N-CSR 1 file001.txt COLUMBIA FUNDS TRUST IX UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4367 --------------------- Columbia Funds Trust IX ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Vincent Pietropaolo, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-772-3698 ------------------- Date of fiscal year end: 06/30/2004 ------------------ Date of reporting period: 06/30/2004 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. COLUMBIA HIGH YIELD MUNICIPAL FUND ANNUAL REPORT June 30, 2004 [photo of woman smiling] [EAGLE HEAD LOGO]: COLUMBIA FUNDS A MEMBER OF COLUMBIA MANGEMENT GROUP Table of Contents Fund Profile 1 Performance Information 2 Economic Update 3 Portfolio Manager's Report 4 Financial Statements 6 Investment Portfolio 7 Statement of Assets and Liabilities 31 Statement of Operations 32 Statement of Changes in Net Assets 33 Notes to Financial Statements 35 Financial Highlights 42 Report of Independent Registered Public Accounting Firm 46 Unaudited Information 47 Trustees 48 Officers 50 Columbia Funds 51 Important Information About This Report 53 Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE TO OUR FELLOW SHAREHOLDERS -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Dear Shareholder: We are pleased to let you know that FleetBoston Financial Corporation and Bank of America Corporation have merged, effective April 1, 2004. As a result of the merger, Columbia Management Group became part of the Bank of America family of companies. Looking ahead, we believe this merger will be a real benefit to our shareholders. Preserving and leveraging our strengths, the combined organization intends to deliver additional research and management capabilities, as well as new products to you. There are no immediate changes planned for fund names or customer service contacts. As you might know, on March 15, 2004, FleetBoston Financial announced an agreement in principle between Columbia Management Advisors, Inc. and Columbia Funds Distributor, Inc. (collectively "Columbia Management") with the staff of the Securities and Exchange Commission ("SEC") and the New York Attorney General ("NYAG") to settle charges involving market timing in Columbia Management mutual funds. (Bank of America came to a similar settlement in principle at the same time.) Under the agreements Columbia Management agreed, among other things, to pay $70 million in disgorgement; $70 million in civil penalties and to reduce mutual fund fees by $80 million over a five-year period. Please rest assured that the settlement and all associated legal fees will be paid by Columbia Management; not by the affected funds or their shareholders. The agreement requires the final approval of the SEC and the NYAG. We want you to know that all of the members of your fund's Board of Trustees are independent of the fund's advisor and its affiliates. In addition, the board has been energetic over the past year in strengthening its capacity to oversee the Columbia funds. Recently, the Board of Trustees: o APPOINTED AN INTERIM CHIEF COMPLIANCE OFFICER OF THE COLUMBIA FUNDS, WHO REPORTS DIRECTLY TO EACH FUND'S AUDIT COMMITTEE. TRUSTEES WERE ALSO ASSIGNED TO FOUR SEPARATE INVESTMENT OVERSIGHT COMMITTEES, EACH DEDICATED TO MONITORING PERFORMANCE OF INDIVIDUAL FUNDS. o VOTED TO DOUBLE THE REQUIRED INVESTMENT BY EACH TRUSTEE IN THE COLUMBIA FUNDS -- TO FURTHER ALIGN THE INTERESTS OF THE TRUSTEES WITH THOSE OF OUR FUND SHAREHOLDERS. AT THE SAME TIME, NEW POLICIES WERE INSTITUTED REQUIRING ALL INVESTMENT PERSONNEL AND TRUSTEES TO HOLD THEIR COLUMBIA FUND SHARES FOR A MINIMUM OF ONE YEAR (UNLESS EXTRAORDINARY CIRCUMSTANCES WARRANT AN EXCEPTION TO BE GRANTED BY SENIOR EXECUTIVES OF THE ADVISOR FOR INVESTMENT PERSONNEL AND BY A DESIGNATED COMMITTEE FOR THE BOARD). Both your fund's trustees and Columbia Management are committed to serving the interests of our shareholders, and we will continue to work hard to help you achieve your financial goals. In the pages that follow, you'll find valuable information about the economic environment during the period and the performance of your Columbia fund. These discussions are followed by financial statements for your fund. We hope that you will take time to read this report and discuss it with your financial advisor if you have any questions. As always, thank you for choosing Columbia funds. It is a privilege to play a role in your financial future. Sincerely, /s/ Thomas C. Theobald /s/ J. Kevin Connaughton Thomas C. Theobald J. Kevin Connaughton Chairman, Board of Trustees President, Columbia Funds J. Kevin Connaughton was named president of Columbia Funds on February 27, 2004. FUND PROFILE -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund The information below gives you a snapshot of your fund at the end of the reporting period. Your fund is actively managed and the composition of its portfolio will change over time. Quality breakdown as of 06/30/04 (%) AAA 22.5 ----------------------------------- AA 1.5 ----------------------------------- A 14.6 ----------------------------------- BBB 22.0 ----------------------------------- BB 4.8 ----------------------------------- B 0.4 ----------------------------------- CCC 0.2 ----------------------------------- C 0.1 ----------------------------------- Non-rated 31.4 ----------------------------------- Cash equivalent 2.5 ----------------------------------- Maturity breakdown as of 06/30/04 (%) [BAR CHART DATA]: 0-1 years 0.6 1-3 years 1.8 3-5 years 5.6 5-7 years 3.7 7-10 years 7.5 10-15 years 19.2 15-20 years 21.6 20-25 years 15.1 25 years and over 22.4 Cash equivalent 2.5 Quality and maturity breakdowns are calculated as a percentage of total investments. Ratings shown in the quality breakdown represent the highest rating assigned to a particular bond by one of the following nationally-recognized rating agencies: Standard & Poor's Corporation, Moody's Investors Service, Inc. or Fitch Ratings Ltd. (C)2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Style BoxTM reveals a fund's investment strategy. For equity funds the vertical axis shows the market capitalization of the stocks owned and the horizontal axis shows investment style (value, blend or growth). For fixed-income funds the vertical axis shows the average credit quality of the bonds owned, and the horizontal axis shows interest rate sensitivity as measured by a bond's duration (short, intermediate or long). All of these numbers are drawn from the data most recently provided by the fund and entered into Morningstar's database as of month-end. Although the data is gathered from reliable sources, Morningstar cannot guarantee completeness and accuracy. As of 06/30/2004. 1 Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. [SIDE BAR DATA]: Summary o For the 12-month period ended June 30, 2004, the fund's class A shares returned 2.10% without sales charge. o In an environment that was more favorable to high yield bonds than any other segment of the fixed-income market, the fund's return was higher than the return of its benchmark, the Lehman Brothers Municipal Bond Index. However, it fell short of the average return for its peer group, the Lipper Current High Yield Municipal Debt Fund Category.1 o The fund benefited from its high-yield focus but was hampered by a below-average stake in charter schools and airline bonds, as well as disappointing returns from multi-family housing bonds. [2 ARROWS POINTING UP]: Class A shares Lehman Brothers Municipal Bond Index 2.10% 0.76% Objective Seeks a high level of total return consisting of current income exempt from federal income tax and opportunities for capital appreciation Total Net Assets $468.7 million Morningstar style box Maturity/Interm. // Quality/Med. 1 PERFORMANCE INFORMATION -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Performance of a $10,000 investment 07/01/94 - 06/30/04 ($) sales charge without with ------------------------------------ Class A 17,471 16,643 ------------------------------------ Class B 17,212 17,212 ------------------------------------ Class C 17,262 17,262 ------------------------------------ Class Z 17,651 n/a ------------------------------------ Performance data quoted represents past performance and current performance may be lower or higher. Past performance is no guarantee of future results. The investment return and principal value will fluctuate so that shares may be worth more or less than the original cost. Please visit www.columbiafunds.com for daily and most recent month-end performance updates. Value of a $10,000 investment 07/01/94 - 06/30/04 [MOUNTAIN CHART DATA]: Class A shares Class A shares Lehman Brothers without sales charge with sales charge Municipal Bond Index 07/1994 $10,000 $ 9,525 $10,000 10,121 9,640 10,183 10,161 9,679 10,219 10,047 9,569 10,068 9,903 9,433 9,889 9,723 9,261 9,710 9,914 9,443 9,924 10,273 9,785 10,208 10,518 10,018 10,505 10,608 10,104 10,626 10,623 10,118 10,638 10,946 10,426 10,978 10,856 10,341 10,882 10,959 10,439 10,985 11,072 10,546 11,125 11,134 10,605 11,195 11,316 10,778 11,357 11,526 10,979 11,546 11,670 11,116 11,657 11,750 11,191 11,745 11,653 11,100 11,666 11,522 10,974 11,516 11,487 10,941 11,484 11,504 10,958 11,479 11,601 11,050 11,604 11,659 11,105 11,709 11,687 11,132 11,707 11,847 11,284 11,870 11,978 11,409 12,005 12,170 11,592 12,224 12,193 11,614 12,173 12,224 11,643 12,196 12,322 11,736 12,308 12,213 11,633 12,145 12,305 11,720 12,247 12,495 11,902 12,432 12,632 12,032 12,565 12,931 12,317 12,913 12,873 12,261 12,791 13,000 12,383 12,943 13,083 12,462 13,026 13,175 12,549 13,103 13,358 12,724 13,294 13,486 12,846 13,431 13,508 12,866 13,435 13,513 12,871 13,447 13,484 12,843 13,387 13,659 13,010 13,598 13,685 13,035 13,652 13,723 13,071 13,686 13,889 13,230 13,898 13,995 13,330 14,071 13,975 13,311 14,071 14,024 13,358 14,121 14,063 13,395 14,156 14,184 13,511 14,324 14,147 13,475 14,261 14,188 13,515 14,281 14,240 13,563 14,317 14,268 13,590 14,234 14,121 13,450 14,029 14,162 13,489 14,080 14,022 13,356 13,967 14,001 13,336 13,973 13,810 13,154 13,822 13,900 13,240 13,968 13,761 13,107 13,863 13,651 13,003 13,802 13,762 13,108 13,963 13,947 13,285 14,267 13,922 13,261 14,183 13,849 13,191 14,109 14,094 13,424 14,483 14,257 13,580 14,684 14,447 13,761 14,910 14,396 13,712 14,833 14,478 13,791 14,994 14,514 13,825 15,108 14,716 14,017 15,482 14,797 14,094 15,635 14,807 14,104 15,685 14,905 14,197 15,826 14,752 14,051 15,655 14,890 14,183 15,824 15,017 14,304 15,930 15,278 14,553 16,166 15,677 14,932 16,433 15,505 14,768 16,377 15,660 14,916 16,572 15,569 14,829 16,433 15,463 14,728 16,276 15,633 14,890 16,558 15,791 15,041 16,757 15,552 14,814 16,428 15,848 15,095 16,749 15,903 15,148 16,851 16,058 15,295 17,029 16,185 15,416 17,249 16,312 15,538 17,456 16,498 15,715 17,838 16,178 15,410 17,542 16,251 15,479 17,469 16,440 15,659 17,837 16,400 15,621 17,793 16,628 15,838 18,042 16,633 15,843 18,053 16,803 16,005 18,172 17,120 16,307 18,597 17,117 16,304 18,519 16,699 15,906 17,871 16,814 16,016 18,005 17,156 16,341 18,534 17,176 16,360 18,441 17,413 16,586 18,633 17,542 16,709 18,788 17,609 16,772 18,895 17,864 17,016 19,178 17,775 16,931 19,111 17,498 16,667 18,658 17,424 16,597 18,591 06/2004 17,471 16,643 18,660 The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. The Lehman Brothers Municipal Bond Index is an unmanaged index considered representative of the broad market for investment grade, tax exempt bonds with a maturity of at least one year. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Average annual total return as of 06/30/04 (%)
Share class A B C Z ------------------------------------------------------------------------------------------------------------------- Inception 07/31/00 07/15/02 07/15/02 03/05/84 ------------------------------------------------------------------------------------------------------------------- Sales charge without with without with without with without ------------------------------------------------------------------------------------------------------------------- 1- year 2.10 -2.74 1.33 -3.54 1.48 0.51 2.33 ------------------------------------------------------------------------------------------------------------------- 5- year 4.36 3.35 4.04 3.72 4.10 4.10 4.57 ------------------------------------------------------------------------------------------------------------------- 10- year 5.74 5.23 5.58 5.58 5.61 5.61 5.85 -------------------------------------------------------------------------------------------------------------------
