholders who have approved telephone redemption assume the risk of any losses due to fraudulent telephone instructions that the Fund reasonably believes to be genuine. The Fund employs certain procedures to determine if telephone instructions are genuine, including requesting personal shareholder information prior to acting on telephone instructions, providing written confirmations of each telephone transaction, and recording all telephone instructions. The Fund may be liable for losses due to fraudulent telephone instructions if it fails to follow these procedures. The Fund may suspend the determination of net asset value and the right of redemption for any period (1) when the New York Stock Exchange is closed, other than customary weekend and holiday closings, (2) when trading on the New York Stock Exchange is restricted, (3) when an emergency exists as a result of which disposal of securities owned by the Fund is not reasonably practicable or it is not reasonably practicable for the Fund to determine the value of its net assets, or (4) as the Securities and Exchange Commission may by order permit for the protection of security holders, provided that applicable rules and regulations of the Securities and Exchange Commission which govern as to whether the conditions prescribed in (2) or (3) exist are complied with. The New York Stock Exchange observes the following holidays: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. In the case of suspension of the right to redeem, shareholders may withdraw their redemption request or receive payment based upon the net asset value computed upon the termination of the suspension. 5 - -------------------------------------------------------------------------------- CUSTODIANS - -------------------------------------------------------------------------------- United States National Bank of Oregon, 321 S.W. Sixth Avenue, Portland, Oregon 97208, acts as Custodian for the Fund. Morgan Stanley Trust Company ("Morgan Stanley" or "Custodian"), One Pierrepont Plaza, Brooklyn, New York 11201 has entered into a custodian agreement with the Fund with respect to the purchase of foreign securities by the Fund. The Custodians hold all securities and cash of the Fund, receive and pay for securities purchased, deliver against payment securities sold, receive and collect income from investments, make all payments covering expenses of the Fund, and perform other administrative duties, all as directed by authorized officers of the Fund. The Custodians do not exercise any supervisory function in the purchase and sale of portfolio securities or payment of dividends. Portfolio securities purchased in the United States are maintained in the custody of the Fund's Custodian. Portfolio securities purchased outside the United States are maintained in the custody of foreign banks, trust companies, or depositories that have sub-custodian arrangements with Morgan Stanley (the "foreign sub-custodians"). Each of the domestic and foreign custodial institutions holding portfolio securities of the Fund has been approved by the Board of Directors of the Fund or, in case of foreign securities by Morgan Stanley, as a delegate of the Board of Directors, all in accordance with regulations under the Investment Company Act of 1940. The Advisor determines whether it is in the best interest of the Fund and its shareholders to maintain Fund assets in each of the countries (if any) in which the Fund invests ("Prevailing Market Risk"). The Board of Directors has delegated to Morgan Stanley the responsibility to evaluate the particular foreign sub-custodians in those countries. The review of Prevailing Market Risk includes an assessment of the risk of holding Fund assets in that country (including risks of expropriation or imposition of exchange controls). In evaluating the foreign sub-custodians, Morgan Stanley will review the operational capability and reliability of the foreign sub-custodian. With respect to foreign sub-custodians, however, there can be no assurance that the Fund, and the value of its shares, will not be adversely affected by acts of foreign governments, financial or operational difficulties of the foreign sub-custodians, difficulties and costs of obtaining jurisdiction over, or enforcing judgments against, the foreign sub-custodians, or the application of foreign law to the Fund's foreign sub-custodial arrangement. Accordingly, an investor should recognize that the risks involved in holding assets abroad are greater than those associated with investing in the United States. - -------------------------------------------------------------------------------- ACCOUNTING SERVICES AND FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The financial statements of the Fund for the year ended December 31, 1997, the selected per share data and ratios under the caption "Financial Highlights," and the report of Coopers & Lybrand L.L.P., independent accountants, are included in the Prospectus and 1997 Annual Report of the Fund. Coopers & Lybrand L.L.P., 1300 S.W. Fifth Avenue, Suite 2700, Portland, Oregon 97201, in addition to examining the financial statements of the Fund, assists in the preparation of the tax returns of the Fund and in certain other matters. 6 - -------------------------------------------------------------------------------- TAXES - -------------------------------------------------------------------------------- FEDERAL INCOME TAXES The Fund intends and expects to meet continuously the tests for qualification as a regulated investment company under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund believes it satisfies the tests to qualify as a regulated investment company. To qualify as a regulated investment company for any taxable year, the Fund must, among other things: (a) derive at least 90 percent of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities, or foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies (the "90 Percent Test"); and (b) diversify its holdings so that, at the end of each quarter, (i) 50 percent or more of the value of the assets of the Fund is represented by cash, government securities, and other securities limited, in respect of any one issuer of such other securities, to an amount not greater than 5 percent of the value of the assets of the Fund and 10 percent of the outstanding voting securities of such issuer, and (ii) not more than 25 percent of the value of the assets of the Fund is invested in the securities (other than government securities) of any one issuer or of two or more issuers that the Fund "controls" within the meaning of Section 851 of the Code and that meet certain requirements (the "Diversification Test"). In addition, the Fund must file, or have filed, a proper election with the Internal Revenue Service. Part I of Subchapter M of the Code will apply to the Fund during a taxable year only if it meets certain additional requirements. Among other things, the Fund must: (a) have a deduction for dividends paid (without regard to capital gain dividends) at least equal to the sum of 90 percent of its investment company taxable income (computed without any deduction for dividends paid) and 90 percent of its tax-exempt interest in excess of certain disallowed deductions (unless the Internal Revenue Service waives this requirement), and (b) either (i) have been subject to Part I of Subchapter M for all taxable years ending after November 8, 1983 or (ii) as of the close of the taxable year have no earnings and profits accumulated in any taxable year to which Part I of Subchapter M did not apply. A regulated investment company that meets the requirements described above is taxed only on its "investment company taxable income," which generally equals the undistributed portion of its ordinary net income and any excess of net short-term capital gain over net long-term capital loss. In addition, any excess of net long-term capital gain over net short-term capital loss that is not distributed is taxed to the Fund at corporate capital gain tax rates. The policy of the Fund is to apply capital loss carry-forwards as a deduction against future capital gains before making a capital gain distribution to shareholders. Under rules that are beyond the scope of this discussion, certain capital losses and certain net foreign currency losses resulting from transactions occurring in November and December of a taxable year may be taken into account either in that taxable year or in the following taxable year. If any net long-term capital gains in excess of net short-term capital losses are retained by the Fund, requiring federal income taxes to be paid thereon by the Fund, the Fund may elect to treat such capital gains as having been distributed to shareholders. In the case of such an election, shareholders will be taxed on such amounts as long-term capital gains, will be able to claim their proportional share of the federal income taxes paid by the Fund on such gains as credits against their own federal income tax liabilities, and generally will be entitled to increase the adjusted tax basis of their shares in the Fund by the differences between their pro rata shares of such gains and their tax credits. 7 Shareholders of the Fund are taxed on distributions of net investment income, or of any excess of net short-term capital gain over net long-term capital loss, as ordinary income. Income distributions to corporate shareholders from the Fund may qualify, in whole or part, for the federal income tax dividends-received deduction, depending on the amount of qualifying dividends received by the Fund. Qualifying dividends may include those paid to the Fund by domestic corporations but do not include those paid by foreign corporations. The dividends-received deduction equals 70 percent of qualifying dividends received from the Fund by a shareholder. Distributions of any excess of net long-term capital gain over net short-term capital loss from the Fund are ineligible for the dividends-received deduction. Distributions properly designated by the Fund as representing the excess of net long-term capital gain over net short-term capital loss are taxable to shareholders at the applicable long-term capital gains rate, regardless of the length of time the shares of the Fund have been held by shareholders. For noncorporate taxpayers, the highest rate that applies to long-term capital gains is lower than the highest rate that applies to ordinary income. Any loss that is realized and allowed on redemption of shares of the Fund 6 months or less from the date of purchase of the shares and following the receipt of a capital gain dividend will be treated as a long-term capital loss to the extent of the capital gain dividend. For this purpose, Section 852(b)(4) of the Code contains special rules on the computation of a shareholder's holding period. Distributions of taxable net investment income and net realized capital gains will be taxable as described above, whether paid in shares or in cash. Each distribution is accompanied by a brief explanation of the form and character of the distribution. Within 60 days after the close of each calendar year, the Fund issues to each shareholder a statement of the federal income tax status of all distributions, including a statement of the prior calendar year's distributions which the Fund has designated to be treated as long-term capital gain. A distribution may be taxable to a shareholder even if the distribution reduces the net asset value of the shares held below their cost (and is in an economic sense a return of the shareholder's capital). This tax result is most likely when shares are purchased shortly before an annual distribution of capital gains or other earnings. The Fund is generally required to obtain from its shareholders a certification of the shareholder's taxpayer identification number and certain other information. The Fund generally will not accept an investment to establish a new account that does not comply with this requirement. If a shareholder fails to certify such number and other information, or upon receipt of certain notices from the Internal Revenue Service, the Fund may be required to withhold 31 percent of any reportable interest or dividends, or redemption proceeds, payable to the shareholder, and to remit such sum to the Internal Revenue Service, for credit toward the shareholder's federal income taxes. A shareholder's failure to provide a social security number or other tax identification number may subject the shareholder to a penalty of $50 imposed by the Internal Revenue Service. In addition, that failure may subject the Fund to a separate penalty of $50. This penalty will be charged against the shareholder's account, which will be closed. Closure of the account may result in a capital gain or loss. If the Fund declares a dividend in October, November, or December payable to shareholders of record on a certain date in such a month and pays the dividend during January of the following year, the shareholders will be taxed as if they had received the dividend on December 31 of the year in which the dividend was declared. Thus, a shareholder may be taxed on the dividend in a taxable year prior to the year of actual receipt. A special tax may apply to the Fund if it fails to make enough distributions during the calendar year. The required distributions for each calendar year generally equal the sum of (a) 98 percent of the ordinary income for the calendar year plus (b) 98 percent of the capital gain net income for the one-year period that ends on October 31 during the calendar year (or for the calendar year itself if the Fund so elects), plus (c) an adjustment relating to any shortfall for the prior taxable year. If the actual distributions are less than the required distributions, a tax of 4 percent applies to the shortfall. The Code allows the deduction by certain individuals, trusts, and estates of "miscellaneous itemized deductions" only to the extent that such deductions exceed 2 percent of adjusted gross income. The limit on miscellaneous itemized deductions will NOT apply, however, with respect to the expenses incurred by any "publicly 8 offered regulated investment company." The Fund believes that it is a publicly offered regulated investment company because its shares are continuously offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act of 1933, as amended). Therefore, the limit on miscellaneous itemized deductions should not apply to expenses incurred by the Fund. STATE INCOME TAXES The state tax consequences of investments in the Fund are beyond the scope of the tax discussions in the Prospectus and this Statement of Additional Information. ADDITIONAL INFORMATION The foregoing summary and the summary included in the Prospectus under "Taxes" of tax consequences of investment in the Fund are necessarily general and abbreviated. No attempt has been made to present a complete or detailed explanation of tax matters. Furthermore, the provisions of the statutes and regulations on which they are based are subject to change by legislative or administrative action. Local taxes are beyond the scope of this discussion. Prospective investors in the Fund are urged to consult their own tax advisors regarding specific questions as to federal, state, or local taxes. This discussion applies only to general U.S. shareholders. Foreign investors and U.S. shareholders with particular tax issues or statuses should consult their own tax advisors regarding the special rules that may apply to them. - -------------------------------------------------------------------------------- PERFORMANCE - -------------------------------------------------------------------------------- The Fund will from time to time advertise or quote its total return performance. These figures represent historical data and are calculated according to Securities and Exchange Commission ("SEC") rules standardizing such computations. The investment return and principal value will fluctuate so that shares when redeemed may be worth more or less than their original cost. The Fund may publish average annual total return quotations for recent 1, 5, and 10-year periods (or a fractional portion thereof) computed by finding the average annual compounded rates of return over the 1, 5, and 10-year periods that would equate the initial amount invested to the ending redeemable value, according to the following formula: n P(1+T) = ERV Where: P = a hypothetical initial payment of $1000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1000 payment made at the beginning of the 1, 5, and 10-year periods (or fractional portion thereof) Total return figures may also be published for recent 1, 5, and 10-year periods where the total return figures represent the percentage return for the 1, 5, and 10-year periods that would equate the initial amount invested to the ending redeemable value. 9 If the Fund's registration statement under the Investment Company Act of 1940 has been in effect less than 1, 5, or 10 years, the time period during which the registration statement has been in effect will be substituted for the periods stated. The Fund may compare its performance to other mutual funds with similar investment objectives and to the mutual fund industry as a whole, as quoted by ranking services and publications of general interest. For example, these services or publications may include Lipper Analytical Services, Inc., Schabacker's Total Investment Service, Barron's, Business Week, Changing Times, The Financial Times, Financial World, Forbes, Investor's Daily, Money, Morningstar, Inc., Personal Investor, The Economist, The Wall Street Journal, and USA Today. These ranking services and publications rank the performance of the Fund against all other funds over specified periods and against funds in specified categories. The Fund may also compare its performance to that of a recognized stock or bond index including the Standard & Poor's 500, Dow Jones, Russell, and Nasdaq stock indices, the NAREIT Equity Index, and the Shearson Lehman and Salomon bond indices, or, with respect to the International Stock Fund, a suitable international index, such as the Morgan Stanley Capital International Europe, Australia, Far East Index or the FT-S&P Actuaries Europe-Pacific Index. The comparative material found in advertisements, sales literature, or in reports to shareholders may contain past or present performance ratings. This is not to be considered representative or indicative of future results or future performance. Unmanaged indices may assume the reinvestment of dividends, but generally do not reflect deductions for administrative and management costs and expenses. - -------------------------------------------------------------------------------- INVESTMENT RESTRICTIONS - -------------------------------------------------------------------------------- The Prospectus sets forth the investment objectives and certain restrictions applicable to the Fund. The following is a list of investment restrictions applicable to the Fund. If a percentage limitation is adhered to at the time of an investment by the Fund, a later increase or decrease in percentage resulting from any change in value or net assets will not result in a violation of the restriction. The Fund may not change these restrictions without the approval of a majority of its shareholders, which means the vote at any meeting of shareholders of the Fund of (i) 67 percent or more of the shares present or represented by proxy at the meeting (if the holders of more than 50 percent of the outstanding shares are present or represented by proxy) or (ii) more than 50 percent of the outstanding shares, whichever is less. The Fund may not: 1. Buy or sell commodities. However, the Fund may invest in futures contracts relating to broadly based stock indices, subject to the restrictions in paragraph 15. 2. Concentrate investments in any industry. However, the Fund may (a) invest up to 25 percent of the value of the total assets in any one industry and (b) invest for temporary defensive purposes up to 100 percent of the value of the total assets in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 3. Buy or sell real estate. However, the Fund may purchase or hold readily marketable securities issued by companies such as real estate investment trusts, which operate in real estate or interests therein. 4. Make loans to other persons (except by purchase of short-term commercial paper, bonds, debentures, or other debt securities constituting part of an issue). 10 5. The Fund may not purchase a repurchase agreement with a maturity greater than seven days or a security that is subject to legal or contractual restrictions on resale or for which there are no readily available market quotations if, as a result of such purchase, more than 10 percent of the assets of the Fund (taken at current value) is invested in such securities. 6. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 10 percent of the outstanding voting securities of that issuer to be held in the Fund. 7. Purchase the securities of any issuer if the purchase, at the time thereof, would cause more than 5 percent of the value of the total assets of the Fund at market value to be invested in the securities of that issuer (other than obligations of the U.S. Government and its agencies and instrumentalities), with reference to 75 percent of the assets of the Fund. 8. Purchase securities of other open-end investment companies. 9. Issue senior securities, bonds, or debentures. 10. Underwrite securities of other issuers, except that the Fund may acquire portfolio securities under circumstances where, if the securities are later publicly offered or sold by the Fund, it might be deemed to be an underwriter for purposes of the Securities Act of 1933. 11. Borrow money in excess of 5 percent of its net asset value. Any borrowing must only be temporarily from banks and for extraordinary or emergency purposes. 12. Invest its funds in the securities of any company if the purchase, at the time thereof, would cause more than 10 percent of the value of the Fund's total assets to be invested in companies which, including predecessors and parents, have a record of less than three years' continuous operation. 13. Invest in companies for the purpose of exercising control or management. 14. Engage in short sales of securities except to the extent that it owns an equal amount of the securities sold short or other securities convertible into an equivalent amount of such securities ("short sales against the box"). Such transactions may only be made to protect a profit in or to attempt to minimize a loss with respect to convertible securities. In any event, no more than 5 percent of the value of the Fund's net assets taken at market may, at any time, be held as collateral for such sales. 15. Buy and sell puts and calls as securities, stock index futures or options on stock index futures, or financial futures or options on financial futures, unless such options are written by other persons and the options or futures are offered through the facilities of a national securities association or are listed on a national securities or commodities exchange. 16. Invest directly in oil, gas, or other mineral development or exploration programs or leases; although, the Fund may own securities of companies engaged in those businesses. Some of the policies described above prohibit particular practices. Other policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the portion of the Fund's assets that may be so invested. Other than paragraph 12, the Fund did not engage in any of these permitted practices during the last year and has no current intention of doing so in the foreseeable future. OTHER RESTRICTIONS To permit the sale of shares of the Fund in certain states, the Fund may make commitments more restrictive than the fundamental restrictions described above. If the Board of Directors of the Fund determines that 11 a commitment is no longer in the best interests of the Fund and its shareholders, it will revoke the commitment, terminate sales of its shares in the state(s) involved, and notify the affected shareholders. - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUND - -------------------------------------------------------------------------------- WARRANTS Warrants are in effect longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant, and various other investment factors. The Fund's investment restrictions do not limit the percentage of the Fund's assets that may be invested in warrants, but the Fund does not intend to invest more than 5 percent of its assets in warrants or more than 2 percent of its assets in warrants that are not listed on the New York Stock Exchange or American Stock Exchange. 12 COLUMBIA SPECIAL FUND, INC. PART C OTHER INFORMATION Item 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements: Financial Highlights are located on page 5 of the Joint Prospectus and page 1 of the Fund Prospectus. The Schedule of Investments and Statement of Assets and Liabilities as of December 31, 1997, the related Statement of Operations for the year ended December 31, 1997, the Statements of Changes in Net Assets for the years ended December 31, 1997 and 1996, the selected per share data and ratios under the caption "Financial Highlights," and the notes thereto, and the report of Independent Accountants ("Financial Statements and Report") are included in the Annual Report to Shareholders for the year ended December 31, 1997, which is incorporated into the Joint Statement of Additional Information by reference. The Financial Statements and Report are also included in the Fund Prospectus, which contains the Registrant's 1997 Annual Report to Shareholders. (b) Exhibits: (1) Registrant's Articles of Incorporation. (2) Restated Bylaws. (4A) Specimen Stock Certificate. (4B) Application. Incorporated by reference to Exhibit 4B to Form N-1A, File No. 333-5863. (5) Investment Advisory Contract. (6) Distribution Agreement. (8A) Custodian Contract with United States National Bank of Oregon. (8B) Custodian Agreement with Morgan Stanley Trust Company. (9) Transfer Agent Agreement. (11) Consent of Accountants. (12A) See paragraph (a) of Item 24. (12B) Annual Report to Shareholders. (14) IRA and Money Purchase Pension and Profit Sharing Plan booklets. Incorporated by reference to Exhibit 14 to Form N-1A, File No. 333-5863. (17) All Powers of Attorney (27) Financial Data Schedule. C-1 Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT The Registrant is controlled by its Board of Directors, whose members also serve as members of the Boards of Directors or Trustees of the following investment companies: Columbia Common Stock Fund, Inc., Columbia Balanced Fund Inc., Columbia International Stock Fund, Inc., Columbia Growth Fund, Inc., Columbia Small Cap Fund, Inc., Columbia Daily Income Company, Columbia Fixed Income Securities Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia U.S. Government Securities Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia High Yield Fund, Inc., and CMC Fund Trust, each of which, including the Registrant, is organized under the laws of the State of Oregon. Item 26. NUMBER OF HOLDERS OF SECURITIES Number of Record Holders Title of Class at December 31, 1997 -------------- ------------------------ Common Stock 48,047
Item 27. INDEMNIFICATION Under the bylaws of the Registrant, any director or officer of the Registrant may be indemnified by the Registrant against all expenses incurred by him in connection with any claim, action, suit or proceeding, civil or criminal, by reason of his being an officer, director, employee or agent of the Registrant, to the fullest extent permitted under the Business Corporation Act of the State of Oregon and the Investment Company Act of 1940 and related regulations and interpretations of the Securities and Exchange Commission (including SEC Rel. Nos. IC-11,330, IC-10,700 and IC-7,221). Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The Registrant's directors and officers are also named insureds under an insurance policy issued by ICI Mutual Insurance Company. Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Information regarding the businesses of the Advisor and its officers and directors is set forth under "Fund Management" in the Prospectus and under "Management" and "Investment Advisory and Other Fees Paid to Affiliates" in the Statement of Additional Information and is incorporated herein by reference. Columbia Trust Company also acts as trustee and/or agent for the investment of the assets of pension and profit sharing plans in pooled accounts. Item 29. PRINCIPAL UNDERWRITERS Pursuant to a distribution agreement with each of the Columbia Funds, including the Registrant, Provident Distributors, Inc. is authorized to sell shares of each fund to the public. No commission or other C-2 compensation is received by Provident Distributors, Inc. in connection with the sale of shares of the Columbia Funds. Certain information on each director and officer of Provident Distributors, Inc. is set forth below: Name and Principal Positions and Offices Positions and Offices Business Address with Provident Distributors with Registrant - -------------------- --------------------------- --------------------- Monroe J. Haegele CEO and Director None Four Fails Corporate Center 6th Floor West Conshohocken, PA 19428 Jane Haegele President None Four Fails Corporate Center 6th Floor West Conshohocken, PA 19428 Philip H. Rinnander Secretary None Four Fails Corporate Center 6th Floor West Conshohocken, PA 19428 Item 30. LOCATION OF ACCOUNTS AND RECORDS The records required to be maintained under Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained by the Registrant, Columbia Funds Management Company and Columbia Trust Company at 1301 SW Fifth Avenue, Portland, Oregon 97201. Records relating to the Registrant's portfolio securities are also maintained by United States National Bank of Oregon, 321 SW Sixth Avenue, Portland, Oregon 97208 and Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201. Item 31. MANAGEMENT SERVICES Not applicable. Item 32. UNDERTAKINGS The Registrant hereby undertakes to promptly call a meeting of the shareholders of the Registrant for the purpose of voting on the removal of any director of the Registrant when requested in writing by shareholders of at least 10 percent of the outstanding shares of Common Stock of the Registrant. The Registrant undertakes to assist its shareholders in communicating with other shareholders of the Registrant to the extent required by Section 16 of the Investment Company Act of 1940 or any regulations promulgated thereunder. The Registrant hereby undertakes, upon request and without charge, to furnish a copy of the Registrant's annual report to shareholders to each person to whom a prospectus is delivered. C-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in this City of Portland and State of Oregon on the 23rd day of February, 1998. COLUMBIA SPECIAL FUND, INC. By J.JERRY INSKEEP, JR. ------------------------- J. Jerry Inskeep, Jr. President Pursuant to the requirements of the Securities Act of 1933, this Post- Effective Amendment to the Registration Statement has been signed below on the 23rd day of February, 1998 by the following persons in the capacities indicated. (i) Principal executive officer: J.JERRY INSKEEP, JR. President and Chairman of the Board - -------------------------------- J. Jerry Inskeep, Jr. (ii) Principal accounting and financial officer: J.JERRY INSKEEP, JR. President and Chairman of the Board - -------------------------------- J. Jerry Inskeep, Jr. (iii) Directors: * JAMES C. GEORGE Director - -------------------------------- James C. George * THOMAS R. MACKENZIE Director - -------------------------------- Thomas R. Mackenzie * RICHARD L. WOOLWORTH Director - -------------------------------- Richard L. Woolworth * By J. JERRY INSKEEP, JR. ------------------------ J. Jerry Inskeep, Jr. as Attorney-in-fact C-4 COLUMBIA SPECIAL FUND, INC. EXHIBIT INDEX Exhibit No. Description - ----------- ----------- (1) Registrant's Articles of Incorporation. (2) Restated Bylaws. (4A) Specimen Stock Certificate. (4B) Application. Incorporated by reference to Exhibit 4B to Form N-1A, File No. 333-5863. (5) Investment Advisory Contract. (6) Distribution Agreement. (8A) Custodian Contract with United States National Bank of Oregon. (8B) Custodian Agreement with Morgan Stanley Trust Company. (9) Transfer Agent Agreement. (11) Consent of Accountants. (12A) See paragraph (a) of Item 24. (12B) Annual Report to Shareholders. (14) IRA and Money Purchase Pension and Profit Sharing Plan booklets. Incorporated by reference to Exhibit 14 to Form N-1A, File No. 333-5863. (17) All Powers of Attorney (27) Financial Data Schedule. C-5 EX-99.1 2 EXHIBIT 99.1 Exhibit 1. ARTICLES OF INCORPORATION OF COLUMBIA SPECIAL FUND, INC. The undersigned natural person of the age of 18 years or more, acting as incorporator under the Oregon Business Corporation Act, adopts the following Articles of Incorporation: ARTICLE I The name of the corporation is Columbia Special Fund, Inc. and its duration shall be perpetual. ARTICLE II The purposes for which the corporation is organized are: A. To engage in the business of an open-end investment company of the management type under the Investment Company Act of 1940, as amended; B. To engage in any other lawful activity for which corporations may be organized under Chapter 57, ORS. ARTICLE III A. The aggregate number of shares which the corporation shall have authority to issue is 100,000,000 share, $.01 par value per share, of voting common stock. B. The corporation may issue and sell fractional shares. Holders of fractional shares shall have pro rata all the rights of full shares, including without limitation, the right to vote, the right to receive dividends and distributions and the right to participate upon liquidation of the corporation. All references herein to the shares of the corporation shall include any fractions thereof. C. The holder of each outstanding share then standing in his or her name on the books of the corporation shall be entitled to one vote per share (or proportionate fraction of a vote for each fractional share of stock), and shall have equal voting rights with all other outstanding voting stock on elections of directors and all other matters to come before the shareholders. ARTICLE IV A. Except as otherwise provided in this article IV, a shareholder may redeem all or any part of his or her shares of the corporation upon deposit for redemption, which deposit shall be in such manner and in accordance with such conditions as the board of directors shall prescribe. B. The redemption price per share shall be the net asset value per share, as determined by the board of directors, less such redemption fee or other charge, if any, as may be fixed by the board of directors. The net asset value per share of any class shall be determined on all days on which the New York Stock Exchange is open for business and at such other time or times as the board of directors shall designate, unless such determination is suspended. C. The board of directors shall, in its absolute discretion, establish from time to time the method for determining the net asset value per share of the corporation's common stock and the net asset value of the corporation. The board of directors may suspend the determination of net asset value for all or any part of any period (i) during which the New York Stock Exchange is closed other than customary weekend and holiday closings, (ii) during which trading on the New York Stock Exchange is restricted, (iii) during which an emergency exists as a result of which (a) the disposal by the corporation of investments owned by it is not reasonably practicable, or (b) it is not reasonably practicable for the corporation fairly to determine the value of its assets, or (iv) as the federal Securities and Exchange Commission or any successor governmental authority may by order permit for the protection of security holders of the corporation. Whenever the board of directors, by declaration or resolution, has suspended the determination of net asset value pursuant to this article, the right of any shareholder to require the corporation to redeem his shares shall be likewise suspended, despite deposit before suspension. At any time a suspension is in effect any shareholder may 2 withdraw his or her certificate or certificates from deposit or may leave the same on deposit, in which case the redemption price shall be the net asset value next determined after the suspension is terminated. D. In determining for the purposes of this certificate of corporation the total value of the assets of the corporation at any time, investments and any other assets of the corporation shall be valued in the manner as may be determined from time to time by the board of directors. E. The right of any holder of shares redeemed by the corporation to receive dividends or distributions thereon and all other rights of such holder with respect to such shares shall terminate at the time as of which the redemption price of such shares is determined, except for the right of such holder to receive (i) the redemption price of such shares from the corporation in accordance with the provisions hereof, and (ii) any dividend or distribution to which such holder had previously become entitled as the record holder of such shares on the record date for such dividend or distribution. F. Redemption of its shares by the corporation is conditional upon the corporation having funds or property legally available therefor. The right to redeem shall terminate upon adoption of a plan of liquidation or dissolution of the corporation by the corporation's board of directors. G. The corporation, either directly or through an agent, may repurchase its shares, out of funds legally available therefor (including unreserved and unrestricted capital surplus), upon such terms and conditions and for the consideration as the board of directors shall deem advisable, by agreement with the owner at a price not exceeding the net asset value per share as determined by the board of directors at such time or times as the board of directors shall designate, and the corporation may take all other steps deemed necessary or advisable in connection therewith. H. The board of directors may delegate any of its powers and duties under this article with respect to appraisal of assets and liabilities and determination of net asset value 3 or with respect to suspension of the determination of net asset value to an officer of the corporation, the custodian or depository of the corporation's assets, or to the investment adviser of the corporation. ARTICLE V Any determination made in good faith, and so far as accounting matters are involved, in accordance with generally accepted accounting principles, by or pursuant to the direction of the board of directors, as to: the amount and allocation of the assets, liabilities, income, expense, gain or loss of the corporation; the amount of any reserves or charges set up and the propriety thereof; the time of or purpose for creating such reserves or charges; the use, alteration, or cancellation of any reserves or charges (whether or not any debt, obligation, or liability for which such reserves or charges shall have been created, shall have been paid or discharged or shall be then or thereafter required to be paid or discharged); the price or closing bid or asked price of any investment owned or held by the corporation; the amortized or market value of any investment or fair value of any other asset of the corporation; the fair market value of assets accepted as consideration for shares; the number of shares of the corporation outstanding; the estimated expense to the corporation in connection with purchases of its shares; the ability to liquidate investments in an orderly fashion; the extent to which it is practicable to deliver a cross-section of the securities held in any portfolio of the corporation in payment for any shares pertaining to that portfolio; or any other matters relating to the issue, sale, purchase and/or other acquisition or disposition of investments or shares of the corporation, shall be final and conclusive, and shall be binding upon the corporation and all holders of its shares, past, present and future; and shares of the corporation are issued and sold on the condition and understanding that any and all such determinations shall be binding as set forth above. ARTICLE VI No holder of shares or securities of the corporation now or hereafter authorized shall have any preemptive right or be entitled as of right to subscribe for, purchase 4 or receive any unissued or treasury shares of any class, whether now or hereafter authorized, or any notes, bonds, debentures, or other securities convertible into, or carrying options or warrants to purchase, shares of any class; but all such unissued or treasury shares of any class, or notes, bonds, debentures or other securities convertible into, or carrying options or warrants to purchase, shares of any class may be issued or disposed of by the board of directors to such persons and on such terms as it, in its absolute discretion, may deem advisable. ARTICLE VII Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the board of directors, or by a sole remaining director. Any directorship to be filled by reason of an increase in the number of directors of the corporation may be filled by the affirmative vote of a majority of the number of directors fixed by the bylaws prior to such increase. Any such directorship not so filled by the directors shall be filled by election at the next annual meeting of shareholders or at a special meeting of shareholders called for that purpose. ARTICLE VIII The board of directors may from time to time distribute to the corporation's shareholders, in partial liquidation, out of stated capital or capital surplus to the extent legally available therefor, a portion of the corporation's assets in cash or property. ARTICLE IX The address of the initial registered office of the corporation is 1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207 and the name of its initial registered agent at such address is J. Jerry Inskeep, Jr. ARTICLE X The name of the directors consisting the initial board of directors of the corporation is one. The name of the person who is to serve as director until the first annual 5 meeting of shareholders and until a successor is elected and shall qualify is J. Jerry Inskeep, Jr., and his address is 1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207. ARTICLE XI The name of the incorporated is J. Jerry Inskeep, Jr., and his address is 1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207. I, the undersigned incorporated, declare under penalties of perjury that I have examined the foregoing and that to the best of my knowledge and belief, it is true, correct and complete. Date: 7-17-85 J. JERRY INSKEEP, JR. ---------------------------------------- J. Jerry Inskeep Jr., Incorporator 6 EX-99.2 3 EXHIBIT 99.2 Exhibit 2. 1992 RESTATED BYLAWS OF COLUMBIA SPECIAL FUND, INC. ARTICLE I SHAREHOLDERS MEETINGS AND VOTING 1.1 ANNUAL MEETING. The Corporation shall not be required to hold an annual meeting of the shareholders. 1.2 SPECIAL MEETINGS. Special meetings of the shareholders, for any purposes, unless otherwise prescribed by statute, may be called by the President or the Board of Directors and shall be called by the President upon the written demand of the holders of not less than one-tenth of all the votes entitled to be cast on any issue proposed to be considered at the meeting. The demand shall describe the purposes for which the meeting is to be held and shall be signed, dated and delivered to the Secretary. 1.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held at any place in or out of Oregon designated by the Board of Directors. If a meeting place is not designated by the Board of Directors, the meeting shall be held at the Corporation's principal office. 1.4 NOTICE OF MEETINGS. Written or printed notice stating the date, time and place of the shareholders meeting and, in the case of a special meeting or a meeting for which special notice is required by law, the purposes for which the meeting is called shall be mailed by the Corporation to each shareholder entitled to vote at the meeting and, if required by law, to any other shareholders entitled to receive notice, at the shareholder's address shown in the Corporation's record of shareholders, with postage prepaid, not earlier than 60 days nor less than 10 days before the meeting date. 1.5 WAIVER OF NOTICE. A shareholder may at any time waive any notice required by law, these Bylaws or the Articles of Incorporation. The waiver shall be in writing, be signed by the shareholder entitled to the notice and be delivered to the Corporation for inclusion in the minutes for filing with the corporate records. A shareholder's attendance at a meeting waives objection to (i) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (ii) consideration of a particular matter at the meeting that is not within the purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. 1 1.6 FIXING OF RECORD DATE. The Board of Directors may fix a future date as the record date to determine the shareholders entitled to notice of a shareholders meeting, demand a special meeting, vote, take any other action or receive payment of any share or cash dividend or other distribution. This date shall not be earlier than 70 days or, in the case of a meeting, later than 10 days before the meeting or action requiring a determination of shareholders. The record date for any meeting, vote or other action of the shareholders shall be the same for all voting groups. If not otherwise fixed by the Board of Directors, the record date to determine shareholders entitled to notice of and to vote at an annual or special shareholders meeting is the close of business on the day before the notice is first mailed or delivered to shareholders. If not otherwise fixed by the Board of Directors, the record date to determine shareholders entitled to receive payment of any share or cash dividend or other distribution is the close of business on the day the Board of Directors authorizes the share or cash dividend or other distribution. 1.7 SHAREHOLDERS LIST FOR MEETING. After a record date for a meeting is fixed, the Corporation shall prepare an alphabetical list of all shareholders entitled to notice of the shareholders meeting. The list shall be arranged by voting group and, within each voting group, by class or series of shares, and it shall show the address of and number of shares held by each shareholder. The shareholders list shall be available for inspection by any shareholder, upon proper demand as may be required by law, beginning two business days after notice of the meeting is given and continuing through the meeting, at the Corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. The Corporation shall make the shareholders list available at the meeting, and any shareholder or the shareholder's agent or attorney shall be entitled to inspect the list at any time during the meeting or any adjournment. Refusal or failure to prepare or make available the shareholders list does not affect the validity of action taken at the meeting. 1.8 QUORUM; ADJOURNMENT. (1) Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. (2) A majority of votes represented at the meeting, although less than a quorum, may adjourn the meeting from time to time to a different time and place without further notice to any shareholder of any adjournment. At an adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting originally held. (3) Once a share is represented for any purpose at a meeting, it shall be present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. A new record date must be set if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. 2 1.9 VOTING REQUIREMENTS; ACTION WITHOUT MEETING. (1) If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law or the Articles of Incorporation. Unless otherwise provided in the Articles of Incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. (2) Action required or permitted by law to be taken at a shareholders meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the Secretary for inclusion in the minutes for filing with the corporate records. Shareholder action taken by written consent is effective when the last shareholder signs the consent, unless the consent specifies an earlier or later effective date. 1.10 PROXIES. A shareholder may vote shares in person or by proxy. A shareholder may appoint a proxy by signing an appointment form either personally or by the shareholder's attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer of the Corporation authorized to tabulate votes. An appointment is valid for 11 months unless a different period is provided in the appointment form. An appointment is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest that has not been extinguished. ARTICLE II BOARD OF DIRECTORS 2.1 DUTIES OF BOARD OF DIRECTORS. All corporate powers of the Corporation shall be exercised by or under the authority of its Board of Directors; the business and affairs of the Corporation shall be managed under the direction of its Board of Directors. 2.2 NUMBER, TERM AND QUALIFICATION. The number of directors of the Corporation shall be at least 1 and no more than 7. Within this range, the initial number of directors shall be 2, and the number of directors shall otherwise be determined from time to time by the Board of Directors. The term of a director shall expire at the next annual meeting of shareholders after his or her election. No reduction in the number of directors shall shorten the term of any incumbent director. Despite the expiration of a director's term, the director shall continue to serve until the director's successor is elected and qualified or the number of directors is decreased. Directors need not be residents of Oregon or shareholders of the Corporation. 3 2.3 REGULAR MEETINGS. If an annual meeting of shareholders is held, a regular meeting of the Board of Directors shall be held without notice other than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide by resolution the time and place for the holding of additional regular meetings in or out of Oregon without notice other than the resolution. 2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the President or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place in or out of Oregon as the place for holding any special meeting of the Board of Directors called by them. 2.5 NOTICE. Notice of the date, time and place of any special meeting of the Board of Directors shall be given at least 24 hours prior to the meeting by notice communicated in person, by telephone, telegraph, teletype, other form of wire or wireless communication, mail or private carrier. If written, notice shall be effective at the earliest of (a) when received, (b) five days after its deposit in the United States mail, as evidenced by the postmark, if mailed postpaid and correctly addressed, or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested and the receipt is signed by or on behalf of the addressee. Notice by all other means shall be deemed effective when received by or on behalf of the director. Notice of any regular or special meeting need not describe the purposes of the meeting unless required by law or the Articles of Incorporation. 2.6 WAIVER OF NOTICE. A director may at any time waive any notice required by law, these Bylaws or the Articles of Incorporation. Except as set forth below, the waiver must be in writing, be signed by the director entitled to the notice, specify the meeting for which notice is waived and be filed with the minutes or corporate records. A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting, or promptly upon the director's arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. 2.7 QUORUM. A majority of the number of directors set forth in or determined in accordance with Section 2.2 of these Bylaws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. If less than a quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. 2.8 MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a different number is provided by law, the Articles of Incorporation or these Bylaws. 2.9 MEETING BY TELEPHONE CONFERENCE; ACTION WITHOUT MEETING. (1) Directors may participate in a regular or special meeting by, or conduct the meeting through, use of any means of communications by which all directors participating 4 may simultaneously hear each other during the meeting. Participation in a meeting by this means shall constitute presence in person at the meeting. (2) Any action that is required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if one or more written consents describing the action taken are signed by all of the directors entitled to vote on the matter and included in the minutes or filed with the corporate records reflecting the action taken. The action shall be effective when the last director signs the consent, unless the consent specifies an earlier or later effective date. 2.10 VACANCIES. Any vacancy on the Board of Directors, including a vacancy resulting from an increase in the number of directors, may be filled by the shareholders, the Board of Directors, the remaining directors if less than a quorum (by the vote of a majority thereof) or by a sole remaining director. Any vacancy not filled by the directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. A vacancy that will occur at a specified later date, by reason of a resignation or otherwise, may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. 2.11 COMPENSATION. By resolution of the Board of Directors, the directors may be paid reasonable compensation for services as directors and their expenses of attending meetings of the Board of Directors. 2.12 PRESUMPTION OF ASSENT. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors shall be deemed to have assented to the action taken at the meeting unless (a) the director's dissent or abstention from the action is entered in the minutes of the meeting, (b) the director delivers a written notice of dissent or abstention to the action to the presiding officer of the meeting before any adjournment or to the Corporation immediately after the adjournment of the meeting or (c) the director objects at the beginning of the meeting or promptly upon the director's arrival to the holding of the meeting or transacting business at the meeting. The right to dissent or abstain is not available to a director who voted in favor of the action. 2.13 REMOVAL. The shareholders may remove one or more directors with or without cause at a meeting called expressly for that purpose, unless the Articles of Incorporation provide for removal for cause only. 2.14 RESIGNATION. Any director may resign by delivering written notice to the Board of Directors, its chairperson or the Corporation. Unless the notice specifies a later effective date, a resignation notice shall be effective upon the earlier of (a) receipt, (b) five days after its deposit in the United States mails, if mailed postpaid and correctly addressed, or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by addressee. Once delivered, a resignation notice is irrevocable unless revocation is permitted by the Board of Directors. 5 2.15 DIRECTORS EMERITUS. The Board of Directors may appoint one or more former directors of the Corporation to serve as directors emeritus. A director emeritus may be appointed to serve on a committee of the Board of Directors. A director emeritus may resign at any time and may be removed by the Board of Directors at any time with or without cause. The term of a director emeritus shall commence upon appointment and continue for one year or until resignation or removal of the director emeritus. The position of director emeritus shall be advisory in nature only, and a director emeritus shall have no vote or right to consent on any action taken by the Board of Directors. A director emeritus shall have no duties or obligations to the Corporation or its shareholders as a director of the Corporation, whether pursuant to the Oregon Business Corporation Act or the Investment Company Act of 1940 or otherwise. Subject to an express determination of the Board of Directors to the contrary, whether generally or in a specific instance, a director emeritus shall have the right to receive notice of and to attend all meetings of the Board of Directors or of any committee to which the director emeritus has been appointed, provided that the failure to provide notice of a meeting of the Board of Directors or of a committee to a director emeritus pursuant to this Section shall not affect the validity of any action taken at that meeting. Subject to an express determination of the Board of Directors to the contrary, whether generally or in a specific instance, a director emeritus shall have the same rights to inspect the records of, or to request information about, the Corporation as any other director of the Corporation acting in the capacity of a director. A director emeritus shall not be counted for purposes of determining the number of directors of the Corporation or the existence of a quorum for the transaction of business at a meeting of the Board of Directors or any committee. By resolution of the Board of Directors, a director emeritus may be paid reasonable compensation for services on the Board of Directors or any committee and the expenses of the director emeritus in attending meetings. ARTICLE III COMMITTEES OF THE BOARD 3.1 COMMITTEES. The Board of Directors may create one or more committees and appoint the members thereof. Each committee shall have two or more members. The creation of a committee and appointment of members to it must be approved by a majority of all directors in office when the action is taken. Subject to any limitation imposed by the Board of Directors or by law, each committee may exercise all the authority of the Board of Directors in the management of the Corporation. A committee may not take any action that a committee is prohibited from taking by the Oregon Business Corporation Act. 3.2 CHANGES OF SIZE AND FUNCTION. Subject to the provisions of law, the Board of Directors shall have the power at any time to change the number of committee members, fill committee vacancies, change any committee members and change the functions and terminate the existence of a committee. 3.3 CONDUCT OF MEETINGS. Each committee shall conduct its meetings in accordance with the applicable provisions of these Bylaws relating to meetings and action without meetings of the Board of Directors. Each committee shall adopt any further rules regarding 6 its conduct, keep minutes and other records and appoint subcommittees and assistants as it deems appropriate. 3.4 COMPENSATION. By resolution of the Board of Directors, committee members may be paid reasonable compensation for services on committees and their expenses of attending committee meetings. ARTICLE IV OFFICERS 4.1 APPOINTMENT. The Board of Directors at its first meeting following its election each year shall appoint a President and a Secretary. At this meeting, or at any other time, the Board of Directors may appoint one of its members as Chairman of the Board and may appoint any other officers, assistant officers and agents. Any two or more offices may be held by the same person. 4.2 COMPENSATION. The Corporation may pay its officers reasonable compensation for their services as fixed from time to time by the Board of Directors or by the President with respect to officers appointed by the President. 4.3 TERM. The term of office of all officers commences upon their appointment and continues until their successors are appointed or until their resignation or removal. 4.4 REMOVAL. Any officer or agent appointed by the Board of Directors or the President may be removed by the Board of Directors at any time with or without cause. Any officer or agent appointed by the President may be removed by the President at any time with or without cause. 4.5 CHAIRMAN OF THE BOARD. The Chairman of the Board, if that office is filled, shall preside at all meetings of the Board of Directors and shall perform any duties and responsibilities prescribed from time to time by the Board of Directors. 4.6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, if that office is filled, shall, with the President and subject to the control of the Board of Directors, be responsible for the general operation of the Corporation, and shall perform any other duties and responsibilities prescribed from time to time by the Board of Directors. 4.7 PRESIDENT. Unless otherwise determined by the Board of Directors, the President, subject to the control of the Board of Directors, shall be responsible for the general operation of the Corporation. He shall have any other duties and responsibilities prescribed by the Board of Directors. Unless otherwise determined by the Board of Directors, the President shall have authority to vote any shares of stock owned by the Corporation and to delegate this authority to any other officer. 7 4.8 VICE PRESIDENTS. Each Vice President shall perform duties and responsibilities prescribed by the Board of Directors or the President. The Board of Directors or the President may confer a special title upon a Vice President. 4.9 SECRETARY. (1) The Secretary shall record and keep the minutes of all meetings of the directors and shareholders in one or more books provided for that purpose and perform any duties prescribed by the Board of Directors or the President. (2) Any assistant secretary shall have the duties prescribed from time to time by the Board of Directors, the President or the Secretary. In the absence or disability of the Secretary, the Secretary's duties shall be performed by an assistant secretary. 