The "with sales charge" returns include the maximum initial sales charge of 4.75% for class A shares, maximum CDSC of 5.00% for class B shares and 1.00% for class C shares for the first year only. All results shown assume reinvestment of distributions. Class Z shares are sold at net asset value with no Rule 12b-1 fees. Performance for different share classes will vary based on differences in sales charges and fees associated with each class. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Class A is a newer class of shares. Its performance information includes returns of the fund's class Z shares (the oldest existing fund class) for periods prior to its inception. These returns have not been restated to reflect any differences in expenses (such as Rule 12b-1 fees) between class Z shares and the newer class of shares. If differences in expenses had been reflected, the returns shown for periods prior to the inception of the newer class of shares would have been lower. Class Z shares were initially offered on March 5, 1984, and class A shares were initially offered on July 31, 2000. Class B and class C are newer classes of shares. Their performance information includes returns of the fund's class A shares from July 31, 2000 (class A's inception) to July 15, 2002 (inception of newer classes of shares). Their performance information prior to July 31, 2000 includes returns of the fund's class Z shares (the oldest existing fund class). These returns have not been restated to reflect any differences in expenses (such as Rule 12b-1 fees) between class A or class Z shares and the newer classes of shares. If differences in expenses had been reflected, the returns shown for periods prior to the inception of the newer classes of shares would have been lower. Class Z shares were initially offered on March 5, 1984, class A shares were initially offered on July 31, 2000, and class B and class C shares were initially offered on July 15, 2002. 2 ECONOMIC UPDATE -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund The US economy staged a solid recovery during the 12-month period that began July 1, 2003 and ended June 30, 2004. The growth rate for the US gross domestic product (GDP) averaged more than 4.5% during the period--on par with the highest annualized pace it has experienced in two decades. Although consumer confidence wavered when the number of new jobs was well below expectations in January and February 2004, it moved generally higher throughout the period. Consumers continued to account for most of the economy's gains. Consumer spending rose as a sizeable package of tax cuts (implemented in 2003) gave disposable income a boost. As a result, retail sales and the housing market showed steady gains. Low interest rates fueled mortgage refinancing activity, which tapered off in the final quarter of the 12-month period. Relatively low mortgage rates provided an additional boost to the housing market. After months of disappointing reports on the number and quality of new jobs added to the labor market, doubts surfaced early in 2004 about the economy's ability to sustain its forward momentum. However, these concerns dissipated when more than a million new jobs were added between March and June. With the last remaining weak spot in the recovery--the employment picture--on the mend, the economy appeared to be on solid ground. The business sector also bounced back during the period. Industrial production turned higher in September 2003, and factories utilized more of their capacity as the period wore on. Business spending on technology rose. In 2004, spending on capital equipment also picked up. BONDS REFLECTED THE ECONOMIC NEWS After a rough July, the US bond market turned in respectable gains from August 2003 through the middle of March 2004, as yields drifted generally lower. However, yields then rose sharply and bonds gave back all of their early gains as the economy strengthened and the employment picture brightened. Investors began to anticipate a shift in the Federal Reserve Board's policy on the key short-term interest rates it controls. On the last day of the period, the Fed raised the federal funds rate from 1.00% to 1.25%. In this environment, the Lehman Brothers Aggregate Bond Index, a broad measure of investment grade bond market performance, returned 0.32%. Despite rising interest rates, the strong economy was more good news than bad for the high yield bond sector, which historically has been more responsive to improving economic conditions. High yield bonds led the fixed-income markets. US STOCKS OUTPERFORMED BONDS The US stock market snapped a three-year losing streak in 2003. However, stocks gave back some of their gains in 2004. Concerns about geopolitical factors, higher interest rates and the impact of the forthcoming presidential election sidelined investors as the period wore on. The S&P 500 Index returned 19.11% during this reporting period. Late in the period, the market's leadership passed from small cap stocks, which were strong performers early in the period, to large cap stocks. Value stocks edged out growth stocks. But as the stock market lost ground near the end of the period, growth stocks generally held up better than value stocks. [SIDE BAR DATA]: Summary For the 12-month period ended June 30, 2004 o The investment grade bond market eked out a positive return as interest rates soared in April and May before settling back somewhat in June. The Lehman Brothers Aggregate Bond Index returned 0.32%. High yield bonds, which can be less sensitive to changing interest rates, fared better. These bonds were market leaders for the period. The Merrill Lynch US High Yield, Cash Pay Index returned 9.97%. [2 arrows pointing up]: Lehman Index Merrill Lynch Index 0.32% 9.97% o As the economy strengthened and corporations reported higher profits, stock prices rose for all segments of the stock market, as measured by the S&P 500 Index and the broader Russell 3000 Index. But many sectors retreated in the final months of the period as interest rates moved higher. [2 arrows pointing up]: S&P 500 Index Russell 3000 Index 19.11% 20.46% The Lehman Brothers Aggregate Bond Index is a market value-weighted index that tracks fixed-rate, publicly placed, dollar-denominated, and non-convertible investment grade debt issues. The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that tracks the performance of non-investment grade corporate bonds. The S&P 500 Index is an unmanaged index that tracks the performance of 500 widely held, large capitalization US stocks. The Russell 3000 Index is an unmanaged index that tracks the performance of the 3,000 largest US companies based on total market capitalization. 3 PORTFOLIO MANAGER'S REPORT -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund For the 12-month period ended June 30, 2004, class A shares of Columbia High Yield Municipal Fund returned 2.10% without sales charge. The fund's emphasis on lower-quality issues helped it outdistance the 0.76% return for its benchmark, the Lehman Brothers Municipal Bond Index, which is restricted to investment grade securities. The fund's return fell short of the Lipper Current High Yield Municipal Debt Fund Category1 average, which was 3.35% for the period. A below-average stake in certain higher-yielding sectors, such as charter schools and airline bonds, hampered returns relative to the Lipper peer group. Several multi-family housing bonds that we owned were also weak performers. HIGH YIELD MUNICIPAL BONDS BEAT HIGHER-QUALITY ISSUES As the economy picked up, credit quality improved and the demand for lower-quality issues increased. High yield municipal bonds outperformed both Treasuries and high-grade counterparts. In this environment, the fund benefited from selling higher-quality bonds and replacing them with higher-yielding municipal issues. Among the better performing, higher-coupon bonds we owned were those issued by Seminole Tribe Convention Center, a hotel and newly renovated casino in Florida; HealthEast, a hospital in Minnesota; and CharterMac, a pooled loan program for multi-family housing projects. SECTOR DIVERSIFICATION HELPED REDUCE VOLATILITY The fund remained diversified across many sectors, which helped cushion it against volatility during a year in which sector returns varied widely. Bonds issued by electric utilities, paper and forest products companies and retirement housing projects posted solid gains. Utilities had suffered in the wake of the California energy crisis and Enron scandal. But as investor concerns eased and energy companies refocused on their core operations, demand picked up and utility bonds rallied. Industrial development bonds issued by paper and forest products companies did well as the economy recovered. Within the retirement housing sector, we focused on bonds with attractive yields issued by well-run organizations, such as Eskaton Gold River Lodge in Northern California. MULTI-FAMILY HOUSING, CHARTER SCHOOL AND AIRLINE SECTORS AFFECTED PERFORMANCE The fund's investment in multi-family housing bonds, such as TX State Affordable Housing's NHT/GTEX LLC Project, hampered returns. The sector performed poorly because low interest rates, which allowed more renters to become homeowners, kept apartment vacancy rates high. In addition, the fund's lack of exposure to bonds issued for charter schools, 1 Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. [SIDE BAR DATA]: Net asset value per share as of 06/30/04 ($) ------------------------------------ Class A 10.96 ------------------------------------ Class B 10.96 ------------------------------------ Class C 10.96 ------------------------------------ Class Z 10.96 ------------------------------------ Distributions declared per share as of 07/01/03 - 06/30/04 ($) ------------------------------------ Class A 0.52 ------------------------------------ Class B 0.44 ------------------------------------ Class C 0.46 ------------------------------------ Class Z 0.55 ------------------------------------ A portion of the fund's income may be subject to the alternative minimum tax. The fund may at times purchase tax-exempt securities at a discount. Some or all of this discount may be included in the fund's ordinary income, and is taxable when distributed. SEC yields as of 06/30/04 (%) ------------------------------------ Class A 5.13 ------------------------------------ Class B 4.64 ------------------------------------ Class C 4.79 ------------------------------------ Class Z 5.59 ------------------------------------ The 30-day SEC yields reflect the portfolio earning power net of expenses, expressed as an annualized percentage of public offering price per share at the end of the period. Taxable-equivalent SEC yields as of 06/30/04 (%) ------------------------------------ Class A 7.89 ------------------------------------ Class B 7.14 ------------------------------------ Class C 7.37 ------------------------------------ Class Z 8.60 ------------------------------------ Taxable-equivalent SEC yields are based on the combined maximum effective 35% federal income tax rate. This tax rate does not reflect the phase out of exemptions or the reduction of otherwise allowable deductions that occur when adjusted gross income exceeds certain levels. 4 -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund which performed well as many schools completed construction, cost the fund. The fund's below-average stake in passenger airline bonds also hurt returns. The sector's gains from the improving economy in the second half of 2003 outweighed subsequent news regarding possible bankruptcy filings by Delta Airlines and US Airways. Other disappointments included bonds issued by Multitrade, which suffered from credit problems but rebounded shortly after the reporting period ended when a large utility agreed to buy them out. Multitrade is an independent power producer in Pittsylvania, Virginia that burns waste wood to generate power for sale to electric utilities. The utility experienced some operating difficulties in late 2003. INTEREST RATES MAY CONTINUE TO RISE GRADUALLY During the second half of 2004, we expect interest rates to climb gradually as job gains fuel spending, sustaining the economy's growth, while some economic weakness overseas keeps domestic economic growth in check. In this environment, we believe that high yield bonds have the potential to continue to outpace higher-quality issues. We expect to limit new purchases in the health care sector, where many issues have already posted strong gains. We also plan to remain well diversified across sectors. [PHOTO OF Maureen G. Newman] Maureen G. Newman has managed Columbia High Yield Municipal Fund since November 1998 and has been with the advisor and its predecessors since 1996. /s/ Maureen G. Newman Tax-exempt investing offers current tax-free income, but it also involves certain risks. Investing in high yield bonds involves greater risk of loss due to credit deterioration than higher-quality bonds. The value of the fund will be affected by interest rate changes and the creditworthiness of issues held in the fund. The manager seeks to identify opportunities and attempts to react quickly to market changes. [SIDE BAR DATA]: Holdings discussed in this report as of 06/30/04(%) Seminole Tribe Convention Center 0.5 -------------------------------------------- HealthEast 0.3 -------------------------------------------- CharterMac 1.0 -------------------------------------------- Eskaton Gold River Lodge 0.3 -------------------------------------------- TX State Affordable Housing's -------------------------------------------- NHT/GTEX LLC Project 0.1 -------------------------------------------- Delta Airlines 0.6 -------------------------------------------- US Airways 0.2 -------------------------------------------- Multitrade 0.7 Your fund is actively managed and the composition of its portfolio will change over time. Information provided is calculated as a percentage of net assets. [CALL OUT]: We believe that high yield bonds have the potential to continue to outspace higher-quality issues. 5 FINANCIAL STATEMENTS -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund
A guide to understanding your fund's financial statements ---------------------------------------------------------------------------------------- Investment Portfolio The investment portfolio details all of the fund's holdings and their market value as of the last day of the reporting period. Portfolio holdings are organized by type of asset, industry, country or geographic region (if applicable) to demonstrate areas of concentration and diversification. ---------------------------------------------------------------------------------------- Statement of Assets and Liabilities This statement details the fund's assets, liabilities, net assets and share price for each share class as of the last day of the reporting period. Net assets are calculated by subtracting all the fund's liabilities (including any unpaid expenses) from the total of the fund's investment and non-investment assets. The share price for each class is calculated by dividing net assets for that class by the number of shares outstanding in that class as of the last day of the reporting period. ---------------------------------------------------------------------------------------- Statement of Operations This statement details income earned by the fund and the expenses accrued by the fund during the reporting period. The Statement of Operations also shows any net gain or loss the fund realized on the sales of its holdings during the period, as well as any unrealized gains or losses recognized over the period. The total of these results represents the fund's net increase or decrease in net assets from operations. ---------------------------------------------------------------------------------------- Statement of Changes in Net Assets This statement demonstrates how the fund's net assets were affected by its operating results, distributions to shareholders and shareholder transactions (e.g., subscriptions, redemptions and dividend reinvestments) during the reporting period. The Statement of Changes in Net Assets also details changes in the number of shares outstanding. ---------------------------------------------------------------------------------------- Notes to Financial Statements These notes disclose the organizational background of the fund, its significant accounting policies (including those surrounding security valuation, income recognition and distributions to shareholders), federal tax information, fees and compensation paid to affiliates and significant risks and contingencies. ---------------------------------------------------------------------------------------- Financial Highlights The financial highlights demonstrate how the fund's net asset value per share was affected by the fund's operating results. The financial highlights table also discloses the classes' performance and certain key ratios (e.g., class expenses and net investment income as a percentage of average net assets).
6 INVESTMENT PORTFOLIO -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund
Municipal Bonds - 95.2% EDUCATION - 3.9% Education - 1.3% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- CA California Statewide Communities San Francisco Art Institute, Series 2002, Development Authority 7.375% 04/01/32 750,000 755,513 ----------------------------------------------------------------------------- CA Pasadena Community College District Election of 2002, Series 2003 A, 5.000% 06/01/19 1,290,000 1,331,164 ----------------------------------------------------------------------------- FL Broward County Educational Facility Nova Southeastern University, Authority 5.625% 04/01/34 925,000 923,982 ----------------------------------------------------------------------------- MA State Development Finance Agency Western New England College, Series 2002, 6.125% 12/01/32 300,000 306,546 ----------------------------------------------------------------------------- OH University of Cincinnati Series 2003 C, 5.000% 06/01/21 1,000,000 1,021,610 ----------------------------------------------------------------------------- VT State Education & Health Buildings Vermont Law School Project, Series 2003 A, Agency 5.500% 01/01/33 500,000 468,645 ----------------------------------------------------------------------------- WV State University Series 2000 A: (a) 04/01/19 1,250,000 589,525 (a) 04/01/25 2,750,000 873,730 ----------------------------------------------------------------------------- Education Total 6,270,715 Prep School - 1.0% ------------------------------------------ ----------------------------------------------------------------------------- CA California Statewide Communities Crossroads School for Arts & Sciences, Series 1998, Development Authority 6.000% 08/01/28 (b) 1,005,000 1,025,432 ----------------------------------------------------------------------------- IL State Development Finance Authority Latin School of Chicago Project, Series 1998, 5.650% 08/01/28 1,725,000 1,733,263 ----------------------------------------------------------------------------- MA State Health & Educational Facilities Learning Center for Deaf Children, Series 1999 C, Authority 6.100% 07/01/19 1,000,000 983,990 ----------------------------------------------------------------------------- NH Business Finance Authority Proctor Academy Project, Series 1998 A, 5.400% 06/01/17 950,000 969,218 ----------------------------------------------------------------------------- Prep School Total 4,711,903 Student Loan - 1.6% ------------------------------------------ ----------------------------------------------------------------------------- NE Nebhelp, Inc. Series 1993 A-6, AMT, 6.450% 06/01/18 4,000,000 4,274,760 ----------------------------------------------------------------------------- NM State Educational Assistance Foundation Series 1996 A-2, AMT, 6.650% 11/01/25 1,955,000 1,972,517 ----------------------------------------------------------------------------- OH Student Loan Funding Corp. Series 1992 B, AMT, 6.750% 01/01/07 1,075,000 1,077,215 ----------------------------------------------------------------------------- Student Loan Total 7,324,492 ---------- EDUCATION TOTAL 18,307,110 See notes to investment portfolio. 7 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HEALTH CARE - 25.7% Congregate Care Retirement - 8.1% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- CA ABAG Finance Authority for Nonprofit Eskaton Gold River Lodge, Series 1998: Corps. 6.375% 11/15/15 (b) 690,000 712,763 6.375% 11/15/28 (b) 550,000 552,706 ----------------------------------------------------------------------------- CA La Verne Brethren Hillcrest Homes, Series 2003 B, 6.625% 02/15/25 685,000 687,000 ----------------------------------------------------------------------------- CA Statewide Community Development Eskaton Village - Grass Valley, Series 2000, Authority 8.250% 11/15/31 (b) 1,750,000 1,907,938 ----------------------------------------------------------------------------- CT State Development Authority The Elim Park Baptist, Inc. Project, Series 2003, 5.850% 12/01/33 660,000 657,023 ----------------------------------------------------------------------------- FL Capital Project Finance Authority Glenridge on Palmer Ranch, Series 2002 A, 8.000% 06/01/32 1,250,000 1,232,975 ----------------------------------------------------------------------------- FL Lee County Industrial Development Shell Point Village Project, Series 1999 A, Authority 5.500% 11/15/29 1,200,000 1,109,016 ----------------------------------------------------------------------------- FL Orange County Health Facilities Orlando Lutheran Towers, Inc., Series 1996, Authority 8.625% 07/01/20 1,500,000 1,549,650 ----------------------------------------------------------------------------- FL Palm Beach County Health Facilities Abbey Delray South, Series 2003, Authority 5.350% 10/01/14 1,250,000 1,244,050 ----------------------------------------------------------------------------- GA Fulton County All Saints - St. Luke's Episcopal Home for the Retired, Series 2004 PJ-A, 6.125% 02/15/34 1,000,000 974,070 ----------------------------------------------------------------------------- GA Savannah Economic Development Authority Marshes of Skidaway, Series 2003 A, 7.400% 01/01/34 1,000,000 971,790 ----------------------------------------------------------------------------- HI State Department of Budget & Finance Kahala Nui Project, Series 2003 A: 7.875% 11/15/23 250,000 248,233 8.000% 11/15/33 1,000,000 996,780 ----------------------------------------------------------------------------- IL State Health Facilities Authority Lutheran Senior Ministries, Series 2001, 7.375% 08/15/31 550,000 535,667 Washington and Jane Smith Community, Series 2003 A, 7.000% 11/15/32 1,000,000 980,450 ----------------------------------------------------------------------------- MA Boston Industrial Development Springhouse, Inc., Series 1998, Financing Authority 5.875% 07/01/20 385,000 372,591 ----------------------------------------------------------------------------- MA State Development Finance Agency Loomis Community Project: Series 1999 A, 5.625% 07/01/15 650,000 622,401 Series 2002 A, 6.900% 03/01/32 220,000 224,081 ----------------------------------------------------------------------------- MD Westminster Economic Development Carroll Lutheran Village, Series 2004 A, Authority 6.250% 05/01/34 1,750,000 1,738,398 See notes to investment portfolio. 8 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Congregate Care Retirement - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- MO State Health & Educational Facilities Lutheran Senior Services, Series 1997, Authority 5.750% 02/01/17 2,000,000 2,047,540 ----------------------------------------------------------------------------- NH State Higher Educational & Health Rivermead at Peterborough, Series 1998: Facilities Authority 5.625% 07/01/18 500,000 466,350 5.750% 07/01/28 1,665,000 1,495,237 ----------------------------------------------------------------------------- NJ State Economic Development Authority Seabrook Village, Inc., Series 2000 A, 8.250% 11/15/30 1,125,000 1,193,940 Winchester Gardens, Series 1996 A, 5.800% 11/01/31 750,000 719,602 ----------------------------------------------------------------------------- PA Chartiers Valley Industrial & Asbury Health Center, Series 1999, Commercial Development Authority 6.375% 12/01/24 750,000 722,783 Friendship Village of South Hills, Series 2003 A, 5.750% 08/15/20 1,000,000 965,710 ----------------------------------------------------------------------------- PA Delaware County Authority Dunwoody Village, Series 2003 A, 5.375% 04/01/17 750,000 770,213 ----------------------------------------------------------------------------- PA Lancaster Industrial Development Garden Spot Village Project, Series 2000 A, Authority 7.625% 05/01/31 825,000 860,838 ----------------------------------------------------------------------------- PA State Authority for Industrial Baptist Home of Philadelphia, Series 1998, Development 5.500% 11/15/18 530,000 474,159 ----------------------------------------------------------------------------- TN Metropolitan Government of Blakeford at Green Hills, Series 1998, Nashville and Davidson County 5.650% 07/01/24 1,825,000 1,633,193 ----------------------------------------------------------------------------- TN Shelby County Health, Educational & Germantown Village, Series 2003 A, Housing Facilities Board 7.250% 12/01/34 1,350,000 1,312,578 ----------------------------------------------------------------------------- TX Abilene Health Facilities Development Sears Methodist Retirement Obligated Group: Corp. Series 1998 A, 5.900% 11/15/25 1,350,000 1,221,912 Series 2003 A, 7.000% 11/15/33 300,000 303,180 ----------------------------------------------------------------------------- TX Houston Health Facilities Development Buckingham Senior Living Community, Series 2004 A, Corp. 7.125% 02/15/34 1,000,000 997,780 ----------------------------------------------------------------------------- WI State Health & Educational Facilities Attic Angel Obligated Group, Series 1998, Authority 5.750% 11/15/27 2,125,000 1,866,919 Clement Manor, Series 1998, 5.750% 08/15/24 2,200,000 1,947,550 Lutheran Program for the Aging, Series 1998, 5.700% 03/01/28 750,000 660,465 Three Pillars Senior Living Communities, Series 2003, 5.600% 08/15/23 790,000 769,160 ----------------------------------------------------------------------------- Congregate Care Retirement Total 37,746,691 See notes to investment portfolio. 