4.10 TREASURER. The Treasurer shall have charge and custody and be responsible for all funds and securities of the Corporation and shall have other duties as prescribed from time to time by the Board of Directors or the President. ARTICLE V INDEMNIFICATION The Corporation shall indemnify to the fullest extent not prohibited by law, including the Oregon Business Corporation Act and the Investment Company Act of 1940, any person who is made, or threatened to be made, a party to an action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (including an action, suit or proceeding by or in the right of the Corporation) by reason of the fact that such person is or was a director, director emeritus or officer of the Corporation or a fiduciary within the meaning of the Employee Retirement Income Security Act of 1974 with respect to any employee benefit plan of the Corporation, or serves or served at the request of the Corporation as a director or officer or as a fiduciary of an employee benefit plan, of another corporation, partnership, joint venture, trust or other enterprise. The Corporation shall pay for or reimburse the reasonable expenses incurred by any such person in any such proceeding in advance of the final disposition of the proceeding if the person sets forth in writing (i) the person's good faith belief that the person is entitled to indemnification under this Article and (ii) the person's agreement to repay all advances if it is ultimately determined that the person is not entitled to indemnification under this Article. No amendment to these Bylaws that limits the Corporation's obligation to indemnify any person shall have any effect on such obligation for any act or omission that occurs prior to the later to occur of the effective date of the amendment or the date notice of the amendment is given to the person. This Article shall not be deemed exclusive of any other provisions for indemnification or advancement of expenses of directors, officers, employees, agents and fiduciaries that may be included in the Articles of Incorporation or any statute, bylaw, agreement, general or specific action of the Board of Directors, vote of shareholders or other document or arrangement. 8 ARTICLE VI ISSUANCE OF SHARES 6.1 ADEQUACY OF CONSIDERATION. Before the Corporation issues shares, the Board of Directors shall determine that the consideration received or to be received for the shares to be issued is adequate. The authorization by the Board of Directors of the issuance of shares for stated consideration shall evidence a determination by the Board that such consideration is adequate. 6.2 CERTIFICATES FOR SHARES. (1) Certificates representing shares of the Corporation shall be in any form determined by the Board of Directors consistent with the requirements of the Oregon Business Corporation Act and these Bylaws. The certificates shall be signed, either manually or in facsimile, by two officers of the Corporation, at least one of whom shall be the President or a Vice President, and may be sealed with the seal of the Corporation, if any, or a facsimile thereof. All certificates for shares shall be consecutively numbered or otherwise identified. The signatures of officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or any assistant transfer agent or registered by a registrar, other than the Corporation itself or an employee of the Corporation. (2) Every certificate for shares of stock that are subject to any restriction on transfer or registration of transfer pursuant to the Articles of Incorporation, the Bylaws, securities laws, a shareholders agreement or any agreement to which the Corporation is a party shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of the restriction and that the Corporation retains a copy of the full text. Every certificate issued when the Corporation is authorized to issue more than one class or series within a class of shares shall set forth on its face or back either (a) a summary of the designations, relative rights, preferences and limitations of the shares of each class and the variations in rights, preferences and limitations for each series authorized to be issued and the authority of the Board of Directors to determine variations for future series or (b) a statement of the existence of those designations, relative rights, preferences and limitations and a statement that the Corporation will furnish a copy thereof to the holder of the certificate upon written request and without charge. (3) All certificates surrendered to the Corporation for transfer shall be canceled. The Corporation shall not issue a new certificate for previously issued shares until the former certificate or certificates for those shares are surrendered and canceled; except that in case of a lost, destroyed or mutilated certificate, a new certificate may be issued on terms prescribed by the Board of Directors. 6.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from time to time appoint one or more transfer agents and one or more registrars for the shares of the Corporation, with powers and duties determined by the Board of Directors. 9 6.4 OFFICER CEASING TO ACT. If the person who signed a share certificate, either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid. ARTICLE VII CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS 7.1 CONTRACTS. Except as otherwise provided by law, the Board of Directors may authorize any officers or agents to execute and deliver any contract or other instrument in the name of and on behalf of the Corporation, and this authority may be general or confined to specific instances. 7.2 LOANS. The Corporation shall not borrow money and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. This authority may be general or confined to specific instances. 7.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money and notes or other evidences of indebtedness issued in the name of the Corporation shall be signed in the manner and by the officers or agents of the Corporation designated by the Board of Directors. 7.4 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited to the credit of the Corporation in those banks, trust companies or other depositaries as the Board of Directors or officers of the Corporation designated by the Board of Directors select, or be invested as authorized by the Board of Directors. ARTICLE VIII MISCELLANEOUS PROVISIONS 8.1 SEVERABILITY. A determination that any provision of these Bylaws is for any reason inapplicable, invalid, illegal or otherwise ineffective shall not affect or invalidate any other provision of these Bylaws. 8.2 AMENDMENTS. These Bylaws may be amended or repealed and new Bylaws may be adopted by the Board of Directors or the shareholders of the Corporation. Adopted: April 21, 1992 10 AMENDMENT TO BYLAWS On April 26, 1994, the Board of Directors of the Fund amended the Bylaws of the Fund to add the following new Section 2.3: 2.3 REGULAR MEETINGS. The Board of Directors may provide by resolution the time and place for the holding of regular meetings in or out of Oregon without notice other than the resolution. 11 EX-99.4(A) 4 EXHIBIT 99.4(A) Exhibit 4.A. NUMBER [LOGO SHARES COLUMBIA SPECIAL FUND, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF OREGON This Certifies that *SEE REVERSE FOR CERTAIN DEFINITIONS is the owner of fully paid and non-assessable Shares of the Columbia Special Fund, Inc., each of the par value of One Cent, transferable on the books of the Corporation by the holder thereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the transfer agent. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. George L. Hanseth SECRETARY Columbia Special Fund, Inc. CORPORATE SEAL OREGON Dated: J. Jerry Inskeep, Jr. CHAIRMAN COUNTERSIGNED: BY TRANSFER AGENT - --------------------------------------------- Authorized Officer REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY A COMMERCIAL BANK OR BY A SECURITIES FIRM HAVING MEMBERSHIP ON A RECOGNIZED NATIONAL SECURITIES EXCHANGE, WHOSE SIGNATURE(S) IS KNOWN TO THE TRANSFER AGENT OF THE CORPORATION. For value received, __________________hereby sell, assign and transfer unto _____________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE) _____________________________________________________________________ ________________________________________________________________Shares of the Common Stock represented by the within Certificate and do hereby irrevocably constitute and appoint__________________________________________Attorney to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated, __________________________ 19____ ____________________________________________________________ Owner ____________________________________________________________ Signature of Co-Owner, if any IMPORTANT: BEFORE SIGNING, READ AND COMPLY CAREFULLY WITH REQUIREMENTS PRINTED ABOVE. SIGNATURE(S) GUARANTEED BY:______________________________________ *The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT-_____Custodian-____ (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors JT TEN - as joint tenants with right of survivorship and not as tenants in common Act________________ (State) Additional abbreviations may also be used though not in the above list. ________________________________________________________________________ THIS SPACE MUST NOT BE COVERED IN ANY WAY EX-99.5 5 EXHIBIT 99.5 EXHIBIT 5 COLUMBIA SPECIAL FUND, INC. INVESTMENT ADVISORY CONTRACT This Agreement is made the 10th day of December, 1997 between COLUMBIA SPECIAL FUND, INC., an Oregon corporation, (the "Fund") and COLUMBIA FUNDS MANAGEMENT COMPANY, an Oregon corporation having its principal place of business in Portland, Oregon (the "Adviser"). The Fund is registered as an open-end investment company pursuant to the Investment Company Act of 1940 (the "Act"). The Adviser is registered as an investment adviser pursuant to the Investment Advisers Act of 1940. This Agreement relates to services to be performed by the Adviser with respect to the Fund. The parties agree as follows: 1. DUTIES OF ADVISER. The Adviser shall regularly provide the Fund with research, advice, and supervision with respect to investment matters and shall furnish continuously an investment program, recommend what securities shall be purchased or sold and what portion of the Fund's assets shall be held invested or uninvested, subject always to the provisions of the Act and the Fund's Articles of Incorporation and Bylaws, and amendments thereto, which amendments shall be furnished to the Adviser by the Fund. The Adviser shall take any steps necessary or appropriate to carry out its decisions in regard to the foregoing matters and the general conduct of the business of the Fund. The Adviser may take into consideration receipt of research and statistical information and other services rendered to the Fund in the allocation of commissions from portfolio brokerage business. 2. ALLOCATION OF CHARGES AND EXPENSES. (a) The Adviser shall pay or reimburse the Fund for payments made by the Fund for all executive salaries and executive expenses, office rent of the Fund, ordinary office expenses (other than the expense of clerical services relating to the administration of the Fund), and for any other expenses that, if otherwise borne by the Fund, would cause the Fund to "be deemed to be acting as a distributor of securities of which it is the issuer, other than through an underwriter," pursuant to Rule 12b-1 under the Act. The Adviser shall provide investment advisory, statistical, and research facilities and all clerical services relating to research, statistical, and investment work with respect to the Fund. (b) The Adviser shall not be required to pay any expenses of the Fund other than those enumerated in this Agreement. The Fund will assume all other costs, including the cost of its custodian, legal, auditing, and accounting expenses, disinterested directors' fees, taxes, and governmental fees, interest, brokers' commissions, transaction expenses, cost of stock certificates, and any other expenses (including clerical expenses) of issue, sale, repurchase, or redemption of shares, expenses of registering or qualifying shares for sale, 1 transfer taxes, and all expenses of preparing the Fund's registration statement and prospectus, and the cost of printing and delivering to shareholders prospectuses and reports. (c) At the request of the Fund, the Adviser shall pay all or a portion of the direct and indirect costs, charges and expenses of or related to the Fund's business and operations. The Adviser will submit to the Fund on a monthly basis a statement setting forth the cost, charges and expenses paid by the Adviser for the previous month. Upon receipt of the statement, the Fund shall promptly reimburse the Adviser for the costs, charges and expenses. 3. COMPENSATION OF THE ADVISER. For the services to be rendered, the facilities to be furnished, and the payments to be made by the Adviser, as provided in Sections 1 and 2 hereof, for each calendar month the Fund shall pay to the Adviser a fee computed at the annual rate of 1 percent of the first $500,000,000 of daily net assets and .75 of 1 percent of the daily net assets in excess of $500,000,000. If the asset value is not required to be determined on any particular business day, then for the purposes of this Section 3, the asset value of a share as last determined shall be deemed to be the asset value of a share as of the close of business on that day. If there is no business day in any calendar month, the fee shall be computed on the basis of the asset value of a share as last determined, multiplied by the average number of shares outstanding on the last day of the month. 4. COVENANTS OF THE ADVISER. In connection with purchases or sales of portfolio securities for the account of the Fund, neither the Adviser nor any officer, director, or employee of the Adviser shall act as a principal. The Adviser covenants that it and its employees will comply with investment restrictions of the Fund's Bylaws applicable to them. If the Adviser or any of its affiliates give any advice to clients concerning the shares of the Fund, it will act solely as investment counsel for the clients and not on behalf of the Fund. 5. LIMITATION ON LIABILITY OF ADVISER. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this agreement relates, except a loss resulting from willful malfeasance, bad faith, or gross negligence on the part of the Adviser in the performance of its duties or from reckless disregard by the Adviser of its obligations and duties under this Agreement. The federal securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of any rights which the Fund may have under any federal securities laws. 6. DURATION AND TERMINATION OF THIS AGREEMENT. (a) This Agreement shall remain in force for two years from the date hereof, and it may be continued from year to year thereafter if approved annually by a vote of a majority of the Fund's shareholders or by its Board of Directors and in either case a vote of a majority of the Board of Directors who are not parties to this Agreement or interested 2 persons of any such party cast in person at a meeting called for the purpose of voting on such approval. (b) This Agreement may be terminated at any time without the payment of any penalty by vote of the Board of Directors of the Fund, by vote of a majority of the outstanding shares of the Fund, or by the Adviser, on 60 days written notice to the other party. (c) This Agreement shall automatically terminate if it is assigned. The Adviser shall notify the Fund of any change in the officers or directors of the Adviser within a reasonable time after the change. The terms "assignment," "vote of a majority of the outstanding voting securities", and "interested persons" shall have the meanings specified in the Act. IN WITNESS WHEREOF the parties have caused this Agreement to be executed as of the day and year first written above. COLUMBIA SPECIAL FUND, INC. By J. JERRY INSKEEP, JR. ----------------------------- Title: President COLUMBIA FUNDS MANAGEMENT COMPANY By GEORGE L. HANSETH ----------------------------- Title: Vice President 3 EX-99.6 6 EXHIBIT 99.6 EXHIBIT 6 DISTRIBUTION AGREEMENT DATED: December 10, 1997 BETWEEN: COLUMBIA SPECIAL FUND, INC. an Oregon corporation 1301 SW Fifth Avenue, Portland, Oregon 97207 the Fund AND: PROVIDENT DISTRIBUTORS, INC., a Delaware corporation Four Falls Corporate Center, 6th Floor West Conshohocken, PA 19428-296197 the Distributor The Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended, (Investment Company Act). The Distributor is engaged principally in the business of distributing shares of the investment companies sponsored and managed by Columbia Funds Management Company (the Adviser), is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, (the Exchange Act), and is a member of the National Association of Securities Dealers, Inc. (NASD). The Fund desires the Distributor to act as a distributor in the public offering of its shares. The parties agree as follows: 1. DELIVERY OF FUND DOCUMENTS. The Fund shall make available promptly to the Distributor copies of any registration statements filed by it with the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended, (Securities Act) or the Investment Company Act, together with any financial statements and exhibits included therein, and all amendments or supplements thereto. 2. SALE OF SHARES. Subject to the provisions of Sections 3, 4, and 6 and to any minimum purchase requirements from time to time described in the Fund's prospectus, the Distributor is authorized to sell, as agent on behalf of the Fund, shares of the Fund's capital stock (Shares) authorized for issuance and registered under the Securities Act. The Distributor may also sell Shares under offers of exchange between and among the investment companies for which the Adviser acts as investment adviser (Columbia Funds) in accordance with the terms of the prospectus for the respective Columbia Funds. Sales will be made by the Distributor on behalf of the Fund by accepting unconditional orders to purchase Shares placed with the Distributor by investors, and purchases will be made by the Distributor only after acceptance by the Distributor of orders. The sales price to the public of Shares shall be the public offering price as defined in Section 5. 3. SALE OF SHARES BY THE FUND. The Fund reserves the right to sell Shares to investors pursuant to applications received and accepted by the Fund or its transfer agent or any other lawful method. The Fund also reserves the right to issue Shares in connection with the merger or consolidation of any other investment company, trust, or personal holding company with the Fund or the Fund's acquisition by purchase or otherwise of all or substantially all of the assets of an investment company, trust, or personal holding company. Any right granted to the Distributor to accept orders for Shares, to make sales on behalf of the Fund, or to purchase Shares for resale will not apply to Shares issued in connection with the merger or consolidation of any other investment company with the Fund or its acquisition by purchase or otherwise of all or substantially all of the assets of any investment company, trust, or personal holding company, or substantially all of the outstanding shares or interests of any such entity, and this right shall not apply to shares that may be offered by the Fund to shareholders by virtue of their being shareholders of the Fund. 4. SHARES COVERED BY THIS AGREEMENT. This Agreement relates to the issuance and sale of Shares that are duly authorized, registered, and available for sale by the Fund, including redeemed or repurchased Shares if and to the extent they may be legally sold and if, but only if, the Fund authorizes the Distributor to sell them. 5. PUBLIC OFFERING PRICE. All Shares sold by the Distributor pursuant to this Agreement shall be sold at the public offering price. The public offering price for all accepted subscriptions will be the net asset value per share, as determined in the manner provided in the Fund's articles of incorporation or bylaws, as now in effect or as later amended (and as reflected in the Fund's then current prospectus), next after the order is accepted by the Distributor. The Distributor will process orders submitted by brokers for the sale of Shares at the public offering price exclusive of any commission charged by such broker to the customer. 6. SUSPENSION OF SALES. If and whenever the determination of net asset value is suspended and until the suspension is terminated, no further orders for Shares shall be accepted by the Distributor except unconditional orders placed with the Distributor before it had knowledge of the suspension. In addition, the Fund reserves the right to suspend sales and the Distributor's authority to accept orders for Shares on behalf of the Fund if, in the judgment of the board of directors of the Fund, it is in the best interests of the Fund to do so. The suspension will continue for the period determined by the Board of Directors of the Fund. In that event, no orders to purchase Shares shall be processed or accepted by the Distributor on behalf of the Fund while the suspension remains in effect, except for Shares necessary to cover unconditional orders accepted by the Distributor before it had knowledge of the suspension, unless otherwise directed by the board of directors of the Fund. 7. SOLICITATION OF ORDERS. In consideration of the rights granted to the Distributor under this Agreement, the Distributor will use its best efforts (but only in jurisdictions in which the Distributor may lawfully do so) to obtain from investors unconditional orders for Shares authorized for issuance by the Fund and registered under the Securities Act, provided that the Distributor may in its discretion reject any order to purchase Shares or cancel any sale if payment for any purchase order is not received in accordance with 2 the terms of the prospectus. This does not obligate the Distributor to register or maintain its registration as a broker or dealer under the securities laws of any jurisdiction if, in the discretion of the Distributor, registration is not practical or feasible. The Fund shall make available to the Distributor at the expense of the Distributor the number of copies of the Fund's then effective prospectus as the Distributor reasonably requests. The Fund shall furnish to the Distributor copies of all information, financial statements, statements of additional information, and other papers the Distributor reasonably requests for use in connection with the distribution of Shares. 8. AUTHORIZED REPRESENTATIONS. (a) The Fund is not authorized by the Distributor to give on behalf of the Distributor any information or to make any representations other than the information and representations contained in a registration statement or prospectus filed with the SEC under the Securities Act or the Investment Company Act covering Shares, as the registration statement and prospectus is amended or supplemented from time to time. (b) The Distributor is not authorized by the Fund to give on behalf of the Fund any information or to make any representations in connection with the sale of Shares other than the information and representations contained in a registration statement or prospectus filed with the SEC under the Securities Act or the Investment Company Act covering Shares, as the registration statement and prospectus is amended or supplemented from time to time, or contained in shareholder reports or other material that may be prepared by or on behalf of the Fund for the Distributor's use. This paragraph shall not be construed to prevent the Distributor from preparing and distributing tombstone and sales literature or other materials it deems appropriate. No person other than the Distributor is authorized to act as principal underwriter (as defined in the Investment Company Act) for the Fund. 9. REGISTRATION AND SALE OF ADDITIONAL SHARES. The Fund agrees to register with the SEC an indefinite number of Shares pursuant to Rule 24f-2 under the Investment Company Act. The Fund will, in cooperation with the Distributor, take action necessary from time to time to qualify the Shares (registered or otherwise qualified for sale under the Securities Act) in any jurisdiction agreeable to the Distributor and Fund and to maintain such qualification. 10. EXPENSES. (a) This Agreement shall not be considered to constitute an exclusive arrangement. The Distributor shall pay (or will enter into arrangements providing that persons other than the Distributor shall pay) all fees and expenses: (i) incurred in connection with its registration as a broker or dealer or the registration or qualification of its officers, directors, or representatives under the laws of various jurisdictions; and 3 (ii) that, if otherwise borne by the Fund, would cause the Fund to "be deemed to be acting as a distributor of securities of which it is the issuer, other than through an underwriter," pursuant to Rule 12b-1 under the Investment Company Act. (b) The Fund shall pay all other fees and expenses incurred by the Fund and not allocated to the Distributor pursuant to 10(a) above. 11. CONFORMITY WITH LAW. The Distributor agrees that in selling Shares it shall conform in all respects with the laws of the United States and any jurisdiction in which the Shares are offered for sale by the Distributor pursuant to this Agreement and the rules and regulations of the NASD. The Fund agrees to notify Distributor of the issuance by the SEC of any stop order suspending the effectiveness of any registration statements filed by it, or the initiation of any proceedings for that purpose. 12. INDEPENDENT CONTRACTOR. The Distributor shall be an independent contractor, and neither the Distributor nor any of its officers, directors, employees, or representatives is or shall be an employee of the Fund in the performance of the Distributor's duties hereunder. The Distributor shall be responsible for its own conduct and the employment, control, and conduct of its agents and employees and for injury to its agents or employees or to others through its agents or employees. The Distributor assumes full responsibility for its agents and employees, as such, under applicable statutes and agrees to pay all employee taxes thereunder. 13. INDEMNIFICATION. (a) The Distributor agrees to indemnify and hold harmless the Fund and each of its directors, officers, employees, and representatives and each person, if any, who controls the Fund within the meaning of Section 15 of the Securities Act against any and all losses, liabilities, damages, claims, or expenses (including the reasonable costs of investigating or defending any alleged loss, liability, damage, claim, or expense and reasonable legal counsel fees incurred in connection therewith) to which the Fund or such directors, officers, employees, representatives, or controlling person may become subject under the Securities Act, under any other statute, at common law, or otherwise, arising out of the acquisition of any Shares by any person which (i) may be based upon any wrongful act by the Distributor or any of Distributor's directors, officers, employees, or representatives or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, shareholder report, or other information covering Shares filed or made public by the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon information furnished to the Fund by the Distributor. In no case (x) is the Distributor's indemnity in favor of the Fund or any person indemnified to be deemed to protect the Fund or such indemnified person against any liability to which the Fund or such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties under this Agreement or (y) is the Distributor to be liable under its indemnity 4 agreement contained in this paragraph with respect to any claim made against the Fund or any person indemnified unless the Fund or such person, as the case may be, shall have notified the Distributor in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon the Fund or upon such person (or after the Fund or such person shall have received notice of such service on any designated agent). Failure to notify the Distributor of any such claim, however, shall not relieve the Distributor from any liability the Distributor may have to the Fund or any person against whom such action is brought otherwise than on account of the Distributor's indemnity agreement contained in this paragraph. (b) The Distributor shall be entitled to participate, at its own expense, in the defense, or, if the Distributor elects, to assume the defense, of any suit brought to enforce any such claim, but, if the Distributor elects to assume the defense, such defense shall be conducted by legal counsel chosen by the Distributor and satisfactory to the Fund, to its directors, officers, employees, or representatives, or to any controlling person or persons, defendant or defendants, in the suit. If the Distributor elects to assume the defense of any such suit and retain such legal counsel, the Fund, its directors, officers, employees, representatives, or controlling person or persons, defendant or defendants in the suit, shall bear the fees and expenses of any additional legal counsel retained by them. If the Distributor does not elect to assume the defense of any such suit, Distributor will reimburse the Fund, such directors, officers, employees, representatives, or controlling person or persons, defendant or defendants in such suit for the reasonable fees and expenses of any legal counsel retained by them. The Distributor agrees to notify promptly the Fund of the commencement of any litigation or proceedings against it or any of its directors, officers, employees, or representatives in connection with the issue or sale of any Shares. (c) The Fund agrees to indemnify and hold harmless the Distributor and each of its directors, officers, employees, and representatives and each person, if any, who controls the Distributor within the meaning of Section 15 of the Securities Act against any and all losses, liabilities, damages, claims, or expenses (including the reasonable costs of investigating or defending any alleged loss, liability, damage, claim, or expense and reasonable legal counsel fees incurred in connection therewith) to which the Distributor or such directors, officers, employees, representatives, or controlling person may become subject under the Securities Act, under any other statute, at common law, or otherwise, arising out of the acquisition of any Shares by any person which (i) may be based upon any wrongful act by the Fund or any of Fund's directors, officers, employees, or representatives or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, shareholder report, or other information covering Shares filed or made public by the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon information furnished to Distributor by the Fund. In no case (x) is the Fund's indemnity in favor of the Distributor or any person indemnified to be deemed to protect the Distributor or such indemnified person against any liability to which the Distributor or such person would otherwise be subject by reason of willful misfeasance, bad 5 faith, or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties under this Agreement or (y) is the Fund to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against the Distributor or person indemnified unless the Distributor or such person, as the case may be, shall have notified the Fund in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim shall have been served upon the Distributor or upon such person (or after the Distributor or such person shall have received notice of such service on any designated agent). Failure to notify the Fund of any such claim, however, shall not relieve the Fund from any liability which the Fund may have to the Distributor or any person against whom such action is brought otherwise than on account of the Fund's indemnity agreement contained in this paragraph. (d) The Fund shall be entitled to participate, at its own expense, in the defense, or, if the Fund elects, to assume the defense, of any suit brought to enforce any such claim, but, if the Fund elects to assume the defense, such defense shall be conducted by legal counsel chosen by the Fund and satisfactory to the Distributor, to its directors, officers, employees, or representatives, or to any controlling person or persons, defendant or defendants, in the suit. If the Fund elects to assume the defense of any such suit and retain such legal counsel, the Distributor, its directors, officers, employees, representatives, or controlling person or persons, defendant or defendants in the suit, shall bear the fees and expenses of any additional legal counsel retained by them. If the Fund does not elect to assume the defense of any such suit, the Fund will reimburse the Distributor, such directors, officers, employees, representatives, or controlling person or persons, defendant or defendants in such suit for the reasonable fees and expenses of any legal counsel retained by them. The Fund agrees to notify promptly the Distributor of the commencement of any litigation or proceedings against it or any of its directors, officers, employees, or representatives in connection with the issue or sale of any Shares. 14. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall become effective upon its execution (effective date) and, unless terminated as provided, shall remain in effect for two years from the date first set forth above (the date of its execution) and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by the vote of a majority of the directors of the Fund who are not interested persons of the Distributor or of the Fund, cast in person at a meeting called for the purpose of voting on such approval, and by vote of the directors of the Fund or of a majority of the outstanding voting securities of the Fund. This Agreement may, on 60 days written notice, be terminated at any time, without the payment of any penalty, by the vote of a majority of the directors of the Fund who are not interested persons of the Distributor or the Fund, by a vote of a majority of the outstanding voting securities of the Fund, or by the Distributor. This Agreement will automatically terminate in the event of its assignment. In interpreting the provisions of this Section 14, the definitions contained in Section 2(a) of the Investment Company Act (including the definitions of "interested person," "assignment," and "majority of the outstanding securities") shall be applied. 6 15. AMENDMENT OF THIS AGREEMENT. This Agreement may be amended, waived, discharged, or terminated only by a written instrument signed by the party against which enforcement of the amendment, waiver, discharge, or termination is sought. If the Fund at any time deems it necessary or advisable in the best interests of the Fund that any amendment of this Agreement be made to comply with the recommendations or requirements of the SEC or other governmental authority or to obtain any advantage under state or federal tax laws and notifies the Distributor of the form of the amendment and the reasons therefor, and if the Distributor declines to assent to the amendment, the Fund may terminate this Agreement immediately without regard to the 60-day period referred to in Section 14. If the Distributor at any time requests that a change be made in the Fund's articles of incorporation or bylaws or in its methods of doing business to comply with any requirements of federal law or regulations of the SEC or of a national securities association of which the Distributor is or may be a member relating to the sale of Shares, and the Fund does not make such necessary change within a reasonable time, the Distributor may terminate this Agreement immediately without regard to the 60-day period referred to in Section 14. 16. MISCELLANEOUS. It is understood and expressly stipulated that neither the shareholders of the Fund nor the directors of the Fund shall be personally liable hereunder. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17. NOTICE. Any notice required or permitted to be given by either party to the other shall be deemed sufficient if sent by registered or certified mail, postage prepaid, addressed by the party giving notice to the other party at the address set forth on the first page of this Agreement. COLUMBIA SPECIAL FUND, INC. By J. JERRY INSKEEP, JR. ----------------------------------- Name: J. Jerry Inskeep, Jr. Title: President PROVIDENT DISTRIBUTORS, INC. By MONROE HAEGELE ----------------------------------- Name: Monroe Haegele Title: CEO 7 EX-99.8(A) 7 EXHIBIT 99.8(A) Exhibit 8.A. CUSTODIAN CONTRACT This Custodian Contract made this 31 day of July, 1985, between COLUMBIA SPECIAL FUND, INC., an Oregon corporation (hereinafter called the "Company"), and UNITED STATES NATIONAL BANK OF OREGON, a national banking association organized under the laws of the United States of America and having its place of business in the City of Portland, Oregon, (hereinafter called the "Custodian") is to become effective, except as otherwise provided herein, on the effective date of the Registration Statement of the Company under the Securities Act of 1933. SECTION 1. The Company agrees to deliver to the Custodian all securities and cash owned by it, and all dividend checks or other income, payments of principal or capital distributions received by the Company with respect to all securities owned by the Company from time to time and the cash consideration due to the Company for such new stock of the Company as may be issued from time to time. SECTION 2. The Custodian is hereby authorized by the Company to receive, hold and deal with, subject to the terms hereof, all securities, cash, whether representing principal deposits or income, and property of any other nature which will be, from time to time hereafter, delivered to it by or for the account of the Company, or purchased with cash on deposit hereunder, exercising the same care in the safekeeping thereof as it exercises with respect to other accounts of similar character. SECTION 3. The Custodian shall keep books and records of all cash deposited hereunder, subdivided into principal and income accounts, and all other property and securities deposited hereunder. SECTION 4. The Custodian shall hold for the account of the Company either in the name of the Company, the name of a nominee of the Company, the name of the Custodian, the name of a nominee of the Custodian, in bearer form, in a securities depository, or the Federal Reserve Book Entry System, all securities or other property delivered to or received by it for the account of the Company. All securities received by the Custodian may be in "street" or other good delivery form. SECTION 5. The Custodian shall receive and receipt for moneys due to the Company. Funds held by the Custodian may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies and in such amounts as it may in its discretion deem necessary or desirable; provided, however, that every other bank or trust company and the funds to be deposited with each shall be approved by vote of the Board of Directors of the Company. Such funds shall be so deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in such capacity. SECTION 6. The Custodian is hereby appointed attorney-in-fact of the Company to endorse for credit to the account of the Company when collected, all checks, drafts or other orders for the payment of money drawn to, or to the order of, the Company, or to the order of the Custodian for the account of the Company. All cash, whether principal or income, and -1- other assets held by the Custodian shall be subject to written orders of the Company or its officers and/or directors for any of the following purposes: a. For the purchase of securities or other property to be retained in the custody of the Custodian, or of other property in which assets of the Company are to be invested, provided that, in every case where payment is made by the Custodian in advance of receipt of the securities purchased, except as provided in Section 8 hereof or except where authorized by resolution of the Company, the Custodian shall be absolutely liable to the Company for such securities to the same extent as if the securities had been received by the Custodian; b. For the redemption of shares of capital stock of the Company; c. For the payment of dividends or other cash distributions to shareholders; d. For payment of taxes, expenses, fees and other liabilities incurred in connection with the operation of the Company including registration and qualification costs and other expenses of issuing stock or changing its capital structure, whether or not such expenses shall be in whole or in part capitalized or treated as deferred expenses; e. For the making of any disbursements authorized by the Board of Director pursuant to the Articles of Incorporation or the By-Laws, copies of which shall be certified to the Custodian by an officer of the Company, provided, however, the Custodian shall have no duty or responsibility to determine whether such disbursements are made in accordance with said Articles of Incorporation or By-Laws; f. For the payment of any expense or liability incurred by the Company; g. For any other purpose as herein specifically provided. All written orders calling for the disbursement of cash shall specify the person, firm, corporation or entity to whom payment is to be made and the purpose for which such payment is made. The Custodian may in its discretion without express authority from the Company make payments to itself or others for minor expenses (defined as out of pocket expenses for postage, insurance and similar expenses) of handling securities or other similar items relating to its duties under this Contract, all such payments to be accounted for to the Company. SECTION 7. The Custodian shall collect all income and other payments with respect to securities held hereunder as of the record date for such income or other payments. The Custodian shall also execute ownership and other certificates and affidavits for all Federal and State tax purposes in connection therewith and in connection with transfers of securities. The Custodian shall hold all such income collected by it hereunder. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons -2- and other income items requiring presentation as and when they become due and shall collect dividends and interest when due on securities held hereunder. SECTION 8. Upon receipt of an order, (to be confirmed in writing) of the Company, or its officers and/or directors stating that the Company has purchased securities or other property in which assets of the Company are permitted to be invested, specifying the securities or other transaction being consummated and other information required by Section 6 hereof, and directing payment for such securities or other property, the Custodian shall, insofar as it has available funds, pay for and hold for the account of the Company any such securities or other property described in the written order. The Custodian may not make payments for securities or other property until receipt of such securities or property by the Custodian except that such payments may be made in advance of receipt of such securities or other property in connection with conversion, exchange or surrender of securities owned or subscribed to, in connection with subscriptions to underwritten offerings with respect to which an initial deposit is required in order to participate in such offering, or where, as the result of an adjudicatory proceeding advance payment is required to obtain the release of such securities or other property. Whenever possible, confirmation of the broker, dealer or other seller shall be furnished the Custodian. SECTION 9. The Custodian shall release and deliver securities or other property owned by the Company in the following cases only: a. Upon sale of such securities for the account of the Company and receipt of payment therefor, such delivery to be preceded by receipt of a written order of the Company or its officers and/or directors, stating that the Company has sold securities or other property in which assets of the Company are invested, specifying the securities or property sold, the prices received therefore the broker or dealer through whom the transaction is being consummated and other information required by Section 6 thereof, and directing delivery of the securities or other property on deposit with the Custodian; b. To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash is to be delivered to the Custodian; c. To the issuer thereof or its agent for transfer in the name of the Company or the Custodian or a nominee of either, or for exchange for a different number of bonds or certificates representing the same aggregate fact amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; d. To the broker selling the same, for examination, in accordance with the "street delivery" custom; e. To a securities depository to be held for the account of the Custodian or to a Federal Reserve Bank to be held for the Custodian in the Federal Reserve Book Entry System; -3- f. Subject to receipt of a written order of the Company or its officers and/or directors, for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; g. Subject to receipt of a written order of the Company or its officers and/or directors, in the case of warrants, rights, or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities. Whenever possible, confirmation of the broker or dealer shall be furnished to the Custodian. SECTION 10. Unless and until otherwise directed by a written order of the Company or its officers and/or directors, the Custodian shall: a. Surrender securities in temporary form or interim receipts for definitive securities; b. Credit to the proper account of the Company all distributions received with respect to the securities; c. Make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; d. Employ suitable agents or custodians; e. Notify the Company of matured and uncollected principal and interest. Upon receipt of information with respect to investments held hereunder, notify the Company: of securities called for redemption, of sinking funds available for the redemption of securities, of the expiration of conversion privileges, of the organization of protective committees, of subscription or conversion rights, and of mergers, consolidations, reorganizations, recapitalizations, or similar proceedings; and f. Do all acts, whether or not expressly authorized, which it may deem necessary or proper for the protection of the property held hereunder. SECTION 11. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company as its agent to carry out such of the provisions of section 6, 8, 9, and 10 of this Contract as the Custodian may from time to time direct; provided, however, that the appointment of such agent shall not relieve the Custodian of any of its responsibilities hereunder. -4- SECTION 12. The Company shall make such arrangements with the Transfer Agent of the Company as will enable the Custodian to receive the cash consideration due to the Company for such new or previously issued stock as may be issued or sold from time to time by the Company. SECTION 13. The Company agrees to furnish the Custodian all instruments necessary to enable the Custodian to carry out the foregoing instructions with respect to collection of income on securities registered in the name of the Company, or its nominee. SECTION 14. The Custodian agrees to prepare and deliver to the Company all such statements and reports with respect to income and principal of the account as shall be reasonably required, but shall not be required to prepare income or other tax returns with respect to the securities of the Company, or the income received thereon, and agrees to use its best efforts to carry out the written orders of the Company or its officers and/or directors, but it shall have no duty to take any action in any way relating to the account except as herein provided or to determine the proper application of any disbursement of cash made on receipt of a written order or resolution. SECTION 15. When instructed by the Company or its officers and/or directors, the Custodian shall deliver to the Transfer Agent or the Company, checks or funds in the amount of the redemption price which will be based on the net asset value of the shares redeemed. SECTION 16. Upon receipt of a written order of the Company specifying: a. The amount of cash or securities or both, payable or distributable as dividends or other distributions to the shareholders, and b. That all necessary action authorizing such payment or distribution has been taken in accordance with the Articles of Incorporation and/or the By-Laws of the Company; accompanied by a certified copy of resolution of the company or the officers and/or directors authorizing such payment or distribution and establishing record and payment dates, the Custodian shall pay and deliver to the Company, or the dividend disbursing agent of the Company checks or funds for amounts so certified to be payable and distributable as dividends or other distributions. SECTION 17. As soon as possible after and as of the close of business each day on which transactions in the custodian account occur, the Custodian shall transmit to the Company advices which shall show: a. All cash received and disbursed; b. All securities received and the prices paid therefor; c. All securities sold and delivered and the prices received therefor; -5- d. All other transactions and the cash, securities and other property, paid or delivered, received or credited, in connection therewith. Additionally, the Custodian shall furnish a monthly statement reflecting all transactions in the account to the Company. SECTION 18. The Custodian shall have no duty or responsibility whatsoever relating to moneys, securities or other property received by the Company and not deposited with the Custodian. The Custodian shall not be liable to anyone, except such liability as may be expressly assumed under this Contract, for any act or omission of the Company, or of any agent of the Company designated by two or more of its officers and/or directors, or for any decision or act or omission to act or anything whatsoever in connection with this Contract, except its own willful default or gross negligence. The Custodian may at the expense of the Company consult with the legal counsel representing the Company and shall not be liable for any action taken or suffered in good faith in accordance with the opinion of such counsel. Anything of this Custodian Contract to the contrary notwithstanding, the Custodian shall not be required to take any action, even when so directed by the Company, or to do anything which, in the opinion of the Custodian, shall be likely to involve it in any liability, loss or expense, unless the Custodian shall first receive security or indemnity in form and amount satisfactory to it against any and all such liability, loss or expense. The Custodian shall not incur any personal liability of any nature in connection with any act done or omitted to be done in good faith in the administration of this account or in carrying out any directions of the Company or its officers and/or directors issued in accordance with this Contract, and the Custodian shall be indemnified and saved harmless by the Company from and against any and all such personal liability to which the Custodian may be subjected by reason of any such act or conduct in its official capacity, including all expenses reasonably incurred in its defense in case the Company fails to provide such defense, unless such act or conduct is the result of the Custodian's own negligence, willful misconduct or lack of good faith. SECTION 19. The Custodian shall be entitled to compensation for its services as agreed upon by the Company and the Custodian from time to time as set forth in Exhibit A attached hereto. SECTION 20. Upon receipt of notice from the Company or a shareholder that a check issued by the Custodian pursuant to this Contract has not been received by the payee thereof, or has been lost or misplaced by said payee, the Custodian shall issue a new check on receipt of such indemnity as it may reasonably require. -6- SECTION 21. From time to time special situations, not contemplated under the terms of this Contract, may arise. An officer of the Company and the Custodian will then negotiate as to the acts to be performed and the compensation to be paid in such situations. SECTION 22. This contract shall be effective as of its execution, and shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid, to the other party, such termination to take effect not sooner than sixty (60) days after date of such delivery or mailing; provided, however, that the Company shall not amend or terminate this Contract in contravention of any applicable Federal or State regulations, or any provision of the Articles of Incorporation and/or the By-Laws of the Company as the same may from time to time be amended and further provided that the Company may at any time by action of its Board of Directors substitute another bank or trust company for the Custodian by giving notice as above to the Custodian. In connection with the operations of this Contract, the Custodian and the Company may agree from time to time on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract, any such interpretive or additional provisions to be signed by both parties and annexed hereto, provided that the Company shall not agree to any such interpretive or additional provisions which shall contravene any applicable Federal or State regulations, or any provision of the Articles of Incorporation and the By-Laws as the same may from time to time be amended. SECTION 23. Upon termination hereof the Company shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. If a successor Custodian is appointed by the Board of Directors, the Custodian shall, upon termination, deliver to such successor Custodian at the office of the Custodian, duly endorsed and in form for transfer, all securities then held hereunder and all funds or other properties of the Company deposited with or held by it hereunder. If no such successor Custodian is appointed, the Custodian shall, in like manner, at its office, upon receipt of a certified copy of a vote of the Board of Directors, deliver such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor Custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report of not less than $2,000,000 all securities, fund and other properties held by the Custodian and all instruments held by it relative thereto and all other property held by it under this Contract. -7- In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Board of Directors to procure the certified copy above referred to, or to appoint a successor Custodian, the Custodian shall be entitled to fair compensation for its services during such period and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. SECTION 24. Any written order to be given to the Custodian by the Company shall be signed by any two of its officers and/or directors. The Company will certify to the Custodian the names of the officers and directors and any change therein, and the Custodian shall not be charged with knowledge thereof until it receives such certification. No written order of the Company shall direct payment of any money or delivery of any securities to the Company, or shall direct payment of money or delivery of securities for purposes not specifically set forth in this Contract, unless accompanied by a copy of a resolution of the Board of Directors, specifying the amount of such payment or the securities to be delivered, the purpose for which the payment or delivery is made declaring such purpose to be a proper company purpose and naming the person or persons to whom such payment or delivery is to be made. Custodian shall not be liable for any action taken by it when directed in writing as herein provided and may rely on continuance in office of any person until otherwise notified in writing. SECTION 25. Evidence required of anyone under this Contract may be by certificate, affidavit, endorsement or any other written instrument which the person acting in reliance thereon believes to be pertinent, reliable and genuine, and to have been signed, made or presented by the proper and duly authorized party or parties. Whenever the Custodian shall deem it necessary that a matter be proved prior to taking, suffering or omitting any action, such matter shall be deemed to be conclusively proved by the certificate of any two officers or directors delivered to the Custodian, but the Custodian, in its discretion, may in lieu of such certification accept, or may require such other or further evidence as it may deem necessary or sufficient. SECTION 26. This Contract shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of Oregon. SECTION 27. Nothing contained in the Articles of Incorporation and the By-Laws of the Company except as specifically set forth in this Contract shall be deemed to impose any powers, duties or responsibilities on the Custodian other than those set forth in this Contract. The Company, by any one of its officers will certify to the Custodian any changes in the Articles of Incorporation and the By-Laws of the Company and the Custodian shall not be charged with knowledge thereof until it receives such certification. The Company warrants that no directions, orders, instructions, notices or certificates shall be issued to the Custodian by an officer or director other than in accordance with the terms and provisions of the Articles of Incorporation or By-Laws of the Company, and the Custodian shall have no duty -8- to question the authority for or the propriety of any such directions, orders, instructions, notices or certificates. Nothing herein contained, however, shall be construed to relieve the Custodian from faithfully performing its duties under this Contract, and the Custodian shall be responsible for any action taken by it not in accordance with this Contract. SECTION 28. All directions, orders, instructions, notices, accountings, reports and other written communications required to be given under this Contract shall be addressed to the parties at their respective addresses shown below or such other addresses as each may hereafter designate in writing delivered to the other: IN WITNESS WHEREOF, the parties hereto have caused this Contract to be signed by their duly authorized officers and their respective corporate seals to be hereto affixed. COLUMBIA SPECIAL FUND, INC. By: J. JERRY INSKEEP, JR. -------------------------------- 1301 S.W. 5th Avenue Portland, Oregon 97201 UNITED STATES NATIONAL BANK OF OREGON By: MARY K. BAKER -------------------------------- 321 S.W. 6th Avenue Portland, Oregon 97208 -9- EXHIBIT A Basic Fee Schedule is as Follows: Monthly Fee on Cash, Marketable Securities, Money Market Instruments, etc. 1. First $20,000,000 of Mkt. Value 1/12 of 1/30 of 1% 2. Next $80,000,000 of Mkt. Value 1/12 of 1/60 of 1% 3. Over $100,000,000 of Mkt. Value 1/12 of 1/100 of 1% Transaction Fees Purchase, sale or redemption of repurchase agreements through U.S. National Bank of Oregon (including Treasury items) $ 7.50 Purchase, sale, redemption, exchange or receipt of securities $ 17.50 Wire Transfers - Outgoing $ 10.00 Wire Transfers - Incoming $ 3.00 Checks drawn on your instructions $ 7.50 Credit interest and principal pay- ments on mortgage pass through bonds $ 7.50 Out of Pocket Expense All out of pocket expenses including postage, insurance, settlement fees, charges made by other banks or Federal Reserve Bank and special taxes will be reimbursed to the custodian. Present charge by Bankers Trust Company for settlement foreign securities is $75.00 and for Future Contracts is $40.00. -10- TRUST CUSTODY SERVICES - -------------------------------------------------------------------------------- U.S. BANK COLUMBIA SPECIAL FUND, INC. 1948500 Annual Minimum Fee: $2,5000.00 Market Value: .00004 Security Transactions: $12.50 Miscellaneous Charges: All out-of-pocket expenses including telephone, postage, express mail, Federal Express, transfer fees, messenger services global settlement fees, global holding charges by other banks, charges made by other banks or Federal Reserve Bank. Fees will be calculated monthly and charged against account assets. A summary of fee's taken will also be provided to the Client for review. The above fee schedule is guaranteed for a period of two years. Effective December 1, 1995 #56827 -11- EX-99.8(B) 8 EXHIBIT 99.8(B) Exhibit 8.B. CUSTODY AGREEMENT This Custody Agreement is dated February 3, 1993 between MORGAN STANLEY TRUST COMPANY, a New York State chartered trust company (the "Custodian"), and COLUMBIA SPECIAL FUND, INC. (the "Customer"). 1. The Customer hereby appoints the Custodian as a custodian of securities and other property owned or under the control of the Customer which are delivered to the Custodian, or any Subcustodian as appointed below, from time to time to be held in custody for the benefit of the Customer. The Customer instructs the Custodian to establish on the books and records of the Custodian an account (the "Account") in the name of the Customer. The Custodian shall record in the Account and shall have general responsibility for the safekeeping of all securities ("Securities"), cash and other property (all such Securities, cash and other Property being collectively the "Property") of the Customer so delivered for custody. It is understood that the specific procedures the Custodian will use in carrying out its responsibilities under this Agreement are set forth in the procedures manual (the "Procedures Manual") prepared by the Custodian and delivered to the Customer, as such Procedures Manual may be amended from time to time by written agreement between the Custodian and the Customer. The Customer acknowledges that the Procedures Manual constitutes an integral part of this Agreement. 2. The Property may be held in custody and deposit accounts that have been established by the Custodian with one or more domestic banks qualified under the Investment Act of 1940, as amended (the "Act"), to act as a custodian, or foreign banks meeting the requirements of rule 17f-5 under the Act, or through the facilities of one or more clearing agencies or central securities depositories, permitted by rule 17f-4 under the Act, in each case approved by the Customer's Board of Directors, as listed on Exhibit A hereto (the "Subcustodians"), as such Exhibit may be amended from time to time by written agreement between the Custodian and the Customer. The Custodian may hold Property for all of its customers with a Subcustodian in a single account that is identified as belonging to the Custodian for the benefit of its customers. Any Subcustodian may hold Property in a securities depository and may utilize a clearing agency. The Customer agrees that the Property may be physically held outside the United States. The Custodian shall not be liable for any loss resulting from the physical presence of any Property in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, exchange controls or acts of war or terrorism. Except as provided in the previous sentence, the liability 1 of the Custodian for losses incurred by the Customer in respect of Securities shall not be affected by the Custodian's use of Subcustodians. 3. With respect to Property held by a Subcustodian pursuant to Section 2: (a) The Custodian will identify on its books as belonging to the Customer any Property held by a Subcustodian for the Custodian's account; (b) The Custodian will hold Property through a Subcustodian only if (i) such Subcustodian and any securities depository or clearing agency in which such Subcustodian holds Property, or any of their creditors, may not assert any right, charge, security interest, lien, encumbrance or other claim of any kind to such Property except a claim of payment for its safe custody or administration and (ii) beneficial ownership of such Property may be freely transferred without the payment of money or value other than for safe custody or administration; (c) The Custodian shall require that Property held by the Subcustodian for the Custodian's account be identified on the Subcustodian's books as separate from any property held by the Subcustodian other than property of the Custodian's customers and as held solely for the benefit of customers of the Custodian; and (d) In the event that the Subcustodian holds Property in a securities depository or clearing agency, such Subcustodian will be required by its agreement with the Custodian to identify on its books such Property as being held for the account of the Custodian as a custodian for its customers. 4. The Custodian shall allow the Customer's accountants reasonable access to the Custodian's records relating to the Property held by the Custodian as such accountants may reasonably require in connection with their examination of the Customer's affairs and/or confirmation of the contents of these records. The Custodian shall also obtain from any Subcustodian (and will require each Subcustodian to use reasonable efforts to obtain from any securities depository or clearing agency in which it deposits Property) an undertaking, to the extent consistent with local practice and the laws of the jurisdiction or jurisdictions to which such Subcustodian, securities depository or clearing agency is subject, to permit independent public accountants such reasonable access to the records of such Subcustodian, securities depository or clearing agency or confirmation of the contents thereof as may be reasonably required in connection with the examination of the Customer's affairs or to take such other action as the Custodian in its judgment may deem sufficient to ensure such reasonable access. 5. The Custodian shall provide such reports and other information to the Customer and to such persons as the Customer directs as the Custodian and the Customer may agree from time to time including but not limited to an identification of entities having possession 2 of Property of the Customer and notification of any transfer to or from each account maintained by a foreign Subcustodian for the Custodian on behalf of the Customer. 6. The Custodian shall make or cause any Subcustodian to make payments from monies being held in the Account only: (a) upon the purchase of Securities and then, to the extent consistent with practice in the jurisdiction in which settlement occurs, upon the delivery of such Securities; (b) for payments to be made in connection with the conversion, exchange or surrender of Securities; (c) upon a request of the Customer that the Custodian return monies being held in the Account; (d) upon a request of the Customer that monies be exchanged for or used to purchase monies denominated in a different currency and then only upon receipt of such exchanged or purchased monies; (e) as provided in Section 8 and 12 hereof; (f) upon termination of this Custody Agreement as hereinafter set forth; and (g) for any other purpose upon receipt of explicit instructions of the Customer accompanied by evidence reasonably acceptable to the Custodian as to the authorization of such payment. Except as provided in the last two sentences of this Section 6 and as provided in Section 8, all payments pursuant to this Section 6 will be made only upon receipt by the Custodian of Authorized Instructions (as hereinafter defined) from the Customer which shall specify the purpose for which the payment is to be made. In the event that it is not possible to make a payment in accordance with Authorized Instructions of the Customer, the Custodian shall proceed in accordance with the procedures set forth in the Procedures Manual. Any payment pursuant to subsection (f) of this Section 6 will be made in accordance with Section 16. 7. The Custodian shall make or cause any Subcustodian to make transfers, exchanges or deliveries of Securities only: (a) upon sale of such Securities and then, to the extent consistent with practice in the jurisdiction in which settlement occurs, upon receipt of payment therefor; (b) upon exercise of conversion, subscription, purchase, exchange or other similar rights pertaining to such Securities and, if applicable to such exercise and if consistent with practice in the applicable jurisdiction, only on receipt of substitute or additional securities to be received upon such exercise; (c) as provided in Section 8 hereof; 3 (d) upon the termination of this Custody Agreement as hereinafter set forth; and (e) for any other purpose upon receipt of explicit instructions of the Customer accompanied by evidence reasonably acceptable to the Custodian as to the authorization of such transfer, exchange or delivery. Except as provided in the last two sentences of this Section 7 and as provided in Section 8, all transfers, exchanges or deliveries of Securities pursuant to this Section 7 will be made only upon receipt by the Custodian of Authorized Instructions of the Customer which shall specify the purpose for which the transfer, exchange or delivery is to be made. In the event that it is not possible to transfer Securities in accordance with Authorized Instructions of the Customer, the Custodian shall proceed in accordance with the procedures set forth in the Procedures Manual. Any transfer or delivery pursuant to subsection (d) of this Section 7 will be made in accordance with Section 16. 8. In the absence of Authorized Instructions from the Customer to the contrary, the Custodian may, and may authorize any Subcustodian to: (a) make payments to itself or others for reasonable expenses of handling Property or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Customer; (b) receive and collect all income and principal with respect to Securities and to credit cash receipts to the Account; (c) exchange Securities when the exchange is purely ministerial (including, without limitation, the exchange of interim receipts or temporary securities for securities in definitive form and the exchange of warrants, or other documents of entitlement to securities, for the securities themselves); (d) surrender Securities at maturity or when called for redemption upon receiving payment therefor; (e) execute in the Customer's name such ownership and other certificates as may be required to obtain the payment of income from Securities; (f) pay or cause to be paid, from the Account, any and all taxes and levies in the nature of taxes imposed on Property by any governmental authority in connection with custody of and transactions in such Property; (g) endorse for collection, in the name of the Customer, checks, drafts and other negotiable instruments; and (h) in general, attend to all nondiscretionary details in connection with the custody, sale, purchase, transfer and other dealings with the Property. 4 9. "Authorized Instructions" of the Customer shall mean instructions received by telecopy, tested telex, electronic link or other electronic means or by such other means as may be agreed in writing in advance between the Customer and the Custodian. The Custodian shall be entitled to act, and shall have no liability for acting, in accordance with the terms of this Agreement or upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Customer. 10. Securities which must be held in registered form may be registered in the name of the Custodian's nominee or, in the case of Securities in the custody of an entity other than the Custodian, in the name of such entity's nominee. The Customer agrees to hold the Custodian and Subcustodians and any such nominee harmless from any liability arising out of any such person acting as a holder of record of such Securities. The Custodian may without notice to the Customer cause any Securities to cease to be registered in the name of any such nominee and to be registered in the name of the Customer. 11. All cash received by the Custodian for the Account shall be held by the Custodian as a short-term credit balance in favor of the Customer and, if the Custodian and the Customer have agreed in writing in advance that such credit balances shall bear interest, the Customer shall earn interest at the rates and times as agreed between the Custodian and the Customer. The Customer understands that any such credit balances will not be accompanied by the benefit of any governmental insurance. 12. From time to time, the Custodian may arrange or extend short-term credit for the Customer which is (i) necessary in connection with payment and clearance of securities and foreign exchange transactions or (ii) pursuant to an agreed schedule, as and if set forth in the Procedures Manual of credits for dividends and interest payments on Securities. All such extensions of credit shall be repayable by the Customer on demand. The Custodian shall be entitled to charge the Customer interest for any such credit extension at rates to be agreed upon from time to time. In addition to any other remedies available, the Custodian shall be entitled to a right of set-off against the Property to satisfy the repayment of such credit extensions and the payment of accrued interest thereon. The Custodian may act as the Customer's agent or act as a principal in foreign exchange transactions at such rates as are agreed from time to time between the Customer and the Custodian. 13. The Customer represents that (i) the execution, delivery and performance of this Agreement (including, without limitation, the ability to obtain the short-term extensions of credit in accordance with Section 12) are within the Customer's power and authority and have been duly authorized by all requisite action (corporate or otherwise) and (ii) this Agreement 5 and each extension of short-term credit extended or arranged for the benefit of the Customer in accordance with Section 12 will at all times constitute a legal, valid and binding obligation of the Customer and be enforceable against the Customer in accordance with their respective terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights in general and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). The Custodian represents that the execution, delivery and performance of this Agreement is within the Custodian's power and authority and has been duly authorized by all requisite action of the Custodian. This Agreement constitutes the legal, valid and binding obligation of the Custodian enforceable against the Custodian in accordance with its terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights in general and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). 14. The Custodian shall be responsible for the performance of only such duties as are set forth in this Agreement or the Procedures Manual or contained in Authorized Instructions given to the Custodian which are not contrary to the provisions of any relevant law or regulation. The Custodian shall hold harmless and indemnify the Customer from and against any loss, damage, cost, expense, liability or claim arising out of the Custodian's negligent or willful failure to comply with the terms of this Agreement or arising out of the Customer's negligence or willful misconduct. Upon the request of the Custodian, the Customer agrees to deliver to the Custodian a duly executed power of attorney, in form and substance satisfactory to the Custodian, authorizing the Custodian to take any action or execute any instrument on behalf of the Customer as necessary or advisable to accomplish the purposes of this Agreement. 15. The Customer agrees to pay to the Custodian from time to time such compensation for its services pursuant to this Agreement as may be mutually agreed upon from time to time and the Custodian's reasonable out-of-pocket or incidental expenses. The Customer hereby agrees to hold the Custodian harmless from any liability or loss resulting from any taxes or other governmental charges, and any expenses related thereto, which may be imposed or assessed with respect to the Account or any Property held therein. The Custodian is and any Subcustodians are authorized to charge the Account for such items and the Custodian shall have a lien, charge and security interest on any and all Property for any amount owing to the Custodian for safe custody or administration from time to time under this Agreement. 6 If the Customer is a U.S. person as defined in Rule 902 promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act"), the Customer recognizes that, in connection with the Customer's election from time to time to participate in distributions of securities (whether pursuant to rights offerings, warrant subscriptions, mergers, reorganizations or otherwise) which have not been registered pursuant to the Act, the Custodian may inform the issuer and its agents that the acquiror of the securities is a U.S. person. The Custodian shall not be responsible to the Customer for the consequences of any issuer's or agent's refusal to permit the Customer to acquire such securities, and the Customer shall hold the Custodian harmless from liability to the issuer and its agents in connection with any such election by the Customer. 16. This Agreement may be terminated by the Customer or the Custodian by 60 days' written notice to the other, sent by registered mail. If notice of termination is given, the Customer shall, within 15 days following the giving of such notice, deliver to the Custodian a statement in writing specifying the successor custodian or other person to whom the Custodian shall transfer the Property. In either event the Custodian, subject to the satisfaction of any lien it may have, will transfer the Property to the person so specified. If the Custodian does not receive such statement the Custodian, at its election, may transfer the Property to a bank or trust company established under the laws of the United States or any state thereof to be held and disposed of pursuant to the provisions of this Agreement or may continue to hold the Property until such a statement is delivered to the Custodian. In such event the Custodian shall be entitled to fair compensation for its services during such period as the Custodian remains in possession of any Property and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect; provided, however, that the Custodian shall no longer settle any transactions in securities for the Account 17. The Custodian, its agents and employees will maintain the confidentiality of information concerning the Property held in the Customer's account, including in dealings with affiliates of the Custodian. In the event the Custodian or any Subcustodian is requested or required to disclose any confidential information concerning the Property, the Custodian shall to the extent practicable and legally permissible, promptly notify the Customer of such request or requirement so that the Customer may seek a protective order or waive the Custodian's or such Subcustodian's compliance with this Section 16. In the absence of such a waiver, if the Custodian or such Subcustodian is compelled, in the opinion of its counsel, to disclose any confidential information, the Custodian or such Subcustodian may disclose such information to such persons as, in the opinion of counsel, is so required. 7 18. Any notice or other communication from the Customer to the Custodian, unless otherwise provided by this Agreement, shall be sent by certified or registered mail to Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York, 11201, Attention: Vice President, and any notice from the Custodian to the Customer is to be mailed postage prepaid, addressed to the Customer at the address appearing below, or as it may hereafter be changed on the Custodian's records in accordance with notice from the Customer. 19. The Custodian may assign all of its rights and obligations hereunder to any other entity which is qualified to act as custodian under the terms of this Agreement and majority-owned, directly or indirectly, by Morgan Stanley Group Inc., and upon the assumption of the rights and obligations hereunder by such entity, such entity shall succeed to all of the rights and obligations of, and be substituted for, the Custodian hereunder as if such entity had been originally named as custodian herein. The Custodian shall give prompt written notice to the Customer upon the effectiveness of any such assignment. This Agreement shall bind the successors and assigns of the Customer and the Custodian and shall be governed by the laws of the State of New York applicable to contracts executed in and to be performed in that state. COLUMBIA SPECIAL FUND, INC. By GEORGE L. HANSETH ----------------------------- Name: George L. Hanseth Title: Senior Vice President Address for record: 1301 SW Fifth Avenue, PO Box 1350 Portland, Oregon 97207-1350 Accepted: MORGAN STANLEY TRUST COMPANY By J. ROBERTS -------------------- Authorized Signature 8 Appendix A CURRENT FEE SCHEDULE FOR COLUMBIA SPECIAL FUND, INC. This letter describes Morgan Stanley Trust Company's ("Morgan Stanley") compensation under this revised fee schedule dated June 7, 1993 with Columbia Special Fund, Inc. Morgan Stanley's compensation shall be as follows:
Transaction Custody Rate County/Product Rate (Basis Points) - -------------- ---- -------------- Australia $75 14 Austria $50 11 Belgium $50 11 Canada $75 8 Denmark $35 14 Finland $35 20 France $75 15 Germany $35 8 Hong Kong $75 15 Ireland $80 12 Italy $80 12 Japan $30 6 Malaysia $100 15 Mexico $125 30 Netherlands $50 12 New Zealand $75 15 Norway $35 10 Singapore $80 12 South Africa $75 9 Spain $80 21 Sweden $50 11 Switzerland $35 12 United Kingdom $50 10 United States $35 4 Eurobonds $35 6 Euro CDs $120 per CD/month
Transactions are defined in the Morgan Stanley Trust Company Billing Guide, as is the method of calculating custody. All new business will be separately negotiated. You are requested to contact your customer executive if you are trading in new countries or in new products. If your customer executive is not notified ahead of time, you will charged at the MSTC generic rates for each respective new country / new product. In-Kind transactions will not be charged. 9 Appendix A COLUMBIA SPECIAL FUND, INC. Cash movements will not be charged. Registration/transfer fees will be charged where incurred by Morgan Stanley. Stamp taxes/duties will be charged where incurred by Morgan Stanley. All fees are calculated and billed monthly in arrears. The fees are due for renegotiation two years from the date of the Agreement, and they will remain effective until renegotiation is complete. MSTC agrees to limit the transaction fees charged to Columbia Special Fund, Inc. (the Fund) to 100 per month for the first three months following the launch date of the Fund. Beyond the third month MSTC will resume charging for all transactions as described in your Billing Guide. For further assistance, please contact Lee William, your customer executive, at (718) 754-2734, or Alice Malina, your billing representative, at (718) 754-2704. 10 MORGAN STANLEY TRUST COMPANY MARKET COVERAGE/CENTRAL DEPOSITORY LIST APRIL 1993
COUNTRY AGENT CENTRAL DEPOSITORY - ------- ----- ------------------ Argentina Citibank N.A. Caja de Valores Australia Australia and New Zealand Bank CHESS** Austria Euroclear OKB Belgium Banque Bruxellas Lambert CIK Brazil Banco de Boston BOVESPA Rio de Janeiro Stock Exchange Canada Toronta Dominion Bank CDS Chile Citibank N.A. N/A China Hongkong & Shanghai Bank. Corp. Shenzhen Exchange: Citibank, N.A. Standard Chartered Bank Hongkong & Shanghai Bank, Corp. Shanghia Exchange: Shanghai Exchange Colombia Cititrust N/A Denmark Euroclear VP Finland Euroclear N/A France Banque Indosuez SICOVAM Germany BHF Bank DKV Greece Citibank N.A. N/A Hong Kong Hongkong & Shanghai Bank. Corp. CCASS Hungary Euroclear (see Austria) OKB Citibank Budapest N/A India* Hongkong & Shanghai Bank. Corp. N/A Indonesia Hongkong & Shanghai Bank. Corp. N/A Ireland Allied Irish Bank N/A Israel Bank Hapoalim SECH Italy Barclays Bank Monte Titoli S.p.A. Japan Morgan Stanley International JASDEC Mutual Fund Clients: Mitsubishi Bank Ltd Jordan Arab Bank N/A Korea Standard Chartered Bank KCD Malaysia Oversea Chinese Banking Corp. MCD** Mexico Citibank N.A. S.D. Indeval Netherlands ABN Amro Bank NECIGEF New Zealand Bank of New Zealand N/A Norway Euroclear VPS Registered Shares: Christiana Bank
11
COUNTRY AGENT CENTRAL DEPOSITORY - ------- ----- ------------------ Pakistan Standard Chartered Bank SCD** Peru Citibank N.A. N/A Philippines Hongkong & Shanghai Bank. Corp. N/A Poland Bank Polska Kasa Opieki S.A. NDS Mutual Fund Clients: Citibank NDS Portugal Banco Commercial Portugues N/A Singapore Oversea Chinese Banking Corp. CDP Spain Banco Santander SCLV Sri Lanka Hongkong & Shanghai Bank. Corp. CDS Sweden Euroclear VPC Switzerland JP Morgan SEGA Taiwan* Hongkong & Shanghai Bank. Corp. TSCD Thailand Standard Chartered Bank SDC Turkey Citibank N.A. N/A United Kingdom Barclays Bank PLC N/A USA DTC DTC National Westminster N/A Uruguay Citibank N.A. N/A Venezuela Citibank N.A. N/A
*Not operational until sub-custody agreement is secured. **These central depositories are not in operation as of yet. 12 GUIDE TO CENTRAL DEPOSITORY ABBREVIATIONS -----------------------------------------
Country Mnemonic Central Depository - ------- -------- ------------------ Australia** CHESS Clearing House Electronic Subregister System Austria OKB OsterreicheKontrollbank Belgium CIK Caisse Interprofesionelle de Depots et de Virements de Tires Brazil BOVESPA Sao Paulo Stock Exchange Canada CDS The Canadian Depository for Securities Denmark VP Vaerdipapircentralen French SICOVAM Societe Interprofessionelle pour la Compensation des Valeurs Mobilleres Germany DKV Deutscher Kassenverein AG Hong Kong CCASS Central Clearing and Settlement System Hungary OKB OsterreicheKontrollbank (of Austria) Israel SECH Stock Exchange Clearing House Japan JASDEC Japan Securities Depository Center Korea KCD Korean Central Depository Malaysia** MCD* Malaysian Central Depository Netherlands NECIGEF Netherlands Central Institute for Giral Effectenclearing Norway VPS Verdipapirsentralen Pakistan** SCD Securities Central Depository Co. Poland NDS National Directory of Securities Singapore CDP Central Depository Pte Ltd. Spain SCLV Serviclo de Compensacion Liquidacion de Valores Sri Lanka CDS Central Depository System Pvt Ltd Sweden VPC Vardipapperscentralen Switzerland SEGA Schweizerische EffektenGiro AG Taiwan* TSCD Taiwan Securities Depository Co. Thailand SCD Share Depository Center
*Not operational until sub-custody agreement is secured. **These central depositories are not in operation as of yet. 13 EX-99.9 9 EXHIBIT 99.9 EXHIBIT 9 COLUMBIA SPECIAL FUND, INC. TRANSFER AGENT AGREEMENT December 10, 1997 This Agreement is made between COLUMBIA SPECIAL FUND, INC. ("Fund"), an Oregon corporation, and COLUMBIA TRUST COMPANY ("Agent"), an Oregon corporation. Fund is an investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), whose shares are registered for sale under the Securities Act of 1933, as amended (the "1933 Act"); and Fund desires to have Agent serve as transfer agent and dividend disbursing agent for Fund, and Agent is willing to serve as transfer agent and dividend disbursing agent for Fund. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, Fund and Agent agree as follows: 1. APPOINTMENT. Fund hereby appoints Agent as transfer agent for the shares of the Fund, as described in the Articles of Incorporation of the Fund, (the "Stock") and dividend disbursing agent for Fund, and Agent agrees to serve as transfer agent and dividend disbursing agent under the terms and conditions hereinafter set forth. 2. DOCUMENTS. Fund has furnished Agent copies of Fund's Articles of Incorporation, investment advisory contract, custodian contract, all account application forms, and other documents relating to shareholders' accounts and a certified copy of the resolutions of Fund's Board of Directors adopting Fund's form of stock certificate and approving the appointment of Agent hereunder. Fund shall furnish promptly to Agent a copy of any amendment or supplement to the above-mentioned documents and any additional documents necessary for Agent to perform its functions hereunder. 3. AUTHORIZED SHARES. Fund certifies to Agent that, as of the date hereof, Fund is authorized to issue 100,000,000 shares. 4. SERVICES TO BE PERFORMED. Agent shall be responsible for performing the duties of transfer agent and dividend disbursing agent for Fund, which duties are more fully set forth in Schedule A to this Agreement. All computer programs and procedures developed by Agent to perform services required under this Agreement shall remain the exclusive property of Agent. 5. MAINTENANCE OF RECORDS; CONFIDENTIALITY. All records maintained by Agent as required on Schedule A shall remain the exclusive property of Fund and shall be preserved and retained by Agent while this Agreement remains in effect. Agent shall make available during regular business hours all records and other data created and maintained pursuant to this Agreement for reasonable audit and inspection by the Fund or any person retained by Fund. Agent shall treat all records and other information with respect to Fund with confidence. 6. COMPENSATION. As compensation for the performance of the services described in parts I and II of Schedule A, Agent shall receive from Fund a per account fee in the amount set forth in Schedule B. These fees will be charged for any account in existence during any part of a month, and the fees will be charged for any part of a month preceding termination of this Agreement. As compensation for the performance of extra charge services described in part III of Schedule A, Agent shall be paid by Fund at the rates listed on Schedule B. Upon request of the Agent, the hourly rates listed on Schedule B may be adjusted, subject to approval by the Fund's Board of Directors in accordance with paragraph 17. 7. EXPENSES. Fund agrees to pay directly or reimburse Agent for postage and the procurement or printing of share certificates, statements, envelopes, checks, reports, tax forms, proxies, or other forms of printed material required in the performance of its services to Fund under this Agreement, and Agent agrees that Fund may purchase these materials directly for use by Agent, subject to prior approval by Agent as to the compatibility of any materials with Agent's data processing equipment. Fund agrees to pay directly or reimburse Agent for all freight and other delivery charges and insurance or bonding charges incurred by Agent in delivering certificates to shareholders and any and all other out-of-pocket expenses and charges incurred by Agent in performing services under this Agreement. 8. MONTHLY STATEMENT. At the end of each month during the term of this Agreement and upon termination of this Agreement, Agent will render an itemized statement to Fund for its fees and expenses under this Agreement. Payment by Fund is due 10 days from the date the statement is received. 9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. 9.1 Agent represents that it is registered with the Securities and Exchange Commission as a transfer agent under Section 17A of the Securities Exchange Act of 1934, as amended, and will notify the Fund promptly if its registration is revoked or if any proceeding is commenced before the Securities and Exchange Commission which may lead to revocation. Agent shall be responsible for compliance with all laws, rules, and regulations of governmental authorities having jurisdiction over transfer agents and their activities. 9.2 Except for the accuracy of information furnished to Fund by Agent, Fund assumes full responsibility for the preparation, contents, and distribution of its prospectuses and for compliance with all applicable requirements of the 1933 Act, the 1940 Act, and any other laws, rules, or regulations of governmental authorities with jurisdiction over Fund. 2 10. REFERENCES TO AGENT. Fund shall not circulate any printed matter that contains any reference to Agent without the prior written approval of Agent, except printed matter that identifies Agent as transfer agent and dividend disbursing agent for Fund. 11. ACTS OF GOD, NATIONAL EMERGENCY, ETC. Agent shall not be liable for loss of data, delays, or errors occurring by reason of circumstances beyond its control, including but not limited to acts of civil or military authority, national emergencies, fire, flood, catastrophe, acts of God, insurrection, war, riot, failure of transportation, communication, or power supply, or machine breakdown. Agent shall use its best efforts to minimize the likelihood of damage, loss of data, delays, or errors resulting from such uncontrollable events, and if damage, loss of data, delays, or errors occur, Agent shall use its best efforts to mitigate the effects of the occurrence. 12. STANDARD OF CARE. Agent shall at all times act in good faith and use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement and to absorb all costs for time, materials, or other expenses necessary to correct any errors made by Agent. Agent shall not be liable for any loss or damage due to its errors unless the errors are caused by its gross negligence, bad faith, or willful misconduct or that of its employees or agents. Fund agrees to pay Agent, at the rates set forth in Schedule B, for any excess work required by Agent due to the errors of Fund's employees or representatives or due to incorrect data furnished to Agent by Fund, Fund's investment adviser, or Fund's custodian. 13. INSTRUCTIONS AND OPINION OF COUNSEL. At any time Agent may apply to an officer of Fund for instructions and consult counsel for Fund or its own counsel on any matter arising in connection with this Agreement. Agent shall not be liable for any action taken or omitted by it in good faith in accordance with such instructions or with the advice or opinion of such counsel. 14. INDEMNIFICATION. Fund shall indemnify and hold Agent harmless from all loss, cost, damage, and expense, including reasonable expenses for counsel, incurred by Agent resulting from any claim, demand, action, or suit in connection with the performance of its duties hereunder or as the result of acting upon any instruction, advice, or opinion obtained pursuant to paragraph 13 hereof, upon any other instruction reasonably believed by Agent to have been properly executed by a duly authorized officer of Fund, or upon any information, data, records, or documents provided to Agent by Fund, Fund's investment adviser, or Fund's custodian. This indemnification shall not apply to actions or omissions constituting gross negligence, bad faith, or willful misconduct of Agent, its employees, or agents. Prior to confessing any claim against it which may be subject to this indemnification, Agent shall give Fund reasonable opportunity to defend against that claim in its own name or in the name of Agent. 15. FIDELITY BOND. Agent will maintain in force throughout the duration of this Agreement a fidelity bond that complies with applicable regulatory requirements, written by a reputable bonding company, covering theft, embezzlement, forgery, and other acts of 3 malfeasance by Agent, its employees, or agents in connection with services performed for Fund. 16. DURATION AND TERMINATION. 16.1 This Agreement shall remain in force until two years from the date hereof and may be continued from year to year thereafter if approved annually by a vote of a majority of the Fund's shareholders (as determined in accordance with the requirements of the 1940 Act) or by its Board of Directors and in either case a vote of a majority of the directors who are not parties to this Agreement or interested persons of any such party cast in person at a meeting called for the purpose of voting on approval. 16.2 This Agreement may be terminated at any time without the payment of any penalty by vote of the Trustees of Fund or by vote of a majority of the outstanding shares of Fund on 60 days written notice to the other party. This Agreement may be terminated by Agent upon 180 days written notice thereof to Fund. Any termination in accordance with this Agreement shall not affect the rights and obligations of the parties under paragraphs 11, 12, 13, and 14 hereof. Immediately upon termination of this Agreement, all records and other data in the possession of Agent which are the property of Fund shall be furnished to Fund in computer written data forms as requested by Fund. 16.3 This Agreement shall automatically terminate if it is assigned, the term "assignment" for this purpose having the meaning defined in Section 2(a)(4) of the 1940 Act. Agent shall notify Fund of any change in the officers or directors of Agent within a reasonable time after the change. 17. AMENDMENTS. This Agreement may be amended with the written consent of Agent and Fund if the amendment has been approved by the Board of Directors of Fund, including a majority of the disinterested directors. 18. NOTICES. Any notice shall be officially given when sent by registered or certified mail by either party to the following addresses, provided that either party may notify the other of any changed address to which such notices should be mailed hereunder: If to Fund: Columbia Special Fund, Inc. 1301 SW Fifth Avenue PO Box 1350 Portland, Oregon 97207 Attention: President If to Agent: Columbia Trust Company 1301 SW Fifth Avenue PO Box 1350 Portland, Oregon 97207 Attention: President 4 19. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Oregon. 20. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties, supersedes any agreements previously entered into by them, and may be amended only by written amendment, duly executed on behalf of the respective parties in accordance with paragraph 17. IN WITNESS WHEREOF, the parties hereto cause this Agreement to be duly executed and to become effective as of the date first written above. COLUMBIA SPECIAL FUND, INC. By J. JERRY INSKEEP, JR ------------------------- Title: President COLUMBIA TRUST COMPANY By GEORGE L. HANSETH --------------------- Title: Vice President 5 SCHEDULE A I. Shareholder Services A. Maintain all shareholder records on electronic data processing equipment, including: 1. Share balances 2. Account transaction history 3. Names and addresses 4. Certificate records 5. Distribution records 6. Transfer records 7. Over-all control records B. New Accounts 1. Deposit all moneys received into transfer account maintained for the Custodian 2. Set up account according to shareholders' instructions as to: a. Amount of shares purchased b. Whether to deliver stock certificates to shareholders C. Additional Purchases 1. Deposit moneys received into a transfer account maintained for the Custodian 2. Issue shareholder confirmations D. Redemptions - Full and Partial 1. Redeem shares upon shareholder request 2. Issue checks for the amount of redemption 3. Issue and mail shareholder confirmations E. Transfer shares as requested, which includes obtaining necessary papers and documents to satisfy transfer requirements. On irregular transfers requiring 6 special legal opinions, such special legal fees, if any, are to be paid for by the Fund. F. Prepare and mail certificates as requested by shareholders G. Process changes, corrections of addresses and registrations H. Compute distributions, dividends and capital gains 1. Reinvest in additional shares as requested by shareholders 2. Issue checks as requested by shareholders 3. Advise each shareholder of amount of dividends received and tax status annually I. Handle replacement of lost certificates J. Produce transcripts of shareholder account history as required K. Maintain the controls associated with the computer programs and manual systems to arrive at the Company's total shares outstanding L. Receive mail and perform other administrative functions relating to transfer agent work II. Reports and Schedules A. Daily 1. Name and address changes 2. Name and address additions and deletions 3. Transaction Register a. Purchases b. Redemptions c. Transfer and adjustments 4. Cash reconciliation - Cash received for day 5. Check reconciliation - checks issued for day 7 6. Transaction reconciliation a. Amount received b. Total shares purchased c. Number of purchase transactions d. Dollar amount redeemed e. Shares redeemed f. Number of accounts redeeming g. Checks issued for redemptions B. Monthly/Daily 1. Balance list of shareholders in account number sequence a. Number of shares outstanding for which stock certificates were issued b. Number of shares outstanding for which stock certificates were not issued c. Total shares outstanding (a + b) 2. a. Purchases, sales and adjustments b. Certificates issued c. Certificates, redemptions and transfers d. Certificates reconciliations by certificate number C. Monthly 1. Sales by states for month D. Periodically 1. Alphabetical account listing 8 III. Extra Charge Services A. Mailing labels or other mailing services to shareholders B. Services in connection with any stock splits C. The computer system is designed to produce almost any display of statistical management or accounting data in almost any format desired by the management, auditors or directors. The parameters of reporting are only limited to the data contained on disc. With sufficient notice this information is available to management in accordance with charges as itemized in Schedule B. 9 COLUMBIA SPECIAL FUND, INC. SCHEDULE B BASIC FEE $1.50 per account per month TIME AND MATERIAL FOR EXTRA SERVICES Computer . . . . . . . . . . . . . . . . . . . . . . At Cost Key punch. . . . . . . . . . . . . . . . . . . . . . At Cost Clerical . . . . . . . . . . . . . . . . . . . . . . At Cost Programming and Direct Technical Management. . . . . . . . . . . . . . . At Cost Travel and per diem expenses (Chargeable only when authorized in advance by Fund) . . . . . . . . . . . . . . . At Cost Mailing Services . . . . . . . . . . . . . . . . . . At Cost Permanent file supplies, forms, microfilm, microfiche . . . . . . . . . . . . . . At Cost Any of the above services when performed outside regular working hours of Agent may be billed at 150 percent of the above. 10 EX-99.11 10 EXHIBIT 99.11 COOPERS Coopers & Lybrand L.L.P. & LYBRAND a professional services firm EXHIBIT 11 CONSENT OF INDEPENDENT ACCOUNTANTS To the Directors of Columbia Special Fund, Inc.: We consent to the inclusion in Post-Effective Amendment No. 13 to the Registration Statement of Columbia Special Fund, Inc. on Form N-1A (File No. 2-99207) of our report, dated February 12, 1998 on our audits of the financial statements and the financial highlights of the Fund, which report is included in the Annual Report to Shareholders for the year ended December 31, 1997, which is included in the Post-Effective Amendment to the Registration Statement. We also consent to the reference to our Firm under the caption "Independent Accountants." COOPERS & LYBRAND L.L.P. Portland, Oregon February 23, 1998 Coopers & Lybrand L.L.P is a member of Coopers & Lybrand International, a Swiss limited liability association. EX-99.12(B) 11 EXHIBIT 99.12(B) [LOGO] COLUMBIA FUNDS 1997 ANNUAL REPORT COLUMBIA COMMON STOCK FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA GROWTH FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA INTERNATIONAL STOCK FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA SPECIAL FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA SMALL CAP FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA REAL ESTATE EQUITY FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA BALANCED FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA DAILY INCOME COMPANY ---------------------------------------------------- ---------------------------------------------------- COLUMBIA U.S. GOVERNMENT SECURITIES FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA FIXED INCOME SECURITIES FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA MUNICIPAL BOND FUND ---------------------------------------------------- ---------------------------------------------------- COLUMBIA HIGH YIELD FUND DEAR COLUMBIA INVESTOR: We are pleased to present the 1997 Columbia Funds Shareholder Report. Inside you will find updated financial information and summaries of each Fund's investment activity for the year, along with a chart illustrating the growth of a hypothetical investment, compared to each Fund's industry benchmark. The "Overview of the Markets" on page one summarizes stock and bond market activity during 1997. In addition, Columbia's investment approach is described, highlighting themes and strategies used during the year to meet the objectives of each Fund. We hope that you find this information helpful as you evaluate the performance of your investments. As always, we appreciate the confidence and trust you have placed in Columbia Funds, and we look forward to helping you achieve your investment goals in the months and years to come. Sincerely, [SIG] [SIG] John A. Kemp Thomas L. Thomsen CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF INVESTMENT OFFICER COLUMBIA FUNDS MANAGEMENT COMPANY COLUMBIA FUNDS MANAGEMENT COMPANY
FRONT COVER FEATURES A PHOTOGRAPH OF THE 80-YEAR-OLD VISTA HOUSE, PERCHED ATOP CROWN POINT AT THE MOUTH OF THE COLUMBIA RIVER GORGE. THE PHOTO WAS TAKEN IN OREGON, LOOKING ACROSS TO WASHINGTON STATE. TABLE OF CONTENTS ----------------------------------------------------------------- ANNUAL REPORT, DECEMBER 31, 1997 AN OVERVIEW OF THE MARKETS.....................................................1 COLUMBIA COMMON STOCK FUND Investment Review............................................................3 Financial Highlights........................................................15 Schedule of Investments.....................................................27 Statement of Assets and Liabilities.........................................61 Statement of Operations.....................................................64 Statements of Changes in Net Assets.........................................67 COLUMBIA GROWTH FUND Investment Review............................................................4 Financial Highlights........................................................16 Schedule of Investments.....................................................29 Statement of Assets and Liabilities.........................................61 Statement of Operations.....................................................64 Statements of Changes in Net Assets.........................................67 COLUMBIA INTERNATIONAL STOCK FUND Investment Review............................................................5 Financial Highlights........................................................17 Schedule of Investments.....................................................31 Statement of Assets and Liabilities.........................................61 Statement of Operations.....................................................64 Statements of Changes in Net Assets.........................................67 COLUMBIA SPECIAL FUND Investment Review............................................................6 Financial Highlights........................................................18 Schedule of Investments.....................................................35 Statement of Assets and Liabilities.........................................61 Statement of Operations.....................................................64 Statements of Changes in Net Assets.........................................68 COLUMBIA SMALL CAP FUND Investment Review............................................................7 Financial Highlights........................................................19 Schedule of Investments.....................................................37 Statement of Assets and Liabilities.........................................62 Statement of Operations.....................................................65 Statements of Changes in Net Assets.........................................68 COLUMBIA REAL ESTATE EQUITY FUND Investment Review............................................................8 Financial Highlights........................................................20 Schedule of Investments.....................................................39 Statement of Assets and Liabilities.........................................62 Statement of Operations.....................................................65 Statements of Changes in Net Assets.........................................68 COLUMBIA BALANCED FUND Investment Review............................................................9 Financial Highlights........................................................21 Schedule of Investments.....................................................40 Statement of Assets and Liabilities.........................................62 Statement of Operations.....................................................65 Statements of Changes in Net Assets.........................................69 COLUMBIA DAILY INCOME COMPANY Investment Review...........................................................10 Financial Highlights........................................................22 Schedule of Investments.....................................................45 Statement of Assets and Liabilities.........................................62 Statement of Operations.....................................................65 Statements of Changes in Net Assets.........................................69 COLUMBIA U.S. GOVERNMENT SECURITIES FUND Investment Review...........................................................11 Financial Highlights........................................................23 Schedule of Investments.....................................................48 Statement of Assets and Liabilities.........................................63 Statement of Operations.....................................................66 Statements of Changes in Net Assets.........................................69 COLUMBIA FIXED INCOME SECURITIES FUND Investment Review...........................................................12 Financial Highlights........................................................24 Schedule of Investments.....................................................49 Statement of Assets and Liabilities.........................................63 Statement of Operations.....................................................66 Statements of Changes in Net Assets.........................................70 COLUMBIA MUNICIPAL BOND FUND Investment Review...........................................................13 Financial Highlights........................................................25 Schedule of Investments.....................................................52 Statement of Assets and Liabilities.........................................63 Statement of Operations.....................................................66 Statements of Changes in Net Assets.........................................70 COLUMBIA HIGH YIELD FUND Investment Review...........................................................14 Financial Highlights........................................................26 Schedule of Investments.....................................................58 Statement of Assets and Liabilities.........................................63 Statement of Operations.....................................................66 Statements of Changes in Net Assets.........................................70 NOTES TO FINANCIAL STATEMENTS.................................................71 COLUMBIA FUNDS P.O. BOX 1350 PORTLAND, OR 97207-1350 222-3606 1-800-547-1707 WWW.COLUMBIAFUNDS.COM AN OVERVIEW OF THE MARKETS ----------------------------------------------------------------- A LOOK BACK AT 1997 The year was ushered in with favorable economic conditions. While the GDP exceeded expectations in the first quarter, it was not accompanied by higher inflation. The Fed, nevertheless, responded to the quickly growing economy by raising short-term interest rates .25% at the end of March. This action set the tone for a dramatic increase in stock market volatility in the second quarter that continued throughout much of the year. Immediately after the rate hike, both the S&P 500 and NASDAQ gave up most of their year-to-date gains, only to have investors bid prices right back up. By the end of the second quarter, the S&P 500 had gained 20.59%, led by a narrow group of large company stocks. GROSS DOMESTIC PRODUCT VS. INFLATION IN 1997 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROSS DOMESTIC PRODUST VS. INFLATION IN 1997 GDP INFLATION (SEASONALLY ADJUSTED ANNUAL RATE) 1QTR 4.90% 2QTR 3.30% 3QTR 3.10% 4QTR 4.30%
In the third quarter, the market began to broaden as investors gained confidence about continued moderate economic growth and low inflation. Investors moved away from large capitalization stocks to seek values in smaller cap companies and issues overseas. Meanwhile, continuing earnings growth, expanding profit margins, subdued inflation and low interest rates all suggested that the stock market would prolong its historic bull run for a 13th consecutive year. Although it appeared that the economy was approaching full utilization, there were no signs of excess or imbalance that suggested the Fed might tighten rates in the near term. 30-YEAR TREASURY YIELDS OVER THE LAST SIX YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1/3/92 7.48 1/10/92 7.39 1/17/92 7.61 1/24/92 7.71 1/31/92 7.76 2/7/92 7.76 2/14/92 7.9 2/21/92 7.94 2/28/92 7.79 3/6/92 7.93 3/13/92 8.07 3/20/92 8.05 3/27/92 7.94 4/3/92 7.88 4/10/92 7.89 4/17/92 7.94 4/24/92 8.04 5/1/92 8.01 5/8/92 7.89 5/15/92 7.82 5/22/92 7.82 5/29/92 7.84 6/5/92 7.85 6/12/92 7.88 6/19/92 7.83 6/26/92 7.78 7/3/92 7.63 7/10/92 7.63 7/17/92 7.68 7/24/92 7.57 7/31/92 7.46 8/7/92 7.39 8/14/92 7.32 8/21/92 7.35 8/28/92 7.42 9/4/92 7.28 9/11/92 7.29 9/18/92 7.32 9/25/92 7.36 10/2/92 7.33 10/9/92 7.52 10/16/92 7.53 10/23/92 7.64 10/30/92 7.62 11/6/92 7.76 11/13/92 7.56 11/20/92 7.53 11/27/92 7.59 12/4/92 7.49 12/11/92 7.44 12/18/92 7.42 12/25/92 7.36 1/1/93 7.4 1/8/93 7.46 1/15/93 7.35 1/22/93 7.29 1/29/93 7.2 2/5/93 7.16 2/12/93 7.12 2/19/93 7.01 2/26/93 6.89 3/5/93 6.74 3/12/93 6.86 3/19/93 6.81 3/26/93 6.94 4/2/93 7.05 4/9/93 6.85 4/16/93 6.75 4/23/93 6.79 4/30/93 6.92 5/7/93 6.84 5/14/93 6.94 5/21/93 7.03 5/28/93 6.98 6/4/93 6.91 6/11/93 6.81 6/18/93 6.81 6/25/93 6.7 7/2/93 6.66 7/9/93 6.64 7/16/93 6.54 7/23/93 6.7 7/30/93 6.56 8/6/93 6.53 8/13/93 6.35 8/20/93 6.22 8/27/93 6.13 9/3/93 5.94 9/10/93 5.88 9/17/93 6.04 9/24/93 6.05 10/1/93 5.99 10/8/93 5.92 10/15/93 5.79 10/22/93 5.98 10/29/93 5.97 11/5/93 6.21 11/12/93 6.15 11/19/93 6.34 11/26/93 6.26 12/3/93 6.25 12/10/93 6.19 12/17/93 6.28 12/24/93 6.21 12/31/93 6.35 1/7/94 6.23 1/14/94 6.3 1/21/94 6.28 1/28/94 6.22 2/4/94 6.36 2/11/94 6.41 2/18/94 6.63 2/25/94 6.71 3/4/94 6.84 3/11/94 6.9 3/18/94 6.92 3/25/94 7.02 4/1/94 7.25 4/8/94 7.26 4/15/94 7.29 4/22/94 7.23 4/29/94 7.31 5/6/94 7.54 5/13/94 7.49 5/20/94 7.3 5/27/94 7.39 6/3/94 7.27 6/10/94 7.31 6/17/94 7.45 6/24/94 7.52 7/1/94 7.61 7/8/94 7.69 7/15/94 7.54 7/22/94 7.56 7/29/94 7.4 8/5/94 7.48 8/12/94 7.48 8/19/94 7.49 8/26/94 7.7 9/2/94 7.77 9/9/94 7.79 9/16/94 7.82 9/23/94 7.91 9/30/94 7.83 10/7/94 7.98 10/28/94 7.96 11/4/94 8.16 11/11/94 8.15 11/18/94 8.13 11/25/94 7.93 12/2/94 7.91 12/9/94 7.86 12/16/94 7.85 12/23/94 7.83 12/30/94 7.88 1/6/95 7.86 1/13/95 7.79 1/20/95 7.89 1/27/95 7.73 2/3/95 7.63 2/10/95 7.67 2/17/95 7.59 2/24/95 7.53 3/3/95 7.54 3/10/95 7.46 3/17/95 7.37 3/24/95 7.36 3/31/95 7.43 4/7/95 7.39 4/14/95 7.34 4/21/95 7.33 4/28/95 7.34 5/5/95 7.02 5/12/95 6.99 5/19/95 6.92 5/26/95 6.75 6/2/95 6.53 6/9/95 6.73 6/16/95 6.62 6/23/95 6.5 6/30/95 6.62 7/7/95 6.52 7/14/95 6.6 7/21/95 6.96 7/28/95 6.9 8/4/95 6.91 8/11/95 6.99 8/18/95 6.9 8/25/95 6.7 9/1/95 6.62 9/8/95 6.59 9/15/95 6.48 9/22/95 6.58 9/29/95 6.5 10/6/95 6.42 10/13/95 6.3 10/20/95 6.36 10/27/95 6.36 11/3/95 6.28 11/10/95 6.34 11/17/95 6.23 11/24/95 6.25 12/1/95 6.09 12/8/95 6.05 12/15/95 6.1 12/22/95 6.06 12/29/95 5.95 1/5/96 6.04 1/12/96 6.15 1/19/96 5.97 1/26/96 6.04 2/2/96 6.16 2/9/96 6.1 2/16/96 6.24 2/23/96 6.4 3/1/96 6.37 3/8/96 6.71 3/15/96 6.74 3/22/96 6.66 3/29/96 6.67 4/5/96 6.82 4/12/96 6.8 4/19/96 6.79 4/26/96 6.79 5/3/96 7.12 5/10/96 6.93 5/17/96 6.83 5/24/96 6.83 5/31/96 6.99 6/7/96 7.03 6/14/96 7.09 6/21/96 7.1 6/28/96 6.87 7/5/96 7.19 7/12/96 7.03 7/19/96 6.97 7/26/96 7.01 8/2/96 6.74 8/9/96 6.69 8/16/96 6.77 8/23/96 6.96 8/30/96 7.12 9/6/96 7.11 9/13/96 6.95 9/20/96 7.04 9/27/96 6.91 10/4/96 6.74 10/11/96 6.84 10/18/96 6.8 10/25/96 6.82 11/1/96 6.68 11/8/96 6.51 11/15/96 6.46 11/22/96 6.44 11/29/96 6.35 12/6/96 6.51 12/13/96 6.57 12/20/96 6.61 12/27/96 6.56 1/3/97 6.73 1/10/97 6.84 1/17/97 6.82 1/24/97 6.89 1/31/97 6.79 2/7/97 6.7 2/14/97 6.52 2/21/97 6.64 2/28/97 6.8 3/7/97 6.81 3/14/97 6.94 3/21/97 6.97 3/28/97 7.09 4/4/97 7.12 4/11/97 7.17 4/18/97 7.05 4/25/97 7.14 5/2/97 6.87 5/9/97 6.89 5/16/97 6.9 5/23/97 6.99 5/30/97 6.91 6/6/97 6.77 6/13/97 6.72 6/20/97 6.66 6/27/97 6.74 7/4/97 6.63 7/11/97 6.53 7/18/97 6.53 7/25/97 6.45 8/1/97 6.45 8/8/97 6.64 8/15/97 6.55 8/22/97 6.65 8/29/97 6.61 9/5/97 6.64 9/12/97 6.59 9/19/97 6.38 9/26/97 6.37 9/30/97 6.4 10/6/97 6.26 10/13/97 6.43 10/20/97 6.42 10/27/97 6.13 11/3/97 6.21 11/10/97 6.14 11/17/97 6.07 11/24/97 6.07 12/1/97 6.04 12/8/97 6.14 12/15/97 5.97 12/22/97 5.89 12/29/97 5.92 1/5/98 5.74
In the fourth quarter, currency devaluations in Southeast Asia rocked investment communities worldwide and market volatility picked up dramatically in late October. The financial crisis in Asian markets was aggravated by overlending and the large amount of debt held by many private companies. At the same time, Japan, which represents a significant percentage of the world markets, showed renewed signs of a slowdown and this created little relief for international investors. As a result of this turbulence, a flight to safety prompted investors to migrate back to more liquid, large capitalization stocks and to U.S. Treasuries, pushing the yield of the long bond below 6% for the first time in almost two years. MARKET OUTLOOK The U.S. equity markets continue to trade at valuation levels that are historically high, but many positive factors support these valuations. The Fed remains vigilant, poised to tighten if economic growth or inflation heat up, but ready to provide liquidity if the economy slows or international concerns intensify. The current scenario -- expectations for modest increases in corporate profits, low inflation and declining interest rates -- is generally positive for the stock market. 1 AN OVERVIEW OF THE MARKETS - -------------------------------------------------------------------------------- At this point, however, we believe that some caution is warranted. Increased risk in the equity markets is evidenced by continued higher volatility and a preference for greater liquidity. Concerns are growing that 1998 earnings may not rise sufficiently to justify current prices. The potential for much slower growth in emerging countries (particularly in Southeast Asia and Latin America) is dimming earnings prospects for many multinational companies. INVESTMENT STRATEGY We have positioned our equity portfolios to favor domestic growth over cyclical issues. Areas that merit particular emphasis, we believe, include retail issues, health care and consumer staple stocks. Continuing strength in consumer confidence and the low level of inflation support an overweighting in these issues in spite of somewhat high valuations. We have increased utility stock holdings to take advantage of their stable relative earnings and high dividend yields. Energy issues have been deemphasized because of slowing world growth and falling commodity prices. CONSUMER CONFIDENCE EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Jan-80 85.9 Feb-80 85.3 Mar-80 80.8 Apr-80 60.5 May-80 50.1 Jun-80 56.1 Jul-80 65.4 Aug-80 70.8 Sep-80 80.3 Oct-80 84.2 Nov-80 87.2 Dec-80 78.6 Jan-81 74.4 Feb-81 69 Mar-81 77.8 Apr-81 81.6 May-81 86.9 Jun-81 83 Jul-81 83.5 Aug-81 85.7 Sep-81 75.6 Oct-81 66.9 Nov-81 66.6 Dec-81 64.9 Jan-82 62.3 Feb-82 56.7 Mar-82 57 Apr-82 61.4 May-82 56.7 Jun-82 63.2 Jul-82 56.9 Aug-82 58.1 Sep-82 54.3 Oct-82 57.4 Nov-82 59.5 Dec-82 59 Jan-83 67.6 Feb-83 79.4 Mar-83 83.1 Apr-83 87.7 May-83 87.5 Jun-83 89 Jul-83 91.2 Aug-83 91.1 Sep-83 92.1 Oct-83 96.7 Nov-83 103.6 Dec-83 103.9 Jan-84 101 Feb-84 101.1 Mar-84 106.1 Apr-84 104.8 May-84 105.8 Jun-84 100.4 Jul-84 103.1 Aug-84 100 Sep-84 99.1 Oct-84 105.4 Nov-84 97 Dec-84 102 Jan-85 103.1 Feb-85 96.1 Mar-85 104.4 Apr-85 99.6 May-85 102.6 Jun-85 103.2 Jul-85 100.9 Aug-85 96 Sep-85 96.1 Oct-85 98.1 Nov-85 98.2 Dec-85 96.9 Jan-86 96 Feb-86 95.1 Mar-86 100 Apr-86 100.2 May-86 100 Jun-86 97.5 Jul-86 91.7 Aug-86 89.7 Sep-86 85.8 Oct-86 89.7 Nov-86 93.2 Dec-86 85.4 Jan-87 91.8 Feb-87 95.8 Mar-87 97.4 Apr-87 103 May-87 102.1 Jun-87 105.8 Jul-87 110.7 Aug-87 115.7 Sep-87 115.1 Oct-87 100.8 Nov-87 107.7 Dec-87 109.9 Jan-88 114.9 Feb-88 112.7 Mar-88 115.7 Apr-88 120.2 May-88 115.7 Jun-88 113.5 Jul-88 119.7 Aug-88 110.7 Sep-88 116.9 Oct-88 112.9 Nov-88 119.3 Dec-88 115.8 Jan-89 120.7 Feb-89 117.4 Mar-89 116.6 Apr-89 116.7 May-89 117.5 Jun-89 120.4 Jul-89 114.7 Aug-89 116.3 Sep-89 117 Oct-89 115.1 Nov-89 113.1 Dec-89 106.5 Jan-90 106.7 Feb-90 107.9 Mar-90 107.3 Apr-90 102.4 May-90 101.8 Jun-90 84.7 Jul-90 85.6 Aug-90 62.6 Sep-90 61.7 Oct-90 61.2 Nov-90 55.1 Dec-90 59.4 Jan-91 81 Feb-91 79.4 Mar-91 76.4 Apr-91 78 May-91 78 Jun-91 77.7 Jul-91 76.1 Aug-91 72.9 Sep-91 60.1 Oct-91 52.7 Nov-91 52.7 Dec-91 52.5 Jan-92 50.4 Feb-92 47.3 Mar-92 56.5 Apr-92 65.1 May-92 71.9 Jun-92 72.6 Jul-92 61.2 Aug-92 59 Sep-92 57.3 Oct-92 54.6 Nov-92 65.6 Dec-92 78.1 Jan-93 76.7 Feb-93 68.5 Mar-93 63.2 Apr-93 67.6 May-93 61.9 Jun-93 58.6 Jul-93 59.2 Aug-93 59.3 Sep-93 63.8 Oct-93 60.5 Nov-93 71.9 Dec-93 79.8 Jan-94 82.6 Feb-94 79.6 Mar-94 86.7 Apr-94 92.1 May-94 88.9 Jun-94 92.5 Jul1994 91.3 Aug-94 90.4 Sep-94 89.5 Oct1994 89.1 Nov-94 100.4 Dec-94 103.4 Jan-95 101.4 Feb-95 99.4 Mar-95 100.2 Apr-95 104.6 May-95 102 Jun-95 92.8 Jul-95 101.4 Aug-95 102.4 Sep-95 97.3 Oct-95 96.3 Nov-95 101.6 Dec-95 99.2 Jan-96 88.4 Feb-96 98 Mar-96 98.4 Apr-96 104.8 May-96 103.5 Jun-96 100.1 Jul-96 107 Aug-96 112 Sep-96 111.8 Oct-96 107.3 Nov-96 109.5 Dec-96 114.2 Jan-97 118.7 Feb-97 118.9 Mar-97 118.5 Apr-97 118.5 May-97 127.9 Jun-97 129.9 Jul-97 126.3 Aug-97 127.6 Sep-97 130.2 Oct-97 123.3 Nov-97 128.3 Dec-97 134.5
REIT valuations remain attractive relative to the broader market, and expectations for double-digit total returns are not unreasonable, with lower volatility than the S&P. As we look to the year ahead, we continue to believe that economic indicators support prospects for a healthy economy. However, peaking profit margins and slowing world growth should, we believe, lead to moderating corporate earnings growth. We anticipate the recent high level of market volatility to continue, so we remain focused on companies that are expected to maintain competitive strength in their industries and deliver dependable earnings growth. So that you may evaluate how the Columbia Funds performed given this economic and financial market backdrop, the following pages contain discussions of the Funds' investment activity during 1997, along with graphs illustrating the growth of $10,000 over various time periods. Each Fund compares its performance to a relevant benchmark. Unlike the Funds, however, these benchmark indices are not actively managed and have no operating expenses, portfolio transaction costs or cash flows. Thank you for your investment in Columbia Funds. We appreciate your confidence, and look forward to serving your investment needs in the years to come. THE INVESTMENT TEAM COLUMBIA FUNDS MANAGEMENT COMPANY FEBRUARY 1998 2 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA COMMON STOCK FUND -- -------------------------------- For the third consecutive year, Columbia Common Stock Fund delivered gains in excess of 20% by posting a total return of 25.37% for 1997. The strongest performing sectors included banking and finance, consumer staples and retailers. Sectors that did not perform as well included energy, REITs and cyclicals like paper and metals. After maintaining a steady weighting in cyclical stocks, we adopted a growth strategy early in the fourth quarter, in anticipation of a slowing economy. To that end, stocks in the building, forest product, metal and chemical sectors were reduced from a total of 16% of the portfolio to 3%. We also reduced positions in energy and technology stocks. Consumer staples, health care and utilities, on the other hand, were increased.Our investment strategy assumes that profit growth in 1998 will be more difficult for domestic companies to attain. With low inflation and low interest rates, price earnings ratios will most likely hold steady for companies delivering good earnings growth. We also believe that market volatility, which has been below average over the last few years, will likely increase to more normal historical levels, making it more important to manage risk and to identify companies with the most reliable growth prospects. With this in mind, we are focusing on areas that are expected to benefit from steady earnings in a slow growth environment. With a median market cap of $10.6 billion, Columbia Common Stock Fund is well diversified with over 78 different issues at year-end. The Fund continues to seek growth of capital and dividend income by using a top down, sector rotation strategy to select stocks of large, well-established companies. SECTORS OF EMPHASIS
% of Net Assets Consumer Staples 16.8 Health Care 12.6 Consumer Non-Durables 11.5 Finance 10.0 Technology 8.6 Energy & Energy Services 7.9
As of December 31, 1997 GROWTH OF $10,000 SINCE INCEPTION EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA COMMON STOCK FUND S&P 500 10/1/91 $10,000 $10,000 12/31/91 $11,025 $10,838 12/31/92 $12,126 $11,664 12/31/93 $14,120 $12,840 12/31/94 $14,411 $13,009 12/31/95 $18,855 $17,898 12/31/96 $22,760 $22,007 12/31/97 $28,531 $29,350 Average Annual Total Returns As of December 31, 1997 CCSF S&P 500 1 Year 25.37% 33.36% 5 Years 18.66% 20.27% Since Inception 18.11% 18.64% Past Performance is not predictive of future performance.