9 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Health Services - 0.6% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- MA State Development Finance Agency Boston Biomedical Research Institute, Series 1999: 5.650% 02/01/19 370,000 349,439 5.750% 02/01/29 550,000 525,948 ----------------------------------------------------------------------------- MA State Health & Educational Facilities Civic Investments, Inc., Series 2002 A, Authority 9.000% 12/15/15 1,500,000 1,688,370 ----------------------------------------------------------------------------- MN Minneapolis & St. Paul Housing Healthpartners Project, Series 2003, Redevelopment Authority 5.875% 12/01/29 400,000 400,692 ----------------------------------------------------------------------------- Health Services Total 2,964,449 Hospitals - 12.7% ------------------------------------------ ----------------------------------------------------------------------------- AZ Health Facilities Authority Phoenix Memorial Hospital, Series 1991, 8.125% 06/01/12 (c) 2,080,346 145,624 ----------------------------------------------------------------------------- AZ Yavapai County Industrial Development Yavapai Regional Medical Center, Series 2003 A, Authority 6.000% 08/01/33 425,000 426,449 ----------------------------------------------------------------------------- CA ABAG Finance Authority for Nonprofit San Diego Hospital Association, Series 2003 C, Corps. 5.375% 03/01/21 500,000 487,765 ----------------------------------------------------------------------------- CA California Statewide Communities Kaiser Permanente, Series 2004 I, Development Authority 3.450% 04/01/35 1,750,000 1,658,948 ----------------------------------------------------------------------------- CA Rancho Mirage Joint Powers Bon Secours-St. Frances Medical Center, Inc., Series 2002 A, Financing Authority 5.625% 07/01/29 2,000,000 1,985,400 ----------------------------------------------------------------------------- CA State Health Facilities Financing Catholic Healthcare West, Series 2004 G, Authority 5.250% 07/01/23 500,000 473,535 Stanford Hospital & Clinics Project, Series 2003 A, 5.000% 11/15/23 1,500,000 1,467,135 ----------------------------------------------------------------------------- CA Whittier Health Facilities Presbyterian Intercommunity Hospital, Series 2002, 5.750% 06/01/31 1,000,000 1,015,050 ----------------------------------------------------------------------------- CO La Junta Arkansas Valley Regional Medical Center Project, Series 1999, 6.100% 04/01/24 900,000 889,524 ----------------------------------------------------------------------------- CO State Health Care Facilities Authority National Jewish Medical & Research Center, Series 1998, 5.375% 01/01/23 1,080,000 1,005,178 Parkview Medical Center, Inc. Project, Series 2001, 6.600% 09/01/25 300,000 310,296 ----------------------------------------------------------------------------- FL Hillsborough County Industrial Tampa General Hospital Project, Series 2003 B, Development Authority 5.250% 10/01/34 1,000,000 944,440 ----------------------------------------------------------------------------- FL Miami Health Facilities Authority Catholic Health East, Series 2003 B, 5.125% 11/15/24 1,000,000 956,690 ----------------------------------------------------------------------------- FL Orange County Health Facilities Orlando Regional Healthcare System: Authority Series 1999 E, 6.000% 10/01/26 875,000 904,855 Series 2002, 5.750% 12/01/32 350,000 356,286 See notes to investment portfolio. 10 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Hospitals - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- FL South Lake County Hospital District South Lake Hospital, Inc., Series 2003: 6.375% 10/01/28 750,000 750,682 6.375% 10/01/34 500,000 499,340 ----------------------------------------------------------------------------- FL West Orange Healthcare District Series 2001 A, 5.650% 02/01/22 1,450,000 1,451,697 ----------------------------------------------------------------------------- IL Southwestern Illinois Development Anderson Hospital, Series 1999: Authority 5.500% 08/15/20 500,000 485,405 5.625% 08/15/29 250,000 233,902 ----------------------------------------------------------------------------- IL State Health Facilities Authority Thorek Hospital & Medical Center, Series 1998, 5.375% 08/15/28 500,000 435,745 ----------------------------------------------------------------------------- IN Health Facility Financing Authority Community Foundation of Northwest Indiana, Inc., Series 2004 A, 6.000% 03/01/34 850,000 807,245 ----------------------------------------------------------------------------- MA State Health & Educational Facilities Jordan Hospital: Authority Series 1998 D, 5.250% 10/01/18 600,000 546,510 Series 2003 E, 6.750% 10/01/33 750,000 761,325 Milford-Whitinsville Regional Hospital: Series 1998 C, 5.750% 07/15/13 610,000 607,517 Series 2002 D, 6.350% 07/15/32 1,715,000 1,719,373 ----------------------------------------------------------------------------- MD State Health & Higher Educational Adventist HealthCare, Series 2003 A: Facilities Authority 5.000% 01/01/16 400,000 391,108 5.750% 01/01/25 600,000 594,300 ----------------------------------------------------------------------------- MI Dickinson County Dickinson County Health Care System, Series 1999, 5.800% 11/01/24 1,000,000 945,640 ----------------------------------------------------------------------------- MI Flint Hospital Building Authority Hurley Medical Center: Series 1998 A, 5.375% 07/01/20 465,000 425,442 Series 1998 B, 5.375% 07/01/28 750,000 712,695 ----------------------------------------------------------------------------- MI State Hospital Finance Authority Oakwood Obligated Group, Series 2003, 5.500% 11/01/18 1,600,000 1,640,976 ----------------------------------------------------------------------------- MN St. Paul Housing & Redevelopment HealthEast Project, Series 1993 B, Authority 6.625% 11/01/17 240,000 241,154 ----------------------------------------------------------------------------- MN Washington Housing & Redevelopment HealthEast Project, Series 1998, Authority 5.250% 11/15/12 1,100,000 1,063,194 ----------------------------------------------------------------------------- MO State Health & Educational Facilities Lake Regional Health System, Series 2003, Authority 5.700% 02/15/34 1,000,000 1,002,790 ----------------------------------------------------------------------------- NC State Medical Care Commission Stanly Memorial Hospital Project, Series 1999, 6.375% 10/01/29 1,000,000 1,057,170 See notes to investment portfolio. 11 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Hospitals - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- NH Health & Education Facilities Authority Catholic Medical Center, Series 2002 A, 6.125% 07/01/32 400,000 400,148 ----------------------------------------------------------------------------- NH State Higher Educational & Health Littleton Hospital Assoc., Inc.: Facilities Authority Series 1998 A: 5.900% 05/01/18 500,000 451,715 6.000% 05/01/28 1,000,000 877,040 Series 1998 B, 5.900% 05/01/28 675,000 584,266 ----------------------------------------------------------------------------- NJ State Health Care Facilities Financing Capital Health Systems, Series 2003 A, Authority 5.750% 12/01/14 1,250,000 1,271,063 ----------------------------------------------------------------------------- NM Farmington San Juan Medical Center, Series 2004 A, 5.000% 06/01/23 500,000 475,320 ----------------------------------------------------------------------------- NV Henderson Health Care Facilities Catholic Healthcare West, Series 1998: Authority 5.125% 07/01/28 540,000 480,929 5.375% 07/01/26 790,000 729,209 ----------------------------------------------------------------------------- NY State Dormitory Authority Memorial Sloan-Kettering Cancer Center, Series 2001-1: (a) 07/01/25 3,600,000 1,202,400 (a) 07/01/26 4,400,000 1,374,076 North Shore - Long Island Jewish Medical Center, Series 2003, 5.500% 05/01/33 400,000 401,632 ----------------------------------------------------------------------------- OH Belmont County Ohio Valley Medical Center, Inc., Series 1998, 5.700% 01/01/13 700,000 623,014 ----------------------------------------------------------------------------- OH Highland County Joint Township Hospital Series 1999, District 6.750% 12/01/29 1,900,000 1,762,706 ----------------------------------------------------------------------------- OH Lakewood Hospital Improvement District Lakewood Hospital Association, Series 2003, 5.500% 02/15/15 1,250,000 1,303,862 ----------------------------------------------------------------------------- OH Miami County Hospital Facilities Upper Valley Medical Center, Inc.: Authority Series 1996 A, 6.250% 05/15/16 500,000 517,290 Series 1996 C, 6.250% 05/15/13 285,000 296,827 Series 1996 D, 6.375% 05/15/26 1,015,000 1,033,859 ----------------------------------------------------------------------------- OH Sandusky County Memorial Hospital, Series 1998, 5.150% 01/01/10 250,000 250,712 ----------------------------------------------------------------------------- OK State Development Finance Authority Duncan Regional Hospital, Series 2003 A, 5.125% 12/01/23 2,000,000 1,927,260 ----------------------------------------------------------------------------- OK Stillwater Medical Center Authority Series 2003, 5.625% 05/15/23 1,000,000 976,650 See notes to investment portfolio. 12 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Hospitals - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- PA Allegheny County Hospital Development Ohio Valley General Hospital, Series 1997, Authority 5.450% 01/01/28 1,550,000 1,393,031 ----------------------------------------------------------------------------- PA Pottsville Hospital Authority Pottsville Hospital & Warne Clinic, Series 1998, 5.625% 07/01/24 800,000 697,336 ----------------------------------------------------------------------------- SC Jobs Economic Development Bon Secours Health System, Series 2002 A, 5.500% 11/15/23 2,250,000 2,192,310 ----------------------------------------------------------------------------- TX Knox County Health, Educational & East Tennessee Hospital, Series 2003 B, Housing Facilities Board 5.750% 07/01/33 250,000 250,000 ----------------------------------------------------------------------------- TX Richardson Hospital Authority Richardson Medical Center, Series 1998, 5.625% 12/01/28 450,000 420,849 ----------------------------------------------------------------------------- TX Tyler Health Facilities Development Mother Frances Hospital, Series 2001, Corp. 6.000% 07/01/31 750,000 755,205 ----------------------------------------------------------------------------- VA Augusta County Industrial Development Augusta Health Care, Inc., Series 2003, Authority 5.250% 09/01/19 2,000,000 2,085,080 ----------------------------------------------------------------------------- WA Skagit County Public Hospital District Series 2003, No. 1 6.000% 12/01/23 1,000,000 978,640 ----------------------------------------------------------------------------- WA State Health Care Facilities Authority Kadlec Medical Center, Series 2001, 5.875% 12/01/21 600,000 633,276 ----------------------------------------------------------------------------- WI State Health & Educational Facilities Aurora Health Care, Inc., Series 2003, Authority 6.400% 04/15/33 700,000 721,343 Fort Healthcare, Inc. Project, Series 2004, 6.100% 05/01/34 1,965,000 1,990,309 Wheaton Franciscan Services, Series 2002, 5.750% 08/15/30 1,050,000 1,067,756 ----------------------------------------------------------------------------- Hospitals Total 59,525,498 Intermediate Care Facilities - 1.2% ------------------------------------------ ----------------------------------------------------------------------------- IL State Development Finance Authority Hoosier Care, Inc., Series 1999 A, 7.125% 06/01/34 1,460,000 1,186,542 ----------------------------------------------------------------------------- IN State Health Facilities Financing Hoosier Care, Inc. Project, Series 1999 A, Authority 7.125% 06/01/34 1,205,000 979,304 ----------------------------------------------------------------------------- LA State Public Facilities Authority Progressive Healthcare Providers, Inc., Series 1998, 6.375% 10/01/28 2,000,000 1,660,200 ----------------------------------------------------------------------------- PA State Economic Development Financing Northwestern Human Services, Series 1998 A, Authority 5.250% 06/01/14 2,150,000 1,717,463 ----------------------------------------------------------------------------- Intermediate Care Facilities Total 5,543,509 Nursing Homes - 3.1% ------------------------------------------ ----------------------------------------------------------------------------- AK Juneau St. Ann's Care Center Project, Series 1999, 6.875% 12/01/25 1,750,000 1,762,810 See notes to investment portfolio. 