3 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA GROWTH FUND -- -------------------------- Columbia Growth Fund gained 26.32% for the year ended December 31, 1997. Drug, bank, insurance and consumer growth stocks contributed to positive performance during the year, while REITs, health care service, and most technology stock returns lagged. The Fund's overall positive performance was attributable to rising P/Es due to lower inflation expectations and good corporate earnings growth. In 1997, the Fund's return lagged the S&P 500 Stock Index where a relatively small number of the largest capitalization stocks in the Index posted superior performance compared to the broader market. Nevertheless, we remain confident that fundamentals of the stocks in Columbia Growth Fund -- lower valuations and superior earnings growth -- are more attractive than the larger company stocks in the Index, and will reward shareholders of the Fund. TOP TEN HOLDINGS
% of Net Assets Cendant Corp. 3.2 Warnaco Group, Inc. (Class A) 3.1 Tyco International Ltd. 2.8 Cisco Systems, Inc. 2.5 Gillette Co. 2.4 Rite Aid Corp. 2.4 Philip Morris Cos., Inc. 2.1 Tandy Corp. 2.0 American General Corp. 2.0 Merck & Co., Inc. 2.0
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC We expect corporate earnings growth to slow as profit margins peak and as demand slows due to economic and currency turmoil in Southeast Asia. Events in that region have lowered inflation expectations even further, however. Therefore, interest rates could stay at current low levels, helping to support the relatively high valuations seen in the stock market. With a view toward less earnings growth and lower interest rates, we are emphasizing stocks from companies with relatively stable growth. With the Asian situation negatively affecting exporters, as well as those companies that compete with imports and that do business in Asia, we expect superior growth to come from more domestically-oriented companies and those multinational companies selling such nondurable items as drugs and various household items. With a median market cap of $9.6 billion, Columbia Growth Fund continues to be well diversified with 81 different holdings as of December 31, 1997. SECTORS OF EMPHASIS
% of Net Assets Finance 18.8 Consumer Non-Durables 16.7 Consumer Staples 14.8 Health 13.0 Technology 12.9
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF $10,000 OVER 20 YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA GROWTH FUND S&P 500 12/31/77 $10,000 $10,000 12/31/78 $10,804 $10,643 12/31/79 $15,187 $12,596 12/31/80 $21,244 $16,671 12/31/81 $20,524 $15,846 12/31/82 $30,079 $19,252 12/31/83 $36,535 $23,569 12/31/84 $34,496 $25,021 12/31/85 $45,559 $32,917 12/31/86 $48,711 $39,053 12/31/87 $55,891 $41,111 12/31/88 $61,933 $47,915 12/31/89 $79,950 $63,061 12/31/90 $77,303 $61,137 12/31/91 $103,788 $79,766 12/31/92 $116,055 $85,844 12/31/93 $131,154 $94,497 12/31/94 $130,328 $95,744 12/31/95 $173,310 $131,725 12/31/96 $209,358 $161,969 12/31/97 $264,496 $215,955 Average Annual Total Returns As of December 31, 1997 CGF S&P 500 1 Year 26.32% 33.36% 5 Years 17.91% 20.27% 10 Years 16.81% 18.04% 20 Years 17.79% 16.61% Past Performance is not predictive of future performance.
4 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA INTERNATIONAL STOCK FUND -- --------------------------------------- The Columbia International Stock Fund enjoyed strength in the first half of the year, where gains were fueled by double-digit returns in Europe, Brazil, India, Taiwan and Korea. The second half of the year grew turbulent, however, as a result of volatile and weak Asian markets, and the Fund recorded a 1997 total return of 11.47%. On early signs of turmoil in Southeast Asia, we sold positions in Korea, Malaysia, Hong Kong, and Taiwan in the third quarter, but the Fund was still negatively impacted. By October, the Asian financial crisis had spread to Hong Kong, and many major stock markets weakened, including Japan, which showed further signs of economic malaise. Led by the United States, however, most of these markets recovered to end the year on a more positive note. Despite a weak international market, Columbia International Stock Fund outperformed its benchmark for the period. Not only did the Fund underweight Japan, but stock selection TOP TEN HOLDINGS
% of Net Assets Novartis, AG 2.3 Sony Corp. 1.7 Aegon NV 1.6 Tubos de Acero de Mexico SA 1.5 SmithKline Beecham plc 1.4 Glaxo Wellcome plc 1.4 Compass Group plc 1.3 Fuji Photo Film Co., Ltd. 1.3 NTT Data Communications System Corp. 1.3 Nintendo, Co., Ltd. 1.2
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC emphasized exporting companies such as electronics and autos, which enabled the Fund's Japanese holdings to outperform the overall Japanese market. Also, above- market weightings in several smaller European markets (Sweden, Norway, Spain and Italy) helped performance. With the European Monetary Union underway (a movement toward one currency), European markets remain attractive as bond yields converge and many countries experience huge declines in interest rates. We approach the new year with uncertainty about when the Asian financial crisis will be resolved. Nevertheless, many global markets show promise. Europe's recovery is gaining momentum and we look for more domestic policy change in Japan that should aid the entire Asian region. The Fund will continue its objective of seeking long-term capital appreciation by investing primarily in stocks of companies based outside the U.S. with at least 75% of the portfolio invested in companies with market valuations over $500 million. TOP TEN COUNTRY WEIGHTINGS
% of Net Assets Japan 22.2 United Kingdom 16.4 France 8.0 Germany 6.2 Netherlands 4.2 Sweden 3.9 Mexico 3.8 Spain 3.6 Canada 3.3 India 3.1
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF $10,000 SINCE INCEPTION EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA INTERNATIONAL FT/S&P STOCK FUND EURO-PAC S&P 500 10/1/92 $10,000 $10,000 $10,000 12/31/92 $10,060 $9,628 $10,503 12/31/93 $13,417 $12,665 $11,562 12/31/94 $13,086 $13,822 $11,714 12/31/95 $13,760 $15,290 $16,117 12/31/96 $16,042 $16,180 $19,817 12/31/97 $17,881 $16,144 $26,428 Average Annual Total Returns As of December 31, 1997 CISF S&P 500 FT/S&P Euro-Pac 1 Year 11.47% 33.36% -0.22% 5 Years 12.19% 20.27% 10.89% Since Inception 11.59% 20.13% 9.46% Past Performance is not predictive of future performance.
5 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA SPECIAL FUND -- --------------------------- The Special Fund generated a total return of 12.64% for the 1997 year. During the fourth quarter, small- and mid-cap stocks underperformed the large-cap S&P 500 Stock Index. This came after an unusually strong third quarter of outperformance, which was fueled by a market rotation away from highly valued large cap stocks. The Fund's performance was adversely affected during the year by an early emphasis in the paper and metal sectors. We believed that these economically sensitive industries would offer value by benefiting from stronger than expected economic growth. In addition, we chose to de-emphasize finance stocks throughout the year in anticipation that these fully priced securities would disappoint if interest rates increased due to the strong TOP TEN HOLDINGS
% of Net Assets American Stores Co. 3.3 Safeway, Inc. 3.0 Kroger, Co. 3.0 Meyer (Fred), Inc. 2.9 Nordstrom, Inc. 2.5 Service Corp, International 2.4 ESC Medical Systems Ltd. 2.2 FIserv, Inc. 2.2 Quality Food Centers, Inc. 2.1 Abercrombie & Fitch Co. (Class A) 2.0
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC world economic growth. The demand for basic materials was reduced by the international slowdown, and this prompted a decline in domestic and foreign interest rates. In turn, investors fled from companies with less predictable earnings to those with more consistent growth. As the year came to a close, we sharply reduced our weightings in paper, metals and machinery from a total of 24% of the portfolio to 7%. We increased areas of steady growth like business and consumer services, consumer staples and health care from 30% of the portfolio to 46%. We also added to REITs and are currently maintaining a below-market weighting in technology. The long-term strategy of the Special Fund has always been to maintain a core of growth stocks while anticipating and recognizing changes in the market. This has enabled us to invest in sectors and themes that benefit from these changes. As we begin 1998, we are emphasizing consistent growth stocks, domestic companies, and risk management. This supports our outlook for low inflation, a reduced rate of corporate profit growth and the likelihood of greater stock market volatility. SECTORS OF EMPHASIS
% of Net Assets Consumer Non-Durables 25.0 Consumer Staples 16.3 Business & Consumer Services 15.7 Health Care 14.0
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF $10,000 OVER 10 YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA SPECIAL FUND S&P 500 RUSSELL 2000 12/31/87 $10,000 $10,000 $10,000 12/31/88 $14,255 $11,655 $12,502 12/31/89 $18,805 $15,339 $14,535 12/31/90 $16,475 $14,871 $11,699 12/31/91 $24,789 $19,403 $17,094 12/31/92 $28,185 $20,881 $20,240 12/31/93 $34,295 $22,986 $24,062 12/31/94 $35,080 $23,289 $23,624 12/31/95 $45,440 $32,041 $30,345 12/31/96 $51,379 $39,398 $35,349 12/31/97 $57,879 $52,533 $43,254 Average Annual Total Returns As of December 31, 1997 CSF S&P 500 Russell 2000 1 Year 12.64% 33.36% 22.36% 5 Years 15.48% 20.27% 16.40% Since Inception 19.19% 18.04% 15.77% Past Performance is not predictive of future performance.
6 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA SMALL CAP FUND -- ----------------------------- For 1997, Columbia Small Cap Fund generated a total return of 34.10%, outperforming both the S&P 500 and the Russell 2000. After particularly strong performance in the second and third quarters, however, the Fund suffered in the fourth quarter when small cap stocks sputtered in response to increased stock market volatility. Investment themes benefiting the portfolio during the year included a focus on specialty retailers based on a high level of consumer confidence and spending. We also emphasized the assisted living sector as part of our emphasis on the aging of America. Another successful strategy was to invest in stocks of well- drilling and oil equipment supply industries, which provided handsome returns. TOP TEN HOLDINGS
% of Net Assets CKE Restaurants, Inc. 2.3 Laser Industries Ltd. 2.1 North Fork Bancorp, Inc. 2.0 Tubos de Acero de Mexico SA ADR 2.0 CIBER, Inc. 1.9 Williams-Sonoma, Inc. 1.9 ATL Ultrasound, Inc. 1.8 Orbital Sciences Corp. 1.7 Engineering Animation, Inc. 1.7 Universal Health Services, Inc. (Class B) 1.6
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC During the fourth quarter, turmoil in Southeast Asian economies prompted investors to seek a safe haven in larger, more liquid stocks. The demand for liquidity depressed small cap valuations and thus stock prices. We responded by selling stocks we believed were fully valued and susceptible to correction, along with those we deemed most vulnerable to negative earnings revisions from the Asian crisis. These areas included energy and certain segments of the technology sector. Meanwhile, we increased our health care exposure due to this sector's more stable domestic revenue base and insulation from the economy. Looking ahead, we believe that relative valuations and earnings growth prospects in the small cap market are attractive based on historical ranges. In the meantime, the Fund continues to employ fundamental research to identify attractively valued, small companies with above average earnings potential. Using a bottoms up approach to stock selection, the Fund had a diversified portfolio of 101 issues at year-end and a median market capitalization of $551 million. SECTORS OF EMPHASIS
% of Net Assets Health Care 27.7 Technology 24.3 Consumer Non-Durables 10.2 Business & Consumer Services 8.0 Energy & Energy Services 6.1 Finance 6.1
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC GROWTH OF $10,000 SINCE INCEPTION EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA SMALL CAP FUND RUSSELL 2000 10/1/96 $10,000 $10,000 12/31/96 $10,762 $10,520 3/31/97 $10,224 $9,976 6/30/97 $12,245 $11,593 9/30/97 $15,021 $13,318 12/31/97 $14,432 $12,872 Average Annual Total Returns As of December 31, 1997 CSCF Russell 2000 1 Year 34.10% 22.36% Since Inception 35.76% 23.42% Past Performance is not predictive of future results.
7 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA REAL ESTATE EQUITY FUND -- -------------------------------------- Columbia Real Estate Equity Fund posted a total return of 24.74% for the year ended December 31, 1997. Real estate investment trusts (REITs) corrected early in the second quarter, along with the rest of the stock market, as investors adjusted to the March 25th rate hike by the Federal Reserve Board. Second quarter money flows into REITs subsequently slowed as investors turned their attention to the rebounding S&P 500. In the third quarter, momentum in the REIT sector resumed, and performance was led by investments in the office, hotel and industrial sectors. We maintained an overweighting in these areas as their internal and acquisition growth fundamentals suggested positive future performance. TOP TEN HOLDINGS
% of Net Assets Equity Office Properties Trust 6.4 Mack-Cali Realty Corp. 5.1 Security Capital Group, Inc. (Class B) 4.4 Security Capital Pacific Trust 4.1 Vornado Realty Trust 4.1 First Industrial Realty Trust, Inc. 3.7 Apartment Investment & Mgmt Co. (Class A) 3.7 Liberty Property Trust 3.5 Catellus Development Corp. 3.5 General Growth Properties, Inc. 3.4
AS OF DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC A below-market weighting in health care and lagging performance in the office sector penalized the portfolio in the fourth quarter. Overall, investor interest in REITs grew significantly in 1997. Money flows into REIT mutual funds were healthy, approaching $5 billion for the year. In addition, market capitalization for the REIT sector jumped 60% to stand at $145 billion by year-end. In an environment where the earnings growth of the broader market is coming into question and S&P 500 dividend yields are at historic lows, we believe that REITs offer attractive total return potential for investors looking to diversify their portfolios. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO COMPOSITION Apartments 16.2% Community Centers 11.9% Industrial 25.6% Lodging 2.9% Manufactured Homes 3.0% Office 17.2% Shopping Malls 7.8% Other 7.9% Cash 7.5% as of December 31, 1997
GROWTH OF $10,000 SINCE INCEPTION EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA NATIONAL ASSOCIATION REAL ESTATE OF REAL ESTATE EQUITY FUND INVESTMENT TRUSTS 4/1/94 $10,000 $10,000 12/31/94 $10,176 $9,978 12/31/95 $11,892 $11,502 12/31/96 $16,446 $15,558 12/31/97 $20,515 $18,710 Average Annual Total Returns As of December 31, 1997 CREF NAREIT 1 Year 24.74% 20.26% Since Inception 20.82% 17.92% Past Performance is not predictive of future performance.
8 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA BALANCED FUND -- ---------------------------- Columbia Balanced Fund returned 18.74% for the 1997 year. While large company stocks led the market in the first half, we maintained a market underweighting in them because we believed much of their price appreciation was unrelated to improving fundamentals. Not surprisingly, large company stocks corrected in the third quarter, as investors questioned the continued earnings growth of this richly valued sector. In the fourth quarter, however, market turmoil in Southeast Asia prompted investors to migrate back to large company stocks in search of greater liquidity. Overall, the equity portion of the portfolio benefited from holdings in financial services (Freddie Mac), diversified manufacturing (General Electric and Tyco Intl.), and consumer goods and services (Mattel and Service Corp. Intl.), due to their relative immunity to economic turmoil outside the U.S. TOP TEN STOCK HOLDINGS
% of Net Assets General Electric Co. 1.6 Merck & Co. 1.6 Freddie Mac 1.6 Mattel, Inc. 1.4 First Union Corp. 1.3 Tyco International Ltd. 1.3 Lilly (Eli) & Co. 1.3 Service Corp. International 1.2 Sunbeam Corp. 1.1 Bristol-Myers Squibb Co. 1.1
As of December 31, 1997 Economically sensitive cyclical stocks were influenced by volatile activity overseas, and portfolio holdings in these sectors suffered. Growth slowed worldwide, particularly in a number of natural resource-hungry developing countries. Concern about lower commodity prices led the Fund to reduce exposure to energy, forest products and chemical industries. In light of the rapid economic slowdown in Southeast Asia, technology holdings were scaled back late in the year, reflecting a growing concern about earnings expectations. 9 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA DAILY INCOME COMPANY -- ----------------------------------- Columbia Daily Income Company generated a total return of 5.11% for the twelve months ended December 31, 1997. This rate of return compares favorably to the rate of inflation as measured by the Consumer Price Index (1.7%). During the year, the Fund's 7-day average yield rose from 4.87% in January to 5.21% at year-end. While long-term interest rates declined during the year, money market rates rose slightly due to the Federal Reserve Board's .25% increase in the Federal Funds rate in March. In addition, the supply of short- term instruments later in the year was particularly strong, driving up the yields on money market instruments in December. PORTFOLIO HIGHLIGHTS Current Yield 5.21% Compound Yield 5.35%
Based on the 7 days ended December 31, 1997 Weighted Average Maturity 31.4 days
As of December 31, 1997 Because of the subdued rate of inflation, the Federal Reserve Board has left short-term rates untouched since March 25, despite a steadily growing economy. The outlook for short-term rates remains unchanged for the next few months. As always, Columbia Daily Income Company invests only in high quality, short- term debt instruments with an average maturity of 30 to 50 days, providing a very liquid, low risk investment. The Fund seeks to provide the highest level of income available that is consistent with the maintenance of liquidity and preservation of capital by investing in various money market instruments. These include commercial paper, U.S. Treasury Bills, U.S. Government agency discount notes and certificates of deposit. AT THIS TIME, MONEY MARKET YIELDS ARE VERY ATTRACTIVE RELATIVE TO THE EXPECTED RATE OF INFLATION. GROWTH OF $10,000 OVER 10 YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA DAILY INCOME COMPANY CONSUMER PRICE INDEX (INFLATION) 12/31/87 $10,000 $10,000 12/31/88 $10,707 $10,407 12/31/89 $11,659 $10,922 12/31/90 $12,573 $11,630 12/31/91 $13,285 $11,960 12/31/92 $13,716 $12,358 12/31/93 $14,061 $12,648 12/31/94 $14,578 $12,981 12/31/95 $15,378 $13,323 12/31/96 $16,141 $13,770 12/31/97 $16,967 $13,957 Average Annual Total Returns as of December 31, 1997 CDIC CPI 1 Year 5.11% 1.70% 5 Years 4.35% 2.58% 10 Years 5.43% 3.39% Past Performance is not predictive of future results.
10 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- U.S. GOVERNMENT SECURITIES FUND -- ------------------------------------- For the year ended 1997, Columbia U.S. Government Securities Fund had a total return of 5.76%. This rate of return compares very favorably to the rate of inflation as measured by the Consumer Price Index, which has increased only 1.7% for the twelve months ended December 31, 1997. Investors' interest in fixed income securities was renewed during the year, as it became EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO COMPOSITION Treasury/Agency Obligations 98.1% Cash 1.9% as of December 31, 1997
clear that the stock market was growing increasingly volatile and that a modestly growing economy was not being accompanied by a strong threat of inflation. Continued economic growth combined with low inflation has caused the Federal Reserve Board to keep interest rates unchanged since March 25th. With market turmoil in Southeast Asia, short-term Treasuries, such as those held by the Fund, are often viewed as a safe haven for investors. PORTFOLIO HIGHLIGHTS Current Yield 4.92%
Based on the 30 days ended December 31, 1997 Weighted Averages Duration 1.76 years Maturity 1.9 years
As of December 31, 1997 GROWTH OF $10,000 OVER 10 YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA MERRILL U.S. LYNCH CONSUMER GOVERNMENT 1-3 PRICE SECURITIES TREASURY INDEX FUND INDEX (INFLATION) 12/31/87 $10,000 $10,000 $10,000 12/31/88 $10,534 $10,623 $10,407 12/31/89 $11,548 $11,778 $10,922 12/31/90 $12,621 $12,924 $11,630 12/31/91 $14,227 $14,433 $11,960 12/31/92 $15,053 $15,342 $12,324 12/31/93 $15,943 $16,172 $12,648 12/31/94 $15,938 $16,265 $12,981 12/31/95 $17,565 $18,054 $13,323 12/31/96 $18,242 $18,953 $13,770 12/31/97 $19,295 $20,211 $13,957 Average Annual Total Returns as of December 31, 1997 CUSG Merrill 1-3 1 Year 5.76% 6.66% 5 Years 5.09% 5.67% 10 Years 6.79% 7.29% Past Performance is not predictive of future results.
11 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA FIXED INCOME SECURITIES FUND -- ------------------------------------------- For 1997, Columbia Fixed Income Securities Fund posted a total return of 9.56%. Although bonds suffered early in the year under pressures of a rapidly growing economy and rising interest rates, the bond market closed the year with a powerful rally triggered by market turmoil in Southeast Asia. After a volatile first quarter, bonds responded positively in the second and third quarters to a moderately growing economy with little sign of inflation. As worldwide stock market volatility intensified in the fourth quarter, investors sought refuge in fixed income. To take advantage of the changing dynamics in this arena, we initiated several shifts in asset allocation. For instance, the yield differential between mortgages and Treasuries fluctuated periodically throughout the year, providing us with opportunities to increase mortgage weightings when prices were low, and decrease mortgage weightings (take profits) when prices crept up. As interest rates dropped in the fourth quarter, we reduced the average coupon (fixed interest rate paid on bonds) of mortgage securities in order to stave off any price deterioration resulting from homeowners refinancing their mortgages (prepayment risk). EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO COMPOSITION Collateralized Mortgage Obligations 47.5% Corporate Bonds 25.9% Treasury/Agency Obligations 14.2% Mortgage Pass-Throughs 4.3% Asset Backed Securities 3.0% Cash 5.1% as of December 31, 1997
The corporate bond sector became attractive when their prices declined relative to Treasuries. We then increased the corporate bond weighting by approximately 3% in the fourth quarter, mostly in the finance sector. Short-term asset-backed securities, such as home equity loans, performed quite well in the fourth quarter, and we took profits in this sector. The Fund invests in a broad range of fixed income securities. At least 95% of assets are invested in debt securities rated Baa or higher, although the vast majority is usually invested in securities rated A or higher. The average target maturity and duration of the Fund are approximately 5.5 years and 4.6 years, respectively, which is slightly longer than the Fund's benchmark, the Lehman Aggregate Bond Index. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO QUALITY Treasury/Agency Obligations 58.8% Aaa 14.9% Aa 3.3% A 9.2% Baa 10.8% Other 3.0% as of December 31, 1997 as rated by Moody's Investor Services, Inc.
GROWTH OF $10,000 OVER 10 YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA CONSUMER FIXED INCOME LEHMAN PRICE INDEX SECURITIES FUND AGGREGATE (INFLATION) 12/31/87 $10,000 $10,000 $10,000 12/31/88 $10,772 $10,789 $10,407 12/31/89 $12,318 $12,357 $10,922 12/31/90 $13,340 $13,464 $11,630 12/31/91 $15,587 $15,618 $11,960 12/31/92 $16,832 $16,774 $12,324 12/31/93 $18,594 $18,409 $12,648 12/31/94 $17,970 $17,872 $12,981 12/31/95 $21,368 $21,173 $13,323 12/31/96 $22,088 $21,941 $13,770 12/31/97 $24,196 $24,059 $13,957 Average Annual Total Returns As of December 31, 1997 CFIS Lehman Aggregate 1 Year 9.56% 9.65% 5 Years 7.53% 7.48% 10 Years 9.24% 9.18% Past Performance is not predictive of future performance.
12 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA MUNICIPAL BOND FUND -- ---------------------------------- Columbia Municipal Bond Fund returned 8.36% for the twelve months ended December 31, 1997. During the first half of the year, fixed income securities experienced price volatility as first quarter economic growth exceeded expectations and the Federal Reserve Board hiked short-term interest rates by .25% to ward off inflation. Bonds recovered from this volatility in the second quarter, and continued to appreciate in the third quarter as moderate growth persisted with little sign of inflation. As a result, interest rates on long-term municipal securities fell approximately .20% by September 30. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO COMPOSITION State of Oregon General Obligations 8.5% Oregon General Obligation Bonds 19.6% Oregon Revenue Bonds 14.7% Oregon Other Bonds 2.6% Other Bonds 7.2% Oregon Insured Bonds 35.4% Oregon Pre-Refunded Bonds 9.1% Cash 2.9% as of December 31, 1997
In the fourth quarter, volatility in the international markets prompted a flight to high quality U.S. Treasuries, further driving bond prices up and yields down. With concern about a delayed recovery in Southeast Asia, investors have lowered their expectations for corporate earnings growth in 1998. These concerns, combined with low reported inflation and a reduced federal budget deficit (which will lower the supply of Treasuries going forward), sent Treasury and municipal yields to lower levels by year-end. Yields on municipal securities fell another .20% during the fourth quarter, pushing down 30-year municipal bonds to their lowest yields in 10 years. The supply of new Oregon bonds remains low, as voters hesitate to approve new taxes. With low interest rates, however, we anticipate that the supply of new Oregon bonds will increase as older issues are refunded and issuers take advantage of lower rates. In trading activity during the year, we endeavored to replace short-term, pre- refunded bonds with longer term, higher yielding bonds to lock in higher rates in a declining interest rate environment. At year-end, the average maturity of the Fund's portfolio was intermediate term, at 11 to 12 years, and its duration was approximately 6.5 years. As always, the Fund maintains a high average credit quality and is broadly diversified within the State. We remain committed to providing shareholders with high, after tax returns combined with a low level of credit risk and low volatility. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO QUALITY Aaa 55.3% Aa 24.4% A 14.0% Baa 1.0% Not Rated 5.3% as of December 31, 1997 as rated by Moody's Investor Services, Inc.
GROWTH OF $10,000 OVER 10 YEARS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA LEHMAN GENERAL CONSUMER MUNICIPAL OBLIGATION PRICE INDEX BOND FUND INDEX (INFLATION) 12/31/87 $10,000 $10,000 $10,000 12/31/88 $11,019 $10,767 $10,407 12/31/89 $12,005 $11,856 $10,922 12/31/90 $12,832 $12,658 $11,630 12/31/91 $14,338 $14,101 $11,960 12/31/92 $15,264 $15,338 $12,324 12/31/93 $16,902 $17,137 $12,648 12/31/94 $16,111 $16,335 $12,981 12/31/95 $18,390 $18,975 $13,323 12/31/96 $19,084 $19,874 $13,770 12/31/97 $20,680 $21,629 $13,957 Average Annual Total Returns As of December 31, 1997 CMBF Lehman G.O. 1 Year 8.36% 8.80% 5 Years 6.26% 7.11% Since Inception 7.54% 8.02% Past Performance is not predictive of future performance.
13 INVESTMENT REVIEW - -------------------------------------------------------------------------------- - ---- ---- -- COLUMBIA HIGH YIELD FUND -- ------------------------------ [LOGO] The Fund posted a total return of 12.70% for the twelve months ended December 31, 1997. Early in the year, the fixed income market suffered from a rapidly expanding economy and rising interest rates. But as bond investors began to realize that growth would not be accompanied by higher inflation, bond prices appreciated throughout the year. As in 1996, the high yield sector of the bond market again outperformed investment-grade bonds in 1997. This caps off several consecutive years of solid performance by high yield bonds, thanks to positive fundamentals and growing investor interest. In 1997, for example, the high yield market grew by over 26% with $135 billion in new issues coming to market from over 700 issuers. Flow of money into high yield funds rose by 42% during the year to $22 billion, as investors continued to view high yield bonds as excellent tools for diversification. In trading activity, positive fundamentals led us to emphasize the media sector throughout much of the SECTORS OF EMPHASIS
% of Net Assets Business Services 3.9 Chemicals 2.0 Metals/Mining 2.0 Hotels/Gaming 4.8 Health Care 7.0
As of December 31, 1997 year with particular emphasis in broadcasting. We also favored specialty retailing and entertainment, both of which contributed positively to Fund performance. As commodity prices came under pressure in the fourth quarter because of the currency crisis in Southeast Asia, bonds in the energy sector were pared back. To reduce exposure to economically sensitive issues on the chance that economic growth will moderate, we also reduced bonds issued by companies in cyclical industries like paper and chemical. For the coming year, favorable conditions such as continuing economic growth, low inflation, and positive cash flows into high yield mutual funds should continue to make this market attractive for the near term. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PORTFOLIO QUALITY Ba 41.0% B 59.0% as of December 31, 1997 as rated by Moody's Investor Services, Inc.
GROWTH OF $10,000 SINCE INCEPTION EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COLUMBIA HIGH YIELD FUND SALOMON BB 10/1/93 $10,000 $10,000 12/31/93 $10,112 $10,185 12/31/94 $10,019 $10,048 12/31/95 $11,935 $12,321 12/31/96 $13,060 $13,429 12/31/97 $14,717 $15,142 Average Annual Total Returns as of December 31, 1997 CHYF Salomon BB 1 Year 12.70% 12.76% 3 Years 13.68% 14.65% Since Inception 9.40% 10.13% Past Performance is not predictive of future performance. LIPPER HIGH YIELD BOND FUND INDEX 10/1/93 $10,000 12/31/93 $10,498 12/31/94 $10,113 12/31/95 $11,870 12/31/96 $13,373 12/31/97 $15,100 Average Annual Total Returns as of December 31, 1997 Lipper HYBF 1 Year 12.91% 3 Years 14.30% Since Inception 10.06% Past Performance is not predictive of future performance.
14 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA COMMON STOCK FUND, INC. -- -------------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $19.26 $18.59 $15.16 $15.29 $14.04 - --------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .29 .25 .26 .27 .22 Net realized and unrealized gains on investments......................... 4.58 3.61 4.38 .04 2.08 - --------------------------------------------------------------------------------------------------- Total from investment operations.... 4.87 3.86 4.64 .31 2.30 - --------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.27) (.23) (.26) (.25) (.21) Distributions (from capital gains).... (1.84) (2.96) (.95) (.19) (.84) - --------------------------------------------------------------------------------------------------- Total distributions................. (2.11) (3.19) (1.21) (.44) (1.05) - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $22.02 $19.26 $18.59 $15.16 $15.29 - --------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 25.37% 20.71% 30.84% 2.06% 16.44% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $783,906 $536,760 $358,523 $124,263 $100,715 Ratio of expenses to average net assets................................ 0.77% 0.76% 0.80% 0.84% 0.84% Ratio of net investment income to average net assets.................... 1.37% 1.32% 1.68% 1.82% 1.48% Portfolio turnover rate................. 90.23% 111.39% 75.36% 64.21% 90.90% Average commission rate paid on portfolio transactions (1)............ $0.0601 $0.0601
(1) The average commission rate paid by the fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- 15 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA GROWTH FUND, INC. -- -------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - ------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $30.74 $29.84 $24.84 $26.38 $26.18 - ------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .19 .19 .31 .29 .16 Net realized and unrealized gains (losses) on investments............. 7.90 6.04 7.86 (.46) 3.24 - ------------------------------------------------------------------------------------------------------- Total from investment operations.... 8.09 6.23 8.17 (.17) 3.40 - ------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.17) (.17) (.29) (.26) (.18) Distributions (from capital gains).... (4.32) (5.14) (2.87) (1.11) (2.98) Distributions (in excess of capital gains).............................. (.02) (.01) (.04) - ------------------------------------------------------------------------------------------------------- Total distributions................. (4.49) (5.33) (3.17) (1.37) (3.20) - ------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $34.34 $30.74 $29.84 $24.84 $26.38 - ------------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 26.32% 20.80% 32.98% -0.63% 13.01% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $1,324,918 $1,064,100 $848,731 $591,694 $605,401 Ratio of expenses to average net assets................................ 0.71% 0.71% 0.75% 0.81% 0.82% Ratio of net investment income to average net assets.................... 0.55% 0.63% 1.14% 1.12% 0.66% Portfolio turnover rate................. 95.67% 75.49% 94.73% 79.28% 105.64% Average commission rate paid on portfolio transactions (1)............ $0.0594 $0.0590
(1) The average commission rate paid by the fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- 16 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA INTERNATIONAL STOCK FUND, INC. -- --------------------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $13.86 $13.07 $12.43 $12.96 $9.95 - ---------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)..... .03 .03 .02 (.02) (.02) Net realized and unrealized gains (losses) on investments and foreign currency transactions................... 1.56 2.13 .62 (.30) 3.34 - ---------------------------------------------------------------------------------------------- Total from investment operations................... 1.59 2.16 .64 (.32) 3.32 - ---------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)........................ (.03) Dividends (in excess of net investment income)............. (.20) Distributions (from capital gains)......................... (1.75) (1.14) (.21) (.31) - ---------------------------------------------------------------------------------------------- Total distributions............ (1.75) (1.37) -- (.21) (.31) - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $13.70 $13.86 $13.07 $12.43 $12.96 - ---------------------------------------------------------------------------------------------- TOTAL RETURN....................... 11.47% 16.59% 5.15% -2.47% 33.37% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)....................... $146,281 $125,510 $100,873 $118,484 $73,047 Ratio of expenses to average net assets........................... 1.62% 1.54% 1.54% 1.52% 1.71% Ratio of net investment income (loss) to average net assets..... 0.19% 0.22% 0.15% (0.21)% (0.62)% Portfolio turnover rate............ 121.53% 129.40% 156.09% 138.79% 144.78% Average commission rate paid on portfolio transactions (1)....... $0.0039 $0.0011
(1) The average commission rate paid by the fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- 17 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA SPECIAL FUND, INC. -- --------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - --------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $19.85 $21.44 $18.69 $19.51 $18.79 - --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss).......... .01 (.06) .03 .08 .01 Net realized and unrealized gains on investments......................... 2.50 2.85 5.45 .36 4.04 - --------------------------------------------------------------------------------------------------------- Total from investment operations.... 2.51 2.79 5.48 .44 4.05 - --------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.02) (.07) Dividends (in excess of net investment income)............................. (.01) Distributions (from capital gains).... (2.10) (4.38) (2.68) (1.16) (3.32) Distributions (in excess of captial gains).............................. (.03) (.03) - --------------------------------------------------------------------------------------------------------- Total distributions................. (2.10) (4.38) (2.73) (1.26) (3.33) - --------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $20.26 $19.85 $21.44 $18.69 $19.51 - --------------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 12.64% 13.07% 29.53% 2.29% 21.68% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $1,249,718 $1,585,284 $1,384,415 $889,526 $772,741 Ratio of expenses to average net assets................................ 0.98% 0.94% 0.98% 1.05% 1.12% Ratio of net investment income (loss) to average net assets.................... 0.04% (0.29)% 0.16% 0.40% 0.01% Portfolio turnover rate................. 166.46% 150.07% 182.99% 178.91% 154.68% Average commission rate paid on portfolio transactions (1)............ $0.0585 $0.0553
(1) The average commission rate paid by the fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- 18 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA SMALL CAP FUND, INC. -- ----------------------------------- [LOGO]
1997 1996(1) ----- ------- - ------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $12.99 $12.00 - ------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss............................. (.08) Net realized and unrealized gains on investments................................... 4.51 .99 - ------------------------------------------------------------------------- Total from investment operations.............. 4.43 .99 - ------------------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions (from capital gains).............. (.77) - ------------------------------------------------------------------------- Total distributions........................... (.77) -- - ------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $16.65 $12.99 - ------------------------------------------------------------------------- TOTAL RETURN...................................... 34.10% 7.62%(2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands).......... $96,431 $21,061 Ratio of expenses to average net assets........... 1.46% 1.61% Ratio of net investment income (loss) to average net assets...................................... (0.81)% 0.00% Portfolio turnover rate........................... 171.75% 32.57% Average commission rate paid on portfolio transactions (3)................................ $0.0564 $0.0546
(1) From inception of operations on September 11, 1996. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The average commission rate paid by the fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- 19 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA REAL ESTATE EQUITY FUND, INC. -- -------------------------------------------- [LOGO]
1997 1996 1995 1994(1) ----- ----- ----- ------- - ------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $16.16 $12.71 $11.72 $12.00 - ------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .79 .77 .78 .49 Net realized and unrealized gains (losses) on investments............. 3.15 3.94 1.12 (.27) - ------------------------------------------------------------------------------------- Total from investment operations.... 3.94 4.71 1.90 .22 - ------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.62) (.52) (.49) (.31) Dividends (in excess of net investment income)............................. (.01) Distributions (from capital gains).... (.48) (.41) Distributions (in excess of capital gains).............................. (.03) (.12) (.14) Tax return of capital................. (.17) (.21) (.28) (.18) - ------------------------------------------------------------------------------------- Total distributions................. (1.30) (1.26) (.91) (.50) - ------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $18.80 $16.16 $12.71 $11.72 - ------------------------------------------------------------------------------------- TOTAL RETURN............................ 24.74% 38.30% 16.86% 1.76%(2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $151,554 $68,073 $21,587 $17,402 Ratio of expenses to average net assets................................ 1.02% 1.06% 1.18% 1.14% Ratio of net investment income to average net assets.................... 4.87% 6.23% 6.71% 6.28% Portfolio turnover rate................. 33.55% 45.82% 53.91% 7.61% Average commission rate paid on portfolio transactions (3)............ $0.0588 $0.0594
(1) From inception of operations on March 16, 1994. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The average commission rate paid by the fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- 20 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA BALANCED FUND, INC. -- ---------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $20.32 $20.08 $17.28 $17.91 $16.80 - --------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .84 .76 .73 .65 .56 Net realized and unrealized gains (losses) on investments............. 2.92 1.58 3.54 (.64) 1.71 - --------------------------------------------------------------------------------------------------- Total from investment operations.... 3.76 2.34 4.27 .01 2.27 - --------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.83) (.76) (.73) (.64) (.56) Dividends (in excess of net investment income)............................. (.01) Distributions (from capital gains).... (1.83) (1.34) (.74) (.59) - --------------------------------------------------------------------------------------------------- Total distributions................. (2.66) (2.10) (1.47) (.64) (1.16) - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $21.42 $20.32 $20.08 $17.28 $17.91 - --------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 18.74% 11.78% 25.08% 0.10% 13.62% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $792,378 $672,593 $486,767 $249,670 $186,589 Ratio of expenses to average net assets................................ 0.68% 0.66% 0.69% 0.72% 0.73% Ratio of net investment income to average net assets.................... 3.83% 3.82% 4.05% 3.82% 3.32% Portfolio turnover rate................. 148.91% 133.21% 108.04% 98.48% 107.60% Average commission rate paid on portfolio transactions (1)............ $0.0610 $0.0596
(1) The average commission rate paid by the fund is computed by dividing the dollar amount of commissions paid during the period by the total number of shares purchased and sold during the period for which commissions were charged. - -------------------------------------------------------------------------------- 21 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA DAILY INCOME COMPANY -- ----------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - ----------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 - ----------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .050 .048 .053 .036 .025 - ----------------------------------------------------------------------------------------------------- Total from investment operations.... .050 .048 .053 .036 .025 - ----------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.050) (.048) (.053) (.036) (.025) - ----------------------------------------------------------------------------------------------------- Total distributions................. (.050) (.048) (.053) (.036) (.025) - ----------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 - ----------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 5.11% 4.96% 5.49% 3.68% 2.51% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $1,169,096 $889,800 $800,656 $730,067 $544,500 Ratio of expenses to average net assets................................ 0.63% 0.62% 0.64% 0.70% 0.75% Ratio of net investment income to average net assets.................... 4.99% 4.84% 5.34% 3.68% 2.49%
- -------------------------------------------------------------------------------- 22 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC. -- ---------------------------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $8.24 $8.34 $7.99 $8.36 $8.35 - --------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .41 .41 .45 .37 .32 Net realized and unrealized gains (losses) on investments............. .05 (.10) .35 (.37) .17 - --------------------------------------------------------------------------------------------------- Total from investment operations.... .46 .31 .80 -- .49 - --------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.41) (.41) (.45) (.37) (.32) Distributions (from capital gains).... (.16) - --------------------------------------------------------------------------------------------------- Total distributions................. (.41) (.41) (.45) (.37) (.48) - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $8.29 $8.24 $8.34 $7.99 $8.36 - --------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 5.76% 3.85% 10.21% -0.03% 5.91% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $37,837 $40,776 $41,842 $33,512 $35,877 Ratio of expenses to average net assets................................ 0.87% 0.80% 0.79% 0.81% 0.75% Ratio of net investment income to average net assets.................... 4.99% 4.99% 5.45% 4.51% 3.74% Portfolio turnover rate................. 184.43% 179.38% 253.17% 253.80% 254.59%
- -------------------------------------------------------------------------------- 23 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA FIXED INCOME SECURITIES FUND, INC. -- ------------------------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $13.08 $13.51 $12.16 $13.44 $13.28 - --------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .85 .85 .88 .83 .85 Net realized and unrealized gains (losses) on investments............. .36 (.43) 1.35 (1.28) .52 - --------------------------------------------------------------------------------------------------- Total from investment operations.... 1.21 .42 2.23 (.45) 1.37 - --------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.85) (.85) (.88) (.83) (.85) Distributions (from capital gains).... (.03) (.36) - --------------------------------------------------------------------------------------------------- Total distributions................. (.88) (.85) (.88) (.83) (1.21) - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $13.41 $13.08 $13.51 $12.16 $13.44 - --------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 9.56% 3.37% 18.91% -3.36% 10.47% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $381,333 $356,421 $316,259 $252,090 $300,532 Ratio of expenses to average net assets................................ 0.66% 0.64% 0.65% 0.66% 0.66% Ratio of net investment income to average net assets.................... 6.43% 6.53% 6.80% 6.53% 6.14% Portfolio turnover rate................. 196.28% 178.25% 137.41% 139.81% 118.80%
- -------------------------------------------------------------------------------- 24 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA MUNICIPAL BOND FUND, INC. -- ---------------------------------------- [LOGO]
1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $12.15 $12.37 $11.48 $12.71 $12.17 - --------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .60 .61 .63 .64 .66 Net realized and unrealized gains (losses) on investments............. .39 (.16) .96 (1.23) .62 - --------------------------------------------------------------------------------------------------- Total from investment operations.... .99 .45 1.59 (.59) 1.28 - --------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income) (1)................................. (.60) (.61) (.63) (.64) (.66) Distributions (from capital gains).... (.07) (.06) (.07) (.08) - --------------------------------------------------------------------------------------------------- Total distributions................. (.67) (.67) (.70) (.64) (.74) - --------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $12.47 $12.15 $12.37 $11.48 $12.71 - --------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 8.36% 3.77% 14.15% -4.68% 10.73% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $409,148 $375,667 $383,796 $339,817 $430,367 Ratio of expenses to average net assets................................ 0.57% 0.56% 0.57% 0.57% 0.58% Ratio of net investment income to average net assets.................... 4.87% 5.00% 5.22% 5.36% 5.25% Portfolio turnover rate................. 16.88% 19.03% 21.45% 19.40% 9.92%
(1) 100% exempt from federal taxation. - -------------------------------------------------------------------------------- 25 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD - ---- ---- -- COLUMBIA HIGH YIELD FUND, INC. -- ------------------------------------ [LOGO]
1997 1996 1995 1994 1993(1) ----- ----- ----- ----- ------- - ----------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $9.94 $9.88 $9.04 $9.94 $10.00 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income................. .81 .81 .82 .80 .18 Net realized and unrealized gains (losses) on investments............. .40 .07 .84 (.90) (.06) - ----------------------------------------------------------------------------------------------------------- Total from investment operations.... 1.21 .88 1.66 (.10) .12 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends (from net investment income)............................. (.81) (.81) (.82) (.80) (.18) Distributions (from capital gains).... (.30) (.01) - ----------------------------------------------------------------------------------------------------------- Total distributions................. (1.11) (.82) (.82) (.80) (.18) - ----------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $10.04 $9.94 $9.88 $9.04 $9.94 - ----------------------------------------------------------------------------------------------------------- TOTAL RETURN............................ 12.70% 9.43% 19.12% -0.92% 1.12%(2) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............................ $39,278 $28,818 $23,471 $12,834 $5,940 Ratio of expenses to average net assets (3)................................... 1.00% 0.93% 1.00% 1.00% 1.00% Ratio of net investment income to average net assets.................... 8.05% 8.29% 8.62% 8.69% 7.30% Portfolio turnover rate................. 124.23% 62.27% 51.60% 36.67% 0.00%
(1) From inception of operations on September 15, 1993. Ratios and portfolio turnover rate are annualized. (2) Not annualized. (3) The ratio was 1.02% in 1997, 1.00% in 1996, 1.06% in 1995, 1.19% in 1994 and 2.03% in 1993, before voluntary reimbursement. - -------------------------------------------------------------------------------- 26 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - --------------------- --------------------- -- COLUMBIA COMMON STOCK FUND, INC. -- --------------------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (93.0%) FINANCE (10.0%) American Express Co. ................................................................. 100,900 $ 9,005,325 American General Corp. ............................................................... 209,600 11,331,500 BankAmerica Corp. .................................................................... 99,600 7,270,800 Berkley (W.R.) Corp. ................................................................. 150,000 6,581,250 *CIT Group, Inc. (Class A)............................................................ 200,000 6,450,000 First Union Corp. .................................................................... 261,300 13,391,625 NationsBank Corp. .................................................................... 126,000 7,662,375 PNC Bank Corp. ....................................................................... 140,900 8,040,106 U.S. Bancorp.......................................................................... 74,044 8,288,300 -------------- 78,021,281 -------------- BUILDING & FORESTRY PRODUCTS (1.4%) Willamette Industries, Inc. .......................................................... 334,400 10,763,500 -------------- BUSINESS & CONSUMER SERVICES (1.7%) Service Corporation Int'l. ........................................................... 367,500 13,574,531 -------------- CHEMICAL (1.0%) IMC Global, Inc. ..................................................................... 242,000 7,925,500 -------------- CONSUMER NON-DURABLE (11.5%) *Costco Cos., Inc. ................................................................... 200,000 8,925,000 *Federated Department Stores, Inc. ................................................... 254,500 10,959,406 Home Depot, Inc. ..................................................................... 140,500 8,271,937 Liz Claiborne, Inc. .................................................................. 223,000 9,324,188 Mattel, Inc. ......................................................................... 259,250 9,657,063 *Meyer (Fred), Inc. .................................................................. 600,000 21,825,000 Nordstrom, Inc. ...................................................................... 225,000 13,584,375 Wal-Mart Stores, Inc. ................................................................ 192,500 7,591,719 -------------- 90,138,688 -------------- CONSUMER STAPLES (16.8%) American Stores Co. .................................................................. 860,000 17,683,750 Avon Products, Inc. .................................................................. 128,300 7,874,412 ConAgra, Inc. ........................................................................ 70,000 2,296,875 Gillette Co. ......................................................................... 145,000 14,563,438 Heinz (H.J.) Co. ..................................................................... 154,000 7,825,125 Kellogg Co. .......................................................................... 400,000 19,850,000 *Kroger Co. .......................................................................... 300,000 11,081,250 PepsiCo, Inc. ........................................................................ 200,000 7,287,500 Rite Aid Corp. ....................................................................... 147,200 8,638,800 *Safeway, Inc. ....................................................................... 156,000 9,867,000 Sunbeam Corp. ........................................................................ 379,400 15,982,225 Sysco Corp. .......................................................................... 200,000 9,112,500 -------------- 132,062,875 -------------- SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- ENERGY (6.8%) Burlington Resources, Inc. ........................................................... 181,017 $ 8,111,824 Exxon Corp. .......................................................................... 160,800 9,838,950 Mobil Corp. .......................................................................... 141,600 10,221,750 Royal Dutch Petroleum Co. ............................................................ 249,600 13,525,200 Texaco, Inc. ......................................................................... 212,000 11,527,500 -------------- 53,225,224 -------------- ENERGY SERVICES (1.1%) Schlumberger Ltd. .................................................................... 105,000 8,452,500 -------------- ENTERTAINMENT & MEDIA (1.2%) *Viacom, Inc. (Class B)............................................................... 235,500 9,758,531 -------------- HEALTH (12.6%) American Home Products Corp. ......................................................... 134,000 10,251,000 Bristol-Myers Squibb Co. ............................................................. 175,000 16,559,375 Lilly (Eli) & Co. .................................................................... 242,000 16,849,250 Merck & Co., Inc. .................................................................... 155,000 16,468,750 Pfizer, Inc. ......................................................................... 169,000 12,601,062 Schering-Plough Corp. ................................................................ 154,000 9,567,250 *Tenet Healthcare Corp. .............................................................. 249,300 8,258,063 Warner-Lambert Co. ................................................................... 66,000 8,184,000 -------------- 98,738,750 -------------- MACHINERY & CAPITAL SPENDING (5.4%) Case Corp. ........................................................................... 133,000 8,038,187 Deere & Co. .......................................................................... 144,700 8,437,819 Emerson Electric Co. ................................................................. 213,000 12,021,188 Tyco International Ltd. .............................................................. 303,308 13,667,817 -------------- 42,165,011 -------------- METAL MINING & STEEL (1.0%) *Getchell Gold Corp. ................................................................. 310,000 7,440,000 -------------- REAL ESTATE SECURITIES (5.8%) American Health Properties, Inc. ..................................................... 120,000 3,307,500 Equity Office Properties Trust........................................................ 174,521 5,508,319 Equity Residential Properties Trust................................................... 125,000 6,320,312 First Industrial Realty Trust, Inc. .................................................. 150,000 5,418,750 JP Realty, Inc. ...................................................................... 106,500 2,762,344 Liberty Property Trust................................................................ 120,000 3,427,500 Mack-Cali Realty Corp. ............................................................... 94,000 3,854,000 Manufactured Home Communities, Inc. .................................................. 49,000 1,323,000 Security Capital Pacific Trust........................................................ 165,500 4,013,375 Simon DeBartolo Group, Inc. .......................................................... 190,400 6,223,700 Spieker Properties, Inc. ............................................................. 79,000 3,387,125 -------------- 45,545,925 --------------