13 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Nursing Homes - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- CO State Health Facilities Authority Volunteers of America Care Facilities, Inc.: Series 1998 A, 5.750% 07/01/20 700,000 619,780 Series 1999 A: 5.750% 07/01/10 890,000 863,665 6.000% 07/01/29 520,000 454,958 ----------------------------------------------------------------------------- DE State Economic Development Authority Churchman's Village Project, Series 1991, 10.000% 03/01/21 665,000 700,797 ----------------------------------------------------------------------------- IA State Finance Authority Care Initiatives Project: Series 1996, 9.250% 07/01/25 495,000 576,888 Series 1998 B: 5.500% 07/01/08 480,000 474,264 5.750% 07/01/18 600,000 541,206 5.750% 07/01/28 1,475,000 1,236,035 ----------------------------------------------------------------------------- MA State Development Finance Agency Alliance Health Care Facilities, Series 1999 A, 7.100% 07/01/32 2,250,000 2,124,585 ----------------------------------------------------------------------------- MA State Industrial Finance Agency GF/Mass., Inc., Series 1994, 8.300% 07/01/23 895,000 903,771 ----------------------------------------------------------------------------- MI Cheboygan Economic Development Metro Health Foundation, Inc. Project, Series 1993, Authority 11.000% 11/01/22 (c) 577,512 88,359 ----------------------------------------------------------------------------- MN Carlton Health & Housing Facilities Inter-Faith Social Services, Inc. Project, Series 2000, Authority 7.500% 04/01/19 250,000 256,555 ----------------------------------------------------------------------------- MN Sartell Health Care & Housing Foundation for Healthcare Project, Series 1999 A, Facilities Authority 6.625% 09/01/29 2,000,000 1,897,540 ----------------------------------------------------------------------------- PA Chester County Industrial Development RHA/PA Nursing Home, Series 2002, Authority 8.500% 05/01/32 395,000 377,359 ----------------------------------------------------------------------------- PA Delaware County Authority Main Line & Haverford Nursing, Series 1992, 9.000% 08/01/22 (c) 50,000 30,000 ----------------------------------------------------------------------------- PA Lackawanna County Industrial Greenridge Nursing Center Project, Series 1990, Development Authority 10.500% 12/01/10 (d)(m) 110,000 99,000 ----------------------------------------------------------------------------- PA Luzerne County Industrial Development Millville Nursing Center Project, Series 1990, Authority 10.500% 12/01/12 (d)(m) 175,000 157,500 ----------------------------------------------------------------------------- TX Kirbyville Health Facilities Heartway III, Series 1997 A, Development Corp. 10.000% 03/20/18 (e) 539,212 172,548 ----------------------------------------------------------------------------- WA Kitsap County Consolidated Housing Martha and Mary Health Services, Series 1996, Authority 7.100% 02/20/36 1,000,000 1,162,330 ----------------------------------------------------------------------------- Nursing Homes Total 14,499,950 ----------- HEALTH CARE TOTAL 120,280,097 See notes to investment portfolio. 14 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HOUSING - 4.9% Assisted Living/Senior - 2.5% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- DE Kent County Heritage at Dover Project, Series 1999, AMT, 7.625% 01/01/30 2,415,000 2,000,755 ----------------------------------------------------------------------------- GA Columbus Housing Authority The Gardens at Calvary Project, Series 1999, 7.000% 11/15/29 2,000,000 1,597,920 ----------------------------------------------------------------------------- IL State Development Finance Authority Care Institute, Inc., Series 1995, 8.250% 06/01/25 1,880,000 1,792,806 ----------------------------------------------------------------------------- MN Roseville Care Institute, Inc. Project, Series 1993, 7.750% 11/01/23 (e) 1,270,000 825,500 ----------------------------------------------------------------------------- NC State Medical Care Commission DePaul Community Facilities Project, Series 1999, 7.625% 11/01/29 1,965,000 2,004,418 ----------------------------------------------------------------------------- NY Huntington Housing Authority Gurwin Jewish Senior Center, Series 1999 A: 5.875% 05/01/19 1,900,000 1,778,001 6.000% 05/01/29 625,000 570,088 ----------------------------------------------------------------------------- NY Suffolk County Industrial Development Gurwin Jewish-Phase II, Series 2004, Agency 6.700% 05/01/39 500,000 501,115 ----------------------------------------------------------------------------- TX Bell County Health Facility Development Care Institute, Inc., Series 1994, Corp. 9.000% 11/01/24 945,000 854,271 ----------------------------------------------------------------------------- Assisted Living/Senior Total 11,924,874 Multi-Family - 2.3% ------------------------------------------ ----------------------------------------------------------------------------- CO State Health Facilities Authority Birchwood Manor Project, Series 1991 A, 7.250% 04/01/11 435,000 436,870 ----------------------------------------------------------------------------- DE Wilmington Electra Arms Senior Association Project, Series 1994 A, AMT, 6.250% 06/01/28 930,000 732,291 ----------------------------------------------------------------------------- FL Broward County Housing Finance Chaves Lake Apartment Project, Series 2000 A, AMT, Authority 7.500% 07/01/40 1,250,000 1,225,500 ----------------------------------------------------------------------------- FL Clay County Housing Finance Authority Madison Commons Apartments, Series 2000 A, AMT, 7.450% 07/01/40 1,235,000 1,218,241 ----------------------------------------------------------------------------- IN New Castle Raintree Apartments, Series 1988 B, (a) 03/01/18 30,625,000 76,562 ----------------------------------------------------------------------------- MN Lakeville Multi-Family Revenue Series 1989, 9.875% 02/01/20 700,000 700,574 ----------------------------------------------------------------------------- MN Washington County Housing Cottages of Aspen Project, Series 1992, AMT, & Redevelopment Authority 9.250% 06/01/22 455,000 464,846 ----------------------------------------------------------------------------- MN White Bear Lake Multi-Family Revenue Series 1989, 9.750% 07/15/19 750,000 752,122 ----------------------------------------------------------------------------- NC Raleigh Multi-Family Revenue Cedar Point Apartments, Series 1999 A: 5.100% 11/01/10 (e) 250,000 137,980 5.875% 11/01/24 (e) 200,000 108,378 ----------------------------------------------------------------------------- Pass Through Certificates Series 1993, 8.500% 12/01/16 455,481 436,597 See notes to investment portfolio. 15 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) HOUSING - (continued) Multi-Family - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- SC State Housing Finance & Development Westbridge Apartments Project, Series 1990, AMT, Authority 9.500% 09/01/20 579,000 564,004 ----------------------------------------------------------------------------- TN Franklin Industrial Development Board Landings Apartment Project, Series 1996 B, 8.750% 04/01/27 1,595,000 1,631,781 ----------------------------------------------------------------------------- TX El Paso County Housing Finance Corp. American Village Communities: Series 2000 C, 8.000% 12/01/32 585,000 596,027 Series 2000 D, 10.000% 12/01/32 690,000 700,799 ----------------------------------------------------------------------------- TX State Affordable Housing Corp. NHT/GTEX LLC Project, Series 2001 C, 10.000% 10/01/31 (e) 1,560,000 390,000 ----------------------------------------------------------------------------- VA Alexandria Redevelopment & Housing Article 1 Associates LLP, Series 1990 A, AMT, Authority 10.000% 01/01/21 500,000 429,065 ----------------------------------------------------------------------------- Multi-Family Total 10,601,637 Single Family - 0.1% ------------------------------------------ ----------------------------------------------------------------------------- CO Housing and Finance Authority Series 1995 D-1, AMT, 7.375% 06/01/26 170,000 170,632 Series 1997 A-2, AMT, 7.250% 05/01/27 120,000 120,434 ----------------------------------------------------------------------------- IA State Housing Finance Authority Series 1984 A, (a) 09/01/16 385,000 97,555 ----------------------------------------------------------------------------- Single Family Total 388,621 ---------- HOUSING TOTAL 22,915,132 INDUSTRIAL - 6.3% Food Products - 1.4% ------------------------------------------ ----------------------------------------------------------------------------- IN Hammond American Maize Products Co. Project, Series 1994 A, AMT, 8.000% 12/01/24 1,760,000 1,838,338 ----------------------------------------------------------------------------- LA Port of New Orleans Industrial Continental Grain Co. Project, Series 1993, Development Corp. 7.500% 07/01/13 2,000,000 2,047,680 ----------------------------------------------------------------------------- MI State Strategic Fund Michigan Sugar Co.: Carollton Project, Series 1998 C, AMT, 6.550% 11/01/25 (b) 1,500,000 1,304,085 Sebewaing Project, Series 1998 A, 6.250% 11/01/15 1,000,000 937,180 ----------------------------------------------------------------------------- OH Toledo Lucas County Port Authority Cargill, Inc. Project, Series 2004 A, 4.800% 03/01/22 500,000 472,610 ----------------------------------------------------------------------------- Food Products Total 6,599,893 Forest Products - 2.4% ------------------------------------------ ----------------------------------------------------------------------------- AL Camden Industrial Development Board Weyerhaeuser Company, Series 2003 B, AMT, 6.375% 12/01/24 275,000 286,842 ----------------------------------------------------------------------------- AL Courtland Industrial Development Board International Paper Co., Series 2003 B, AMT, 6.250% 08/01/25 2,000,000 2,038,000 See notes to investment portfolio. 16 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) INDUSTRIAL - (continued) Forest Products - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- AL Phenix City Industrial Development Meadwestvaco, Series 2002 A, AMT, Board 6.350% 05/15/35 1,000,000 1,031,110 ----------------------------------------------------------------------------- GA Rockdale County Development Authority Solid Waste Disposal, Visy Paper, Inc., Series 1993, AMT, 7.500% 01/01/26 2,800,000 2,896,264 ----------------------------------------------------------------------------- LA Beauregard Parish Boise Cascade Project, Series 2002, 6.800% 02/01/27 1,750,000 1,764,822 ----------------------------------------------------------------------------- MI Delta County Economic Development Corp. Mead Westvaco Escambia Project, Series 2002 B, AMT, 6.450% 04/15/23 750,000 773,497 ----------------------------------------------------------------------------- MS Lowndes County Weyerhaeuser Corp., Series 1992 A, 6.800% 04/01/22 1,995,000 2,231,846 ----------------------------------------------------------------------------- VA Bedford County Industrial Development Nekoosa Packaging Corp. Project, Series 1998, AMT, Authority 5.600% 12/01/25 400,000 358,952 ----------------------------------------------------------------------------- Forest Products Total 11,381,333 Manufacturing - 0.6% ------------------------------------------ ----------------------------------------------------------------------------- IL Will-Kankakee Regional Development Flanders Corp./Precisionaire, Series 1997, AMT, Authority 6.500% 12/15/17 815,000 797,918 ----------------------------------------------------------------------------- KS Wichita Airport Authority Cessna Citation Service Center, Series 2002 A, AMT, 6.250% 06/15/32 1,875,000 1,953,188 ----------------------------------------------------------------------------- Manufacturing Total 2,751,106 Metals & Mining - 0.3% ------------------------------------------ ----------------------------------------------------------------------------- NV State Department of Business & Industry Wheeling-Pittsburgh Steel Corp., Series 1999 A, AMT, 8.000% 09/01/14 (f) 474,194 362,715 ----------------------------------------------------------------------------- VA Greensville County Industrial Wheeling-Pittsburgh Steel Corp., Series 1999 A, AMT, Development Authority 7.000% 04/01/14 930,000 721,968 ----------------------------------------------------------------------------- Metals & Mining Total 1,084,683 Oil & Gas - 1.6% ------------------------------------------ ----------------------------------------------------------------------------- NJ Middlesex County Amerada Hess Corp., Series 2004, 6.050% 09/15/34 (g) 285,000 288,366 ----------------------------------------------------------------------------- NV Clark County Industrial Development Southwest Gas Corp. Project, Series 2003 E, AMT, Authority 5.800% 03/01/38 1,750,000 1,843,608 ----------------------------------------------------------------------------- TX Gulf Coast Industrial Development Citgo Petroleum Project, Series 1998, AMT, Authority 8.000% 04/01/28 875,000 914,690 ----------------------------------------------------------------------------- TX Texas City Industrial Development Corp. Arco Pipe Line Co. Project, Series 1990, 7.375% 10/01/20 2,000,000 2,509,900 See notes to investment portfolio. 