27 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - --------------------- --------------------- -- COLUMBIA COMMON STOCK FUND, INC. -- --------------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) TECHNOLOGY (8.6%) Autodesk, Inc. ....................................................................... 115,300 $ 4,266,100 Automatic Data Processing, Inc. ...................................................... 232,000 14,239,000 *Cadence Design Systems, Inc. ........................................................ 270,000 6,615,000 *Computer Sciences Corp. ............................................................. 190,200 15,881,700 *EMC Corp. ........................................................................... 260,200 7,139,238 Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 112,000 4,179,000 Hewlett-Packard Co. .................................................................. 122,400 7,650,000 Lucent Technologies, Inc. ............................................................ 94,800 7,572,150 -------------- 67,542,188 -------------- UTILITIES/COMMUNICATIONS (2.7%) AT&T Corp. ........................................................................... 124,000 7,595,000 Frontier Corp. ....................................................................... 244,300 5,878,469 SBC Communications, Inc. ............................................................. 102,400 7,500,800 -------------- 20,974,269 -------------- UTILITIES/ELECTRIC/GAS (5.4%) Cinergy Corp. ........................................................................ 237,000 9,080,063 Edison International.................................................................. 264,300 7,185,656 Idaho Power Co. ...................................................................... 236,600 8,902,075 Texas Utilities Co. .................................................................. 420,000 17,456,250 -------------- 42,624,044 -------------- Total Common Stocks (Cost $591,083,706) ................................................................. 728,952,817 --------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- REPURCHASE AGREEMENTS (12.1%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $39,316,709. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999................................................................ $ 39,303,062 $ 39,303,062 J.P. Morgan Securities, Inc. 6.521% dated 12/31/1997, due 01/02/1998 in the amount of $38,613,793. Collateralized by U.S. Treasury Notes 3.625% to 7.500% due 08/31/2000 to 02/15/2005......................................................... 38,600,000 38,600,000 Merrill Lynch 6.388% dated 12/31/1997, due 01/02/1998 in the amount of $16,705,845. Collateralized by U.S. Treasury Bonds 6.250% to 7.625% due 02/15/2023 to 08/15/2025............................................................. 16,700,000 16,700,000 -------------- Total Repurchase Agreements (Cost $94,603,062) .................................................................. 94,603,062 -------------- TOTAL INVESTMENTS (105.1%) (Cost $685,686,768)...................................................................... 823,555,879 RECEIVABLES LESS LIABILITIES (-5.1%)...................................................... (39,650,060) -------------- NET ASSETS (100.0%)....................................................................... $ 783,905,819 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. The accompanying notes are an integral part of the financial statements. 28 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------- ------------------------- -- COLUMBIA GROWTH FUND, INC. -- -----------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (98.3%) FINANCE (18.8%) Allstate Corp. ....................................................................... 271,600 $ 24,681,650 American General Corp. ............................................................... 488,600 26,414,937 American International Group, Inc. ................................................... 199,225 21,665,719 Banc One Corp. ....................................................................... 300,000 16,293,750 BankAmerica Corp. .................................................................... 200,000 14,600,000 BankBoston Corp. ..................................................................... 150,000 14,090,625 Barnett Banks, Inc. .................................................................. 239,000 17,178,125 *CIT Group, Inc. (Class A)............................................................ 600,000 19,350,000 Fannie Mae............................................................................ 456,800 26,066,150 First Union Corp. .................................................................... 198,000 10,147,500 Freddie Mac........................................................................... 500,700 20,998,106 Morgan Stanley, Dean Witter, Discover & Co. .......................................... 405,080 23,950,355 NationsBank Corp. .................................................................... 232,000 14,108,500 -------------- 249,545,417 -------------- BUILDING & FORESTRY PRODUCTS (1.2%) *Crown Vantage, Inc. ................................................................. 195,100 1,365,700 Mead Corp. ........................................................................... 500,000 14,000,000 -------------- 15,365,700 -------------- BUSINESS & CONSUMER SERVICES (7.9%) *Cendant Corp. ....................................................................... 1,231,550 42,334,531 *Corrections Corporation of America................................................... 400,000 14,825,000 *FIserv, Inc. ........................................................................ 300,500 14,762,063 McKesson Corp. ....................................................................... 148,900 16,109,119 Service Corporation Int'l. ........................................................... 448,300 16,559,081 -------------- 104,589,794 -------------- CONSUMER DURABLE (0.1%) *Sonic Automotive, Inc. .............................................................. 132,500 1,275,312 -------------- CONSUMER NON-DURABLE (16.7%) *Consolidated Stores Corp. ........................................................... 491,200 21,582,100 *Federated Department Stores, Inc. ................................................... 402,800 17,345,575 Home Depot, Inc. ..................................................................... 135,100 7,954,012 Liz Claiborne, Inc. .................................................................. 290,000 12,125,625 Mattel, Inc. ......................................................................... 643,400 23,966,650 *Neiman-Marcus Group, Inc. ........................................................... 240,400 7,272,100 *Office Depot, Inc. .................................................................. 596,800 14,285,900 *Payless ShoeSource, Inc. ............................................................ 380,200 25,520,925 Royal Caribbean Cruises Ltd. ......................................................... 300,000 15,993,750 Tandy Corp. .......................................................................... 697,600 26,901,200 Unifi, Inc. .......................................................................... 200,000 8,137,500 SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Warnaco Group, Inc. (Class A)......................................................... 1,290,300 $ 40,483,163 -------------- 221,568,500 -------------- CONSUMER STAPLES (14.8%) Avon Products, Inc. .................................................................. 215,100 13,201,762 CVS Corp. ............................................................................ 190,000 12,171,875 Gillette Co. ......................................................................... 312,100 31,346,544 Kellogg Co. .......................................................................... 106,000 5,260,250 Libbey, Inc. ......................................................................... 390,500 14,790,188 Philip Morris Cos., Inc. ............................................................. 600,000 27,187,500 Rite Aid Corp. ....................................................................... 533,925 31,334,723 *Safeway, Inc. ....................................................................... 327,700 20,727,025 Sunbeam Corp. ........................................................................ 600,000 25,275,000 Sysco Corp. .......................................................................... 328,400 14,962,725 -------------- 196,257,592 -------------- ENERGY (1.4%) Anadarko Petroleum Corp. ............................................................. 177,000 10,741,688 Apache Corp. ......................................................................... 203,700 7,142,231 -------------- 17,883,919 -------------- ENERGY SERVICES (0.9%) Schlumberger Ltd. .................................................................... 150,000 12,075,000 -------------- HEALTH (13.0%) American Home Products Corp. ......................................................... 180,000 13,770,000 *Apria Healthcare Group, Inc. ........................................................ 901,720 12,116,862 Bristol-Myers Squibb Co. ............................................................. 244,500 23,135,812 *Ethical Holdings Ltd. ADR............................................................ 283,000 884,375 Lilly (Eli) & Co. .................................................................... 322,100 22,426,213 Merck & Co., Inc. .................................................................... 246,200 26,158,750 Pfizer, Inc. ......................................................................... 327,300 24,404,306 Schering-Plough Corp. ................................................................ 217,600 13,518,400 *Tenet Healthcare Corp. .............................................................. 745,900 24,707,938 Warner-Lambert Co. ................................................................... 83,800 10,391,200 -------------- 171,513,856 -------------- HOTELS & GAMING (1.4%) *Host Marriott Corp. ................................................................. 390,000 7,653,750 *Station Casinos, Inc. ............................................................... 1,076,600 10,967,863 -------------- 18,621,613 -------------- MACHINERY & CAPITAL SPENDING (5.2%) Emerson Electric Co. ................................................................. 361,000 20,373,938 General Electric Co. ................................................................. 150,000 11,006,250 Tyco International Ltd. .............................................................. 830,354 37,417,827 -------------- 68,798,015 --------------
29 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------- ------------------------- -- COLUMBIA GROWTH FUND, INC. -- -----------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) REAL ESTATE SECURITIES (4.0%) Duke Realty Investments, Inc. ........................................................ 168,200 $ 4,078,850 Equity Office Properties Trust........................................................ 111,800 3,528,688 Equity Residential Properties Trust................................................... 219,900 11,118,694 JP Realty, Inc. ...................................................................... 350,000 9,078,125 Public Storage, Inc. ................................................................. 50,000 1,468,750 Simon DeBartolo Group, Inc. .......................................................... 144,300 4,716,806 TriNet Corporate Realty Trust, Inc. .................................................. 146,000 5,648,375 Vornado Realty Trust.................................................................. 294,800 13,837,175 -------------- 53,475,463 -------------- TECHNOLOGY (12.9%) Autodesk, Inc. ....................................................................... 114,700 4,243,900 *Cadence Design Systems, Inc. ........................................................ 543,000 13,303,500 *Cisco Systems, Inc. ................................................................. 590,700 32,931,525 Computer Associates International, Inc. .............................................. 158,250 8,367,469 *Computer Sciences Corp. ............................................................. 289,500 24,173,250 *EMC Corp. ........................................................................... 379,600 10,415,275 Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 171,400 6,395,362 Hewlett-Packard Co. .................................................................. 202,900 12,681,250 Intel Corp. .......................................................................... 200,800 14,106,200 Lucent Technologies, Inc. ............................................................ 159,800 12,764,025 *Microsoft Corp. ..................................................................... 151,500 19,581,375 *Tellabs, Inc. ....................................................................... 225,000 11,896,875 -------------- 170,860,006 -------------- Total Common Stocks (Cost $998,562,165) ................................................................. 1,301,830,187 --------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- REPURCHASE AGREEMENT (2.1%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $27,758,843 Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999 (Cost $27,749,208)................................................................... $ 27,749,208 $ 27,749,208 -------------- TOTAL INVESTMENTS (100.4%) (Cost $1,026,311,373).................................................................... 1,329,579,395 RECEIVABLES LESS LIABILITIES (-0.4%)...................................................... (4,661,706) -------------- NET ASSETS (100.0%)....................................................................... $1,324,917,689 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. The accompanying notes are an integral part of the financial statements. 30 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------ ------------------ -- COLUMBIA INTERNATIONAL STOCK FUND, INC. -- ---------------------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (86.2%) ARGENTINA (1.1%) Banco de Galicia y Buenos Aires SA de CV, ADR (Banking)............................... 16,300 $ 419,725 *Disco SA, ADR (Retail)............................................................... 26,000 1,157,000 -------------- 1,576,725 -------------- BELGIUM (0.6%) *Lernout & Hauspie Speech Products NV (Business Services)............................. 20,000 930,000 -------------- BRAZIL (0.5%) Cia Tecidos do Norte de Minas SA (Textiles)........................................... 1,973,067 707,192 -------------- CANADA (3.3%) Bombardier, Inc. (Class B) (Manufacturing - Diversified Inds.).................................................. 25,000 513,735 Canadian National Railway Co. (Transportation)........................................ 8,500 399,839 *Cognicase, Inc. (Business Services).................................................. 30,500 369,813 Magna International, Inc. (Class A) (Motor Vehicles & Parts)............................................................. 12,000 751,520 *Newbridge Networks Corp. (Electronics)............................................... 15,000 524,743 Northern Telecom Ltd. (Electronics)................................................... 11,000 977,598 Royal Bank of Canada (Banking)........................................................ 17,000 898,302 Thomson Corp. (Media)................................................................. 16,000 438,946 -------------- 4,874,496 -------------- CHILE (0.6%) *Distribucion y Servicio D&S SA, ADR (Retail)......................................... 50,000 928,125 -------------- FINLAND (2.6%) Finnlines Oyj (Transportation)........................................................ 34,000 1,354,880 Merita plc. (Class A) (Banking)....................................................... 280,000 1,532,274 Metsa Serla Oyj (Series B) (Paper & Forest Products).................................. 114,000 889,725 -------------- 3,776,879 -------------- FRANCE (7.9%) Alcatel Alsthom SA (Electronics)...................................................... 10,000 1,271,715 BIC SA (Consumer Products)............................................................ 10,000 730,280 Carrefour SA (Retail)................................................................. 1,200 626,382 Cie de Saint Gobain SA (Building Materials)........................................... 6,084 864,736 Cie Francaise d'Etudes et de Construction Technip (Construction)...................... 3,700 390,574 Cipe France SA (Business Services).................................................... 5,400 182,588 Elf-Aquitaine SA (Oil Exploration & Production)....................................... 11,000 1,280,027 SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- *France Telecom SA, ADR (Utilities - Communication)................................... 39,000 $ 1,404,000 Lafarge SA (Building Materials)....................................................... 7,200 472,659 L'Oreal SA (Consumer Products)........................................................ 2,500 978,722 *Renault SA (Motor Vehicles & Parts).................................................. 60,000 1,688,638 Schneider SA (Electrical Equipment)................................................... 13,000 706,242 Sodexho Alliance SA (Food & Beverages)................................................ 1,000 535,783 Synthelabo SA (Pharmaceuticals)....................................................... 3,600 450,037 -------------- 11,582,383 -------------- GERMANY (4.9%) Allianz AG (Insurance)................................................................ 3,000 777,401 Deutsche Bank AG (Banking)............................................................ 12,500 882,778 Gehe AG (Wholesale Distributor)....................................................... 20,000 1,000,945 Heidelberger Zement AG (Building Materials)........................................... 3,850 274,037 Mannesmann AG (Machinery & Capital Spending).......................................... 3,400 1,718,623 Siemens AG (Electrical Equipment)..................................................... 7,500 444,169 Thyssen AG (Steel).................................................................... 6,000 1,284,547 Volkswagen AG (Motor Vehicles & Parts)................................................ 1,500 844,131 -------------- 7,226,631 -------------- HUNGARY (0.4%) *Gedeon Richter Ltd., GDS (Pharmaceuticals)........................................... 5,400 627,750 -------------- INDIA (3.1%) Bajaj Auto Ltd., GDR (Motor Vehicles & Parts)......................................... 30,000 607,500 Bank of Baroda Ltd. (Banking)......................................................... 271,000 783,197 Indian Hotels Co., Ltd., The, GDR (Entertainment & Leisure)........................... 37,000 696,063 Industrial Credit & Investment Corp. of India Ltd., The, GDR (Financial Services)..... 30,000 387,750 Infosys Technologies Ltd. (Business Services)......................................... 16,000 506,803 Mahindra & Mahindra Ltd. (Motor Vehicles & Parts)..................................... 70,000 581,841 Tata Engineering & Locomotive Co., Ltd., GDS (Motor Vehicles & Parts)................. 50,000 416,750 Videsh Sanchar Nigam Ltd., GDR (Utilities - Communication)............................ 40,000 557,000 -------------- 4,536,904 -------------- INDONESIA (0.5%) *Gulf Indonesia Resources Ltd. (Oil Exploration & Production)......................... 36,000 792,000 -------------- ITALY (2.1%) Credito Italiano S.p.A (Banking)...................................................... 338,500 1,047,606 ENI S.p.A (Oil Exploration & Production).............................................. 132,000 754,179
31 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------ ------------------ -- COLUMBIA INTERNATIONAL STOCK FUND, INC. -- ---------------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) Fiat S.p.A (Motor Vehicles & Parts)................................................... 266,000 $ 771,928 Gewiss S.p.A (Electrical Equipment)................................................... 24,800 469,883 -------------- 3,043,596 -------------- JAPAN (22.2%) Banyu Pharmaceutical Co., Ltd. (Pharmaceuticals)...................................... 22,000 243,599 Bellsystem 24, Inc. (Business Services)............................................... 6,000 788,927 BRIDGESTONE CORP. (Motor Vehicles & Parts)............................................ 32,000 696,348 DENSO CORP. (Motor Vehicles & Parts).................................................. 23,000 415,609 East Japan Railway Co. (Transportation)............................................... 148 670,296 Fuji Heavy Inds., Ltd. (Machinery & Capital Spending)................................. 91,000 246,305 Fuji Photo Film Co., Ltd. (Entertainment & Leisure)................................... 50,000 1,922,338 FUJITSU LTD. (Electronics)............................................................ 47,000 505,959 Hitachi Maxell Ltd. (Electronics)..................................................... 36,000 636,678 Ishikawajima-Harima Heavy Industries Co., Ltd. (Machinery & Capital Spending)......... 310,000 464,821 ITO-YOKADO CO., LTD. (Retail)......................................................... 31,000 1,585,160 KEYENCE CORP. (Electronics)........................................................... 6,600 979,469 KOMATSU LTD. (Machinery & Capital Spending)........................................... 143,000 720,223 MABUCHI MOTOR CO., LTD. (Electrical Equipment)........................................ 16,000 815,686 Mitsubishi Estate Co., Ltd. (Real Estate)............................................. 70,000 764,321 Mitsubishi Trust & Banking Corp., The (Banking)....................................... 55,000 554,018 MITSUI & CO., LTD. (Wholesale Distributor)............................................ 90,000 534,256 Mitsui Fudosan Co., Ltd. (Real Estate)................................................ 72,000 697,578 MYCAL CORP. (Retail).................................................................. 95,000 796,232 Nintendo Co., Ltd. (Entertainment & Leisure).......................................... 18,000 1,785,467 NIPPON STEEL CORP. (Metals, Mining & Steel)........................................... 300,000 445,213 NIPPON TELEGRAPH & TELEPHONE CORP. (Utilities - Communication)........................ 1,000 861,207 Nomura Securities Co., Ltd., The (Financial Services)................................. 76,000 1,016,840 NTT Data Communications Systems Corp. (Business Services)............................. 35 1,891,965 ROHM CO., LTD. (Electronics).......................................................... 17,000 1,738,562 SANKYO CO., LTD. (Pharmaceuticals).................................................... 36,000 816,609 Sekisui House, Ltd. (Construction).................................................... 112,000 722,553
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Shiseido Co., Ltd. (Consumer Products)................................................ 110,000 $ 1,505,575 SONY CORP. (Electronics).............................................................. 28,000 2,497,501 Sumitomo Bank Ltd., The (Banking)..................................................... 58,000 664,514 Takeda Chemical Inds., Ltd. (Pharmaceuticals)......................................... 41,000 1,172,780 Tokio Marine & Fire Insurance Co., Ltd., The (Insurance).............................. 130,000 1,479,431 TOYOTA MOTOR CORP. (Motor Vehicles & Parts)............................................................................. 50,000 1,437,909 TRANS COSMOS, INC. (Business Services)................................................ 18,000 316,955 -------------- 32,390,904 -------------- MEXICO (3.8%) Fomento Economico Mexicano SA de CV (Series B) (Food & Beverages)..................... 100,000 800,546 *Industrias CH SA (Series B) (Steel).................................................. 280,000 1,682,016 Panamerican Beverages, Inc. (Class A) (Food & Beverages).............................. 26,000 848,250 *Tubos de Acero de Mexico SA, ADR (Steel)............................................. 102,000 2,205,750 -------------- 5,536,562 -------------- NETHERLANDS (4.2%) ABN Amro Holding NV (Banking)......................................................... 32,524 633,480 Aegon NV (Insurance).................................................................. 25,992 2,313,391 Akzo Nobel NV (Chemicals)............................................................. 4,800 827,456 Koninklijke Pakhoed NV (Certificates) (Oil Equipment & Services)........................................................... 16,484 475,500 Philips Electronics NV (Electronics).................................................. 20,000 1,199,211 Vendex International NV (Certificates) (Retail)....................................... 13,178 727,129 -------------- 6,176,167 -------------- NORWAY (1.5%) *Fred Olsen Energy ASA (Oil Exploration & Production)................................. 20,000 415,902 Smedvig ASA (Class A) (Oil Equipment & Services)...................................... 32,000 674,142 Tomra Systems ASA (Machinery & Capital Spending)...................................... 49,000 1,098,879 -------------- 2,188,923 -------------- SPAIN (3.6%) Banco Bilbao Vizcaya SA (Banking)..................................................... 48,000 1,552,960 Dragados & Construcciones SA (Construction)........................................... 39,000 830,522 Inmobiliaria Metropolitana Vasco Central SA (Real Estate)............................. 17,500 788,982 *Tele Pizza SA (Restaurants).......................................................... 6,500 524,675
32 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------ ------------------ -- COLUMBIA INTERNATIONAL STOCK FUND, INC. -- ---------------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) Telefonica de Espana SA, ADR (Utilities - Communication).............................. 10,000 $ 910,625 Vallehermoso SA (Real Estate)......................................................... 20,000 612,941 -------------- 5,220,705 -------------- SWEDEN (3.9%) *Argonaut AB (Class B) (Transportation)............................................... 515,000 882,894 Assa Abloy AB (Class B) (Manufacturing - Diversified Inds.)........................... 33,000 873,566 ICB Shipping AB (Class B) (Transportation)............................................ 140,000 1,764,780 *Munters AB (Manufacturer - Consumer Products)........................................ 110,000 949,830 SSAB Svenskt Stal AB (Class B) (Metals, Mining & Steel)............................... 25,000 412,833 Telefonaktiebolaget LM Ericsson, ADR (Electronics).................................... 20,000 746,250 -------------- 5,630,153 -------------- SWITZERLAND (3.0%) Credit Suisse Group (Registered) (Financial Services)................................. 6,500 1,006,509 Novartis AG (Bearer) (Pharmaceuticals)................................................ 2,100 3,417,266 -------------- 4,423,775 -------------- UNITED KINGDOM (16.4%) Associated British Foods plc (Food & Beverages)....................................... 62,000 540,646 Bank of Scotland (Banking)............................................................ 86,000 792,376 Barclays plc (Banking)................................................................ 50,639 1,348,058 British Aerospace plc (Aircraft & Aerospace).......................................... 38,000 1,084,746 British Petroleum Co. plc (Oil Exploration & Production).............................. 56,561 744,478 British Sky Broadcasting Group plc (Media)............................................ 105,000 787,770 British Telecommunications plc (Utilities - Communication)............................ 110,000 866,004 Compass Group plc (Restaurants)....................................................... 160,000 1,971,728 Electrocomponents plc (Electronics)................................................... 86,469 643,049 Glaxo Wellcome plc (Pharmaceuticals).................................................. 86,000 2,037,540 Granada Group plc (Entertainment & Leisure)........................................... 60,975 932,996 Hays plc (Business Services).......................................................... 120,000 1,603,180 National Westminster Bank plc (Banking)............................................... 93,000 1,548,491 Next plc (Retail)..................................................................... 80,000 910,838 Railtrack Group plc (Transportation).................................................. 100,000 1,591,005 Reuters Holdings plc (Media).......................................................... 69,000 754,946 Siebe plc (Machinery & Capital Spending).............................................. 72,295 1,421,416
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- *Smallworldwide plc, ADR (Business Services).......................................... 19,000 $ 415,625 SmithKline Beecham plc (Pharmaceuticals).............................................. 200,682 2,057,034 Smiths Industries plc (Manufacturing - Diversified Inds.)............................. 28,000 390,660 Wetherspoon, J.D. plc (Restaurants)................................................... 140,000 771,646 WPP Group plc (Media)................................................................. 160,000 709,453 -------------- 23,923,685 -------------- Total Common Stocks (Cost $111,122,019).................................................................. 126,093,555 -------------- PREFERRED STOCKS (2.2%) BRAZIL (1.4%) Bardella Industrias Mecanicas SA (Manufacturing - Diversified Inds.).................. 4,000 430,108 Cia Cervejaria Brahma SA (Food & Beverages)........................................... 1,195,000 803,091 Cia Paranaense de Energi SA (Class B) (Utilities - Electric).......................... 48,000,000 653,763 DIXIE TOGA SA (Containers)............................................................ 437,500 223,454 *Empresa Nacional de Comercio Redito e Participacoes SA (Textiles).................... 1,195,000 857 -------------- 2,111,273 GERMANY (0.8%) Porsche AG (Motor Vehicles & Parts)................................................... 700 1,167,770 -------------- Total Preferred Stocks (Cost $2,718,459) ................................................................... 3,279,043 -------------- WARRANTS (0.1%) FRANCE (0.1%) *Cie Generale des Eaux (05/02/2001) (Utilities)....................................... 220,000 149,580 JAPAN (0.0%) *Mr. Max Corp. (02/17/1998) (Retail).................................................. 5,000 0 -------------- Total Warrants (Cost $692,496) ..................................................................... 149,580 -------------- CONVERTIBLE NOTE (0.5%) GERMANY (0.5%) Daimler-Benz AG, GDR (Motor Vehicles & Parts) 5.750% 06/14/2002 (Cost $819,929)...................................................................... 9,838 737,850 -------------- Total investments, excluding temporary cash investments (Cost $115,352,903) ................................................................. 130,260,028 --------------
33 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------ ------------------ -- COLUMBIA INTERNATIONAL STOCK FUND, INC. -- ---------------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- REPURCHASE AGREEMENTS (11.7%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $7,418,693. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999................................................................ $ 7,416,118 $ 7,416,118 J.P. Morgan Securities, Inc. 6.521% dated 12/31/1997, due 01/02/1998 in the amount of $7,352,626. Collateralized by U.S. Treasury Notes 3.625% to 7.500% due 08/31/2000 to 02/15/2005......................................................... 7,350,000 7,350,000 Merrill Lynch 6.388% dated 12/31/1997, due 01/02/1998 in the amount of $2,300,805. Collateralized by U.S. Treasury Bonds 6.250% to 7.625% due 02/15/2023 to 08/15/2025......................................................... 2,300,000 2,300,000 -------------- Total Repurchase Agreements (Cost $17,066,118) .................................................................. 17,066,118 -------------- TOTAL INVESTMENTS (100.7%) (Cost $132,419,021)...................................................................... 147,326,146 CASH AND RECEIVABLES LESS LIABILITIES (-0.7%)............................................. (1,045,611) -------------- NET ASSETS (100%)......................................................................... $ 146,280,535 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. The accompanying notes are an integral part of the financial statements. 34 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - -------------------------- -------------------------- -- COLUMBIA SPECIAL FUND, INC. -- ------------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (97.5%) BUILDING & FORESTRY PRODUCTS (2.1%) Longview Fibre Co. ................................................................... 815,000 $ 12,377,812 Willamette Industries, Inc. .......................................................... 420,500 13,534,844 -------------- 25,912,656 -------------- BUSINESS & CONSUMER SERVICES (15.7%) *AccuStaff, Inc. ..................................................................... 400,000 9,200,000 *Corrections Corporation of America................................................... 450,000 16,678,125 DENTSPLY International, Inc. ......................................................... 550,000 16,775,000 *Dollar Thrifty Automotive Group, Inc. ............................................... 500,000 10,250,000 *FIserv, Inc. ........................................................................ 555,000 27,264,375 Hertz Corp. (Class A)................................................................. 484,000 19,481,000 McKesson Corp. ....................................................................... 174,100 18,835,444 *NovaCare Employee Services, Inc. .................................................... 450,000 3,600,000 *Romac International, Inc. ........................................................... 465,000 11,363,437 Service Corporation Int'l. ........................................................... 800,000 29,550,000 ServiceMaster Co. .................................................................... 450,000 13,162,500 *StaffMark, Inc. ..................................................................... 337,500 10,673,438 Unitog Co. ........................................................................... 415,000 9,233,750 -------------- 196,067,069 -------------- CHEMICAL (0.8%) IMC Global, Inc. ..................................................................... 300,000 9,825,000 -------------- CONSUMER DURABLE (1.4%) *Furniture Brands International, Inc. ................................................ 850,000 17,425,000 -------------- CONSUMER NON-DURABLE (25.0%) +*Abercrombie & Fitch Co. (Class A)................................................... 800,000 25,000,000 *AnnTaylor Stores Corp. .............................................................. 1,240,000 16,585,000 *Consolidated Stores Corp. ........................................................... 450,000 19,771,875 +*Gadzooks, Inc. ..................................................................... 700,000 14,700,000 *Helen of Troy Ltd. .................................................................. 1,010,000 16,286,250 *Landry's Seafood Restaurants, Inc. .................................................. 1,000,000 24,000,000 Liz Claiborne, Inc. .................................................................. 450,000 18,815,625 *Meyer (Fred), Inc. .................................................................. 1,000,000 36,375,000 Nordstrom, Inc. ...................................................................... 525,000 31,696,875 *Papa John's International, Inc. ..................................................... 600,000 20,925,000 *Planet Hollywood International, Inc. (Class A)....................................... 1,375,000 18,218,750 *Polo Ralph Lauren Corp. (Class A).................................................... 600,000 14,587,500 St. John Knits, Inc. ................................................................. 600,000 24,000,000 +*Vans, Inc. ......................................................................... 860,000 13,007,500 *Zale Corp. .......................................................................... 790,000 18,170,000 -------------- 312,139,375 -------------- CONSUMER STAPLES (16.3%) American Stores Co. .................................................................. 2,015,000 41,433,437 SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Hannaford Brothers Co. ............................................................... 200,000 $ 8,687,500 *Kroger Co. .......................................................................... 1,000,000 36,937,500 Libbey, Inc. ......................................................................... 350,000 13,256,250 Newell Co. ........................................................................... 400,000 17,000,000 *Quality Food Centers, Inc. .......................................................... 400,000 26,800,000 *Safeway, Inc. ....................................................................... 600,000 37,950,000 Sunbeam Corp. ........................................................................ 400,000 16,850,000 *Whole Foods Market, Inc. ............................................................ 100,000 5,112,500 -------------- 204,027,187 -------------- HEALTH (14.0%) *American Oncology Resources, Inc. ................................................... 600,000 9,600,000 *ATL Ultrasound, Inc. ................................................................ 100,000 4,600,000 *Dura Pharmaceuticals, Inc. .......................................................... 213,000 9,771,375 *Elan Corp. plc ADR................................................................... 150,000 7,678,125 *ESC Medical Systems Ltd. ............................................................ 706,500 27,376,875 *Inhale Therapeutic Systems........................................................... 100,000 2,600,000 *MedPartners, Inc. ................................................................... 50,000 1,118,750 Mentor Corp. ......................................................................... 600,000 21,900,000 Omnicare, Inc. ....................................................................... 300,000 9,300,000 *PAREXEL International Corp. ......................................................... 230,000 8,510,000 *PhyCor, Inc. ........................................................................ 300,000 8,100,000 +*ResMed, Inc. ....................................................................... 500,000 14,062,500 *Serologicals Corp. .................................................................. 500,000 13,000,000 *Sofamor Danek Group, Inc. ........................................................... 200,000 13,012,500 *Transkaryotic Therapies, Inc. ....................................................... 155,000 5,444,375 *Watson Pharmaceuticals, Inc. ........................................................ 600,000 19,462,500 -------------- 175,537,000 -------------- MACHINERY & CAPITAL SPENDING (1.9%) Applied Power, Inc. (Class A)......................................................... 134,500 9,280,500 General Cable Corp. .................................................................. 100,000 3,618,750 Parker-Hannifin Corp. ................................................................ 250,000 11,468,750 -------------- 24,368,000 -------------- METAL MINING & STEEL (2.8%) *Getchell Gold Corp. ................................................................. 800,000 19,200,000 +Schnitzer Steel Industries, Inc. (Class A)........................................... 550,000 15,434,375 -------------- 34,634,375 -------------- POLLUTION CONTROL (3.9%) *Air & Water Technologies Corp. (Class A)............................................. 1,200,100 1,350,112 *Culligan Water Technologies, Inc. ................................................... 400,000 20,100,000 *Ionics, Inc. ........................................................................ 343,000 13,419,875 +*Osmonics, Inc. ..................................................................... 869,000 13,741,063 -------------- 48,611,050 --------------
35 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - -------------------------- -------------------------- -- COLUMBIA SPECIAL FUND, INC. -- ------------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) REAL ESTATE SECURITIES (6.5%) Apartment Investment & Management Co. (Class A)....................................... 114,000 $ 4,189,500 Colonial Properties Trust............................................................. 135,000 4,066,875 Equity Office Properties Trust........................................................ 123,000 3,882,187 Equity Residential Properties Trust................................................... 80,000 4,045,000 First Industrial Realty Trust, Inc. .................................................. 115,000 4,154,375 General Growth Properties, Inc. ...................................................... 111,000 4,009,875 Liberty Property Trust................................................................ 153,000 4,370,063 Macerich Co. ......................................................................... 150,000 4,275,000 Mack-Cali Realty Corp. ............................................................... 101,000 4,141,000 Manufactured Home Communities, Inc. .................................................. 150,000 4,050,000 Public Storage, Inc. ................................................................. 145,000 4,259,375 *Security Capital Group, Inc. (Class B)............................................... 350,000 11,375,000 Security Capital Industrial Trust..................................................... 163,000 4,054,625 Security Capital Pacific Trust........................................................ 160,000 3,880,000 Simon DeBartolo Group, Inc. .......................................................... 122,000 3,987,875 Spieker Properties, Inc. ............................................................. 100,000 4,287,500 *Trammell Crow Co. ................................................................... 24,000 618,000 TriNet Corporate Realty Trust, Inc. .................................................. 105,000 4,062,188 Vornado Realty Trust.................................................................. 90,000 4,224,375 -------------- 81,932,813 -------------- TECHNOLOGY (4.6%) *Apple Computer, Inc. ................................................................ 1,000,000 13,125,000 *FlexiInternational Software, Inc. ................................................... 25,000 387,500 *FORE Systems, Inc. .................................................................. 600,000 9,150,000 +*Integrated Measurement Systems, Inc. ............................................... 300,000 5,137,500 *Loral Space & Communications Corp. .................................................. 650,000 13,934,375 *VIASOFT, Inc. ....................................................................... 360,000 15,210,000 -------------- 56,944,375 -------------- TRANSPORTATION (1.6%) +*Celadon Group, Inc. ................................................................ 500,000 6,750,000 *Trans World Airlines, Inc. .......................................................... 1,300,000 13,162,500 -------------- 19,912,500 --------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- UTILITIES/ELECTRIC/GAS (0.9%) United Water Resources, Inc. ......................................................... 575,000 $ 11,248,438 -------------- Total Common Stocks (Cost $1,080,385,133) ............................................................... 1,218,584,838 -------------- REPURCHASE AGREEMENTS (7.4%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $65,646,574. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999................................................................ $ 65,623,788 65,623,788 J.P. Morgan Securities, Inc. 6.521% dated 12/31/1997, due 01/02/1998 in the amount of $27,009,648. Collateralized by U.S. Treasury Notes 3.625% to 7.500% due 08/31/2000 to 02/15/2005......................................................... 27,000,000 27,000,000 -------------- Total Repurchase Agreements (Cost $92,623,788) .................................................................. 92,623,788 -------------- TOTAL INVESTMENTS (104.9%) (Cost $1,173,008,921).................................................................... 1,311,208,626 RECEIVABLES LESS LIABILITIES (-4.9%)...................................................... (61,490,829) -------------- NET ASSETS (100.0%)....................................................................... $1,249,717,797 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. + Affiliated issuers (Note 1) The accompanying notes are an integral part of the financial statements. 36 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA SMALL CAP FUND, INC. -- -----------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (96.7%) AEROSPACE (1.7%) *Orbital Sciences Corp. .............................................................. 55,000 $ 1,636,250 -------------- FINANCE (6.1%) *Golden State Bancorp, Inc. .......................................................... 17,000 635,375 *Insignia Financial Group, Inc. (Class A)............................................. 50,000 1,150,000 North Fork Bancorp, Inc. ............................................................. 58,600 1,966,763 *Stirling Cooke Brown Holdings Ltd. .................................................. 20,400 499,800 TCF Financial Corp. .................................................................. 37,100 1,259,081 *Wilshire Financial Services Group, Inc. ............................................. 15,000 397,500 -------------- 5,908,519 -------------- BUILDING & FORESTRY PRODUCTS (1.1%) Martin Marietta Materials, Inc. ...................................................... 30,000 1,096,875 -------------- BUSINESS & CONSUMER SERVICES (8.0%) *AccuStaff, Inc. ..................................................................... 36,000 828,000 *Billing Information Concepts Corp. .................................................. 17,000 816,000 *Family Golf Centers, Inc. ........................................................... 45,000 1,411,875 G & K Services, Inc. (Class A)........................................................ 27,800 1,167,600 *Hagler Bailly, Inc. ................................................................. 20,000 450,000 *Hall, Kinion & Associates, Inc. ..................................................... 40,000 875,000 *Lamalie Associates, Inc. ............................................................ 3,000 60,000 *Seattle FilmWorks, Inc. ............................................................. 92,000 1,023,500 Select Appointments Holdings plc ADR.................................................. 38,000 693,500 *Walsh International, Inc. ........................................................... 40,300 423,150 -------------- 7,748,625 -------------- CONSUMER DURABLE (4.0%) Clayton Homes, Inc. .................................................................. 54,900 988,200 *Coastcast Corp. ..................................................................... 90,000 1,248,750 Exide Corp. .......................................................................... 14,300 370,012 *Tower Automotive, Inc. .............................................................. 30,000 1,261,875 -------------- 3,868,837 -------------- CONSUMER NON-DURABLE (10.2%) *ACX Technologies, Inc. .............................................................. 24,000 586,500 *Bed, Bath & Beyond, Inc. ............................................................ 26,700 1,027,950 *Bon-Ton Stores, Inc. ................................................................ 63,500 952,500 *Borders Group, Inc. ................................................................. 24,500 767,156 CKE Restaurants, Inc. ................................................................ 51,800 2,182,075 *Cost Plus, Inc. ..................................................................... 51,000 1,479,000 *Day Runner, Inc. .................................................................... 20,000 810,000 *Star Buffet, Inc. ................................................................... 19,000 218,500 *Williams-Sonoma, Inc. ............................................................... 44,200 1,850,875 -------------- 9,874,556 -------------- SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- CONSUMER STAPLES (0.3%) *Beringer Wine Estates Holdings, Inc. (Class B)....................................... 8,500 $ 323,000 -------------- ENERGY (2.9%) *Meridian Resource Corp. ............................................................. 75,000 717,187 *Ocean Energy, Inc. .................................................................. 16,000 789,000 *Patterson Energy, Inc. .............................................................. 5,600 216,650 *Seagull Energy Corp. ................................................................ 53,000 1,093,125 -------------- 2,815,962 -------------- ENERGY SERVICES (3.2%) *Hanover Compressor Co. .............................................................. 7,000 143,062 *Tubos de Acero de Mexico SA ADR...................................................... 90,000 1,946,250 *Willbros Group, Inc. ................................................................ 65,000 975,000 -------------- 3,064,312 -------------- ENTERTAINMENT & MEDIA (3.8%) *Golden Books Family Entertainment, Inc. ............................................. 17,600 181,500 Nelson (Thomas), Inc. ................................................................ 51,000 589,687 *Regal Cinemas, Inc. ................................................................. 50,000 1,393,750 *WMS Industries, Inc. ................................................................ 68,400 1,444,950 -------------- 3,609,887 -------------- HEALTH (27.6%) *Alternative Living Services, Inc. ................................................... 44,300 1,309,619 *American Oncology Resources, Inc. ................................................... 55,500 888,000 *Assisted Living Concepts, Inc. ...................................................... 57,000 1,125,750 *ATL Ultrasound, Inc. ................................................................ 38,000 1,748,000 *Atria Communities, Inc. ............................................................. 63,000 1,078,875 *Cardiac Pathways Corp. .............................................................. 65,000 455,000 *Concentra Managed Care, Inc. ........................................................ 13,000 438,750 *ESC Medical Systems Ltd. ............................................................ 25,000 968,750 *HealthCare COMPARE Corp. ............................................................ 19,300 986,712 *FPA Medical Management, Inc. ........................................................ 54,600 1,016,925 *Health Management Systems, Inc. ..................................................... 50,000 296,875 *IDEXX Laboratories, Inc. ............................................................ 20,000 318,750 *Immunex Corp. ....................................................................... 15,000 810,000 Jones Medical Industries, Inc. ....................................................... 37,500 1,434,375 *Laser Industries Ltd. ............................................................... 75,000 2,053,125 *Ligand Pharmaceuticals, Inc. (Class B)............................................... 73,897 951,424 *MedPartners, Inc. ................................................................... 51,000 1,141,125 *MedQuist, Inc. ...................................................................... 23,450 814,887 *Protein Design Labs, Inc. ........................................................... 20,000 800,000 *Quorum Health Group, Inc. ........................................................... 50,000 1,306,250 *Somnus Medical Technologies, Inc. ................................................... 100,000 1,275,000 *Spiros Development Corp. II (Units-1 callable Common Share of Spiros & 1 Warrant of Durable Pharmaceuticals)............................................................. 30,000 513,750
37 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA SMALL CAP FUND, INC. -- -----------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) *Thermo Cardiosystems, Inc. .......................................................... 50,000 $ 1,337,500 *Transkaryotic Therapies, Inc. ....................................................... 35,100 1,232,888 *Universal Health Services, Inc. (Class B)............................................ 30,000 1,511,250 *Watson Pharmaceuticals, Inc. ........................................................ 25,400 823,913 -------------- 26,637,493 -------------- MACHINERY & CAPITAL SPENDING (1.3%) Robbins & Myers, Inc. ................................................................ 32,000 1,268,000 -------------- METAL MINING & STEEL (0.1%) Oregon Steel Mills, Inc. ............................................................. 3,000 63,938 -------------- POLLUTION CONTROL (1.4%) *Allied Waste Industries, Inc. ....................................................... 55,500 1,293,844 -------------- TECHNOLOGY (24.3%) *ADC Telecommunications, Inc. ........................................................ 13,000 542,750 *Aspect Telecommunications Corp. ..................................................... 52,000 1,085,500 *Avant! Corp. ........................................................................ 21,000 351,750 *AXENT Technologies, Inc. ............................................................ 76,800 1,324,800 *CHS Electronics, Inc. ............................................................... 30,000 513,750 *CIBER, Inc. ......................................................................... 32,000 1,856,000 *Computer Products, Inc. ............................................................. 33,800 764,725 *Davox Corp. ......................................................................... 26,900 877,613 *Eltron International, Inc. .......................................................... 41,400 1,252,350 *Engineering Animation, Inc. ......................................................... 35,100 1,614,600 *HNC Software, Inc. .................................................................. 32,000 1,376,000 *Hyperion Software Corp. ............................................................. 5,300 189,475 *Infinium Software, Inc. ............................................................. 50,000 812,500 *Intelligent Polymers, Ltd. (Units-1 Common share & 1 Warrant)........................ 22,000 486,750 *JDA Software Group, Inc. ............................................................ 3,000 105,000 *Metro Information Services, Inc. .................................................... 43,000 1,193,250 *MICROS Systems, Inc. ................................................................ 30,600 1,377,000 *Molecular Dynamics, Inc. ............................................................ 29,000 471,250 *New Era of Networks, Inc. ........................................................... 39,000 438,750 *P-COM, Inc. ......................................................................... 57,000 983,250 *Peerless Systems Corp. .............................................................. 74,000 952,750 *Platinum Software Corp. ............................................................. 80,000 940,000 *RadiSys Corp. ....................................................................... 22,000 819,500
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- *Security Dynamics Technologies, Inc. ................................................ 26,000 $ 929,500 *Transition Systems, Inc. ............................................................ 60,000 1,327,500 *World Access, Inc. .................................................................. 36,400 869,050 -------------- 23,455,363 -------------- TRANSPORTATION (0.1%) *Ryanair Holdings plc ADR............................................................. 3,000 75,375 -------------- UTILITIES/COMMUNICATIONS (0.6%) *Anicom, Inc. ........................................................................ 33,400 530,225 -------------- Total Common Stocks (Cost $83,909,185) .................................................................. 93,271,061 -------------- WARRANT (0.1%) HEALTH (0.1%) *Ligand Pharmaceuticals, Inc. (06/03/2000) (Cost $44,517)....................................................................... 8,000 67,000 -------------- Total investments, excluding temporary cash investment (Cost $83,953,702)........................................................ 93,338,061 -------------- REPURCHASE AGREEMENT (3.7%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $3,623,531. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999 (Cost $3,622,273) ................................................................... $ 3,622,273 3,622,273 -------------- TOTAL INVESTMENTS (100.5%) (Cost $87,575,975)....................................................................... 96,960,334 RECEIVABLES LESS LIABILITIES (-0.5%)...................................................... (529,025) -------------- NET ASSETS (100.0%)....................................................................... $ 96,431,309 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. The accompanying notes are an integral part of the financial statements. 38 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------- ------------------- -- COLUMBIA REAL ESTATE EQUITY FUND, INC. -- --------------------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (92.4%) REAL ESTATE APARTMENTS (16.2%) Apartment Investment & Management Co. (Class A)....................................... 152,200 $ 5,593,350 Associated Estates Realty Corp. ...................................................... 148,800 3,524,700 Colonial Properties Trust............................................................. 156,100 4,702,512 Equity Residential Properties Trust................................................... 91,003 4,601,339 Security Capital Pacific Trust........................................................ 256,171 6,212,147 -------------- 24,634,048 -------------- OFFICE (17.2%) Boston Properties, Inc. .............................................................. 137,000 4,529,563 Equity Office Properties Trust........................................................ 308,418 9,734,443 Mack-Cali Realty Corp. ............................................................... 189,400 7,765,400 Reckson Associates Realty Corp. ...................................................... 156,800 3,978,800 -------------- 26,008,206 -------------- INDUSTRIAL (25.6%) Alexandria Real Estate Equities, Inc. ................................................ 149,500 4,718,594 First Industrial Realty Trust, Inc. .................................................. 155,500 5,617,437 Liberty Property Trust................................................................ 186,700 5,332,619 Public Storage, Inc. ................................................................. 130,700 3,839,312 Security Capital Industrial Trust..................................................... 194,145 4,829,357 Shurgard Storage Centers, Inc. (Class A).............................................. 123,900 3,593,100 Spieker Properties, Inc. ............................................................. 103,500 4,437,562 Storage Trust Realty.................................................................. 51,200 1,347,200 TriNet Corporate Realty Trust, Inc. .................................................. 131,000 5,068,063 -------------- 38,783,244 -------------- MANUFACTURED HOMES (3.0%) Manufactured Home Communities, Inc. .................................................. 170,400 4,600,800 -------------- COMMUNITY CENTERS (11.9%) Excel Realty Trust, Inc. ............................................................. 142,100 4,476,150 JP Realty, Inc. ...................................................................... 158,000 4,098,125 Pan Pacific Retail Properties, Inc. .................................................. 152,200 3,253,275 Vornado Realty Trust.................................................................. 131,900 6,191,056 -------------- 18,018,606 -------------- SHOPPING MALLS (7.8%) General Growth Properties, Inc. ...................................................... 143,000 5,165,875 Macerich Co. ......................................................................... 83,300 2,374,050 Simon DeBartolo Group, Inc. .......................................................... 130,856 4,277,356 -------------- 11,817,281 -------------- SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- LODGING (2.9%) Patriot American Hospitality, Inc. ................................................... 70,200 $ 2,022,638 Starwood Lodging Trust................................................................ 40,200 2,326,575 -------------- 4,349,213 -------------- OTHER (7.8%) *Catellus Development Corp. .......................................................... 261,900 5,238,000 *Security Capital Group, Inc. (Class B)............................................... 202,900 6,594,250 -------------- 11,832,250 -------------- Total Common Stocks (Cost $112,868,719) ................................................................. 140,043,648 -------------- WARRANT (0.1%) OTHER (0.1%) *Security Capital Group 09/18/1997-09/18/1998 (Cost $176,224)...................................................................... 22,497 118,109 -------------- Total investments, excluding temporary cash investment (Cost $113,044,943) ................................................................. 140,161,757 -------------- REPURCHASE AGREEMENT (7.3%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $11,044,700. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999 (Cost $11,040,866)................................................................... $ 11,040,866 11,040,866 -------------- TOTAL INVESTMENTS (99.8%) (Cost $124,085,809)...................................................................... 151,202,623 RECEIVABLES LESS LIABILITIES (0.2%)....................................................... 351,817 -------------- NET ASSETS (100.0%)....................................................................... $ 151,554,440 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. The accompanying notes are an integral part of the financial statements. 39 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA BALANCED FUND, INC. -- ----------------------------------
SHARES OR PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMON STOCKS (52.3%) FINANCE (9.3%) Allstate Corp. ....................................................................... 84,600 $ 7,688,025 American General Corp. ............................................................... 129,100 6,979,469 Banc One Corp. ....................................................................... 100,000 5,431,250 BankAmerica Corp. .................................................................... 99,800 7,285,400 Chase Manhattan Corp. ................................................................ 60,000 6,570,000 First Union Corp. .................................................................... 206,900 10,603,625 Freddie Mac........................................................................... 301,000 12,623,187 Morgan Stanley, Dean Witter, Discover & Co. .......................................... 89,100 5,268,038 NationsBank Corp. .................................................................... 110,900 6,744,106 Travelers Property Casualty Corp. (Class A)........................................... 97,400 4,285,600 -------------- 73,478,700 -------------- BUILDING & FORESTRY PRODUCTS (0.2%) Weyerhaeuser Co. ..................................................................... 39,400 1,933,062 -------------- BUSINESS & CONSUMER SERVICES (1.9%) *Corrections Corporation of America................................................... 124,600 4,617,987 McKesson Corp. ....................................................................... 10,000 1,081,875 Service Corporation Int'l. ........................................................... 256,400 9,470,775 -------------- 15,170,637 -------------- CHEMICAL (0.5%) du Pont (E.I.) de Nemours & Co. ...................................................... 64,000 3,844,000 -------------- CONSUMER NON-DURABLE (5.1%) *Consolidated Stores Corp. ........................................................... 63,100 2,772,456 *Federated Department Stores, Inc. ................................................... 187,300 8,065,606 Home Depot, Inc. ..................................................................... 86,700 5,104,462 Mattel, Inc. ......................................................................... 292,350 10,890,038 *Office Depot, Inc. .................................................................. 108,100 2,587,644 Tandy Corp. .......................................................................... 166,600 6,424,513 Wal-Mart Stores, Inc. ................................................................ 123,900 4,886,306 -------------- 40,731,025 -------------- CONSUMER STAPLES (6.6%) American Stores Co. .................................................................. 168,800 3,470,950 Avon Products, Inc. .................................................................. 50,200 3,081,025 Gillette Co. ......................................................................... 49,000 4,921,437 Nabisco Holdings Corp. (Class A)...................................................... 90,100 4,364,219 PepsiCo, Inc. ........................................................................ 134,200 4,889,913 Philip Morris Cos., Inc. ............................................................. 180,100 8,160,781 Rite Aid Corp. ....................................................................... 90,000 5,281,875 *Safeway, Inc. ....................................................................... 99,400 6,287,050 Sunbeam Corp. ........................................................................ 212,000 8,930,500 SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Sysco Corp. .......................................................................... 67,900 $ 3,093,694 -------------- 52,481,444 -------------- ENERGY (3.2%) Burlington Resources, Inc. ........................................................... 87,535 3,922,662 Exxon Corp. .......................................................................... 98,600 6,033,088 Mobil Corp. .......................................................................... 84,400 6,092,625 Royal Dutch Petroleum Co. ............................................................ 100,700 5,456,681 Texaco, Inc. ......................................................................... 64,400 3,501,750 -------------- 25,006,806 -------------- ENERGY SERVICES (0.4%) Schlumberger Ltd. .................................................................... 34,000 2,737,000 -------------- ENTERTAINMENT & MEDIA (0.5%) Disney (Walt) Co. .................................................................... 38,000 3,764,375 -------------- HEALTH (7.8%) Aetna, Inc. .......................................................................... 55,500 3,916,219 American Home Products Corp. ......................................................... 102,300 7,825,950 Bristol-Myers Squibb Co. ............................................................. 89,200 8,440,550 Lilly (Eli) & Co. .................................................................... 143,800 10,012,075 Merck & Co., Inc. .................................................................... 120,300 12,781,875 Pfizer, Inc. ......................................................................... 80,000 5,965,000 Schering-Plough Corp. ................................................................ 72,800 4,522,700 *Tenet Healthcare Corp. .............................................................. 132,200 4,379,125 Warner-Lambert Co. ................................................................... 31,400 3,893,600 -------------- 61,737,094 -------------- MACHINERY & CAPITAL SPENDING (4.0%) Case Corp. ........................................................................... 40,000 2,417,500 Emerson Electric Co. ................................................................. 105,600 5,959,800 General Electric Co. ................................................................. 176,000 12,914,000 Tyco International Ltd. .............................................................. 227,626 10,257,397 -------------- 31,548,697 -------------- REAL ESTATE SECURITIES (2.7%) American Health Properties, Inc. ..................................................... 73,600 2,028,600 Equity Office Properties Trust........................................................ 63,283 1,997,370 Equity Residential Properties Trust................................................... 48,500 2,452,281 JP Realty, Inc. ...................................................................... 97,500 2,528,906 Manufactured Home Communities, Inc. .................................................. 78,000 2,106,000 Security Capital Pacific Trust........................................................ 91,800 2,226,150 Simon DeBartolo Group, Inc. .......................................................... 52,500 1,716,094 Spieker Properties, Inc. ............................................................. 53,000 2,272,375 Vornado Realty Trust.................................................................. 92,800 4,355,800 -------------- 21,683,576 --------------
40 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA BALANCED FUND, INC. -- ----------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMON STOCKS (CONTINUED) TECHNOLOGY (6.2%) Autodesk, Inc. ....................................................................... 69,100 $ 2,556,700 *Cadence Design Systems, Inc. ........................................................ 170,600 4,179,700 *Cisco Systems, Inc. ................................................................. 110,650 6,168,737 *Computer Sciences Corp. ............................................................. 75,000 6,262,500 *EMC Corp. ........................................................................... 75,000 2,057,812 Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 89,200 3,328,275 Hewlett-Packard Co. .................................................................. 76,000 4,750,000 Intel Corp. .......................................................................... 110,800 7,783,700 International Business Machines Corp. ................................................ 76,600 8,009,488 Lucent Technologies, Inc. ............................................................ 52,500 4,193,438 -------------- 49,290,350 -------------- UTILITIES/COMMUNICATIONS (2.2%) AT&T Corp. ........................................................................... 80,200 4,912,250 Bell Atlantic Corp. .................................................................. 48,100 4,377,100 MCI Communications Corp. ............................................................. 47,800 2,046,437 SBC Communications, Inc. ............................................................. 85,000 6,226,250 -------------- 17,562,037 -------------- UTILITIES/ELECTRIC/GAS (1.7%) Cinergy Corp. ........................................................................ 116,800 4,474,900 Houston Industries, Inc. ............................................................. 177,200 4,729,025 Texas Utilities Co. .................................................................. 108,300 4,501,219 -------------- 13,705,144 -------------- Total Common Stocks (Cost $415,436,102) ................................................................. 414,673,947 -------------- U.S. GOVERNMENT, FEDERAL AGENCY OBLIGATIONS (26.6%) U.S. TREASURY BONDS & NOTES (7.3%) U.S. Treasury Bonds 12.000% 05/15/2005................................................................... $ 4,005,000 5,476,837 8.875% 08/15/2017................................................................... 8,970,000 11,903,468 8.125% 08/15/2019................................................................... 2,350,000 2,941,173 U.S. Treasury Notes 6.125% 08/31/1998................................................................... 7,640,000 7,665,067 8.875% 02/15/1999................................................................... 28,675,000 29,651,757 -------------- 57,638,302 -------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (0.2%) 7.500% 08/15/2027 - 10/15/2027...................................................... 1,534,643 1,572,042 -------------- FEDERAL HOUSING ADMINISTRATION (FHA) (0.6%) FHA Insured Project Pool #23-11059 7.700% 08/01/2028................................................................... 1,609,689 1,643,186
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- FHA Insured Project Pool #55 7.430% 04/01/2022................................................................... $ 1,898,328 $ 1,984,949 FHA Insured Project Pool #53-43077 9.125% 07/25/2033................................................................... 1,098,642 1,178,898 -------------- 4,807,033 -------------- AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (18.5%) FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1233 Cl. H 7.000% 04/15/2007................................................................... 600,000 618,000 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1543 Cl. XN 7.000% 07/15/2023................................................................... 5,617,000 5,804,538 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1627 Cl. EA 6.000% 05/15/2023................................................................... 1,817,000 1,678,561 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1763 Cl. H 8.250% 07/15/2023................................................................... 130,000 139,275 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1895 Cl. B 7.500% 12/15/2023................................................................... 3,940,000 4,044,646 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1904 Cl. C 7.250% 08/15/2024................................................................... 3,490,000 3,543,432 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1910 Cl. D 8.000% 11/15/2024................................................................... 1,883,000 1,979,752 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1933 Cl. C 7.000% 03/15/2025................................................................... 2,440,000 2,462,043 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1933 Cl. AE 7.000% 03/15/2025................................................................... 2,060,000 2,076,987 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1933 Cl. VC 7.550% 03/15/2012................................................................... 2,950,000 3,123,148 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1941 Cl. C 6.750% 06/15/2022................................................................... 2,690,000 2,690,834 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1971 Cl. A 7.500% 07/15/2027................................................................... 3,000,000 3,114,001 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1971 Cl. E 7.500% 01/20/2024................................................................... 16,580,000 17,035,535
41 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA BALANCED FUND, INC. -- ----------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
U.S. GOVERNMENT, FEDERAL AGENCY OBLIGATIONS (CONTINUED) FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1995 Cl. A 7.500% 08/20/2027................................................................... $ 7,200,000 $ 7,460,732 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1995 Cl. D 7.500% 08/20/2012................................................................... 5,150,000 5,244,264 FHLMC GNMA Multiclass Mtg. Partn. Ctfs. Gtd. Series 40 Cl. N 6.500% 05/17/2021................................................................... 7,180,000 7,039,523 FHLMC GNMA Multiclass Mtg. Partn. Ctfs. Gtd. Series 62 Cl. B 7.500% 05/20/2024................................................................... 3,756,000 3,870,075 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1994-10 Cl. UU 6.500% 01/25/2024................................................................... 857,000 829,368 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G1 Cl. B 7.500% 06/20/2024................................................................... 3,910,000 4,044,387 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G4 Cl. C 7.500% 06/17/2024................................................................... 6,650,000 6,848,514 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G5 Cl. VA 7.500% 07/17/2012................................................................... 5,700,000 6,007,780 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-27 Cl. B 7.000% 02/18/2025................................................................... 3,020,000 3,034,710 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. L 7.500% 02/17/2012................................................................... 1,760,000 1,774,087 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-39 Cl. B 7.500% 05/17/2027................................................................... 1,530,000 1,603,606 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-46 Cl. B 7.500% 03/17/2025................................................................... 3,900,000 4,003,252 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-63 Cl. PH 7.000% 07/18/2026................................................................... 6,510,000 6,673,970 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-74 Cl. D 7.500% 09/20/2023................................................................... 9,775,000 10,042,634 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1996-15 Cl. B 7.500% 08/20/2020................................................................... 8,493,000 8,703,975
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. B 7.000% 08/16/2026................................................................... $ 4,214,914 $ 4,262,908 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. C 7.000% 03/20/2027................................................................... 3,877,000 3,913,037 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. M 7.500% 02/16/2012................................................................... 3,530,000 3,620,439 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. N 7.500% 02/16/2027................................................................... 3,372,500 3,492,629 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-11 Cl. M 8.000% 05/16/2024................................................................... 4,890,000 5,128,768 Puerto Rico Housing Finance Corp. Series A Cl. 4 9.000% 07/20/2017................................................................... 477,433 477,433 -------------- 146,386,843 -------------- Total U.S. Government, Federal Agency Obligations (Cost $205,197,469) ................................................................. 210,404,220 -------------- OTHER SECURITIZED LOANS (7.0%) COLLATERALIZED MORTGAGE OBLIGATIONS (5.3%) BA Mortgage Securities, Inc. Series 1997-2 Cl. 1A-3 7.400% 10/25/2027................................................................... 2,952,561 2,978,004 Bear Stearns Mortgage Securities, Inc. Series 1996-2 Cl. A1 6.758% 01/25/2025................................................................... 4,522,414 4,506,779 Bear Stearns Mortgage Securities, Inc. Series 1996-8 Cl. A9 7.600% 11/25/2027................................................................... 4,607,000 4,711,413 Bear Stearns Structured Securities, Inc. (144A) Series 1995-1 Cl. A 6.727% 09/25/2024................................................................... 3,138,131 3,041,811 CWHL, Inc. Mtg. Pass Thru Ctf. Series 1997-3 Cl. A10 7.500% 06/25/2027................................................................... 4,569,141 4,635,487 GE Capital Mortgage Services, Inc. Series 1997-8 Cl. A6 7.250% 10/25/2027................................................................... 2,460,000 2,518,579 Headlands Mortgage Securities, Inc. Series 1997-3 Cl. A-1-6 7.000% 07/25/2027................................................................... 4,810,000 4,828,890
42 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA BALANCED FUND, INC. -- ----------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
OTHER SECURITIZED LOANS (CONTINUED) Mortgage Obligation Structured Trust (144A) Series 1993-1 Cl. B1 10.668% 10/25/2018................................................................... $ 3,616,915 $ 3,785,897 Norwest Asset Securities Corp. Series 1997-16 Cl. A2 6.750% 10/25/2027................................................................... 5,385,900 5,345,609 PNC Mortgage Securities Corp. Series 1997-4 Cl. 2PP2 7.500% 07/25/2027................................................................... 2,750,000 2,798,242 Residential Funding Mortgage Securities I, Inc. Series 1997-S7 Cl. A-3 7.500% 05/25/2027................................................................... 3,051,000 3,143,418 -------------- 42,294,129 -------------- ASSET BACKED SECURITIES (1.7%) Green Tree Financial Corp. Series 1995-8 Cl. A2 6.150% 12/15/2026................................................................... 2,620,024 2,620,024 Green Tree Financial Corp. Series 1996-7 Cl. A2 6.300% 10/15/2027................................................................... 3,320,000 3,321,029 Lehman FHA Title I Loan Trust Series 1995-6 Cl. A-2 6.630% 05/25/2007................................................................... 5,422,573 5,409,384 The Money Store Residential Trust Series 1997-II Cl. A4 7.385% 01/15/2029................................................................... 1,982,000 2,009,867 -------------- 13,360,304 -------------- Total Other Securitized Loans (Cost $54,776,885) .................................................................. 55,654,433 -------------- CORPORATE BONDS (12.7%) INDUSTRIAL (5.9%) Allied Holdings, Inc. Series B 8.625% 10/01/2007................................................................... 500,000 507,500 American Home Products Corp. 7.700% 02/15/2000................................................................... 4,600,000 4,735,102 Amgen, Inc. 8.125% 04/01/2097................................................................... 2,425,000 2,674,193 Cinemark USA, Inc. Series B 9.625% 08/01/2008................................................................... 350,000 361,375 Coca-Cola Enterprises, Inc. 6.375% 08/01/2001................................................................... 4,000,000 4,028,440 Eckerd Corp. 9.250% 02/15/2004................................................................... 4,000,000 4,396,680
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Ethan Allen, Inc. 8.750% 03/15/2001................................................................... $ 3,450,000 $ 3,527,625 Federal Express Corp. Pass Thru Trust Series 1997-1C 7.650% 01/15/2014................................................................... 2,200,000 2,350,854 Georgia-Pacific Corp. 9.950% 06/15/2002................................................................... 3,061,000 3,464,287 Hilton Hotels Corp. 7.375% 06/01/2002................................................................... 3,500,000 3,593,520 Johns Manville International Grp. 10.875% 12/15/2004................................................................... 1,500,000 1,665,000 Jones Intercable, Inc. 8.875% 04/01/2007................................................................... 300,000 313,500 Lenfest Communications, Inc. 8.375% 11/01/2005................................................................... 650,000 667,875 Nabisco, Inc. 6.700% 06/15/2002................................................................... 2,000,000 2,025,680 Santa Fe Pacific Gold Corp. 8.375% 07/01/2005................................................................... 5,100,000 5,493,720 Teekay Shipping Corp. Guaranteed First Preferred Shipping Mtg. Notes 8.320% 02/01/2008................................................................... 1,000,000 1,020,000 Tenet Healthcare Corp. 10.125% 03/01/2005................................................................... 900,000 983,250 Time Warner Entertainment Co. L.P. 9.625% 05/01/2002................................................................... 1,900,000 2,122,737 8.375% 03/15/2023................................................................... 1,320,000 1,506,357 UCAR Global Enterprises Series B 12.000% 01/15/2005................................................................... 1,000,000 1,120,000 -------------- 46,557,695 -------------- FINANCIAL (5.8%) Abn Amro Bank N. V. Chicago 7.550% 06/28/2006................................................................... 3,575,000 3,825,393 Bankamerica Corp. 5.938% 02/20/2002................................................................... 3,800,000 3,788,030 Aetna Services, Inc. 7.625% 08/15/2026................................................................... 3,500,000 3,683,295 Bear Stearns Cos., Inc. Series B Medium Term Notes 5.779% 10/10/2000................................................................... 7,825,000 7,802,777 Caterpillar Financial Services Corp. Medium Term Notes 6.350% 12/01/1998................................................................... 1,590,000 1,592,179 Commercial Credit Group, Inc. 6.625% 06/01/2015................................................................... 1,250,000 1,291,325
43 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA BALANCED FUND, INC. -- ----------------------------------
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- --------------
CORPORATE BONDS (CONTINUED) ERP Operating Limited Partnership (144A) 8.500% 05/15/1999................................................................... $ 2,700,000 $ 2,775,681 First Security Corp. 7.875% 10/15/1999................................................................... 1,325,000 1,361,000 +Fleet Mortgage Group, Inc. 6.500% 09/15/1999................................................................... 550,000 552,937 Goldman Sachs Group L.P. (144A) Medium Term Notes 7.200% 03/01/2007................................................................... 2,800,000 2,905,224 Hartford Life, Inc. 7.650% 06/15/2027................................................................... 2,555,000 2,702,398 Liberty Property L.P. 7.100% 08/15/2004................................................................... 3,525,000 3,605,934 Morgan Stanley Group, Inc. Medium Term Notes 5.750% 02/15/2001................................................................... 2,100,000 2,070,978 Security Capital Industrial Medium Term Notes 7.810% 02/01/2015................................................................... 3,250,000 3,403,725 Simon DeBartolo Group, L.P. 7.125% 09/20/2007................................................................... 2,300,000 2,360,076 Spieker Properties L.P. 6.900% 01/15/2004................................................................... 2,450,000 2,477,538 -------------- 46,198,490 -------------- UTILITY (0.5%) GTE North, Inc. 5.500% 02/15/1999................................................................... 2,905,000 2,886,030 Worldcom, Inc. 8.875% 01/15/2006................................................................... 1,000,000 1,075,920 -------------- 3,961,950 -------------- YANKEE (0.5%) Hydro-Quebec 8.400% 01/15/2022................................................................... 2,155,000 2,538,418
SHARES OR PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Ontario Province CDA 6.000% 02/21/2006................................................................... $ 1,725,000 $ 1,698,383 -------------- 4,236,801 -------------- Total Corporate Bonds (Cost $99,154,016) .................................................................. 100,954,936 -------------- Total investments, excluding temporary cash investments (Cost $687,367,178) ................................................................. 781,687,536 -------------- REPURCHASE AGREEMENT (2.4%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $18,645,686. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999 (Cost $18,639,214)................................................................... 18,639,214 18,639,214 -------------- TOTAL INVESTMENTS (101.0%) (Cost $706,006,392)...................................................................... 800,326,750 -------------- RECEIVABLES LESS LIABILITIES (-1.0%)...................................................... (7,948,494) -------------- NET ASSETS (100.0%)....................................................................... $ 792,378,256 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. * Non-income producing. + Affiliated issuers. (Note 1) The accompanying notes are an integral part of the financial statements. 44 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ----------------------- ----------------------- -- COLUMBIA DAILY INCOME COMPANY -- -----------------------------------
PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- COMMERCIAL PAPER (90.1%) A. I. Credit Corp. 6.080% 01/06/1998................................................................... $ 4,510,000 $ 4,505,430 Air Products & Chemicals, Inc. 5.950% 01/07/1998................................................................... 5,000,000 4,994,215 Alabama Power Co. 5.910% 01/05/1998................................................................... 3,325,000 3,322,271 5.860% 01/06/1998................................................................... 5,000,000 4,995,117 6.000% 01/06/1998................................................................... 10,000,000 9,990,000 American General Finance Corp. 5.550% 01/28/1998................................................................... 5,000,000 4,978,417 5.500% 02/02/1998................................................................... 7,000,000 6,964,708 5.500% 02/11/1998................................................................... 5,000,000 4,967,917 5.720% 02/27/1998................................................................... 10,000,000 9,907,845 Ameritech Capital Funding Corp. 5.570% 01/29/1998................................................................... 5,000,000 4,977,565 Archer-Daniels-Midland Co. 6.200% 01/06/1998................................................................... 5,000,000 4,994,833 5.570% 01/21/1998................................................................... 6,000,000 5,980,505 5.530% 01/22/1998................................................................... 10,000,000 9,966,206 5.670% 02/11/1998................................................................... 5,000,000 4,966,925 5.700% 03/05/1998................................................................... 6,000,000 5,939,200 Associates Corp. of North America 6.740% 01/02/1998................................................................... 21,100,000 21,092,099 Atlantic Richfield Co. 5.580% 01/22/1998................................................................... 3,000,000 2,989,770 Avco Financial Services, Inc. 5.690% 03/02/1998................................................................... 5,000,000 4,951,794 5.680% 03/04/1998................................................................... 6,000,000 5,940,360 5.690% 03/04/1998................................................................... 6,000,000 5,940,255 5.690% 03/05/1998................................................................... 10,000,000 9,898,845 B.P. America, Inc. 6.100% 01/05/1998................................................................... 5,000,000 4,995,764 6.300% 01/05/1998................................................................... 5,000,000 4,995,625 6.000% 01/20/1998................................................................... 2,500,000 2,491,667 Bank of America, FSB 5.800% 01/12/1998................................................................... 5,000,000 4,990,333 5.570% 01/26/1998................................................................... 10,000,000 9,959,772 BankAmerica Corp. 5.530% 01/28/1998................................................................... 10,000,000 9,956,989 Barclays U.S. Funding Corp. 8.250% 01/02/1998................................................................... 10,000,000 9,995,417 8.500% 01/02/1998................................................................... 10,000,000 9,995,278 5.590% 01/27/1998................................................................... 7,000,000 6,970,653 Becton, Dickinson & Co. 6.150% 01/09/1998................................................................... 2,633,000 2,628,952 PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Bell Atlantic Financial Services, Inc. 5.800% 01/09/1998................................................................... $ 10,000,000 $ 9,985,500 5.820% 01/13/1998................................................................... 19,000,000 18,960,068 Beneficial Corp. 5.630% 01/20/1998................................................................... 6,000,000 5,981,233 Brown-Forman Corp. 6.250% 01/06/1998................................................................... 4,755,000 4,750,047 CIT Group Holdings, Inc. 5.500% 02/02/1998................................................................... 5,000,000 4,974,792 5.500% 02/05/1998................................................................... 5,000,000 4,972,500 5.560% 02/09/1998................................................................... 7,000,000 6,956,756 5.720% 03/10/1998................................................................... 10,000,000 9,890,367 Cargill, Inc. 5.620% 03/03/1998................................................................... 15,000,000 14,854,817 Cargill Financial Services Corp. 5.640% 02/26/1998................................................................... 10,000,000 9,910,700 Chevron Transport Co. 5.550% 02/10/1998................................................................... 7,000,000 6,955,754 5.680% 03/06/1998................................................................... 5,000,000 4,948,723 5.700% 04/15/1998................................................................... 10,000,000 9,833,750 5.720% 04/17/1998................................................................... 6,000,000 5,897,994 Clorox Co. 5.680% 01/16/1998................................................................... 5,000,000 4,987,378 5.730% 02/23/1998................................................................... 5,000,000 4,957,025 5.730% 02/24/1998................................................................... 10,000,000 9,912,459 Commercial Credit Co. 5.500% 02/04/1998................................................................... 10,000,000 9,946,528 5.530% 02/04/1998................................................................... 5,000,000 4,973,118 5.600% 02/04/1998................................................................... 3,000,000 2,983,667 5.530% 02/05/1998................................................................... 10,000,000 9,944,700 Deere (John) Credit Co. 5.590% 01/20/1998................................................................... 5,000,000 4,984,472 Deere (John) Capital Corp. 5.560% 01/30/1998................................................................... 7,000,000 6,967,567 Disney (Walt) Co. 5.580% 02/23/1998................................................................... 10,000,000 9,916,300 5.600% 02/24/1998................................................................... 5,000,000 4,957,223 5.650% 03/27/1998................................................................... 7,000,000 6,905,520 Dow Jones & Co., Inc. 5.950% 01/14/1998................................................................... 1,900,000 1,895,604 duPont (E.I.) de Nemours & Co. 5.600% 01/20/1998................................................................... 1,600,000 1,595,022 5.520% 01/22/1998................................................................... 5,000,000 4,983,133 5.490% 02/03/1998................................................................... 5,000,000 4,974,075 5.670% 02/25/1998................................................................... 5,000,000 4,955,900 Florida Power Corp. 5.900% 01/12/1998................................................................... 10,000,000 9,980,333 5.880% 02/10/1998................................................................... 3,000,000 2,979,910
45 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ----------------------- ----------------------- -- COLUMBIA DAILY INCOME COMPANY -- -----------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMERCIAL PAPER (CONTINUED) Ford Motor Credit Co. 6.170% 01/05/1998................................................................... $ 5,000,000 $ 4,995,715 5.920% 01/06/1998................................................................... 4,800,000 4,795,264 5.570% 01/21/1998................................................................... 8,000,000 7,974,007 5.570% 01/26/1998................................................................... 5,000,000 4,979,886 5.570% 02/03/1998................................................................... 15,000,000 14,921,092 General Electric Capital Corp. 5.830% 01/07/1998................................................................... 10,000,000 9,988,664 5.550% 02/06/1998................................................................... 15,000,000 14,914,437 5.580% 02/13/1998................................................................... 8,000,000 7,945,440 5.680% 03/11/1998................................................................... 5,000,000 4,944,778 Glaxo Wellcome plc 5.570% 01/21/1998................................................................... 5,000,000 4,983,754 5.670% 03/02/1998................................................................... 5,000,000 4,951,962 5.700% 03/10/1998................................................................... 7,000,000 6,923,525 5.670% 03/16/1998................................................................... 5,000,000 4,940,938 Goldman Sachs Group L.P. 5.870% 01/09/1998................................................................... 10,000,000 9,985,325 5.800% 01/15/1998................................................................... 5,000,000 4,987,917 5.650% 02/20/1998................................................................... 2,000,000 1,983,992 Hewlett-Packard Co. 6.200% 01/08/1998................................................................... 1,000,000 998,622 5.950% 01/21/1998................................................................... 5,376,000 5,357,341 Household Finance Corp. 5.700% 01/16/1998................................................................... 5,000,000 4,987,333 5.550% 02/09/1998................................................................... 8,000,000 7,950,667 5.670% 02/17/1998................................................................... 5,000,000 4,962,200 5.580% 02/20/1998................................................................... 10,000,000 9,920,950 Idaho Power Co. 5.860% 01/13/1998................................................................... 5,000,000 4,989,420 McGraw-Hill Companies, Inc. 5.580% 01/29/1998................................................................... 6,000,000 5,973,030 5.670% 03/19/1998................................................................... 4,600,000 4,543,489 Merrill Lynch & Co., Inc. 5.850% 01/15/1998................................................................... 10,000,000 9,975,625 5.640% 01/20/1998................................................................... 2,800,000 2,791,227 5.560% 02/11/1998................................................................... 10,000,000 9,935,134 5.610% 02/25/1998................................................................... 10,000,000 9,912,734 5.680% 02/27/1998................................................................... 2,500,000 2,477,122 5.690% 02/27/1998................................................................... 2,500,000 2,477,082 MetLife Funding, Inc. 5.700% 01/16/1998................................................................... 10,000,000 9,974,667 5.680% 01/22/1998................................................................... 2,000,000 1,993,058 5.660% 02/12/1998................................................................... 5,000,000 4,966,197 5.660% 02/17/1998................................................................... 5,000,000 4,962,267 5.660% 02/19/1998................................................................... 5,000,000 4,960,695
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Minnesota Mining & Manufacturing Co. 5.580% 02/18/1998................................................................... $ 5,000,000 $ 4,962,025 5.580% 02/19/1998................................................................... 15,000,000 14,883,750 Monsanto Co. 6.300% 01/05/1998................................................................... 5,000,000 4,995,625 5.820% 01/08/1998................................................................... 10,000,000 9,987,066 6.250% 01/08/1998................................................................... 10,000,000 9,986,111 5.950% 01/15/1998................................................................... 3,843,000 3,833,473 6.020% 01/16/1998................................................................... 5,000,000 4,986,622 Morgan Stanley Group, Inc. 5.800% 01/15/1998................................................................... 2,000,000 1,995,167 5.530% 01/27/1998................................................................... 5,000,000 4,979,263 5.530% 01/30/1998................................................................... 10,000,000 9,953,917 5.590% 02/17/1998................................................................... 10,000,000 9,925,467 Nalco Chemical Co. 5.700% 03/09/1998................................................................... 10,000,000 9,892,334 5.710% 03/20/1998................................................................... 10,000,000 9,874,697 5.700% 03/23/1998................................................................... 10,000,000 9,870,167 National Rural Utilities Cooperative Finance Corp. 6.150% 01/09/1998................................................................... 2,800,000 2,795,695 5.670% 03/09/1998................................................................... 5,000,000 4,946,450 5.690% 03/09/1998................................................................... 5,000,000 4,946,262 5.650% 03/12/1998................................................................... 10,000,000 9,888,570 5.690% 03/23/1998................................................................... 6,000,000 5,922,237 Norwest Financial, Inc. 5.820% 01/13/1998................................................................... 5,000,000 4,989,492 5.820% 01/14/1998................................................................... 10,000,000 9,977,367 5.790% 01/27/1998................................................................... 4,000,000 3,982,630 5.790% 01/30/1998................................................................... 3,000,000 2,985,525 5.700% 02/24/1998................................................................... 5,000,000 4,956,459 PacifiCorp 5.750% 01/23/1998................................................................... 2,000,000 1,992,653 5.770% 02/02/1998................................................................... 2,963,000 2,947,328 5.720% 02/26/1998................................................................... 10,000,000 9,909,434 Procter & Gamble Co. 5.570% 02/18/1998................................................................... 3,000,000 2,977,256 Prudential Funding Corp. 5.510% 01/23/1998................................................................... 5,000,000 4,982,399 5.520% 01/26/1998................................................................... 5,000,000 4,980,067 5.570% 01/28/1998................................................................... 5,000,000 4,978,339 5.510% 01/29/1998................................................................... 13,000,000 12,942,298 SBC Communications, Inc. 5.760% 01/20/1998................................................................... 5,000,000 4,984,000 St. Paul Cos., Inc. 5.580% 02/05/1998................................................................... 5,000,000 4,972,100 5.580% 02/09/1998................................................................... 5,000,000 4,969,000 5.580% 02/13/1998................................................................... 2,000,000 1,986,360
46 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ----------------------- ----------------------- -- COLUMBIA DAILY INCOME COMPANY -- -----------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
COMMERCIAL PAPER (CONTINUED) Sonoco Products Co. 6.800% 01/02/1998................................................................... $ 16,933,000 $ 16,926,603 Southern California Gas Co. 5.550% 01/23/1998................................................................... 3,000,000 2,989,363 5.580% 01/23/1998................................................................... 8,000,000 7,971,480 Southern New England Telecom 5.850% 01/05/1998................................................................... 2,221,000 2,219,195 Texaco, Inc. 5.880% 01/09/1998................................................................... 10,000,000 9,985,300 5.730% 03/06/1998................................................................... 10,000,000 9,896,542 USAA Capital Corp. 5.570% 02/12/1998................................................................... 15,000,000 14,900,204 5.570% 02/13/1998................................................................... 6,400,000 6,356,430 5.680% 04/07/1998................................................................... 5,000,000 4,923,479 Washington Gas Light Co. 5.570% 02/02/1998................................................................... 8,000,000 7,959,154 5.700% 02/18/1998................................................................... 6,800,000 6,747,244 Washington Post Co. 6.080% 01/07/1998................................................................... 10,000,000 9,988,178 Weyerhaeuser Real Estate Co. 5.820% 01/06/1998................................................................... 5,000,000 4,995,150 5.820% 01/07/1998................................................................... 5,000,000 4,994,342 5.820% 01/08/1998................................................................... 10,000,000 9,987,067 5.800% 01/12/1998................................................................... 10,000,000 9,980,667 Xerox Credit Corp. 5.530% 01/27/1998................................................................... 4,000,000 3,983,410 5.540% 02/10/1998................................................................... 10,000,000 9,936,906 5.650% 02/20/1998................................................................... 6,000,000 5,951,975 5.650% 03/24/1998................................................................... 5,000,000 4,934,868 -------------- Total Commercial Paper (Cost $1,053,008,380) ............................................................... 1,053,008,380 --------------
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- REPURCHASE AGREEMENTS (10.3%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $649,533. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999................................................................ $ 649,308 $ 649,308 J.P. Morgan Securities, Inc. 6.521% dated 12/31/1997, due 01/02/1998 in the amount of $60,021,440. Collateralized by U.S. Treasury Notes 3.625% to 7.500% due 08/31/2000 to 02/15/2005......................................................... 60,000,000 60,000,000 Merrill Lynch 6.388% dated 12/31/1997, due 01/02/1998 in the amount of $60,021,000. Collateralized by U.S. Treasury Bonds 6.250% to 7.625% due 02/15/2023 to 08/15/2025......................................................... 60,000,000 60,000,000 -------------- Total Repurchase Agreements (Cost $120,649,308) ................................................................. 120,649,308 -------------- TOTAL INVESTMENTS (100.4%) (Cost $1,173,657,688, including $6,537,187 accrued interest receivable).................. 1,173,657,688 CASH AND RECEIVABLES LESS LIABILITIES (-0.4%)............................................. (4,562,120) -------------- NET ASSETS (100.0%)....................................................................... $1,169,095,568 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 47 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - -------------- -------------- -- COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC. -- ----------------------------------------------------
PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- U.S. TREASURY NOTES (98.1%) 6.875% 08/31/1999................................................................... $ 7,675,000 $ 7,818,906 5.875% 11/15/1999................................................................... 16,225,000 16,280,782 5.875% 02/15/2000................................................................... 9,750,000 9,786,562 6.000% 08/15/2000................................................................... 3,200,000 3,224,000 -------------- Total U.S. Treasury Notes (Cost $37,019,300) .................................................................. 37,110,250 REPURCHASE AGREEMENT (1.3%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $489,830. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999. (Cost $489,660) ..................................................................... 489,660 489,660 -------------- TOTAL INVESTMENTS (99.4%) (Cost $37,508,960)....................................................................... 37,599,910 RECEIVABLES LESS LIABILITIES (0.6%)....................................................... 236,765 -------------- NET ASSETS (100.0%)....................................................................... $ 37,836,675 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 48 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ---------------- ---------------- -- COLUMBIA FIXED INCOME SECURITIES FUND, INC. -- -------------------------------------------------
PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- U.S. GOVERNMENT, FEDERAL AGENCY OBLIGATIONS (55.8%) U.S. TREASURY BONDS & NOTES (12.8%) U.S. Treasury Bonds 8.875% 08/15/2017................................................................... $ 14,630,000 $ 19,414,464 8.125% 08/15/2019................................................................... 5,000,000 6,257,815 U.S. Treasury Notes 6.125% 08/31/1998................................................................... 23,054,000 23,129,640 -------------- 48,801,919 -------------- OTHER GOVERNMENT AGENCY OBLIGATIONS (1.4%) Farm Credit Systems Financial Assistance Corp. Series A 9.375% 07/21/2003................................................................... 4,660,000 5,408,489 -------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (2.9%) 7.500% 10/15/2026 - 10/15/2027...................................................... 10,640,503 10,899,812 -------------- FEDERAL HOUSING ADMINISTRATION (FHA) (1.4%) FHA Insured Project Pool #2022 7.430% 12/01/2020................................................................... 1,720,239 1,729,649 FHA Insured Project Pool #1984-D 9.680% 02/01/2024................................................................... 268,635 280,807 FHA Insured Project Pool #051-11078 8.350% 04/01/2030................................................................... 2,217,205 2,323,077 FHA Insured Project Pool #092-35499 8.450% 11/15/2031................................................................... 789,545 829,519 -------------- 5,163,052 -------------- AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (37.3%) FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1558 Cl. C 6.500% 07/15/2023................................................................... 2,084,000 2,058,835 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1971 Cl. A 7.500% 07/15/2027................................................................... 4,041,000 4,194,560 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1971 Cl. E 7.500% 01/20/2024................................................................... 16,646,000 17,103,349 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1995 Cl. A 7.500% 08/20/2027................................................................... 1,750,000 1,813,372 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1995 Cl. D 7.500% 08/20/2012................................................................... 9,155,000 9,322,569 FHLMC GNMA Multiclass Mtg. Partn. Ctfs. Gtd. Series 40 Cl. N 6.500% 05/17/2021................................................................... 4,700,000 4,608,044 PRINCIPAL AMOUNT VALUE(1) ------------- -------------- FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1763 Cl. H 8.250% 07/15/2023................................................................... $ 692,000 $ 741,370 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1910 Cl. D 8.000% 11/15/2024................................................................... 1,850,000 1,945,057 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1920 Cl. N 7.000% 02/15/2026................................................................... 3,110,000 3,110,000 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1941 Cl. C 6.750% 06/15/2022................................................................... 2,980,000 2,980,924 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1933 Cl. AE 7.000% 03/15/2025................................................................... 5,156,300 5,198,820 FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1933 Cl. C 7.000% 03/15/2025................................................................... 3,316,818 3,346,782 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1991-94 Cl. C 0.000% 01/25/1999................................................................... 1,654,184 1,609,719 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G1 Cl. B 7.500% 06/20/2024................................................................... 7,760,000 8,026,711 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G4 Cl. C 7.500% 06/17/2024................................................................... 7,223,000 7,438,620 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G5 Cl. VD 7.250% 04/17/2010................................................................... 3,600,000 3,737,611 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-24 Cl. YL 7.000% 04/18/2027................................................................... 3,166,000 3,199,890 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. G 7.500% 05/17/2026................................................................... 1,843,511 1,884,476 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. H 7.500% 05/17/2027................................................................... 1,766,000 1,842,838 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. L 7.500% 02/17/2012................................................................... 4,100,000 4,132,816 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-39 Cl. B 7.500% 05/17/2027................................................................... 2,673,000 2,801,594 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-43 Cl. B 7.500% 08/18/2025................................................................... 9,700,000 9,991,569
49 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ---------------- ---------------- -- COLUMBIA FIXED INCOME SECURITIES FUND, INC. -- -------------------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
U.S. GOVERNMENT, FEDERAL AGENCY OBLIGATIONS (CONTINUED) FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-44 Cl. PG 7.000% 02/18/2024................................................................... $ 3,920,000 $ 4,024,673 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-63 Cl. PH 7.000% 07/18/2026................................................................... 7,230,000 7,412,105 FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-74 Cl. D 7.500% 09/20/2023................................................................... 10,600,000 10,890,222 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1996-23 Cl. C 7.500% 12/20/2022................................................................... 3,607,000 3,721,955 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-11 Cl. M 8.000% 05/16/2024................................................................... 1,190,000 1,248,105 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-2 Cl. K 7.500% 01/20/2024................................................................... 2,410,000 2,489,819 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. M 7.500% 02/16/2012................................................................... 4,357,000 4,468,626 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. N 7.500% 02/16/2027................................................................... 4,165,468 4,313,842 GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1998-1 Cl. A 7.000% 01/15/2028................................................................... 1,890,000 1,878,773 Puerto Rico Housing Finance Corp. Series A Cl. 4 9.000% 07/20/2017................................................................... 864,542 864,542 -------------- 142,402,188 -------------- Total U.S. Government, Federal Agency Obligations (Cost $206,029,797) ................................................................. 212,675,460 -------------- OTHER SECURITIZED LOANS (13.2%) COLLATERALIZED MORTGAGE OBLIGATIONS (10.2%) BA Mortgage Securities, Inc. Series 1997-2 Cl. 1A-3 7.400% 10/25/2027................................................................... 2,913,413 2,938,518 Bear Stearns Mortgage Securities, Inc. Series 1996-2 Cl. A1 6.758% 01/25/2025................................................................... 4,298,842 4,283,979 GE Capital Mortgage Services, Inc. Series 1997-8 Cl. A6 7.250% 10/25/2027................................................................... 2,480,000 2,539,056
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- GE Capital Mortgage Services, Inc. Series 1997-8 Cl. A7 7.250% 10/25/2027................................................................... $ 6,232,714 $ 6,273,296 Mortgage Obligation Structured Trust (144A) Series 1993-1 Cl. B1 10.668% 10/25/2018................................................................... 2,837,841 2,970,425 Norwest Asset Securities Corp. Series 1997-16 Cl. A2 6.750% 10/25/2027................................................................... 13,470,000 13,369,234 PNC Mortgage Securities Corp. Series 1997-4 Cl. 2PP2 7.500% 07/25/2027................................................................... 2,895,000 2,945,786 Residential Funding Morgage Securities, Inc. Series 1993-S45 Cl. A-10 8.000% 12/25/2023................................................................... 1,250,000 1,286,756 Structured Asset Securities Corp. Series 1997-4 Cl. 2A2 7.000% 12/25/2027................................................................... 2,500,000 2,525,440 -------------- 39,132,490 -------------- ASSET BACKED SECURITIES (3.0%) Empire Funding Home Loan Owner Trust Series 1997-1 Cl. A-2 7.060% 03/25/2023................................................................... 2,890,000 2,903,901 Empire Funding Home Loan Owner Trust Series 1997-2 Cl. A-1 8.850% 09/25/2023................................................................... 1,896,251 1,895,984 Saxon Asset Securities Co. Series 1996-1 Cl. A2 8.060% 09/25/2027................................................................... 6,265,000 6,546,925 -------------- 11,346,810 -------------- Total Other Securitized Loans (Cost $49,626,860) .................................................................. 50,479,300 -------------- CORPORATE BONDS (25.9%) INDUSTRIAL (11.0%) Ethan Allen, Inc. 8.750% 03/15/2001................................................................... 1,975,000 2,019,437 Federal Express Corp. Pass Thru Trust Series 1997-1C 7.650% 01/15/2014................................................................... 2,300,000 2,457,711 Foster Wheeler Corp. 6.750% 11/15/2005................................................................... 2,925,000 2,943,486 Georgia-Pacific Corp. 9.950% 06/15/2002................................................................... 3,250,000 3,678,187 Gulf Canada Resources Ltd. 9.625% 07/01/2005................................................................... 1,250,000 1,359,375
50 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ---------------- ---------------- -- COLUMBIA FIXED INCOME SECURITIES FUND, INC. -- -------------------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
CORPORATE BONDS (CONTINUED) Heritage Media Corp. 8.750% 02/15/2006................................................................... $ 1,250,000 $ 1,329,687 Hilton Hotels Corp. 7.375% 06/01/2002................................................................... 4,000,000 4,106,880 Hollinger International Publishing, Inc. 8.625% 03/15/2005................................................................... 300,000 310,500 ICI Wilmington, Inc. 7.050% 09/15/2007................................................................... 3,805,000 3,949,476 Johns Manville International Grp. 10.875% 12/15/2004................................................................... 1,500,000 1,665,000 Lenfest Communications, Inc. 8.375% 11/01/2005................................................................... 1,350,000 1,387,125 Marriott International, Inc. 6.750% 12/01/2009................................................................... 2,750,000 2,807,613 Nabisco, Inc. 6.700% 06/15/2002................................................................... 3,750,000 3,798,150 Precision Castparts Corp. 6.750% 12/15/2007................................................................... 1,650,000 1,653,482 Sears, Roebuck Acceptance Corp. 6.400% 10/11/2000................................................................... 4,525,000 4,552,060 Tenet Healthcare Corp. 8.625% 12/01/2003................................................................... 750,000 781,875 Time Warner Entertainment Co. L.P. 8.375% 03/15/2023................................................................... 2,600,000 2,967,068 -------------- 41,767,112 -------------- FINANCIAL (13.4%) Aetna Services, Inc. 7.625% 08/15/2026................................................................... 5,000,000 5,261,850 American Health Properties, Inc. 7.500% 01/15/2007................................................................... 650,000 677,469 Bankamerica Corp. 5.938% 02/20/2002................................................................... 3,500,000 3,488,975 Deutsche Bank Financial, Inc. 7.500% 04/25/2009................................................................... 2,700,000 2,908,116 Equitable Cos., Inc. 9.000% 12/15/2004................................................................... 855,000 969,630 First Bank System, Inc. 6.188% 11/26/2010................................................................... 7,230,000 7,222,770 Ford Motor Credit Co. 6.500% 02/28/2002................................................................... 4,135,000 4,175,978 General Electric Capital Corp. Medium Term Notes 6.350% 09/15/2001................................................................... 3,200,000 3,252,224 Goldman Sachs Group L.P. (144A) Medium Term Notes 7.200% 03/01/2007................................................................... 3,700,000 3,839,046
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Health Care Properties, Inc. 6.500% 02/15/2006................................................................... $ 6,400,000 $ 6,362,304 Liberty Property L.P. 7.100% 08/15/2004................................................................... 3,725,000 3,810,526 Merrill Lynch & Co., Inc. Medium Term Notes 6.450% 06/20/2000................................................................... 3,650,000 3,680,441 Swiss Bank Corp. N.Y. 7.250% 09/01/2006................................................................... 1,825,000 1,923,714 USL Capital Corp. 6.500% 12/01/2003................................................................... 3,350,000 3,358,475 -------------- 50,931,518 -------------- UTILITY (1.5%) California Energy Co., Inc. 9.875% 06/30/2003................................................................... 1,000,000 1,084,570 Northern Indiana Public Service Co. Medium Term Notes 6.900% 06/01/2000................................................................... 1,250,000 1,269,538 6.750% 06/01/2000................................................................... 2,500,000 2,530,800 Worldcom, Inc. 8.875% 01/15/2006................................................................... 900,000 968,328 -------------- 5,853,236 -------------- Total Corporate Bonds (Cost $96,450,075) .................................................................. 98,551,866 -------------- Total investments, excluding temporary cash investment (Cost $352,106,732) ................................................................. 361,706,626 -------------- REPURCHASE AGREEMENT (4.4%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $16,762,082 Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999 (Cost $16,756,264)................................................................... 16,756,264 16,756,264 -------------- TOTAL INVESTMENTS (99.3%) (Cost $368,862,996)...................................................................... 378,462,890 RECEIVABLES LESS LIABILITIES (0.7%)....................................................... 2,869,864 -------------- NET ASSETS (100.0%)....................................................................... $ 381,332,754 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 51 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - --------------------- --------------------- -- COLUMBIA MUNICIPAL BOND FUND, INC. -- ----------------------------------------
PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- STATE OF OREGON GENERAL OBLIGATION BONDS (8.5%) Board of Higher Education Series A 0.000% 08/01/2014................................................................... $ 450,000 $ 196,312 5.900% 08/01/2018................................................................... 1,000,000 1,072,500 Board of Higher Education Refunding Series B 6.250% 10/15/2012................................................................... 740,000 799,200 Elderly & Disabled Housing Refunding Series B 6.250% 08/01/2013................................................................... 1,000,000 1,090,000 Pollution Control Series C 5.625% 06/01/2013................................................................... 2,830,000 2,875,987 5.900% 06/01/2014................................................................... 3,670,000 3,747,987 Veterans' Welfare 11.000% 06/01/1999................................................................... 865,000 947,175 7.000% 07/01/2000................................................................... 1,350,000 1,449,563 9.000% 10/01/2000................................................................... 1,010,000 1,140,038 11.000% 12/01/2000................................................................... 865,000 1,029,350 0.000% 07/01/2001................................................................... 1,200,000 1,041,000 6.000% 08/01/2002................................................................... 2,000,000 2,157,500 6.000% 02/01/2004................................................................... 695,000 761,025 9.000% 04/01/2004................................................................... 280,000 352,100 9.000% 04/01/2005................................................................... 1,010,000 1,302,900 8.250% 07/01/2005................................................................... 500,000 625,625 9.000% 10/01/2005................................................................... 1,640,000 2,142,250 7.250% 01/01/2007................................................................... 1,485,000 1,798,706 9.200% 04/01/2007................................................................... 2,345,000 3,183,338 8.250% 07/01/2007................................................................... 540,000 697,950 9.200% 10/01/2007................................................................... 1,250,000 1,717,188 8.000% 01/01/2008................................................................... 1,220,000 1,557,025 7.300% 07/01/2008................................................................... 1,125,000 1,387,969 8.000% 07/01/2008................................................................... 480,000 617,400 5.850% 10/01/2015................................................................... 1,075,000 1,158,312 -------------- Total State of Oregon General Obligation Bonds (Cost $32,697,391) .................................................................. 34,848,400 -------------- OREGON GENERAL OBLIGATION BONDS (19.6%) Clackamas & Washington Counties School District #3JT West Linn-Wilsonville 5.875% 10/01/2009................................................................... 2,550,000 2,750,812 Clackamas County School District #7J Lake Oswego Series A 5.300% 06/15/2005................................................................... 1,000,000 1,061,250 5.500% 06/15/2006................................................................... 1,000,000 1,066,250 5.700% 06/15/2010................................................................... 2,735,000 2,888,844 Clackamas Community College District 5.250% 12/01/2009................................................................... 1,270,000 1,346,200 PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Deschutes County Administrative School District #1 Bend-Lapine 0.000% 02/01/2000................................................................... $ 1,175,000 $ 1,082,469 0.000% 02/01/2001................................................................... 1,135,000 1,003,056 0.000% 02/01/2002................................................................... 1,445,000 1,221,025 5.800% 02/01/2004................................................................... 780,000 828,750 5.900% 02/01/2005................................................................... 980,000 1,042,475 Eugene Public Safety 6.000% 06/01/2005................................................................... 850,000 939,250 Eugene Public Safety Facilities 5.625% 06/01/2013................................................................... 1,295,000 1,366,225 Jackson County School District #549C Medford 5.375% 06/01/2012................................................................... 1,200,000 1,233,000 Lane County Area Education District Lane Community College 5.300% 06/01/2007................................................................... 1,000,000 1,063,750 4.850% 06/01/2008................................................................... 4,080,000 4,192,200 5.000% 06/01/2009................................................................... 1,000,000 1,042,500 Lane County School District #1 Pleasant Hill 5.350% 12/01/2012................................................................... 650,000 673,562 5.450% 12/01/2013................................................................... 725,000 754,000 Lane County School District #4J Eugene 0.000% 01/01/2003................................................................... 1,345,000 1,087,769 0.000% 01/01/2005................................................................... 1,395,000 1,027,069 Lane County School District #4J Eugene Refunding Series A 0.000% 07/01/2001................................................................... 2,015,000 1,745,494 0.000% 07/01/2003................................................................... 1,480,000 1,171,050 0.000% 07/01/2005................................................................... 2,325,000 1,674,000 5.250% 07/01/2008................................................................... 590,000 609,912 Lane County School District #19 Springfield Refunding 0.000% 02/01/1999................................................................... 470,000 450,697 Metro Open Spaces Program Series C 5.100% 09/01/2009................................................................... 2,375,000 2,443,281 Metro Washington Park Zoo Series A 5.250% 01/15/2009................................................................... 1,040,000 1,090,700 5.300% 01/15/2011................................................................... 1,000,000 1,040,000 Milwaukie, Or 4.650% 06/01/2009................................................................... 405,000 410,062 4.750% 06/01/2010................................................................... 425,000 430,844 4.850% 06/01/2011................................................................... 340,000 343,400 Multnomah-Clackamas Counties School District No. 10JT Gresham 5.250% 06/01/2017................................................................... 1,620,000 1,634,175