17 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) INDUSTRIAL - (continued) Oil & Gas - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- VI Virgin Islands Public Finance Authority Hovensa Coker Project, Series 2002, AMT, 6.500% 07/01/21 125,000 132,269 Hovensa Refinery, Series 2003, AMT: 5.875% 07/01/22 1,000,000 1,015,410 6.125% 07/01/22 875,000 902,318 ----------------------------------------------------------------------------- Oil & Gas Total 7,606,561 ---------- INDUSTRIAL TOTAL 29,423,576 OTHER - 7.8% Other - 0.7% ------------------------------------------ ----------------------------------------------------------------------------- NJ State Economic Development Authority Motor Vehicle Commission, Series 2003 A, (a) 07/01/14 2,500,000 1,583,925 ----------------------------------------------------------------------------- NY Convention Center Operating Corp. Yale Building Project, Series 2003, (a) 06/01/08 2,100,000 1,747,767 ----------------------------------------------------------------------------- Other Total 3,331,692 Pool/Bond Bank - 0.3% ------------------------------------------ ----------------------------------------------------------------------------- SD Economic Development Finance Authority Davis Family Sodak, Series 2004 4-A, AMT, 6.000% 04/01/29 1,400,000 1,373,316 ----------------------------------------------------------------------------- Pool/Bond Bank Total 1,373,316 Refunded/Escrowed (h) - 5.4% ------------------------------------------ ----------------------------------------------------------------------------- CO Adams County Series 1991 B, 11.250% 09/01/11 (i) 905,000 1,275,519 ----------------------------------------------------------------------------- CO State Department of Transportation Series 2001 832R-B, 9.670% 06/15/15 (f)(j) 2,000,000 2,505,560 ----------------------------------------------------------------------------- CT State Development Authority New Haven Residuals, Series 1996, AMT, 8.250% 12/01/06 460,000 500,503 ----------------------------------------------------------------------------- FL Tampa Bay Utility Systems Revenue, Series 1999, 10.150% 10/01/23 (f)(j) 7,500,000 9,556,125 ----------------------------------------------------------------------------- GA Forsyth County Hospital Authority Baptist Hospital Worth County, Series 1998, 6.000% 10/01/08 755,000 809,639 ----------------------------------------------------------------------------- GA State Municipal Electric Authority Series 1991 V, 6.600% 01/01/18 690,000 822,163 ----------------------------------------------------------------------------- IL University of Illinois Certificate of Participation, Utilities Infrastructure Projects, Series 2001 A, 5.500% 08/15/16 1,425,000 1,591,768 ----------------------------------------------------------------------------- NC Eastern Municipal Power Agency Series 1991 A, 6.500% 01/01/18 3,320,000 4,046,980 ----------------------------------------------------------------------------- NC Lincoln County Lincoln County Hospital Project, Series 1991, 9.000% 05/01/07 125,000 138,920 ----------------------------------------------------------------------------- NJ State Economic Development Authority Winchester Gardens, Series 1996 A, 8.625% 11/01/25 2,000,000 2,323,940 See notes to investment portfolio. 18 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) OTHER - (continued) Refunded/Escrowed (h) - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- TN Shelby County Health Educational & Open Arms Care Corp.: Housing Facilities Board Series 1992 A, 9.750% 08/01/19 290,000 353,751 Series 1992 C, 9.750% 08/01/19 290,000 352,846 ----------------------------------------------------------------------------- WV State Hospital Finance Authority Charleston Medical Center, Series 2000 A, 6.750% 09/01/30 925,000 1,098,891 ----------------------------------------------------------------------------- Refunded/Escrowed Total 25,376,605 Tobacco - 1.4% ------------------------------------------ ----------------------------------------------------------------------------- CA Golden State Tobacco Securitization Series 2003 A-1, Authority 6.250% 06/01/33 1,725,000 1,545,824 Series 2003 B, 5.500% 06/01/43 1,250,000 1,234,125 ----------------------------------------------------------------------------- LA Tobacco Settlement Financing Corp. Series 2001 B, 5.875% 05/15/39 1,000,000 794,780 ----------------------------------------------------------------------------- NJ Tobacco Settlement Financing Series 2003, Corporation 6.750% 06/01/39 2,000,000 1,781,640 ----------------------------------------------------------------------------- SC Tobacco Settlement Revenue Series 2001 B, Management Authority 6.375% 05/15/28 1,000,000 856,140 ----------------------------------------------------------------------------- Tobacco Total 6,212,509 ---------- OTHER TOTAL 36,294,122 OTHER REVENUE - 1.6% Hotels - 0.4% ------------------------------------------ ----------------------------------------------------------------------------- PA Philadelphia Authority for Industrial Doubletree Project, Series 1997 A, Development 6.500% 10/01/27 2,000,000 2,013,700 ----------------------------------------------------------------------------- Hotels Total 2,013,700 Recreation - 1.1% ------------------------------------------ ----------------------------------------------------------------------------- CA Agua Caliente Band of Cahuilla Indians Series 2003, 6.000% 07/01/18 1,000,000 985,870 ----------------------------------------------------------------------------- CT Mashantucket Western Pequot Tribe Series 1999 B, (a) 09/01/15 (f) 2,000,000 1,072,700 ----------------------------------------------------------------------------- CT Mohegan Indians Tribe Gaming Authority Series 2001, 6.250% 01/01/31 (f) 475,000 491,938 ----------------------------------------------------------------------------- FL Capital Trust Agency Seminole Tribe Convention Center, Series 2002 A, 10.000% 10/01/33 (f) 2,050,000 2,467,196 ----------------------------------------------------------------------------- NM Red River Sports Facilities Revenue Red River Ski Area Project, Series 1998, 6.450% 06/01/07 155,000 156,167 ----------------------------------------------------------------------------- Recreation Total 5,173,871 See notes to investment portfolio. 19 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) OTHER REVENUE - (continued) Retail - 0.1% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- OH Lake County North Madison Properties Ltd. Project, Series 1993, 8.819% 09/01/11 475,000 467,148 ----------------------------------------------------------------------------- Retail Total 467,148 ---------- OTHER REVENUE TOTAL 7,654,719 RESOURCE RECOVERY - 1.8% Disposal - 0.8% ------------------------------------------ ----------------------------------------------------------------------------- IL Development Finance Authority Waste Management, Inc., Series 1997, AMT, 5.050% 01/01/10 250,000 255,535 ----------------------------------------------------------------------------- MA State Development Finance Agency Peabody Monofill Associates, Inc. Project, Series 1994, 9.000% 09/01/05 330,000 337,762 ----------------------------------------------------------------------------- OH State Solid Waste Republic Service, Inc. Project, Series 2004, AMT, 4.250% 04/01/33 2,000,000 1,877,840 ----------------------------------------------------------------------------- UT Carbon County Solid Waste Disposal Laidlaw Environmental, Series 1997 A, AMT, 7.450% 07/01/17 1,500,000 1,541,970 ----------------------------------------------------------------------------- Disposal Total 4,013,107 Resource Recovery - 1.0% ------------------------------------------ ----------------------------------------------------------------------------- MA State Development Finance Agency Ogden Haverhill Project: Series 1998 A, AMT, 5.500% 12/01/13 500,000 491,160 Series 1998 A, AMT 5.600% 12/01/19 1,000,000 960,500 Series 1999 A, AMT, 6.700% 12/01/14 750,000 784,095 ----------------------------------------------------------------------------- PA Delaware County Industrial American Ref-Fuel Co., Series 1997 A, Development Authority 6.200% 07/01/19 2,225,000 2,279,446 ----------------------------------------------------------------------------- Resource Recovery Total 4,515,201 ---------- RESOURCE RECOVERY TOTAL 8,528,308 TAX-BACKED - 19.7% Local Appropriated - 1.8% ------------------------------------------ ----------------------------------------------------------------------------- CA Compton Certificates of Participation Civic Center & Capital Improvements, Series 1997 A, 5.500% 09/01/15 1,500,000 1,529,580 ----------------------------------------------------------------------------- CA Southeast Resource Recovery Facilities Series 2003 B, AMT, Authority 5.375% 12/01/18 2,000,000 2,066,180 ----------------------------------------------------------------------------- MN Andover Economic Development Authority Andover Community Center, Series 2004, 5.200% 02/01/34 750,000 716,107 ----------------------------------------------------------------------------- MO St. Louis Industrial Development St. Louis Convention Center Hotel, Series 2000, Authority (a) 07/15/18 3,000,000 1,478,940 See notes to investment portfolio. 20 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) TAX-BACKED - (continued) Local Appropriated - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- SC Berkeley County School District Securing Assets for Education, Series 2003, 5.000% 12/01/28 2,000,000 1,905,640 ----------------------------------------------------------------------------- SC Dorchester County School District Growth Remedy Opportunity Tax Hike, Series 2004, 5.250% 12/01/29 1,000,000 963,290 ----------------------------------------------------------------------------- Local Appropriated Total 8,659,737 Local General Obligations - 5.6% ------------------------------------------ ----------------------------------------------------------------------------- CA East Side Union High School District Series 2003 B, 5.100% 02/01/20 1,320,000 1,404,625 ----------------------------------------------------------------------------- CA Empire Union School District Series 1987-1 A, (a) 10/01/21 1,665,000 664,002 ----------------------------------------------------------------------------- CA Los Angeles Community College District Series 2003 B, 5.000% 08/01/19 2,000,000 2,064,780 ----------------------------------------------------------------------------- CA Los Angeles Unified School District Series 1997 E, 5.125% 01/01/27 3,800,000 3,821,052 Series 2002, 5.750% 07/01/16 800,000 910,296 ----------------------------------------------------------------------------- CA Modesto High School District Series 2002 A, (a) 08/01/19 2,650,000 1,221,544 ----------------------------------------------------------------------------- CA North Orange County Community College Election of 2002, Series 2003 B, District (a) 08/01/21 7,920,000 3,202,610 ----------------------------------------------------------------------------- CA Rocklin Unified School District Election of 2002, Series 2003, (a) 08/01/17 3,130,000 1,633,860 ----------------------------------------------------------------------------- CA William S. Hart Union High School Series 2003 A, District 5.000% 09/01/19 1,625,000 1,677,991 ----------------------------------------------------------------------------- CO Red Sky Ranch Metropolitan District Series 2003, 6.050% 12/01/33 1,000,000 983,910 ----------------------------------------------------------------------------- IL Hoffman Estates Park District Series 2004, 5.250% 12/01/23 1,000,000 1,006,340 ----------------------------------------------------------------------------- NY New York City Series 1995 B, 7.250% 08/15/07 1,000,000 1,122,270 Series 2003 J, 5.500% 06/01/18 1,500,000 1,585,425 ----------------------------------------------------------------------------- OH Dublin City School District Series 2003, 5.000% 12/01/20 2,450,000 2,520,364 ----------------------------------------------------------------------------- TX Dallas County Flood Control District Series 2002, 7.250% 04/01/32 1,000,000 1,014,780 ----------------------------------------------------------------------------- WA Clark County School District No. 037 Vancouver, Series 2001B, (a) 12/01/18 2,500,000 1,204,300 ----------------------------------------------------------------------------- Local General Obligations Total 26,038,149 See notes to investment portfolio. 