52 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - --------------------- --------------------- -- COLUMBIA MUNICIPAL BOND FUND, INC. -- ----------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
OREGON GENERAL OBLIGATION BONDS (CONTINUED) Multnomah-Clackamas Counties School District #51JT Riverdale 5.750% 06/01/2016................................................................... $ 2,270,000 $ 2,394,850 Multnomah County Public Improvements 5.250% 10/01/2013................................................................... 1,800,000 1,842,750 Multnomah County School District #4 Gresham 6.100% 01/01/2008................................................................... 3,000,000 3,198,750 6.100% 01/01/2009................................................................... 200,000 212,500 Multnomah County School District #7 Reynolds 5.250% 06/01/2011................................................................... 1,500,000 1,545,000 Multnomah County School District #40 David Douglas 7.100% 06/01/2002................................................................... 880,000 985,600 Port of Portland Series A 0.000% 03/01/2007................................................................... 3,000,000 1,980,000 Portland Public Improvements Series A 5.750% 06/01/2014................................................................... 2,400,000 2,463,000 Portland Public Improvements Series B 4.625% 12/01/2010................................................................... 300,000 301,125 Portland Recreational Facilities Improvements Series A 5.750% 06/01/2012................................................................... 1,370,000 1,462,475 5.750% 06/01/2013................................................................... 1,345,000 1,430,744 5.750% 06/01/2015................................................................... 1,155,000 1,225,744 Portland Recreational Facilities Improvements Series B 5.500% 06/01/2009................................................................... 2,115,000 2,231,325 5.750% 06/01/2014................................................................... 1,750,000 1,861,563 5.750% 06/01/2015................................................................... 2,955,000 3,128,606 Portland Community College District 0.000% 07/01/2007................................................................... 2,025,000 1,326,375 Tri-County Metropolitan Transportation District Light Rail Extension Series A 6.000% 07/01/2012................................................................... 3,495,000 3,717,806 Tualatin Hills Park & Recreation District 5.700% 03/01/2009................................................................... 1,340,000 1,428,775 5.750% 03/01/2010................................................................... 730,000 775,625 Washington County Refunding 6.200% 12/01/2007................................................................... 1,500,000 1,605,000 Washington & Clackamas Counties School District #23J Tigard Refunding 5.400% 01/01/2010................................................................... 1,720,000 1,784,500 Washington County School District #48J Beaverton Series B 6.150% 06/01/2008................................................................... 1,010,000 1,057,975
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Washington County School District #48J Beaverton Series C 7.800% 06/01/2003................................................................... $ 1,200,000 $ 1,404,000 -------------- Total Oregon General Obligation Bonds (Cost $75,734,827) .................................................................. 80,078,159 -------------- OREGON REVENUE BONDS (14.7%) Albany Hospital Facility Authority Mennonite Home 5.625% 10/01/2017................................................................... 375,000 381,094 Clackamas County Hospital Facility Authority Robison Jewish Home Project 6.250% 10/01/2021................................................................... 2,000,000 2,046,400 Clackamas County Hospital Facility Authority GNMA Collateral Jennings Lodge 7.500% 10/20/2031................................................................... 1,030,000 1,113,687 Clackamas County Housing Authority Multifamily Housing Easton Ridge Series A 5.800% 12/01/2016................................................................... 2,255,000 2,342,381 Deschutes County Hospital Facility Authority 5.750% 01/01/2009................................................................... 1,670,000 1,763,937 Deschutes Valley Water District 5.875% 09/01/2005................................................................... 3,420,000 3,685,050 Eugene Electric Utility Refunding 5.800% 08/01/2008................................................................... 1,435,000 1,508,544 5.800% 08/01/2009................................................................... 1,300,000 1,361,750 6.000% 08/01/2011................................................................... 1,375,000 1,450,625 Eugene Electric Utility 5.000% 08/01/2017................................................................... 1,480,000 1,467,050 Eugene Electric Utility Series C 5.750% 08/01/2011................................................................... 715,000 757,006 5.750% 08/01/2016................................................................... 1,055,000 1,105,113 Gresham Sewer 5.350% 06/01/2006................................................................... 860,000 909,450 Gresham Stormwater 6.100% 10/01/2009................................................................... 1,115,000 1,220,925 Hillsboro Hospital Facility Authority Tuality Healthcare 5.750% 10/01/2012................................................................... 2,395,000 2,484,813 Lebanon Wastewater Refunding 5.750% 06/01/2011................................................................... 1,225,000 1,278,594 North Clackamas Parks & Recreation District Recreational Facilities 5.700% 04/01/2013................................................................... 2,840,000 2,953,600
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PRINCIPAL AMOUNT VALUE(1) ------------- --------------
OREGON REVENUE BONDS (CONTINUED) Northern Wasco County People's Utility District Electric 0.000% 02/01/2006................................................................... $ 610,000 $ 408,700 0.000% 02/01/2007................................................................... 585,000 364,163 0.000% 02/01/2008................................................................... 610,000 352,275 0.000% 02/01/2011................................................................... 500,000 233,125 Oregon Health, Housing, Educational & Cultural Facilities Authority Reed College Project Series A 5.300% 07/01/2011................................................................... 500,000 513,750 Oregon Housing Financial 5.800% 07/01/2009................................................................... 420,000 421,646 Oregon Housing & Community Services Department Housing Finance Assisted Insured Multi-Unit B 6.800% 07/01/2013................................................................... 8,270,000 8,786,875 Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program Series A 6.800% 07/01/2016................................................................... 2,125,000 2,279,063 Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program Series D 6.700% 07/01/2013................................................................... 1,000,000 1,058,750 Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program Series E 6.750% 07/01/2016................................................................... 2,705,000 2,863,919 Portland Hydroelectric Power 6.800% 10/01/2004................................................................... 465,000 469,338 Portland Parking Refunding 6.375% 10/01/2012................................................................... 1,700,000 1,782,875 Portland Water System 5.250% 08/01/2013................................................................... 2,000,000 2,042,500 5.000% 08/01/2017................................................................... 3,685,000 3,666,575 Prineville Sewer First Lien 6.500% 07/01/2004................................................................... 500,000 537,500 6.800% 07/01/2012................................................................... 1,050,000 1,168,125 Reedsport Water 7.000% 10/01/2014................................................................... 520,000 590,850 South Fork Water Board First Lien 5.450% 02/01/2014................................................................... 1,300,000 1,321,125 Tri-County Metropolitan Transportation District Refunding Series A 5.700% 08/01/2013................................................................... 3,000,000 3,097,500
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Washington County Unified Sewer Agency Unrefunded Series A 6.200% 10/01/2010................................................................... $ 420,520 $ 462,046 -------------- Total Oregon Revenue Bonds (Cost $56,794,517) .................................................................. 60,250,719 -------------- OREGON INSURED BONDS (35.4%) Central Oregon Community College District 5.800% 06/01/2007................................................................... 760,000 818,900 Chemeketa Community College District 5.950% 06/01/2016................................................................... 1,600,000 1,742,000 Chemeketa Community College District Series B 5.600% 06/01/2014................................................................... 1,105,000 1,182,350 Clackamas & Washington Counties School District #3JT 5.750% 06/01/2010................................................................... 590,000 649,737 Clackamas County Health Facility Authority Revenue Refunding Adventist Health A 6.350% 03/01/2009................................................................... 1,500,000 1,635,000 Clackamas County School District #115 Gladstone 6.150% 06/01/2014................................................................... 1,200,000 1,317,000 Clatsop County Administrative School District #10 5.875% 07/01/2012................................................................... 630,000 657,562 Crook County School District 4.900% 02/01/2009................................................................... 1,165,000 1,181,019 Deschutes & Jefferson Counties School District #2J Redmond Refunding 5.600% 06/01/2009................................................................... 1,000,000 1,051,250 Emerald Peoples Utilities District 7.200% 11/01/2006................................................................... 480,000 575,405 7.350% 11/01/2011................................................................... 2,000,000 2,527,500 Eugene Electric Utility Revenue Refunding 4.700% 08/01/2008................................................................... 1,225,000 1,251,031 Hood River County School District 5.650% 06/01/2008................................................................... 1,020,000 1,086,300 Josephine County School District #7 Grants Pass 5.700% 06/01/2013................................................................... 2,000,000 2,132,500 Klamath County 5.100% 06/01/2008................................................................... 1,015,000 1,083,512 5.150% 06/01/2009................................................................... 700,000 747,250 Lane County School District #19 Springfield 6.000% 10/15/2012................................................................... 740,000 838,050 6.000% 10/15/2014................................................................... 1,310,000 1,483,575
54 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - --------------------- --------------------- -- COLUMBIA MUNICIPAL BOND FUND, INC. -- ----------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
OREGON INSURED BONDS (CONTINUED) Lane County School District #52 Bethel 6.250% 12/01/2007................................................................... $ 580,000 $ 665,550 6.400% 12/01/2009................................................................... 750,000 856,875 Lincoln County School District 6.000% 06/15/2006................................................................... 900,000 1,009,125 6.000% 06/15/2007................................................................... 1,855,000 2,091,512 6.000% 06/15/2008................................................................... 1,150,000 1,299,500 6.000% 06/15/2009................................................................... 2,465,000 2,785,450 5.600% 06/15/2010................................................................... 2,480,000 2,693,900 5.250% 06/15/2012................................................................... 3,815,000 3,972,369 Malheur County School District #26 Nyssa 5.750% 06/01/2015................................................................... 1,910,000 2,026,987 Marion & Linn County Elementary School District #77J Stayton 6.250% 07/01/2013................................................................... 1,260,000 1,404,900 Marion County School District #103C Woodburn Series B 0.000% 11/01/2006................................................................... 2,000,000 1,365,000 0.000% 11/01/2007................................................................... 2,000,000 1,300,000 0.000% 11/01/2009................................................................... 2,500,000 1,465,625 0.000% 11/01/2011................................................................... 2,010,000 1,037,662 Medford Hospital Facility Authority Revenue Gross-Rogue Valley Health Services 6.800% 12/01/2011................................................................... 1,820,000 1,983,800 Morrow County School District #1 6.000% 06/01/2006................................................................... 880,000 981,200 Multnomah County Educational Facilities University of Portland Project 5.000% 04/01/2018................................................................... 1,500,000 1,492,500 Multnomah County School District #3 Parkrose 5.400% 12/01/2005................................................................... 1,010,000 1,084,487 5.700% 12/01/2008................................................................... 1,330,000 1,436,400 5.700% 12/01/2009................................................................... 1,970,000 2,115,288 5.500% 12/01/2010................................................................... 895,000 947,581 5.500% 12/01/2011................................................................... 1,000,000 1,052,500 Northern Oregon Corrections 5.250% 09/15/2012................................................................... 1,000,000 1,037,500 5.300% 09/15/2013................................................................... 1,000,000 1,035,000 Ontario Oregon Catholic Health Holy Rosary Medical Center 5.500% 11/15/2012................................................................... 1,500,000 1,573,125 Oregon Health Sciences University Revenue Series A 0.000% 07/01/2009................................................................... 1,530,000 906,525 0.000% 07/01/2012................................................................... 1,315,000 642,706 0.000% 07/01/2014................................................................... 2,495,000 1,094,681 0.000% 07/01/2015................................................................... 4,325,000 1,789,469
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Oregon Health Sciences University Revenue Series B 4.875% 07/01/2007................................................................... $ 1,695,000 $ 1,767,038 Oregon Department of General Services Certificates Participation Series C 5.800% 03/01/2015................................................................... 840,000 875,700 Oregon Department of Administrative Services Certificates Participation Series A 5.375% 11/01/2004................................................................... 1,500,000 1,601,250 5.250% 05/01/2008................................................................... 4,950,000 5,240,813 5.300% 05/01/2008................................................................... 750,000 800,625 5.250% 11/01/2009................................................................... 2,460,000 2,579,925 5.700% 05/01/2015................................................................... 1,000,000 1,062,500 5.375% 11/01/2016................................................................... 4,360,000 4,474,450 Oregon Department of Administrative Services Certificates Participation Series B 5.500% 11/01/2011................................................................... 1,635,000 1,733,100 5.000% 11/01/2013................................................................... 1,000,000 1,000,000 5.000% 11/01/2014................................................................... 500,000 498,750 Oregon Department of Administrative Services Certificates Participation Series C 5.500% 05/01/2011................................................................... 2,000,000 2,115,000 5.750% 05/01/2017................................................................... 2,000,000 2,140,000 Oregon Health, Housing, Educational & Cultural Facilities Authority Lewis & Clark College 6.000% 10/01/2013................................................................... 965,000 1,054,263 Port of Portland Airport Revenue Portland International Airport Series 7-A 6.500% 07/01/2004................................................................... 500,000 541,875 6.750% 07/01/2015................................................................... 2,895,000 3,155,550 Port of Portland Airport Revenue Series 9-A 5.500% 07/01/2006................................................................... 500,000 527,500 Portland Arena Gas Tax Revenue 0.000% 06/01/2016................................................................... 1,100,000 385,000 0.000% 06/01/2017................................................................... 1,420,000 465,050 Portland Community College District 5.000% 07/01/2011................................................................... 2,000,000 2,030,000 Portland Gas Tax Revenue Series A 5.800% 06/01/2016................................................................... 1,625,000 1,720,469 Portland Sewer System Revenue Series A 5.000% 06/01/2009................................................................... 1,000,000 1,036,250 5.000% 06/01/2015................................................................... 5,500,000 5,520,625 Salem-Keizer School District #24J 5.400% 06/01/2006................................................................... 1,000,000 1,063,750 Salem Pedestrian Safety Improvements 5.400% 05/01/2009................................................................... 1,000,000 1,057,500 Salem Water & Sewer 6.000% 06/01/2005................................................................... 1,080,000 1,200,150
55 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - --------------------- --------------------- -- COLUMBIA MUNICIPAL BOND FUND, INC. -- ----------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
OREGON INSURED BONDS (CONTINUED) Tillamook County 6.250% 01/01/2014................................................................... $ 960,000 $ 1,064,400 5.700% 01/15/2016................................................................... 700,000 744,625 Umatilla County School District #6R Umatilla 5.080% 06/15/2018................................................................... 1,455,000 1,453,181 Umatilla County School District #8R Hermiston 6.000% 12/01/2010................................................................... 695,000 758,419 Union Health District 5.750% 02/01/2010................................................................... 1,070,000 1,112,800 Washington County School District #13 5.350% 06/01/2011................................................................... 355,000 371,863 5.350% 06/01/2012................................................................... 440,000 459,250 5.400% 06/01/2013................................................................... 485,000 506,219 Washington County School District #48J Beaverton Series A 5.200% 12/01/2009................................................................... 1,740,000 1,827,000 Washington County School District #88J Sherwood 6.100% 06/01/2012................................................................... 1,000,000 1,101,250 Washington County Unified Sewer Agency Revenue 5.500% 10/01/2016................................................................... 1,500,000 1,569,375 Washington County Unified Sewer Agency Revenue Series A 0.000% 10/01/2003................................................................... 1,975,000 1,550,375 0.000% 10/01/2005................................................................... 5,230,000 3,745,988 0.000% 10/01/2007................................................................... 4,835,000 3,148,794 5.750% 10/01/2009................................................................... 3,350,000 3,752,000 5.400% 10/01/2012................................................................... 520,000 546,650 Washington County Unified Sewer Agency Unrefunded Series A 5.900% 10/01/2006................................................................... 1,050,913 1,149,436 Western Lane Hospital District Facility Authority Revenue Refunding Sisters St. Joseph Peace 5.625% 08/01/2007................................................................... 2,080,000 2,264,600 Yamhill County School District #29J Newberg 5.500% 06/01/2010................................................................... 1,405,000 1,477,006 6.100% 06/01/2011................................................................... 3,355,000 3,677,919 Yamhill County School District #40 6.000% 06/01/2009................................................................... 500,000 567,500 5.350% 06/01/2010................................................................... 500,000 529,375 5.600% 06/01/2016................................................................... 500,000 526,250 -------------- Total Oregon Insured Bonds (Cost $136,123,662) ................................................................. 144,658,566 --------------
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- OREGON PRE-REFUNDED BONDS (9.1%) Clackamas & Washington Counties School District #3JT West Linn-Wilsonville 5.875% 08/01/2009................................................................... $ 1,000,000 $ 1,066,250 Clackamas County Hospital Facility Authority Elderly Housing Willamette View Income Project 7.000% 11/15/2011................................................................... 470,000 525,225 Clackamas County School District #1 6.250% 07/01/2002................................................................... 925,000 987,437 6.300% 07/01/2003................................................................... 700,000 748,125 6.500% 07/01/2004................................................................... 1,235,000 1,327,625 6.500% 07/01/2005................................................................... 1,355,000 1,456,625 6.500% 07/01/2006................................................................... 1,485,000 1,596,375 Lane County School District #19 Springfield 6.150% 10/15/2009................................................................... 1,500,000 1,672,500 Multnomah County Educational Facilities University Portland Project 6.000% 04/01/2014................................................................... 1,375,000 1,507,344 Oregon City Sewer 6.500% 10/01/2007................................................................... 500,000 561,250 Oregon Board of Higher Education Series A 6.350% 08/01/2014................................................................... 1,535,000 1,724,956 Oregon Housing, Educational & Cultural Facilities Authority Reed College Project Series A 6.350% 07/01/2002................................................................... 320,000 348,000 6.400% 07/01/2003................................................................... 280,000 305,200 Portland Airport Way Urban Renewal & Redevelopment Tax Increment Series A 7.300% 06/01/2010................................................................... 1,400,000 1,505,000 Portland Community College District Series A 6.000% 07/01/2012................................................................... 1,500,000 1,606,875 Portland Sewer System Revenue Series A 6.050% 06/01/2009................................................................... 535,000 589,169 6.200% 06/01/2012................................................................... 5,540,000 6,149,400 6.250% 06/01/2015................................................................... 2,000,000 2,225,000 Washington County Unified Sewer Agency Series A 5.900% 10/01/2006................................................................... 2,679,087 2,926,903 Washington County Unified Sewer Agency Revenue Series A 6.125% 10/01/2012................................................................... 4,510,000 4,989,187 Washington County Unified Sewer Agency Series A 6.200% 10/01/2010................................................................... 3,064,480 3,393,912 -------------- Total Oregon Pre-Refunded Bonds (Cost $34,060,410) .................................................................. 37,212,358 --------------
56 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - --------------------- --------------------- -- COLUMBIA MUNICIPAL BOND FUND, INC. -- ----------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- OREGON OTHER BONDS (2.6%) Grants Pass Urban Renewal Agency Tax Increment 6.125% 08/01/2012................................................................... $ 755,000 $ 781,425 Hood River Urban Renewal Agency Revenue 6.250% 12/15/2011................................................................... 1,250,000 1,360,937 Lane County School District #4J Eugene Certificates Participation 6.900% 10/01/2000................................................................... 500,000 536,250 Lebanon Special Obligation Revenue Refunding Lease Water 5.400% 10/01/2013................................................................... 755,000 770,100 Medford Urban Renewal Agency Tax Revenue 5.875% 09/01/2010................................................................... 500,000 527,500 Newberg Certificates Participation 5.900% 12/01/1998................................................................... 365,000 370,876 6.000% 12/01/1999................................................................... 390,000 403,163 6.100% 12/01/2000................................................................... 410,000 430,500 6.200% 12/01/2001................................................................... 410,000 436,650 Portland Building Refunding Series A 4.750% 04/01/2007................................................................... 2,000,000 2,030,000 Portland Airport Way Urban Renewal & Redevelopment Tax Increment Series C 5.900% 06/01/2006................................................................... 860,000 921,275 Portland Urban Renewal & Redevelopment Refunding, Downtown Waterfront Series L 6.400% 06/01/2008................................................................... 2,085,000 2,257,013 -------------- Oregon Other Bonds (2.6%) (Cost $10,109,353) .................................................................. 10,825,689 -------------- OTHER BONDS (7.2%) Puerto Rico Commonwealth 6.250% 07/01/2008................................................................... 1,000,000 1,155,000 Puerto Rico Commonwealth Public Improvements 6.250% 07/01/2009................................................................... 3,000,000 3,453,750 6.250% 07/01/2013................................................................... 1,000,000 1,170,000 Puerto Rico Commonwealth Aqueduct & Sewer Authority 5.200% 07/01/2008................................................................... 1,000,000 1,066,250 Puerto Rico Commonwealth Aqueduct & Sewer Authority Revenue Series A 9.000% 07/01/2009................................................................... 5,830,000 7,447,825 Puerto Rico Commonwealth Infrastructure Financing Authority 5.000% 07/01/2013................................................................... 1,750,000 1,760,937 Puerto Rico Commonwealth Public Buildings Authority 5.000% 07/01/2013................................................................... 3,130,000 3,157,387 PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Puerto Rico Electric Power Authority 5.000% 07/01/2010................................................................... $ 2,425,000 $ 2,494,719 Puerto Rico Housing Finance Corp. Single Family Mortgage Revenue Portfolio 1 Series B 7.500% 10/15/2012................................................................... 1,040,000 1,098,500 Puerto Rico Housing Finance Corp. Single Family Mortgage Revenue Portfolio 1 Series C 6.750% 10/15/2013................................................................... 710,000 757,925 Puerto Rico Housing Finance Corp. Multi Family Mortgage Revenue Portfolio A-1 7.500% 04/01/2022................................................................... 1,680,000 1,772,400 Puerto Rico Industrial, Medical & Environmental Pollution Control Facilities Financing Authority Revenue FHA Insured Mortgage Dr. Pila Hospital Project-A 7.700% 08/01/2008................................................................... 1,975,000 2,051,294 Puerto Rico Housing Bank & Finance Agency Single Family Mortgage Revenue FHA Homeownership 5th Portfolio 7.500% 12/01/2015................................................................... 610,000 658,038 Virgin Islands Public Finance Authority Revenue Unrefunded Balance Series A 7.300% 10/01/2018................................................................... 1,185,000 1,531,613 -------------- Total Other Bonds (Cost $27,865,999) .................................................................. 29,575,638 -------------- Total investments, excluding temporary cash investment (Cost $373,386,159) ................................................................. 397,449,529 -------------- TAX-EXEMPT MONEY MARKET INVESTMENT (2.3%) SEI Tax Exempt Trust (Cost $9,250,961) ................................................................... 9,250,961 9,250,961 -------------- TOTAL INVESTMENTS (99.4%) (Cost $382,637,120)...................................................................... 406,700,490 RECEIVABLE LESS LIABILITIES (0.6%)........................................................ 2,447,685 -------------- NET ASSETS (100.0%)....................................................................... $ 409,148,175 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 57 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA HIGH YIELD FUND, INC. -- ------------------------------------
PRINCIPAL December 31, 1997 AMOUNT VALUE(1) ------------- -------------- CORPORATE BONDS (89.5%) INDUSTRIAL (3.9%) BUSINESS SERVICES (3.9%) Iron Mountain, Inc. Senior Subordinated Notes 10.125% 10/01/2006................................................................. $ 750,000 $ 825,000 Pierce Leahy Corp. Senior Subordinated Notes 11.125% 07/15/2006................................................................. 625,000 706,250 -------------- Total Industrial ..................................................................... 1,531,250 -------------- BASIC INDUSTRY (4.0%) CHEMICALS (2.0%) ICO, Inc. Series B Senior Notes 10.375% 06/01/2007................................................................. 750,000 804,375 METALS/MINING (2.0%) Ryerson Tull, Inc. Notes 8.500% 07/15/2001................................................................. 750,000 776,250 -------------- Total Basic Industry ................................................................. 1,580,625 -------------- CONSUMER RELATED (17.5%) HOTEL/GAMING (4.8%) HMH Properties, Inc. Series B Senior Secured Notes 9.500% 05/15/2005................................................................. 600,000 639,000 Rio Hotel & Casino, Inc. Senior Subordinated Notes 9.500% 04/15/2007................................................................. 450,000 477,000 Station Casinos, Inc. Senior Subordinated Notes 9.625% 06/01/2003................................................................. 740,000 764,050 -------------- 1,880,050 -------------- HEALTHCARE (7.0%) Abbey Healthcare Group, Inc. Senior Subordinated Notes 9.500% 11/01/2002................................................................. 850,000 892,500 Healthsouth Corp. Senior Subordinated Notes 9.500% 04/01/2001................................................................. 300,000 315,975 Quorum Health Group, Inc. Senior Subordinated Notes 8.750% 11/01/2005................................................................. 750,000 774,375 PRINCIPAL AMOUNT VALUE(1) ------------- -------------- Tenet Healthcare Corp. Senior Subordinated Notes 10.125% 03/01/2005................................................................. $ 700,000 $ 764,750 -------------- 2,747,600 -------------- OTHER (5.7%) Maxim Group, Inc. (144A) Senior Subordinated Notes 9.250% 10/15/2007................................................................. 900,000 891,000 Westpoint Stevens, Inc. Senior Subordinated Debentures 9.375% 12/15/2005................................................................. 800,000 840,000 Worldtex, Inc. (144A) Senior Notes 9.625% 12/15/2007................................................................. 500,000 512,500 -------------- 2,243,500 -------------- Total Consumer Related ............................................................... 6,871,150 -------------- ENERGY (7.2%) Gulf Canada Resources Ltd. Subordinated Debentures 9.625% 07/01/2005................................................................. 750,000 815,625 Kelley Oil & Gas Corp. Series B Senior Subordinated Notes 10.375% 10/15/2006................................................................. 600,000 640,500 Nuevo Energy Co. Senior Subordinated Notes 9.500% 04/15/2006................................................................. 900,000 951,750 Santa Fe Energy Resource, Inc. Senior Subordinated Debentures 11.000% 05/15/2004................................................................. 400,000 434,000 -------------- Total Energy ......................................................................... 2,841,875 -------------- HOUSING RELATED (3.4%) USG Corp. Series B Senior Notes 9.250% 09/15/2001................................................................. 500,000 535,000 Webb (Del E.) Corp. Senior Subordinated Notes 9.750% 01/15/2008................................................................. 750,000 780,000 -------------- Total Housing Related ................................................................ 1,315,000 -------------- MANUFACTURING (9.5%) Hayes Wheels International, Inc. Series B Senior Subordinated Notes 9.125% 07/15/2007................................................................. 800,000 828,000 Polymer Group, Inc. Series B Senior Subordinated Notes 9.000% 07/01/2007................................................................. 500,000 500,000
58 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA HIGH YIELD FUND, INC. -- ------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
CORPORATE BONDS (CONTINUED) Silgan Holdings, Inc. Senior Subordinated Debentures 9.000% 06/01/2009................................................................. $ 750,000 $ 766,875 Titan Wheel International, Inc. Senior Subordinated Notes 8.750% 04/01/2007................................................................. 800,000 836,000 Tracor, Inc. Senior Subordinated Notes 8.500% 03/01/2007................................................................. 800,000 808,000 -------------- Total Manufacturing .................................................................. 3,738,875 -------------- MEDIA (21.7%) Cinemark USA, Inc. Series B Senior Subordinated Notes 9.625% 08/01/2008................................................................. 750,000 774,375 Heritage Media Corp. Senior Subordinated Notes 8.750% 02/15/2006................................................................. 750,000 797,812 Hollinger International Publishing, Inc. Senior Notes 8.625% 03/15/2005................................................................. 800,000 828,000 Jacor Communications Co. (144A) Senior Subordinated Notes 8.750% 06/15/2007................................................................. 750,000 768,750 Jones Intercable, Inc. Senior Notes 8.875% 04/01/2007................................................................. 700,000 731,500 Lamar Advertising Co. Senior Subordinated Notes 9.625% 12/01/2006................................................................. 900,000 969,750 Lenfest Communications, Inc. Senior Secured Notes 8.375% 11/01/2005................................................................. 750,000 770,625 Regal Cinemas, Inc. (144A) Senior Subordinated Notes 8.500% 10/01/2007................................................................. 750,000 755,625 SFX Broadcasting, Inc. Series B Senior Subordinated Notes 10.750% 05/15/2006................................................................. 750,000 823,125 Sinclair Broadcast Group, Inc. Senior Subordinated Notes 8.750% 12/15/2007................................................................. 750,000 748,125 Young Broadcasting, Inc. Gtd. Senior Subordinated Notes 11.750% 11/15/2004................................................................. 500,000 556,250 -------------- Total Media .......................................................................... 8,523,937 --------------
PRINCIPAL AMOUNT VALUE(1) ------------- -------------- RETAIL (5.8%) OTHER (5.8%) Ethan Allen, Inc. Senior Notes 8.750% 03/15/2001................................................................. $ 750,000 $ 766,875 Specialty Retailers, Inc. Series B Senior Notes 8.500% 07/15/2005................................................................. 750,000 761,250 Zale Corp. (144A) Senior Notes 8.500% 10/01/2007................................................................. 750,000 746,250 -------------- Total Retail ......................................................................... 2,274,375 -------------- TRANSPORTATION (3.5%) OTHER (3.5%) Allied Holdings, Inc. Series B Senior Notes 8.625% 10/01/2007................................................................. 500,000 507,500 Teekay Shipping Corp. Gtd. 1st Pfd. Ship. Mtg. Notes 8.320% 02/01/2008................................................................. 850,000 867,000 -------------- Total Transportation ................................................................. 1,374,500 -------------- UTILITY (8.7%) ELECTRICS (4.5%) AES Corp. Senior Subordinated Notes 10.250% 07/15/2006................................................................. 800,000 864,000 California Energy Co., Inc. Senior Secured Notes 9.875% 06/30/2003................................................................. 850,000 921,885 -------------- 1,785,885 -------------- TELECOMMUNICATIONS (4.2%) Paging Network, Inc. Senior Subordinated Notes 10.000% 10/15/2008................................................................. 750,000 780,000 Worldcom, Inc. Senior Notes 8.875% 01/15/2006................................................................. 799,910 860,639 -------------- 1,640,639 -------------- Total Utilities ...................................................................... 3,426,524 -------------- YANKEE (4.3%) Argentina Republic Unsubordinated Global Bonds 11.000% 10/09/2006................................................................. 750,000 807,150
59 SCHEDULE OF INVESTMENTS ----------------------------------------------------------------- [LOGO] - ------------------------ ------------------------ -- COLUMBIA HIGH YIELD FUND, INC. -- ------------------------------------
PRINCIPAL AMOUNT VALUE(1) ------------- --------------
CORPORATE BONDS (CONTINUED) Mexico-United Mexican States Global Bonds 11.375% 09/15/2016................................................................. $ 750,000 $ 862,500 -------------- Total Yankee ......................................................................... 1,669,650 -------------- Total Corporate Bonds (Cost $34,017,097) .................................................................. 35,147,761 -------------- REPURCHASE AGREEMENTS (8.9%) Goldman Sachs Corp. 6.337% dated 12/31/1997, due 01/02/1998 in the amount of $2,760,481. Collateralized by U.S. Treasury Notes 5.875% due 08/31/1999................................................................ 2,759,523 2,759,523 J.P. Morgan Securities, Inc. 6.521% dated 12/31/1997, due 01/02/1998 in the amount of $750,268. Collateralized by U.S. Treasury Notes 3.625% to 7.500% due 08/31/2000 to 02/15/2005......................................................... 750,000 750,000 -------------- Total Repurchase Agreements (Cost $3,509,523) ................................................................... 3,509,523 -------------- TOTAL INVESTMENTS (98.4%) (Cost $37,526,620)....................................................................... 38,657,284 RECEIVABLES LESS LIABILITIES (1.6%)....................................................... 621,125 -------------- NET ASSETS (100.0%)....................................................................... $ 39,278,409 -------------- --------------
(1) See Note 1 of Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 60 STATEMENTS OF ASSETS AND LIABILITIES -----------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA COLUMBIA COMMON STOCK GROWTH INTERNATIONAL STOCK SPECIAL December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC. ------------- --------------- ------------------- --------------- ASSETS: Investments at identified cost............. $591,083,706 $ 998,562,165 $115,352,903 $ 1,080,385,133 - --------------------------------------------- ------------- --------------- ------------------- --------------- Investments at value (Notes 1 and 2)....... $728,952,817 $ 1,301,830,187 $130,260,028 $ 1,218,584,838 Temporary cash investments, at cost (Note 1)........................................ 94,603,062 27,749,208 17,066,118 92,623,788 Cash....................................... 49,992 Cash denominated in foreign currencies (cost $30,118) (Note 1)................... 28,481 Receivable for: Interest................................. 380,104 95,041 71,382 539,653 Dividends................................ 991,982 1,157,953 148,571 812,476 Investments sold......................... 179,769 4,642,953 140,743 Capital stock sold....................... 12,830,283 1,098,716 109,439 1,600,359 Forward foreign currency exchange contract held, at market (Note 1)....... 26,154,849 ------------- --------------- ------------------- --------------- Total assets............................... 837,938,017 1,336,574,058 173,888,860 1,314,301,857 ------------- --------------- ------------------- --------------- LIABILITIES: Payable for: Capital stock redeemed................... 21,686,397 1,612,360 345,451 54,827,406 Dividends and distributions.............. 2,537,818 9,010,622 985,568 5,565,501 Investments purchased.................... 29,137,562 2,906,000 Investment management fee (Note 4)....... 399,727 638,746 125,499 954,989 Accrued expenses......................... 270,694 394,641 126,631 330,164 Forward foreign currency exchange contracts held (Note 1)................. 26,025,176 ------------- --------------- ------------------- --------------- Total liabilities.......................... 54,032,198 11,656,369 27,608,325 64,584,060 ------------- --------------- ------------------- --------------- NET ASSETS APPLICABLE TO OUTSTANDING SHARES...................................... $783,905,819 $ 1,324,917,689 $146,280,535 $ 1,249,717,797 ------------- --------------- ------------------- --------------- ------------- --------------- ------------------- --------------- Net assets consist of: Undistributed net investment income........ $ 1,537,363 $ 1,999,579 $ 360,073 Unrealized appreciation on: Investments.............................. 137,869,111 303,268,022 $ 14,907,125 138,199,705 Translation of assets and liabilities in foreign currencies...................... 124,446 Undistributed net realized gain (loss) from: Investments.............................. 798,088 1,714,128 (30,287) (812,034) Foreign currency transactions............ (129,673) Capital shares (Note 3).................... 385,808 616,718 Capital paid in (Note 3)................... 643,701,257 1,017,550,152 131,408,924 1,111,353,335 ------------- --------------- ------------------- --------------- $783,905,819 $ 1,324,917,689 $146,280,535 $ 1,249,717,797 ------------- --------------- ------------------- --------------- ------------- --------------- ------------------- --------------- SHARES OF CAPITAL STOCK OUTSTANDING (NOTE 3).......................................... 35,603,323 38,580,838 10,674,460 61,671,768 ------------- --------------- ------------------- --------------- ------------- --------------- ------------------- --------------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (1)......................... $ 22.02 $ 34.34 $ 13.70 $ 20.26 ------------- --------------- ------------------- --------------- ------------- --------------- ------------------- ---------------
(1) The net asset value per share is computed by dividing net assets applicable to outstanding shares by shares of capital stock outstanding. The accompanying notes are an integral part of the financial statements. 61 STATEMENTS OF ASSETS AND LIABILITIES -----------------------------------------------------------------
COLUMBIA COLUMBIA REAL COLUMBIA COLUMBIA SMALL CAP ESTATE EQUITY BALANCED DAILY INCOME December 31, 1997 FUND, INC. FUND, INC. FUND, INC. COMPANY ------------ ------------- ------------- --------------- ASSETS: Investments at identified cost............. $ 83,953,702 $113,044,943 $ 687,367,178 $ 1,173,657,688 - --------------------------------------------- ------------ ------------- ------------- --------------- Investments at value (Notes 1 and 2)....... $ 93,338,061 $140,161,757 $ 781,687,536 $ 1,173,657,688 Temporary cash investments, at cost (Note 1)........................................ 3,622,273 11,040,866 18,639,214 Cash....................................... 300,000 Receivable for: Interest................................. 34,328 33,119 4,943,205 370,359 Dividends................................ 5,387 735,392 473,178 Investments sold......................... 1,824,671 8,078,540 Capital stock sold....................... 570,168 1,532,140 7,114,096 12,123,502 ------------ ------------- ------------- --------------- Total assets............................... 97,570,217 155,327,945 820,935,769 1,186,451,549 ------------ ------------- ------------- --------------- LIABILITIES: Payable for: Capital stock redeemed................... 231,990 931,665 1,852,679 16,588,968 Dividends and distributions.............. 442,455 663,247 361,650 Investments purchased.................... 321,655 2,016,928 25,767,691 Investment management fee (Note 4)....... 80,499 91,680 333,276 445,481 Accrued expenses......................... 62,309 69,985 242,217 321,532 ------------ ------------- ------------- --------------- Total liabilities.......................... 1,138,908 3,773,505 28,557,513 17,355,981 ------------ ------------- ------------- --------------- NET ASSETS APPLICABLE TO OUTSTANDING SHARES...................................... $ 96,431,309 $151,554,440 $ 792,378,256 $ 1,169,095,568 ------------ ------------- ------------- --------------- ------------ ------------- ------------- --------------- Net assets consist of: Undistributed net investment income........ $ 758,037 Unrealized appreciation on investments..... $ 9,384,359 $ 27,116,814 94,320,358 Undistributed net realized gain (loss) from investments............................... (47,218) (1,863) 902,790 Capital shares (Note 3).................... $ 1,169,096 Capital paid in (Note 3)................... 87,094,168 124,439,489 696,397,071 1,167,926,472 ------------ ------------- ------------- --------------- $ 96,431,309 $151,554,440 $ 792,378,256 $ 1,169,095,568 ------------ ------------- ------------- --------------- ------------ ------------- ------------- --------------- SHARES OF CAPITAL STOCK OUTSTANDING (NOTE 3).......................................... 5,792,970 8,062,906 36,999,621 1,169,095,568 ------------ ------------- ------------- --------------- ------------ ------------- ------------- --------------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (1)......................... $ 16.65 $ 18.80 $ 21.42 $ 1.00 ------------ ------------- ------------- --------------- ------------ ------------- ------------- ---------------
(1) The net asset value per share is computed by dividing net assets applicable to outstanding shares by shares of capital stock outstanding. The accompanying notes are an integral part of the financial statements. 62 STATEMENTS OF ASSETS AND LIABILITIES -----------------------------------------------------------------
COLUMBIA U.S. COLUMBIA FIXED COLUMBIA COLUMBIA GOVERNMENT SECURITIES INCOME SECURITIES MUNICIPAL BOND HIGH YIELD December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC. --------------------- ----------------- -------------- ------------ ASSETS: Investments at identified cost............. $37,019,300 $352,106,732 $373,386,159 $ 34,017,097 - --------------------------------------------- --------------------- ----------------- -------------- ------------ Investments at value (Notes 1 and 2)....... $37,110,250 $361,706,626 $397,449,529 $ 35,147,761 Temporary cash investments, at cost (Note 1)........................................ 489,660 16,756,264 9,250,961 3,509,523 Receivable for: Interest................................. 594,173 4,146,142 5,150,997 845,880 Investments sold......................... 1,734,615 Capital stock sold....................... 2,744 587,519 711,513 52,553 --------------------- ----------------- -------------- ------------ Total assets............................... 38,196,827 384,931,166 412,563,000 39,555,717 --------------------- ----------------- -------------- ------------ LIABILITIES: Payable for: Capital stock redeemed................... 296,055 258,822 194,689 25,561 Dividends and distributions.............. 13,147 678,152 942,554 203,813 Investments purchased.................... 2,065,838 2,037,575 Investment management fee (Note 4)....... 16,372 161,421 172,765 3,517 Accrued expenses......................... 34,578 434,179 67,242 44,417 --------------------- ----------------- -------------- ------------ Total liabilities.......................... 360,152 3,598,412 3,414,825 277,308 --------------------- ----------------- -------------- ------------ NET ASSETS APPLICABLE TO OUTSTANDING SHARES...................................... $37,836,675 $381,332,754 $409,148,175 $ 39,278,409 --------------------- ----------------- -------------- ------------ --------------------- ----------------- -------------- ------------ Net assets consist of: Unrealized appreciation on investments..... $ 90,950 $ 9,599,894 $ 24,063,370 $ 1,130,664 Undistributed net realized gain (loss) from investments............................... (249,278) 8,080 301,769 30,713 Capital shares (Note 3).................... 45,619 284,274 328,202 Capital paid in (Note 3)................... 37,949,384 371,440,506 384,454,834 38,117,032 --------------------- ----------------- -------------- ------------ $37,836,675 $381,332,754 $409,148,175 $ 39,278,409 --------------------- ----------------- -------------- ------------ --------------------- ----------------- -------------- ------------ SHARES OF CAPITAL STOCK OUTSTANDING (NOTE 3).......................................... 4,561,855 28,427,440 32,820,166 3,913,232 --------------------- ----------------- -------------- ------------ --------------------- ----------------- -------------- ------------ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (1)......................... $ 8.29 $ 13.41 $ 12.47 $ 10.04 --------------------- ----------------- -------------- ------------ --------------------- ----------------- -------------- ------------
(1) The net asset value per share is computed by dividing net assets applicable to outstanding shares by shares of capital stock outstanding. The accompanying notes are an integral part of the financial statements. 63 STATEMENTS OF OPERATIONS -----------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA COLUMBIA COMMON STOCK GROWTH INTERNATIONAL STOCK SPECIAL Year Ended December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC. ------------- ------------- ------------------- ------------- INVESTMENT INCOME: Income: Interest................................. $ 3,048,343 $ 1,820,088 $ 633,045 $ 5,470,977 Dividends................................ 11,603,708 13,482,283 2,328,263 9,434,285 Foreign taxes withheld (net of reclaims)............................... (276,894) ------------- ------------- ------------------- ------------- Total income........................... 14,652,051 15,302,371 2,684,414 14,905,262 ------------- ------------- ------------------- ------------- Expenses: Investment management fees (Note 4)...... 4,158,273 7,019,161 1,504,787 12,373,140 Shareholder servicing costs (Note 4)..... 802,650 1,036,576 401,177 1,402,637 Reports to shareholders.................. 121,540 273,690 89,060 297,099 Accounting expense....................... 35,794 38,348 89,372 45,504 Financial information and subscriptions........................... 9,802 18,422 19,979 26,041 Custodian fees........................... 27,901 49,225 147,332 58,659 Bank transaction and checking fees....... 20,985 33,934 47,326 50,531 Registration fees........................ 80,003 84,219 38,396 55,075 Legal, insurance and auditing fees....... 36,992 47,281 34,161 54,489 Other.................................... 3,228 8,839 35,838 10,314 ------------- ------------- ------------------- ------------- Total expenses......................... 5,297,168 8,609,695 2,407,428 14,373,489 ------------- ------------- ------------------- ------------- Net investment income (Note 1)............. 9,354,883 6,692,676 276,986 531,773 ------------- ------------- ------------------- ------------- REALIZED GAIN (LOSS) AND UNREALIZED APPRECIATION (DEPRECIATION) FROM INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investments (Note 2)(1).................. 61,630,849 150,238,079 17,347,526 122,678,842 Foreign currency transactions (Note 1)... (286,335) ------------- ------------- ------------------- ------------- Net realized gain...................... 61,630,849 150,238,079 17,061,191 122,678,842 ------------- ------------- ------------------- ------------- Net unrealized appreciation (depreciation) on: Investments (Note 1)..................... 76,981,002 122,000,869 (1,735,993) 49,916,627 Translation of assets and liabilities in foreign currencies (Note 1)............. (67,221) ------------- ------------- ------------------- ------------- Net unrealized appreciation (depreciation) during the period...... 76,981,002 122,000,869 (1,803,214) 49,916,627 ------------- ------------- ------------------- ------------- Net gain on investment and foreign currency transactions (Note 1)..................... 138,611,851 272,238,948 15,257,977 172,595,469 ------------- ------------- ------------------- ------------- Net increase in net assets resulting from operations................................ $147,966,734 $ 278,931,624 $15,534,963 $ 173,127,242 ------------- ------------- ------------------- ------------- ------------- ------------- ------------------- -------------
(1) The net realized gain for CSF includes $7,023,101 loss from affiliated issuers. (Note 1) The accompanying notes are an integral part of the financial statements. 64 STATEMENTS OF OPERATIONS -----------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA COLUMBIA SMALL CAP REAL ESTATE EQUITY BALANCED DAILY INCOME Year Ended December 31, 1997 FUND, INC. FUND, INC. FUND, INC. COMPANY -------------- ------------------ ------------- ------------ INVESTMENT INCOME: Income: Interest................................. $ 267,417 $ 522,739 $ 27,456,656 $50,578,946 Dividends................................ 87,990 6,230,108 6,696,506 -------------- ------------------ ------------- ------------ Total income........................... 355,407 6,752,847 34,153,162 50,578,946 -------------- ------------------ ------------- ------------ Expenses: Investment management fees (Note 4)...... 547,892 864,343 3,826,628 4,296,685 Shareholder servicing costs (Note 4)..... 84,315 147,702 908,682 785,663 Reports to shareholders.................. 22,892 36,581 158,095 194,528 Accounting expense....................... 30,148 28,628 43,071 44,583 Financial information and subscriptions........................... 981 2,444 22,155 13,392 Custodian fees........................... 2,305 4,733 30,526 35,947 Bank transaction and checking fees....... 19,580 10,591 32,640 100,680 Registration fees........................ 48,501 57,476 53,865 138,174 Legal, insurance and auditing fees....... 19,033 20,368 40,600 41,730 Other.................................... 23,345 1,603 14,547 12,298 -------------- ------------------ ------------- ------------ Total expenses......................... 798,992 1,174,469 5,130,809 5,663,680 -------------- ------------------ ------------- ------------ Net investment income (loss) (Note 1)...... (443,585) 5,578,378 29,022,353 44,915,266 -------------- ------------------ ------------- ------------ REALIZED GAIN AND UNREALIZED APPRECIATION FROM INVESTMENT TRANSACTIONS: Net realized gain from investments (Note 2)........................................ 4,931,098 3,597,873 62,144,958 Net unrealized appreciation on investments during the period (Note 1)................ 7,895,606 16,211,982 38,270,990 -------------- ------------------ ------------- Net gain on investments (Note 1)........... 12,826,704 19,809,855 100,415,948 -------------- ------------------ ------------- ------------ Net increase in net assets resulting from operations................................ $12,383,119 $25,388,233 $ 129,438,301 $44,915,266 -------------- ------------------ ------------- ------------ -------------- ------------------ ------------- ------------
The accompanying notes are an integral part of the financial statements. 65 STATEMENTS OF OPERATIONS -----------------------------------------------------------------
COLUMBIA U.S. COLUMBIA FIXED COLUMBIA COLUMBIA GOVERNMENT SECURITIES INCOME SECURITIES MUNICIPAL BOND HIGH YIELD Year Ended December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC. --------------------- ----------------- -------------- ----------- INVESTMENT INCOME: Income: Interest................................. $2,284,819 $25,828,885 $21,295,777 $3,184,666 ----------- ----------------- -------------- ----------- Total income........................... 2,284,819 25,828,885 21,295,777 3,184,666 ----------- ----------------- -------------- ----------- Expenses: Investment management fees (Note 4)...... 194,230 1,821,809 1,952,213 211,632 Shareholder servicing costs (Note 4)..... 59,553 315,560 124,730 43,233 Reports to shareholders.................. 12,689 80,510 25,942 11,708 Accounting expense....................... 28,508 37,923 29,953 34,145 Financial information and subscriptions........................... 1,051 15,912 37,910 3,564 Custodian fees........................... 1,530 14,491 15,412 1,388 Bank transaction and checking fees....... 2,345 24,208 4,572 3,740 Registration fees........................ 16,104 38,435 15,190 27,510 Legal, insurance and auditing fees....... 22,084 37,787 34,199 20,525 Other.................................... 673 4,224 8,930 358 ----------- ----------------- -------------- ----------- 338,767 2,390,859 2,249,051 357,803 Expenses reimbursed by investment advisor (1)..................................... (5,959) ----------- ----------------- -------------- ----------- Total expenses......................... 338,767 2,390,859 2,249,051 351,844 ----------- ----------------- -------------- ----------- Net investment income (Note 1)............. 1,946,052 23,438,026 19,046,726 2,832,822 ----------- ----------------- -------------- ----------- REALIZED GAIN AND UNREALIZED APPRECIATION FROM INVESTMENT TRANSACTIONS: Net realized gain from investments (Note 2)........................................ 147,024 2,758,117 2,429,586 1,148,575 Net unrealized appreciation on investments during the period (Note 1)................ 63,763 7,594,450 10,155,954 279,884 ----------- ----------------- -------------- ----------- Net gain on investments (Note 1)........... 210,787 10,352,567 12,585,540 1,428,459 ----------- ----------------- -------------- ----------- Net increase in net assets resulting from operations................................ $2,156,839 $33,790,593 $31,632,266 $4,261,281 ----------- ----------------- -------------- ----------- ----------- ----------------- -------------- ----------- (1) The Advisor has voluntarily agreed to assume the ordinary expenses of the Fund to the extent that these expenses, together with the Fund's advisory fee, exceed 1% of the Fund's average net assets.