21 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) TAX-BACKED - (continued) Special Non-Property Tax - 3.4% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- CO State Department of Transportation Series 2001 832R-A, 9.670% 06/15/14 (f)(j) 3,000,000 3,759,090 ----------------------------------------------------------------------------- FL Northern Palm Beach County Improvement Series 1999: District 5.900% 08/01/19 500,000 544,400 6.000% 08/01/29 750,000 803,858 ----------------------------------------------------------------------------- MO St. Louis County Industrial Development Kiel Center Arena, Series 1992, AMT, Authority 7.875% 12/01/24 3,000,000 3,053,790 ----------------------------------------------------------------------------- NY State Thruway Authority Series 2003 A, 5.000% 03/15/20 3,500,000 3,596,740 ----------------------------------------------------------------------------- PR Commonwealth of Puerto Rico Highway & Series 2003 AA: Transportation Authority 5.500% 07/01/18 1,225,000 1,371,571 5.500% 07/01/19 2,320,000 2,592,670 ----------------------------------------------------------------------------- Special Non-Property Tax Total 15,722,119 Special Property Tax - 5.2% ------------------------------------------ ----------------------------------------------------------------------------- CA Carson Improvement Board Act 1915 Series 1992, 7.375% 09/02/22 140,000 141,355 ----------------------------------------------------------------------------- CA Huntington Beach Community Facilities Grand Coast Resort, Series 2000-1, District 6.450% 09/01/31 1,250,000 1,274,075 ----------------------------------------------------------------------------- CA Irvine Improvement Bond Act 1915 No. 00-18-GRP 3, Series 2003, 5.550% 09/02/26 500,000 483,875 ----------------------------------------------------------------------------- CA Oakdale Public Financing Authority Central City Redevelopment Project, Series 2004, 5.375% 06/01/33 2,000,000 1,900,180 ----------------------------------------------------------------------------- CA Oceanside Community Development Downtown Redevelopment Project, Series 2003, Commissions 5.700% 09/01/25 500,000 499,955 ----------------------------------------------------------------------------- CA Orange County Community Facilities Ladera Ranch: District Series 1999 A, 6.500% 08/15/21 1,000,000 1,037,870 Series 2003 A, 5.550% 08/15/33 1,000,000 973,210 ----------------------------------------------------------------------------- CA Orange County Improvement Bond Act 1915 Phase IV, No. 01-1-B, Series 2003, 5.750% 09/02/33 1,000,000 998,510 ----------------------------------------------------------------------------- CA Pleasanton Joint Powers Financing Series 1993 B, Authority 6.750% 09/02/17 1,740,000 1,772,138 ----------------------------------------------------------------------------- CA Redwood City Community Facilities 1 Redwood, Series 2003 B, District 6.000% 09/01/33 700,000 708,778 ----------------------------------------------------------------------------- CA Temecula Valley Unified School District Series 2003, 6.125% 09/01/33 600,000 600,354 ----------------------------------------------------------------------------- FL Brandy Creek Community Development Series 2003 A, District 6.350% 05/01/34 1,000,000 1,014,180 ----------------------------------------------------------------------------- FL Celebration Community Development Series 2003A, District 6.400% 05/01/34 1,000,000 1,015,540 See notes to investment portfolio. 22 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) TAX-BACKED - (continued) Special Property Tax - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- FL Colonial Country Club Community Series 2003, Development 6.400% 05/01/33 745,000 762,150 ----------------------------------------------------------------------------- FL Concorde Estates Community Development Series 2004 A, District 5.850% 05/01/35 1,320,000 1,243,044 ----------------------------------------------------------------------------- FL Double Branch Community Development Series 2002 A, District 6.700% 05/01/34 700,000 734,664 Series 2003 B, 5.375% 05/01/08 1,170,000 1,178,810 ----------------------------------------------------------------------------- FL Heritage Palms Community Development Series 1999, District 6.250% 11/01/04 375,000 376,151 ----------------------------------------------------------------------------- FL Islands at Doral Southwest District Series 2003, Community Development 6.375% 05/01/35 770,000 788,033 ----------------------------------------------------------------------------- FL Lexington Oaks Community Development Series 1998 A, District 6.125% 05/01/19 250,000 252,383 Series 1998 B, 5.500% 05/01/05 50,000 50,155 Series 2000 A: 7.200% 05/01/30 675,000 705,301 6.700% 05/01/33 250,000 258,773 ----------------------------------------------------------------------------- FL Middle Village Community Development Series 2004 A, District 6.000% 05/01/35 2,000,000 1,986,440 ----------------------------------------------------------------------------- FL Orlando Conroy Road Interchange Project, Series 1998 A: 5.500% 05/01/10 325,000 330,635 5.800% 05/01/26 600,000 600,204 ----------------------------------------------------------------------------- FL Stoneybrook Community Development Series 1998 A, District 6.100% 05/01/19 805,000 812,994 Series 1998 B, 5.700% 05/01/08 35,000 35,223 ----------------------------------------------------------------------------- FL Westchester Community Development Series 2003, District 6.125% 05/01/35 800,000 798,208 ----------------------------------------------------------------------------- MI Pontiac Finance Authority Development Area No. 3, Series 2002, 6.375% 06/01/31 1,000,000 994,230 ----------------------------------------------------------------------------- Special Property Tax Total 24,327,418 State Appropriated - 0.9% ------------------------------------------ ----------------------------------------------------------------------------- CA State Public Works Board Coalinga State Hospital, Series 2004 A, 5.500% 06/01/19 1,000,000 1,061,990 ----------------------------------------------------------------------------- LA State Military Department Custody Receipts, Series 2004, 4.850% 05/01/24 1,500,000 1,402,980 ----------------------------------------------------------------------------- NY Triborough Bridge & Tunnel Authority Javits Convention Center Project, Series 1990 E, 7.250% 01/01/10 1,770,000 1,996,772 ----------------------------------------------------------------------------- State Appropriated Total 4,461,742 See notes to investment portfolio. 23 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) TAX-BACKED - (continued) State General Obligations - 2.8% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- CA State Series 2003: 5.250% 02/01/18 2,000,000 2,123,920 5.250% 02/01/20 2,000,000 2,104,640 5.250% 02/01/23 800,000 826,936 ----------------------------------------------------------------------------- MA Massachusetts Bay Transportation Series 1992 B, Authority 6.200% 03/01/16 5,825,000 6,782,281 ----------------------------------------------------------------------------- PR Commonwealth of Puerto Rico Series 2004 A, 5.000% 07/01/30 1,200,000 1,256,364 ----------------------------------------------------------------------------- State General Obligations Total 13,094,141 ---------- TAX-BACKED TOTAL 92,303,306 TRANSPORTATION - 7.3% Air Transportation - 2.8% ------------------------------------------ ----------------------------------------------------------------------------- CA Los Angeles Regional Airports American Airlines, Inc., Series 2002 C, AMT, Improvement Corp. 7.500% 12/01/24 500,000 421,680 ----------------------------------------------------------------------------- FL Capital Trust Agency Air Cargo Orlando Project, Series 2003, AMT, 6.750% 01/01/32 650,000 604,045 ----------------------------------------------------------------------------- IL Chicago O'Hare International Airport United Airlines, Inc., Series 2000 A, AMT, 6.750% 11/01/11 (c) 1,600,000 396,896 ----------------------------------------------------------------------------- IN Indianapolis Airport Authority Federal Express Corp. Project, Series 1994, AMT, 7.100% 01/15/17 1,000,000 1,024,100 ----------------------------------------------------------------------------- MA State Port Authority Delta Airlines, Inc., Series 2001 A, AMT, 5.500% 01/01/16 2,935,000 3,025,868 ----------------------------------------------------------------------------- MN Minneapolis & St. Paul Metropolitan Northwest Airlines: Airports Commission Series 2001 A, AMT, 7.000% 04/01/25 825,000 703,816 Series 2001 B, AMT, 6.500% 04/01/25 500,000 473,135 ----------------------------------------------------------------------------- NC Charlotte/Douglas International Airport US Airways, Inc.: Series 1998, AMT, 5.600% 07/01/27 500,000 267,250 Series 2000, AMT, 7.750% 02/01/28 1,250,000 892,275 ----------------------------------------------------------------------------- NJ State Economic Development Authority Continental Airlines, Inc. Project: Series 1999, AMT, 6.250% 09/15/29 500,000 362,905 Series 2003, AMT, 9.000% 06/01/33 1,000,000 1,032,440 ----------------------------------------------------------------------------- PA Philadelphia Authority for Industrial Aero Philadelphia, Series 1999, AMT: Development 5.250% 01/01/09 350,000 328,318 5.500% 01/01/24 1,000,000 781,520 ----------------------------------------------------------------------------- TX Alliance Airport Authority AMR Corp., Series 1991, AMT, 7.000% 12/01/11 1,070,000 890,775 See notes to investment portfolio. 24 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) TRANSPORTATION - (continued) Air Transportation - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- TX Houston Industrial Development Corp. United Parcel Service, Series 2002, AMT, 6.000% 03/01/23 1,072,549 1,072,442 ----------------------------------------------------------------------------- WA Port of Seattle Northwest Airlines, Inc. Project, Series 2001, AMT, 7.250% 04/01/30 925,000 790,570 ----------------------------------------------------------------------------- Air Transportation Total 13,068,035 Airports - 1.3% ------------------------------------------ ----------------------------------------------------------------------------- DC Metropolitan Washington Airports Series 2003 A, AMT, Authority 5.000% 10/01/33 1,500,000 1,435,500 ----------------------------------------------------------------------------- NC Charlotte Airport Revenue Series 1999, AMT, 10.760% 04/20/19 (f)(i)(j) 4,000,000 4,642,480 ----------------------------------------------------------------------------- Airports Total 6,077,980 Ports - 1.3% ------------------------------------------ ----------------------------------------------------------------------------- WA Port of Seattle Series 2000 A, AMT, 10.620% 02/01/10 (f)(j) 1,250,000 1,502,025 Series 2000 B, AMT, 10.620% 02/01/11 (f)(j) 3,750,000 4,537,088 ----------------------------------------------------------------------------- Ports Total 6,039,113 Toll Facilities - 1.6% ------------------------------------------ ----------------------------------------------------------------------------- CO E-470 Public Highway Authority Series 2000 B: (a) 09/01/18 4,000,000 1,951,720 (a) 09/01/35 17,500,000 1,721,475 ----------------------------------------------------------------------------- CO Northwest Parkway Public Highway Series 2001 D, Authority 7.125% 06/15/41 2,750,000 2,848,698 ----------------------------------------------------------------------------- MA State Turnpike Authority Metro Highway Systems Revenue, Series 1997 C (a) 01/01/20 2,000,000 912,000 ----------------------------------------------------------------------------- Toll Facilities Total 7,433,893 Transportation - 0.3% ------------------------------------------ ----------------------------------------------------------------------------- NV State Department of Business & Industry Las Vegas Monorail Project, Series 2000, 7.375% 01/01/40 1,750,000 1,720,705 ----------------------------------------------------------------------------- Transportation Total 1,720,705 ---------- TRANSPORTATION TOTAL 34,339,726 UTILITY - 16.2% Independent Power Producers - 3.1% ------------------------------------------ ----------------------------------------------------------------------------- MI Midland County Economic Development Series 2000 A, AMT, Corp. 6.875% 07/23/09 1,650,000 1,703,378 ----------------------------------------------------------------------------- NY Port Authority of New York & New Jersey KIAC Power Project, Series 1996, AMT, 6.750% 10/01/11 1,000,000 1,048,530 ----------------------------------------------------------------------------- PA Carbon County Industrial Development Panther Creek Partners Project, Series 2000, AMT, Authority 6.650% 05/01/10 920,000 985,035 See notes to investment portfolio. 