The accompanying notes are an integral part of the financial statements. 66 STATEMENTS OF CHANGES IN NET ASSETS -----------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA COMMON STOCK GROWTH INTERNATIONAL STOCK Years Ended December 31, FUND, INC. FUND, INC. FUND, INC. --------------------------- ------------------------------- --------------------------- 1997 1996 1997 1996 1997 1996 ------------ ------------ -------------- -------------- ------------ ------------ INCREASE IN NET ASSETS: Operations: Net investment income........ $ 9,354,883 $ 5,885,201 $ 6,692,676 $ 6,027,740 $ 276,986 $ 254,666 Net realized gain (loss) from: Investments (Note 2)....... 61,630,849 70,666,274 150,238,079 154,006,111 17,347,526 9,808,805 Foreign currency transactions (Note 1)..... (286,335) 1,454,573 Change in net unrealized appreciation (depreciation) on: Investments................ 76,981,002 8,532,253 122,000,869 21,295,845 (1,735,993) 5,676,201 Translation of assets and liabilities in foreign currencies (Note 1)....... (67,221) 185,947 ------------ ------------ -------------- -------------- ------------ ------------ Net increase in net assets resulting from operations... 147,966,734 85,083,728 278,931,624 181,329,696 15,534,963 17,380,192 Distributions to shareholders: From net investment income... (8,468,207) (5,169,680) (5,838,423) (5,089,302) (254,666) In excess of net investment income...................... (24,695)* (1,646,464)* From net realized gain from investment and foreign currency transactions....... (61,141,619) (70,666,274) (148,364,649) (154,006,111) (16,691,558) (9,422,995) In excess of net realized gain from investment transactions................ (97,665)* (469,156)* Capital share transactions, net (Note 3)...................... 168,789,109 169,111,664 136,089,618 193,603,540 21,927,539 18,580,064 ------------ ------------ -------------- -------------- ------------ ------------ Net increase in net assets... 247,146,017 178,237,078 260,818,170 215,368,667 20,770,944 24,636,131 NET ASSETS: Beginning of period............ 536,759,802 358,522,724 1,064,099,519 848,730,852 125,509,591 100,873,460 ------------ ------------ -------------- -------------- ------------ ------------ End of period (1).............. $783,905,819 $536,759,802 $1,324,917,689 $1,064,099,519 $146,280,535 $125,509,591 ------------ ------------ -------------- -------------- ------------ ------------ ------------ ------------ -------------- -------------- ------------ ------------ - --------------------------------- ------------ ------------ -------------- -------------- ------------ ------------
(1) Includes undistributed net investment income of: $ 1,537,363 $ 901,158 $ 1,999,579 $ 1,931,709 $ -- $ 3,885 * On a tax basis, there was no return of capital.
The accompanying notes are an integral part of the financial statements. 67 STATEMENTS OF CHANGES IN NET ASSETS -----------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA SPECIAL SMALL CAP REAL ESTATE EQUITY Years Ended December 31, FUND, INC. FUND, INC. FUND, INC. --------------------------------- --------------------------- ---------------------------- 1997 1996 1997 1996 (2) 1997 1996 --------------- --------------- ------------ ------------ ------------- ------------ INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)................... $ 531,773 $ (4,487,503) $ (443,585) $ (126) $ 5,578,378 $ 1,994,016 Net realized gain (loss) from investments (Note 2)....................... 122,678,842 295,204,950 4,931,098 (275,796) 3,597,873 1,627,328 Change in net unrealized appreciation (depreciation) on investments.............. 49,916,627 (112,950,905) 7,895,606 1,488,753 16,211,982 9,368,906 --------------- --------------- ------------ ------------ ------------- ------------ Net increase in net assets resulting from operations............... 173,127,242 177,766,542 12,383,119 1,212,831 25,388,233 12,990,250 Distributions to shareholders: From net investment income................... (4,230,674) (1,370,203) From net realized gain from investment transactions............. (122,678,842) (289,460,071) (4,258,935) (3,597,873) (1,627,328) In excess of net realized gain from investment transactions............. (154,157)* (243,742)* (349,207)* From tax return of capital.................. (1,252,467) (657,602) Capital share transactions, net (Note 3)............... (385,860,660) 312,562,708 67,245,755 19,848,539 67,417,742 37,500,111 --------------- --------------- ------------ ------------ ------------- ------------ Net increase (decrease) in net assets............... (335,566,417) 200,869,179 75,369,939 21,061,370 83,481,219 46,486,021 NET ASSETS: Beginning of period......... 1,585,284,214 1,384,415,035 21,061,370 68,073,221 21,587,200 --------------- --------------- ------------ ------------ ------------- ------------ End of period (1)........... $ 1,249,717,797 $ 1,585,284,214 $ 96,431,309 $ 21,061,370 $ 151,554,440 $ 68,073,221 --------------- --------------- ------------ ------------ ------------- ------------ --------------- --------------- ------------ ------------ ------------- ------------ - ------------------------------ --------------- --------------- ------------ ------------ ------------- ------------
(1) Includes undistributed net investment income (loss) of:.......................... $ 360,073 $ -- $ -- $ (126) $ -- $ -- (2) From inception of operations on September 11, 1996. * On a tax basis, there was no return of capital.
The accompanying notes are an integral part of the financial statements. 68 STATEMENTS OF CHANGES IN NET ASSETS -----------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA BALANCED DAILY INCOME U.S. GOVERNMENT Years Ended December 31, FUND, INC. COMPANY SECURITIES FUND, INC. ----------------------------- ------------------------------- --------------------------- 1997 1996 1997 1996 1997 1996 ------------- ------------- --------------- ------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income.......... $ 29,022,353 $ 22,231,964 $ 44,915,266 $ 40,303,114 $ 1,946,052 $ 2,058,101 Net realized gain from investments (Note 2).......... 62,144,958 41,189,499 147,024 83,457 Change in net unrealized appreciation (depreciation) on investments................... 38,270,990 4,167,518 63,763 (584,568) ------------- ------------- --------------- ------------- ------------ ------------ Net increase in net assets resulting from operations..... 129,438,301 67,588,981 44,915,266 40,303,114 2,156,839 1,556,990 Distributions to shareholders: From net investment income..... (28,593,156) (21,892,044) (44,915,266) (40,303,114) (1,946,052) (2,058,101) In excess of net investment income........................ (124,615)* From net realized gain from investment transactions....... (61,376,451) (41,189,499) In excess of net realized gain from investment transaction... (97,205)* Capital share transactions, net (Note 3)........................ 80,316,642 181,539,809 279,295,599 89,144,447 (3,150,453) (564,932) ------------- ------------- --------------- ------------- ------------ ------------ Net increase (decrease) in net assets........................ 119,785,336 185,825,427 279,295,599 89,144,447 (2,939,666) (1,066,043) NET ASSETS: Beginning of period.............. 672,592,920 486,767,493 889,799,969 800,655,522 40,776,341 41,842,384 ------------- ------------- --------------- ------------- ------------ ------------ End of period.................... $ 792,378,256 $ 672,592,920 $ 1,169,095,568 $ 889,799,969 $ 37,836,675 $ 40,776,341 ------------- ------------- --------------- ------------- ------------ ------------ ------------- ------------- --------------- ------------- ------------ ------------ - ----------------------------------- ------------- ------------- --------------- ------------- ------------ ------------
(1) Includes undistributed net investment income of: $ 758,037 $ 540,163 * On a tax basis, there was no return of capital.
The accompanying notes are an integral part of the financial statements. 69 STATEMENTS OF CHANGES IN NET ASSETS -----------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA FIXED INCOME SECURITIES MUNICIPAL BOND HIGH YIELD Years Ended December 31, FUND, INC. FUND, INC. FUND, INC. -------------------------- ---------------------------- -------------------------- 1997 1996 1997 1996 1997 1996 ------------ ------------ ------------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income................... $ 23,438,026 $ 21,823,484 $ 19,046,726 $ 18,837,582 $ 2,832,822 $ 2,084,562 Net realized gain from investments (Note 2)..................................... 2,758,117 1,600,093 2,429,586 1,991,804 1,148,575 237,862 Change in net unrealized appreciation (depreciation) on investments.......... 7,594,450 (11,107,884) 10,155,954 (7,232,960) 279,884 (1,892) ------------ ------------ ------------- ------------ ------------ ------------ Net increase in net assets resulting from operations........................ 33,790,593 12,315,693 31,632,266 13,596,426 4,261,281 2,320,532 Distributions to shareholders: From net investment income.............. (23,438,026) (21,823,484) (19,046,726) (18,837,582) (2,832,822) (2,084,562) In excess of net investment income...... (4,724)* From net realized gain from investment transactions........................... (847,470) (2,276,966) (1,842,655) (1,136,542) (28,544) Capital share transactions, net (Note 3)....................................... 15,406,761 49,669,884 23,176,895 (1,044,677) 10,168,259 5,139,840 ------------ ------------ ------------- ------------ ------------ ------------ Net increase (decrease) in net assets... 24,911,858 40,162,093 33,480,745 (8,128,488) 10,460,176 5,347,266 NET ASSETS: Beginning of period....................... 356,420,896 316,258,803 375,667,430 383,795,918 28,818,233 23,470,967 ------------ ------------ ------------- ------------ ------------ ------------ End of period............................. $381,332,754 $356,420,896 $ 409,148,175 $375,667,430 $ 39,278,409 $ 28,818,233 ------------ ------------ ------------- ------------ ------------ ------------ ------------ ------------ ------------- ------------ ------------ ------------ * On a tax basis, there was no return of capital.
The accompanying notes are an integral part of the financial statements. 70 NOTES TO FINANCIAL STATEMENTS ----------------------------------------------------------------- -- 1. SIGNIFICANT ACCOUNTING POLICIES -- The Columbia Funds (the Funds) consist of Columbia Common Stock Fund, Inc. (CCSF), Columbia Growth Fund, Inc. (CGF), Columbia International Stock Fund, Inc. (CISF), Columbia Special Fund, Inc. (CSF), Columbia Small Cap Fund, Inc. (CSCF), Columbia Real Estate Equity Fund, Inc. (CREF), Columbia Balanced Fund, Inc. (CBF), Columbia Daily Income Company (CDIC), Columbia U.S. Government Securities Fund, Inc. (CUSG), Columbia Fixed Income Securities Fund, Inc. (CFIS), Columbia Municipal Bond Fund, Inc. (CMBF), and Columbia High Yield Fund, Inc. (CHYF). All Funds are open-end investment companies registered under the Investment Company Act of 1940, as amended, and are diversified except CMBF, which is non-diversified. The policies described below are consistently followed by the Funds in the preparation of their financial statements in conformity with generally accepted accounting principles. INVESTMENT VALUATION. The values of CCSF, CGF, CISF, CSF, CSCF, CREF and CBF equity investments are based on the last sale prices reported by the principal securities exchanges on which the investments are traded, or, in the absence of recorded sales, at the closing bid prices on such exchanges or over-the-counter markets. Temporary cash investments in short-term securities (principally repurchase agreements) are valued at cost, which approximates market. CDIC investments are carried at values deemed best to reflect their fair values as determined in good faith by or under the supervision of officers of CDIC, specifically so authorized by its Directors. These values are based on cost adjusted for amortization of discount or premium and accrued interest, unless unusual circumstances indicate that another method of determining fair value should be considered. CBF, CUSG, CFIS, CMBF and CHYF fixed income investments are carried at values deemed best to reflect their fair values as determined in good faith under consistently applied procedures by or under the supervision of officers of the investment advisor to those Funds specifically so authorized by their Directors. These values are based on market value as quoted by dealers who are market makers in these securities or by an independent pricing service unless unusual circumstances indicate that another method of determining fair value should be considered. Market values for CBF, CUSG, CFIS and CHYF fixed income investments are based on the average of bid and ask prices and market value for CMBF is based on bid prices, or by reference to other securities with comparable ratings, interest rates and maturities. Temporary cash investments in short-term securities (principally repurchase agreements) are valued at cost, which approximates market. 71 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED -- AFFILIATED ISSUERS. Under the Investment Company Act of 1940, as amended, an issuer is an "affiliated issuer" of a Fund if the Fund holds 5% or more of that issuer's outstanding voting securities or is held under common control. CSF and CBF had investments in such affiliated issuers at December 31, 1997 as follows:
DIVIDEND AND BALANCE OF BALANCE OF INTEREST INCOME SHARES/PRINCIPAL SHARES/PRINCIPAL JANUARY 1, HELD GROSS GROSS HELD VALUE 1997- DECEMBER 31, PURCHASES & SALES & DECEMBER 31, DECEMBER 31, DECEMBER 31, NAME OF ISSUER 1996 ADDITIONS REDUCTIONS 1997 1997 1997 - ------------------------------ ---------------- ----------- ---------- ---------------- ------------- --------------- Columbia Special Fund (a) Abercrombie & Fitch Co........ -- 800,000 800,000 $ 25,000,000 Celadon Group, Inc............ 580,000 80,000 500,000 6,750,000 Gadzooks, Inc................. -- 700,000 700,000 14,700,000 Harmonic Lightwaves, Inc...... 540,000 540,000 -- -- Integrated Measurement Syst......................... 170,000 290,000 160,000 300,000 5,137,500 Osmonics, Inc................. 400,000 469,000 869,000 13,741,063 Resmed, Inc................... 605,000 105,000 500,000 14,062,500 Schnitzer Steel Industries.... 500,000 50,000 550,000 15,434,375 $107,500 United Dental Care............ 487,500 487,500 -- -- Vans, Inc..................... -- 860,000 860,000 13,007,500 ------------- --------------- 107,832,938 107,500 Columbia Balanced Fund (b) Fleet Mortgage Group, Inc..... 550,000 550,000 552,937 35,750 ------------- --------------- Total affiliated issuers.................................................................. $ 108,385,875 $143,250 ------------- --------------- ------------- ---------------
(a) Fund holds 5% or more of that issuer's outstanding shares. (b) Fund holds an investment under common control. (Note 4) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. CISF enters into forward foreign currency exchange contracts to hedge certain portfolio securities denominated in foreign currencies. Forward contracts are recorded at market value. CISF could be exposed to risks if counterparties to the forward contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. The effect of any change in the value of a hedged foreign currency would be offset by the increase (resulting from a change in exchange rates) in value of the securities denominated in that currency. Net realized gains arising from forward contracts amounted to $241,528 and are included in net realized gain from foreign currency transactions. As of December 31, 1997, CISF had entered into the following forward contract resulting in net unrealized appreciation of $129,673. 72 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 1. SIGNIFICANT ACCOUNTING POLICIES, -- CONTINUED
JAPANESE YEN U.S. DOLLARS NET TO TO SETTLEMENT UNREALIZED BE DELIVERED BE RECEIVED DATE APPRECIATION - -------------- -------------- ---------- ------------- Y3,370,000,000 $ 26,154,849 01/28/1998 $ 129,673
FOREIGN CURRENCY TRANSLATIONS. The books and records of CISF are maintained in U.S. dollars. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, other assets, and liabilities at the daily rates of exchange on the valuation date, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. CISF does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such changes are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on CISF's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates. INTEREST AND DIVIDEND INCOME. Interest income is recorded on the accrual basis and dividend income is recorded on the ex-dividend date. Amortization of discount or premium is recorded over the life of the respective instrument. The majority of dividend income recorded by CREF is from Real Estate Investment Trusts (REITs). For tax purposes, a portion of these dividends consist of capital gains and return of capital. For financial reporting purposes, these dividends are recorded as dividend income. SHAREHOLDER DISTRIBUTIONS. CCSF, CREF and CBF distribute net investment income quarterly and any net realized gains from investment transactions annually. CGF, CISF, CSF and CSCF distribute net investment income and any net realized gains annually. CDIC distributes its net investment income daily -- including any realized investment gains or losses. CUSG, CFIS, CMBF and CHYF distribute their net investment income monthly and any net realized gains annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions, net operating losses, deferral of losses from wash sales, passive foreign investment company income and return of capital received from REITS. USE OF ESTIMATES. The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FEDERAL INCOME TAXES. The Funds have made no provision for federal income taxes on net investment income or net realized gains from sales of securities, since it is the intention of the Funds to comply with the provisions of the Internal Revenue Code available to certain investment companies, and to make distributions of income and security profits sufficient to relieve them from substantially all federal income taxes. 73 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 1. SIGNIFICANT ACCOUNTING POLICIES, -- CONTINUED As of December 31, 1997, CUSG has $242,419 in capital loss carryovers available to offset future capital gains which expire in 2002. To the extent that the capital loss carryovers are used to offset any capital gains, it is unlikely that the gains so offset will be distributed to shareholders. OTHER. Investment transactions are accounted for on the date the investments are purchased or sold. The cost of investments sold is determined by the use of the specific identification method for both financial reporting and income tax purposes. Realized gains and losses from investment transactions and unrealized appreciation or depreciation of investments are reported on the basis of identified costs. The Funds, through their custodians, receive delivery of underlying securities collateralizing repurchase agreements (included in temporary cash investments). Market values of these securities are required to be at least 100% of the cost of the repurchase agreements. The Funds' investment advisor determines that the value of the underlying securities is at all times at least equal to the resale price. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. CHYF invests in lower rated debt securities, which may be more susceptible to adverse economic conditions than investment grade holdings. These securities are often subordinated to the prior claims of other senior lenders, and uncertainties exist as to an issuer's ability to meet principal and interest payments. At December 31, 1997, 41% of the Fund's debt securities were rated Ba and 59% were rated B by Moody's Investor Services, Inc. 74 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 2. INVESTMENT TRANSACTIONS -- Aggregate purchases, sales and maturities, net realized gain and unrealized appreciation (depreciation) of investments, including temporary cash investments for CDIC and excluding temporary cash investments for all other Funds, as of and for the period ended December 31, 1997, were as follows:
COLUMBIA COLUMBIA COLUMBIA COLUMBIA COMMON STOCK GROWTH INTERNATIONAL STOCK SPECIAL FUND, INC. (CCSF) FUND, INC. (CGF) FUND, INC. (CISF) FUND, INC. (CSF) ----------------- ---------------- ------------------- ---------------- PURCHASES: Investment securities other than U.S. Government obligations..... $649,705,323 $1,132,681,444 $166,070,521 $2,285,721,068 ----------------- ---------------- ------------------- ---------------- ----------------- ---------------- ------------------- ---------------- SALES AND MATURITIES: Investment securities other than U.S. Government obligations..... $569,259,757 $1,154,366,139 $168,627,388 $2,727,547,308 ----------------- ---------------- ------------------- ---------------- ----------------- ---------------- ------------------- ---------------- NET REALIZED GAIN: Investment securities other than U.S. Government obligations..... $ 61,630,849 $ 150,238,079 $ 17,347,526 $ 122,678,842 ----------------- ---------------- ------------------- ---------------- ----------------- ---------------- ------------------- ---------------- UNREALIZED APPRECIATION (DEPRECIATION) AS OF DECEMBER 31, 1997: Appreciation..................... $148,390,643 $ 327,736,887 $ 23,089,195 $ 199,310,779 Depreciation..................... (10,521,532) (24,468,865) (8,182,034) (61,111,074) ----------------- ---------------- ------------------- ---------------- Net unrealized appreciation.... $137,869,111 $ 303,268,022 $ 14,907,125 $ 138,199,705 ----------------- ---------------- ------------------- ---------------- ----------------- ---------------- ------------------- ---------------- UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES AS OF DECEMBER 31, 1997: Appreciation..................... $149,383,139 $ 329,136,822 $ 23,079,940 $ 199,396,129 Depreciation..................... (10,521,532) (24,763,294) (8,267,962) (62,132,757) ----------------- ---------------- ------------------- ---------------- Net unrealized appreciation.... $138,861,607 $ 304,373,528 $ 14,811,978 $ 137,263,372 ----------------- ---------------- ------------------- ---------------- ----------------- ---------------- ------------------- ---------------- For federal income tax purposes, the cost of investments owned at December 31, 1997................. $590,091,210 $ 997,456,659 $115,448,050 $1,081,321,466 ----------------- ---------------- ------------------- ---------------- ----------------- ---------------- ------------------- ----------------
The net realized gain for CCSF, CGF, & CSF includes proceeds of $2,242, $361,277, & $672,539, respectively, from shareholder class action suits related to securities held by those Funds. 75 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 2. INVESTMENT TRANSACTIONS, CONTINUED --
COLUMBIA COLUMBIA REAL ESTATE COLUMBIA COLUMBIA SMALL CAP EQUITY FUND, INC. BALANCED DAILY INCOME FUND, INC. (CSCF) (CREF) FUND, INC. (CBF) COMPANY (CDIC) ----------------- ----------------- ---------------- --------------- PURCHASES: Investment securities other than U.S. Government obligations............... $147,752,870 $ 99,553,326 $ 565,825,789 $9,939,776,531 U.S. Government obligations........... 604,980,516 33,659,217 ----------------- ----------------- ---------------- --------------- Total purchases..................... $147,752,870 $ 99,553,326 $1,170,806,305 $9,973,435,748 ----------------- ----------------- ---------------- --------------- ----------------- ----------------- ---------------- --------------- SALES AND MATURITIES: Investment securities other than U.S. Government obligations............... $ 86,451,984 $ 35,352,329 $ 509,635,998 $9,669,083,804 U.S. Government obligations........... 613,086,023 33,659,217 ----------------- ----------------- ---------------- --------------- Total sales and maturities.......... $ 86,451,984 $ 35,352,329 $1,122,722,021 $9,702,743,021 ----------------- ----------------- ---------------- --------------- ----------------- ----------------- ---------------- --------------- NET REALIZED GAIN: Investment securities other than U.S. Government obligations............... $ 4,931,098 $ 3,597,873 $ 60,242,570 U.S. Government obligations........... 1,902,388 ----------------- ----------------- ---------------- Total net realized gain............. $ 4,931,098 $ 3,597,873 $ 62,144,958 ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- UNREALIZED APPRECIATION (DEPRECIATION) AS OF DECEMBER 31, 1997:............... Appreciation.......................... $ 12,040,728 $ 27,174,929 $ 98,838,009 Depreciation.......................... (2,656,369) (58,115) (4,517,651) ----------------- ----------------- ---------------- Net unrealized appreciation......... $ 9,384,359 $ 27,116,814 $ 94,320,358 ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES AS OF DECEMBER 31, 1997: Appreciation.......................... $ 12,028,865 $ 29,011,667 $ 99,512,204 Depreciation.......................... (2,704,005) (58,115) (4,608,500) ----------------- ----------------- ---------------- Net unrealized appreciation......... $ 9,324,860 $ 28,953,552 $ 94,903,704 ----------------- ----------------- ---------------- ----------------- ----------------- ---------------- For federal income tax purposes, the cost of investments owned at December 31, 1997............................... $ 84,013,201 $111,208,205 $ 686,783,832 $1,173,657,688 ----------------- ----------------- ---------------- --------------- ----------------- ----------------- ---------------- ---------------
The net realized gain for CBF includes proceeds of $2,236 from shareholder class action suits related to securities held by the Fund. - -------------------------------------------------------------------------------- 76 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 2. INVESTMENT TRANSACTIONS, CONTINUED --
COLUMBIA U.S. COLUMBIA FIXED COLUMBIA COLUMBIA GOVERNMENT SECURITIES INCOME SECURITIES MUNICIPAL BOND HIGH YIELD FUND, INC. (CUSG) FUND, INC. (CFIS) FUND, INC. (CMBF) FUND, INC. (CHYF) --------------------- ----------------- ----------------- ----------------- PURCHASES: Investment securities other than U.S. Government obligations............... $205,016,907 $ 81,001,133 $46,508,531 U.S. Government obligations........... $77,834,027 514,542,364 747,187 --------------------- ----------------- ----------------- ----------------- Total purchases..................... $77,834,027 $719,559,271 $ 81,001,133 $47,255,718 --------------------- ----------------- ----------------- ----------------- --------------------- ----------------- ----------------- ----------------- SALES AND MATURITIES: Investment securities other than U.S. Government obligations............... $179,565,984 $ 64,319,420 $39,446,080 U.S. Government obligations........... $81,184,234 528,675,378 1,240,234 --------------------- ----------------- ----------------- ----------------- Total sales and maturities.......... $81,184,234 $708,241,362 $ 64,319,420 $40,686,314 --------------------- ----------------- ----------------- ----------------- --------------------- ----------------- ----------------- ----------------- NET REALIZED GAIN (LOSS): Investment securities other than U.S. Government obligations............... $ (80,814) $ 2,429,586 $ 1,165,879 U.S. Government obligations........... $ 147,024 2,838,931 (17,304) --------------------- ----------------- ----------------- ----------------- Total net realized gain............. $ 147,024 $ 2,758,117 $ 2,429,586 $ 1,148,575 --------------------- ----------------- ----------------- ----------------- --------------------- ----------------- ----------------- ----------------- UNREALIZED APPRECIATION (DEPRECIATION) AS OF DECEMBER 31, 1997: Appreciation.......................... $ 103,729 $ 9,785,428 $ 24,070,747 $ 1,157,854 Depreciation.......................... (12,779) (185,534) (7,377) (27,190) --------------------- ----------------- ----------------- ----------------- Net unrealized appreciation......... $ 90,950 $ 9,599,894 $ 24,063,370 $ 1,130,664 --------------------- ----------------- ----------------- ----------------- --------------------- ----------------- ----------------- ----------------- UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES AS OF DECEMBER 31, 1997: Appreciation.......................... $ 96,870 $ 9,785,428 $ 24,061,804 $ 1,157,854 Depreciation.......................... (12,779) (186,732) (7,377) (27,190) --------------------- ----------------- ----------------- ----------------- Net unrealized appreciation......... $ 84,091 $ 9,598,696 $ 24,054,427 $ 1,130,664 --------------------- ----------------- ----------------- ----------------- --------------------- ----------------- ----------------- ----------------- For federal income tax purposes, the cost of investments owned at December 31, 1997............................... $37,026,159 $352,107,930 $373,395,102 $34,017,097 --------------------- ----------------- ----------------- ----------------- --------------------- ----------------- ----------------- -----------------
- -------------------------------------------------------------------------------- 77 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 3. CAPITAL STOCK --
COLUMBIA COLUMBIA COLUMBIA COMMON STOCK GROWTH INTERNATIONAL STOCK FUND, INC. (CCSF) FUND, INC. (CGF) FUND, INC. (CISF) ----------------------------- ------------------------------- ----------------------------- 1997 1996 1997 1996 1997 1996 ------------- ------------- -------------- -------------- ------------- ------------- SHARES: Shares sold................... 12,609,458 9,187,403 9,453,209 9,588,118 6,414,910 4,458,919 Shares issued for reinvestment of dividends................. 3,039,307 3,836,536 4,230,608 4,993,329 1,146,267 808,789 ------------- ------------- -------------- -------------- ------------- ------------- 15,648,765 13,023,939 13,683,817 14,581,447 7,561,177 5,267,708 Less shares redeemed.......... (7,908,821) (4,449,235) (9,715,431) (8,408,189) (5,939,634) (3,930,959) ------------- ------------- -------------- -------------- ------------- ------------- Net increase in shares........ 7,739,944 8,574,704 3,968,386 6,173,258 1,621,543 1,336,749 ------------- ------------- -------------- -------------- ------------- ------------- ------------- ------------- -------------- -------------- ------------- ------------- AMOUNTS: Sales......................... $ 277,332,028 $ 183,843,205 $ 329,861,186 $ 309,798,468 $ 98,515,375 $ 62,941,735 Reinvestment of dividends..... 66,961,124 74,699,264 145,279,077 154,190,774 15,703,862 11,145,109 ------------- ------------- -------------- -------------- ------------- ------------- 344,293,152 258,542,469 475,140,263 463,989,242 114,219,237 74,086,844 Less redemptions.............. (175,504,043) (89,430,805) (339,050,645) (270,385,702) (92,291,698) (55,506,780) ------------- ------------- -------------- -------------- ------------- ------------- Net increase.................. $ 168,789,109 $ 169,111,664 $ 136,089,618 $ 193,603,540 $ 21,927,539 $ 18,580,064 ------------- ------------- -------------- -------------- ------------- ------------- ------------- ------------- -------------- -------------- ------------- ------------- Capital stock authorized (shares)..................... 100,000,000 100,000,000 100,000,000 Par Value..................... no par $.01 no par
- --------------------------------------------------------------------------------
COLUMBIA COLUMBIA COLUMBIA SPECIAL SMALL CAP REAL ESTATE EQUITY FUND, INC. (CSF) FUND, INC. (CSCF) FUND, INC. (CREF) ------------------------------- ---------------------------- ----------------------------- 1997 1996 1997 1996 (1) 1997 1996 -------------- -------------- ------------- ------------ ------------- ------------- SHARES: Shares sold...................... 17,301,738 25,624,116 6,092,245 1,756,650 9,713,082 4,543,366 Shares issued for reinvestment of dividends....................... 5,787,116 13,826,136 229,093 444,904 226,545 -------------- -------------- ------------- ------------ ------------- ------------- 23,088,854 39,450,252 6,321,338 1,756,650 10,157,986 4,769,911 Less shares redeemed............. (41,278,382) (24,162,690) (2,149,149) (135,869) (6,308,136) (2,255,778) -------------- -------------- ------------- ------------ ------------- ------------- Net increase (decrease) in shares.......................... (18,189,528) 15,287,562 4,172,189 1,620,781 3,849,850 2,514,133 -------------- -------------- ------------- ------------ ------------- ------------- -------------- -------------- ------------- ------------ ------------- ------------- AMOUNTS: Sales............................ $ 365,659,534 $ 593,195,434 $ 97,707,061 $ 21,545,009 $ 168,764,062 $ 65,389,802 Reinvestment of dividends........ 117,246,979 273,619,242 3,814,406 8,209,513 3,428,343 -------------- -------------- ------------- ------------ ------------- ------------- 482,906,513 866,814,676 101,521,467 21,545,009 176,973,575 68,818,145 Less redemptions................. (868,767,173) (554,251,968) (34,275,712) (1,696,470) (109,555,833) (31,318,034) -------------- -------------- ------------- ------------ ------------- ------------- Net increase (decrease).......... $ (385,860,660) $ 312,562,708 $ 67,245,755 $ 19,848,539 $ 67,417,742 $ 37,500,111 -------------- -------------- ------------- ------------ ------------- ------------- -------------- -------------- ------------- ------------ ------------- ------------- Capital stock authorized (shares)........................ 100,000,000 100,000,000 100,000,000 Par Value........................ $ .01 no par no par
(1) From inception of operations on September 11, 1996.
- -------------------------------------------------------------------------------- 78 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 3. CAPITAL STOCK, CONTINUED --
COLUMBIA COLUMBIA COLUMBIA U.S. BALANCED DAILY INCOME GOVERNMENT SECURITIES FUND, INC. (CBF) COMPANY (CDIC) FUND, INC. (CUSG) ----------------------------- --------------------------------- --------------------------- 1997 1996 1997 1996 1997 1996 ------------- ------------- --------------- --------------- ------------ ------------ SHARES: Shares sold................... 11,631,390 12,203,107 1,948,660,105 1,425,767,034 1,678,641 1,751,071 Shares issued for reinvestment of dividends................. 4,143,787 3,066,051 44,892,534 40,287,100 214,917 230,872 ------------- ------------- --------------- --------------- ------------ ------------ 15,775,177 15,269,158 1,993,552,639 1,466,054,134 1,893,558 1,981,943 Less shares redeemed.......... (11,880,698) (6,405,495) (1,714,257,040) (1,376,909,687) (2,278,311) (2,051,336) ------------- ------------- --------------- --------------- ------------ ------------ Net increase (decrease) in shares....................... 3,894,479 8,863,663 279,295,599 89,144,447 (384,753) (69,393) ------------- ------------- --------------- --------------- ------------ ------------ ------------- ------------- --------------- --------------- ------------ ------------ AMOUNTS: Sales......................... $ 255,961,711 $ 251,516,248 $ 1,948,660,105 $ 1,425,767,034 $ 13,843,228 $ 14,407,264 Reinvestment of dividends..... 89,309,106 62,884,919 44,892,534 40,287,100 1,771,509 1,898,935 ------------- ------------- --------------- --------------- ------------ ------------ 345,270,817 314,401,167 1,993,552,639 1,466,054,134 15,614,737 16,306,199 Less redemptions.............. (264,954,175) (132,861,358) (1,714,257,040) (1,376,909,687) (18,765,190) (16,871,131) ------------- ------------- --------------- --------------- ------------ ------------ Net increase (decrease)....... $ 80,316,642 $ 181,539,809 $ 279,295,599 $ 89,144,447 $ (3,150,453) $ (564,932) ------------- ------------- --------------- --------------- ------------ ------------ ------------- ------------- --------------- --------------- ------------ ------------ Capital stock authorized (shares)..................... 100,000,000 2,000,000,000 100,000,000 Par Value..................... no par $.001 $.01
COLUMBIA FIXED COLUMBIA COLUMBIA INCOME SECURITIES MUNICIPAL BOND HIGH YIELD FUND, INC. (CFIS) FUND, INC. (CMBF) FUND, INC. (CHYF) ----------------------------- ----------------------------- ----------------------------- 1997 1996 1997 1996 1997 1996 ------------- ------------- ------------- ------------- ------------- ------------- SHARES: Shares sold...................... 8,909,289 9,571,457 6,372,612 4,732,337 2,127,208 1,058,203 Shares issued for reinvestment of dividends....................... 1,456,925 1,427,852 1,369,697 1,395,611 342,994 197,255 ------------- ------------- ------------- ------------- ------------- ------------- 10,366,214 10,999,309 7,742,309 6,127,948 2,470,202 1,255,458 Less shares redeemed............. (9,188,186) (7,165,704) (5,853,872) (6,210,439) (1,457,004) (730,964) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares.......................... 1,178,028 3,833,605 1,888,437 (82,491) 1,013,198 524,494 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- AMOUNTS: Sales............................ $ 117,209,758 $ 124,564,521 $ 77,959,329 $ 57,398,891 $ 21,499,878 $ 10,345,832 Reinvestment of dividends........ 19,185,059 18,580,087 16,813,005 16,930,817 3,460,890 1,925,766 ------------- ------------- ------------- ------------- ------------- ------------- 136,394,817 143,144,608 94,772,334 74,329,708 24,960,768 12,271,598 Less redemptions................. (120,988,056) (93,474,724) (71,595,439) (75,374,385) (14,792,509) (7,131,758) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease).......... $ 15,406,761 $ 49,669,884 $ 23,176,895 $ (1,044,677) $ 10,168,259 $ 5,139,840 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Capital stock authorized (shares)........................ 200,000,000 100,000,000 100,000,000 Par Value........................ $.01 $.01 no par
79 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES --
COLUMBIA COLUMBIA COLUMBIA COLUMBIA SPECIAL COMMON STOCK GROWTH INTERNATIONAL STOCK FUND, INC. FUND, INC. (CCSF) FUND, INC. (CGF) FUND, INC. (CISF) (CSF) ----------------- --------------------- ------------------- ---------- Investment management fees incurred..... $4,158,273 $7,019,161 $1,504,787 $12,373,140 Investment management fee computation basis (percentage of daily net assets per annum)............................. 0.60 of 1% 0.75 of 1% to 1% 1% to $200,000,000 daily $500,000,000 net assets; 0.625 of daily net 1% between assets; $200,000,000 and 0.75 of 1% $500,000,000; and in excess 0.50 of 1% of in excess of $500,000,000 $500,000,000 Transfer agent fee (included in shareholder servicing costs)........... $424,958 $857,591 $313,943 $979,562 Fees earned by directors not affiliated with each Fund's investment advisor, transfer agent, or Columbia Management Co..................................... $6,704 $11,980 $1,476 $14,774 Value of investments held at December 31, 1997 by: Columbia Management Co................ $457,230 $94,101 $62,437 $2,232,560 Columbia Funds Management Company..... $93,330 $44,502 $16,810 $769,764
COLUMBIA COLUMBIA COLUMBIA COLUMBIA SMALL CAP REAL ESTATE EQUITY BALANCED DAILY INCOME FUND, INC. (CSCF) FUND, INC. (CREF) FUND, INC. (CBF) COMPANY (CDIC) ----------------- ------------------ ---------------- ------------------ Investment management fees incurred..... $547,892 $864,343 $3,826,628 $4,296,685 Investment management fee computation basis (percentage of daily net assets per annum)............................. 1% 0.75 of 1% 0.50 of 1% 0.50 of 1% to $500,000,000 daily net assets; 0.45 of 1% between $500,000,000 and $1,000,000,000; and 0.40 of 1% in excess of $1,000,000,000 Transfer agent fee (included in shareholder servicing costs)........... $73,575 $131,357 $511,482 $648,992 Fees earned by directors not affiliated with each Fund's investment advisor, transfer agent, or Columbia Management Co..................................... $506 $1,110 $7,503 $8,731 Value of investments held at December 31, 1997 by: Columbia Management Co................ $139,668 $2,604,160 Columbia Funds Management Company..... $11,827 $24,472 $3,356,624
- -------------------------------------------------------------------------------- 80 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- -- 4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES, CONTINUED --
COLUMBIA U.S. COLUMBIA FIXED COLUMBIA COLUMBIA GOVERNMENT SECURITIES INCOME SECURITIES MUNICIPAL BOND HIGH YIELD FUND, INC. (CUSG) FUND, INC. (CFIS) FUND, INC. (CMBF) FUND, INC. (CHYF) --------------------- ----------------- ----------------- ----------------- Investment management fees incurred..... $194,230 $1,821,809 $1,952,213 $211,632 Investment management fee computation basis (percentage of daily net assets per annum)............................. 0.50 of 1% 0.50 of 1% 0.50 of 1% 0.60 of 1% Transfer agent fee (included in shareholder servicing costs)........... $45,009 $249,777 $112,418 $38,316 Fees earned by directors not affiliated with each Fund's investment advisor, transfer agent, or Columbia Management Co..................................... $390 $3,611 $3,867 $348 Value of investments held at December 31, 1997 by: Columbia Management Co................ $417,550 $1,015,605 $2,066,804 $367,927 Columbia Funds Management Company..... $66,328 $291,606 $293,924 $291,996
The investment advisor of the Funds is Columbia Funds Management Company (CFMC). The transfer agent for the Funds is Columbia Trust Company (CTC), a majority owned subsidiary of CFMC. The transfer agent is compensated based on a per account fee. On December 10, 1997, CFMC, CTC and Columbia Management Company (CMC), an affiliated company, became - -------------------------------------------------------------------------------- indirect subsidiaries of Fleet Financial Group, Inc. (Fleet), a publicly owned multi-bank holding company registered under the Bank Holding Company Act of 1956. Prior to that date, certain officers and directors of the Funds were also officers and directors of CFMC, CTC and CMC. Those individuals did not receive any compensation or other payment from the Funds. As a result of federal banking regulations, no officers or directors of the Funds are officers or directors of CFMC, CTC or CMC following the transaction with Fleet. J. Jerry Inskeep, Jr., an officer and director of the Funds, is affiliated with Fleet, but receives no compensation or other payment from the Funds. As a result of the transaction with Fleet, directors of the Funds were required to approve new contracts for investment advisory and transfer agent services between the Funds and CFMC and CTC, respectively. These new contracts are the same in all material respects to the corresponding previous contracts. Shareholders of the Funds were required to approve the new investment advisory contracts. The proxy voting results of the approval by shareholders of the Funds of those contracts is set forth at the end of this 1997 Annual Report. 81 REPORT OF INDEPENDENT ACCOUNTANTS ----------------------------------------------------------------- TO THE SHAREHOLDERS AND BOARD OF DIRECTORS, Columbia Common Stock Fund, Inc. (CCSF) Columbia Growth Fund, Inc. (CGF) Columbia International Stock Fund, Inc. (CISF) Columbia Small Cap Fund, Inc. (CSCF) Columbia Special Fund, Inc. (CSF) Columbia Real Estate Equity Fund, Inc. (CREF) Columbia Balanced Fund, Inc. (CBF) Columbia Daily Income Company (CDIC) Columbia U.S. Government Securities Fund, Inc. (CUSG) Columbia Fixed Income Securities Fund, Inc. (CFIS) Columbia Municipal Bond Fund, Inc. (CMBF) Columbia High Yield Fund, Inc. (CHYF) We have audited the accompanying statements of assets and liabilities, including the schedules of investments for each of the twelve funds comprising Columbia Funds (the "Funds"), as of December 31, 1997, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, except for CSCF which is for the period from inception, September 11, 1996 to December 31, 1996 and for the year ended December 31, 1997 and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodians and brokers. 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 the twelve funds comprising Columbia Funds enumerated above as of December 31, 1997, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, except for CSCF which is for the period from inception, September 11, 1996 to December 31, 1996 and for the year ended December 31, 1997 and the financial highlights for each of the periods indicated therein, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Portland, Oregon February 12, 1998 82 PROXY VOTING RESULTS ----------------------------------------------------------------- On December 4, 1997, the Funds held a Special Meeting of Shareholders to approve new investment advisory contracts with the Advisor. The need to approve a new investment advisory contract was caused by the change in control of the Advisor resulting from the acquisition of the Advisor by Fleet Financial Group, Inc. A new investment advisory contract was approved by each Fund as shown below:
TOTAL FUND OUTSTANDING FOR AGAINST ABSTENTION - ----------------------------------- ------------ --------- ---------- ----------- Columbia Common Stock Fund......... 33,424,104 23,503,684 92,486 125,914 Columbia Growth Fund............... 34,932,310 18,670,005 323,723 442,534 Columbia International Stock Fund.............................. 10,136,429 6,162,186 75,846 128,929 Columbia Special Fund.............. 66,728,987 35,764,587 603,044 1,097,275 Columbia Small Cap Fund............ 4,439,465 2,766,574 45,914 34,298 Columbia Real Estate Equity Fund... 7,395,725 4,826,934 70,141 52,743 Columbia Balanced Fund............. 36,136,805 19,709,041 97,202 240,899 Columbia Daily Income Company...... 875,748,841 464,677,559 11,346,679 10,251,952 Columbia U.S. Government Securities Fund.............................. 4,525,865 3,140,210 15,454 39,456 Columbia Fixed Income Securities Fund.............................. 27,941,833 15,526,380 226,012 255,217 Columbia Municipal Bond Fund....... 32,247,512 20,286,357 523,472 551,537 Columbia High Yield Fund........... 3,715,453 2,400,164 12,704 54,931
SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, THE ADVISOR, OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. EX-99.17 12 EXHIBIT 99.17 Exhibit 17 POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George L. Hanseth as the undersigned's true and lawful attorney and agent, with full power of substitution and resubstitution for and in the name, place and stead of the undersigned, in any and all capacities, to sign the Registration Statement on Form N-1A for the registration of shares of each of Columbia Common Stock Fund, Inc., Columbia Growth Fund, Inc., Columbia International Stock Fund, Inc., Columbia Special Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia U.S. Government Securities Fund, Inc., Columbia Fixed Income Securities Fund, Inc., Columbia Municipal Bond Fund, Inc., and Columbia High Yield Fund, Inc., and any and all amendments (including post-effective amendments) thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each attorney and agent full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that the attorney and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: January 27, 1995 JAMES C. GEORGE ------------------------------------------ James C. George POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints each of J. Jerry Inskeep, Jr., John A. Kemp, George L. Hanseth and James F. Rippey, as the undersigned's true and lawful attorney and agent, with full power of substitution and resubstitution for and in the name, place and stead of the undersigned, in any and all capacities, to sign the Registration Statement on Form N-1A for the registration of shares of Columbia Common Stock Fund, Inc., Columbia Growth Fund, Inc., Columbia Special Fund, Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia U.S. Government Securities Fund, Inc., Columbia Fixed Income Securities Fund, Inc., or Columbia Municipal Bond Fund, Inc., and any and all amendments (including post-effective amendments) thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each attorney and agent full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that the attorney and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: February 17, 1992 RICHARD L. WOOLWORTH ----------------------------------------- Richard L. Woolworth POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints each of J. Jerry Inskeep, Jr., John A. Kemp, George L. Hanseth, and James F. Rippey, the undersigned's true and lawful attorney and agent, with full power of substitution and resubstitution for and in the name, place and stead of the undersigned, in any and all capacities, to sign each Registration Statement on Form N-1A for the registration of shares of each of Columbia Common Stock Fund, Inc., Columbia Growth Fund, Inc., Columbia Special Fund, Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia U.S. Government Securities Fund, Inc., Columbia Fixed Income Securities Fund, Inc., or Columbia Municipal Bond Fund, Inc., and any and all amendments (including post-effective amendments) thereto, to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each attorney and agent full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that the attorney and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: April 21, 1992 J. JERRY INSKEEP ----------------------------------------- J. Jerry Inskeep POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints each of J. Jerry Inskeep, Jr., John A. Kemp, George L. Hanseth, and James F. Rippey, the undersigned's true and lawful attorney and agent, with full power of substitution and resubstitution for and in the name, place and stead of the undersigned, in any and all capacities, to sign each Registration Statement on Form N-1A for the registration of shares of each of Columbia Common Stock Fund, Inc., Columbia Growth Fund, Inc., Columbia Special Fund, Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia U.S. Government Securities Fund, Inc., Columbia Fixed Income Securities Fund, Inc., or Columbia Municipal Bond Fund, Inc., and any and all amendments (including post-effective amendments) thereto, to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each attorney and agent full power and authority to do any and all acts and things necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that the attorney and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: April 21, 1992 THOMAS R. MACKENZIE ----------------------------------------- Thomas R. Mackenzie EX-27 13 EXHIBIT 27 (FDS)
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1997, AND THE AUDITED ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000773599 COLUMBIA SPECIAL FUND, INC. YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1,080,385,133 1,218,584,838 3,093,231 0 92,623,788 1,314,301,857 2,906,000 0 61,678,060 64,584,060 0 1,111,970,053 61,671,760 79,861,296 360,073 0 (812,034) 0 138,199,705 1,249,717,797 9,434,285 5,470,977 0 14,373,489 531,773 122,678,842 49,916,627 173,127,242 0 0 122,832,999 0 17,301,738 41,278,382 5,787,116 (335,566,417) 0 (829,577) 0 0 12,373,140 0 14,373,489 1,469,487,969 19.85 .01 2.50 0 2.10 0 20.26 .98 0 0
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