25 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) UTILITY - (continued) Independent Power Producers - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- PA State Economic Development Financing Colver Project, Series 1994 D, AMT, Authority 7.150% 12/01/18 1,650,000 1,711,908 ----------------------------------------------------------------------------- PA State Economic Development Financing Northampton Generating: Authority Series 1994 A, AMT, 6.500% 01/01/13 3,000,000 3,029,580 Series 1994 B, AMT, 6.750% 01/01/07 2,530,000 2,609,796 ----------------------------------------------------------------------------- VA Pittsylvania County Industrial Multitrade of Pittsylvania, Series 1994 A, AMT: Development Authority 7.450% 01/01/09 3,500,000 3,018,680 7.500% 01/01/14 500,000 422,460 ----------------------------------------------------------------------------- Independent Power Producers Total 14,529,367 Investor Owned - 5.5% ------------------------------------------ ----------------------------------------------------------------------------- AZ Maricopa County Pollution Control Corp. El Paso Electric Co. Project, Series 2002 A, 6.250% 05/01/37 1,000,000 1,033,180 Southern California Edison Co., Series 2000 A, 2.900% 06/01/35 1,000,000 959,700 ----------------------------------------------------------------------------- CA Chula Vista Industrial Development San Diego Gas & Electric, Series 1996, Revenue 5.500% 12/01/21 1,275,000 1,292,761 ----------------------------------------------------------------------------- FL Polk County Industrial Development Tampa Electric Co. Project, Series 1996, AMT, Authority 5.850% 12/01/30 1,500,000 1,465,230 ----------------------------------------------------------------------------- IL State Development Finance Authority Peoples Gas Light & Coke Co., Series 2003 E, AMT, 4.875% 11/01/38 2,500,000 2,418,425 ----------------------------------------------------------------------------- IN Petersburg Indiana Power & Light Co.: Series 1991, 5.750% 08/01/21 1,000,000 1,008,880 Series 1995, 6.625% 12/01/24 255,000 260,725 ----------------------------------------------------------------------------- LA Calcasieu Parish Industrial Development Entergy Gulf States, Inc., Series 1999, Board 5.450% 07/01/10 500,000 511,220 ----------------------------------------------------------------------------- LA West Feliciana Parish Entergy Gulf States, Inc., Series 1999 B, 6.600% 09/01/28 250,000 254,297 ----------------------------------------------------------------------------- MS State Business Finance Corp. Systems Energy Resources, Inc. Project, Series 1999, 5.900% 05/01/22 1,500,000 1,507,800 ----------------------------------------------------------------------------- MT Forsyth Portland General Electric Co., Series 1998 A, 5.200% 05/01/33 375,000 389,591 ----------------------------------------------------------------------------- NC Wake County Industrial Facilities & Carolina Power & Light, Series 2002, Pollution Control Financing Authority 5.375% 02/01/17 2,000,000 2,094,060 ----------------------------------------------------------------------------- NM Farmington Tucson Electric Power Co., Series 1997 A, 6.950% 10/01/20 2,000,000 2,077,220 ----------------------------------------------------------------------------- NV Clark County Industrial Development Nevada Power Co., Series 1995 B, AMT, Authority 5.900% 10/01/30 2,135,000 1,881,533 See notes to investment portfolio. 26 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) UTILITY - (continued) Investor Owned - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- NV Clark County Industrial Development Southern California Edison, Series 2000, AMT, Authority 3.250% 06/01/31 1,000,000 969,530 ----------------------------------------------------------------------------- PA Beaver County Industrial Development Toledo Edison Co. Project, Series 1995, Authority 7.625% 05/01/20 2,000,000 2,115,060 ----------------------------------------------------------------------------- SC Berkeley County Pollution Control South Carolina Generating Co. Project, Series 2003, Facilities Authority 4.875% 10/01/14 1,500,000 1,539,240 ----------------------------------------------------------------------------- TX Brazos River Authority Texas Utilities Electric Co. Project: Series 2001 C, AMT, 5.750% 05/01/36 650,000 691,892 Series 2003 C, AMT, 6.750% 10/01/38 1,650,000 1,732,071 ----------------------------------------------------------------------------- WY Converse County PacifiCorp, Series 1988, 3.900% 01/01/14 1,500,000 1,402,575 ----------------------------------------------------------------------------- Investor Owned Total 25,604,990 Joint Power Authority - 1.5% ------------------------------------------ ----------------------------------------------------------------------------- GA State Municipal Electric Authority Series 1991 V, 6.600% 01/01/18 3,375,000 3,983,006 ----------------------------------------------------------------------------- NC Eastern Municipal Power Agency Series 1991 A, 6.500% 01/01/18 1,680,000 1,943,239 Series 2003 C, 5.375% 01/01/17 1,000,000 1,032,710 ----------------------------------------------------------------------------- Joint Power Authority Total 6,958,955 Municipal Electric - 4.6% ------------------------------------------ ----------------------------------------------------------------------------- MN Western Municipal Power Agency Series 2003 B, 5.000% 01/01/15 500,000 534,125 ----------------------------------------------------------------------------- NY Long Island Power Authority Series 1998-8 C, 5.000% 04/01/10 2,000,000 2,163,120 Series 2003 A, 5.000% 06/01/09 2,000,000 2,129,420 ----------------------------------------------------------------------------- PR Electric Power Authority Series 1998 NN, 5.500% 07/01/20 1,005,000 1,087,641 ----------------------------------------------------------------------------- TX Lower Colorado River Authority Series 1999 A, 5.500% 05/15/21 15,000,000 15,847,200 ----------------------------------------------------------------------------- Municipal Electric Total 21,761,506 Water & Sewer - 1.5% ------------------------------------------ ----------------------------------------------------------------------------- CA State Department of Water Resources Central Valley Project, Series 2002 X, 5.500% 12/01/17 1,300,000 1,449,318 FL Key West Sewer Revenue, Series 2003, 5.250% 10/01/18 1,000,000 1,069,460 ----------------------------------------------------------------------------- MS V Lakes Utility District Series 1994, 8.250% 07/15/24 400,000 383,512 See notes to investment portfolio. 27 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Municipal Bonds - (continued) UTILITY - (continued) Water & Sewer - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- NH State Industrial Development Authority Pennichuck Water Works, Inc. Project, Series 1988, AMT, 7.500% 07/01/18 470,000 518,889 ----------------------------------------------------------------------------- PA Dauphin County Industrial Development Dauphin Water Supply Co., Series 1992 A, AMT, Authority 6.900% 06/01/24 3,200,000 3,833,056 ----------------------------------------------------------------------------- Water & Sewer Total 7,254,235 ----------- UTILITY TOTAL 76,109,053 Total Municipal Bonds (cost of $449,788,390) 446,155,149 Municipal Preferred Stocks - 1.0% HOUSING - 1.0% Multi-Family - 1.0% ------------------------------------------ ----------------------------------------------------------------------------- Charter Municipal Mortgage Acceptance 6.300% 04/30/19 1,000,000 1,009,630 Co., AMT 6.625% 06/30/09 (f) 2,000,000 2,175,320 7.600% 11/30/10 (f) 1,500,000 1,699,680 Total Municipal Preferred Stocks (cost of $4,500,000) 4,884,630 Short-Term Obligations - 2.5% Variable Rate Demand Notes (k) - 2.5% ------------------------------------------ ----------------------------------------------------------------------------- IA State Finance Authority Drake University Project, Series 2001, 1.130% 07/01/31 700,000 700,000 Village Court Associates, Series 1985 A, 1.100% 11/01/15 300,000 300,000 ----------------------------------------------------------------------------- IA Woodbury County Siouxland Medical Education Foundation, Series 1996, 1.150% 11/01/16 1,500,000 1,500,000 ----------------------------------------------------------------------------- ID State Health Facilities Authority OSF Healthcare System, Series 2002, 1.100% 11/15/27 2,200,000 2,200,000 St. Luke's Regional Medical Center Project, Series 1995, 1.080% 05/01/22 1,200,000 1,200,000 ----------------------------------------------------------------------------- IN State Development Financing Authority Cathedral High School, Series 2001, 1.130% 09/01/26 300,000 300,000 ----------------------------------------------------------------------------- IN State Health Facilities Financing Fayette Memorial Hospital Association, Series 2002 A, Authority 1.130% 10/01/32 400,000 400,000 See notes to investment portfolio. 28 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Short-Term Obligations - (continued) Variable Rate Demand Notes (k) - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- MN State Department of Revenue Brooklyn Center, Brookdale Corp. II Project, Series 2001, 1.130% 12/01/24 800,000 800,000 ----------------------------------------------------------------------------- MN State Higher Education Facilities Saint Olaf College, Series 2002 5-M1, Authority 1.080% 10/01/32 1,300,000 1,300,000 Mankato, Bethany Lutheran College, Series 2000 B, 1.130% 11/01/15 400,000 400,000 ----------------------------------------------------------------------------- MS Jackson County Pollution Control Chevron USA, Inc., Series 1993, 1.050% 06/01/23 900,000 900,000 ----------------------------------------------------------------------------- ND Ward County Health Care Facilities Trinity Health, Series 2002 A, Authority 1.130% 07/01/29 195,000 195,000 ----------------------------------------------------------------------------- NY New York City Series 1993 A-7, 1.040% 08/01/20 100,000 100,000 ----------------------------------------------------------------------------- UT Eagle Mountain Gas & Electric Revenue Series 2001, 1.070% 12/15/25 400,000 400,000 ----------------------------------------------------------------------------- WI State Health & Education Facilities ProHealth Care, Inc., Riverview Hospital Association, Authority Series 2001, 1.130% 10/01/30 1,100,000 1,100,000 ----------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES TOTAL 11,795,000 ----------- Total Short-Term Obligations (cost of $11,795,000) 11,795,000 Total Investments - 98.7% (cost of $466,083,390) (l) 462,834,779 Other Assets & Liabilities, Net - 1.3% 5,876,637 Net Assets - 100.0% 468,711,416 See notes to investment portfolio.
29 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund NOTES TO INVESTMENT PORTFOLIO: (a)Zero coupon bond. (b)Denotes a restricted security, which is subject to registration with the SEC or is required to be exempted from such registration prior to resale. At June 30, 2004, the value of these securities amounted to $5,502,924, which represents 1.2% of net assets. ACQUISITION ACQUISITION SECURITY DATE COST ----------- ------------ ------ CA ABAG Finance Authority for Nonprofit Corps., Eskaton Gold River Lodge, Series 1998: 6.375% 11/15/15 07/30/98 $ 686,531 6.375%11/15/28 07/30/98 541,288 CA California Statewide Communities Development Authority, Crossroads School for Arts & Sciences, Series 1998: 6.000% 08/01/28 08/21/98 305,000 6.000% 08/01/28 08/31/98 700,000 CA Statewide Community Development Authority, Eskaton Village - Grass Valley, Series 2000, 8.250% 11/15/31 09/08/00 1,750,000 MIState Strategic Fund, Michigan Sugar Co., Carollton Project, Series 1998 C, AMT, 6.550%11/01/25 11/24/98 1,500,000 ---------- $5,482,819 ========== (c)The issuer has filed for bankruptcy protection under Chapter 11 and is in default of certain debt covenants. Income is not being accrued. As of June 30, 2004, the value of these securities amounted to $660,879, which represents 0.1% of net assets. (d)The issuer is in default of certain debt covenants. Income is being partially accrued based on the execution of a forbearance agreement with the borrower. As of June 30, 2004, the value of these securities amounted to $256,500, which represents 0.1% of net assets. (e)The issuer is in default of certain debt covenants. Income is not being accrued. As of June 30, 2004, the value of these securities amounted to $1,634,406, which represents 0.3% of net assets. (f)Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, these securities amounted to $34,771,917, which represents 7.4% of net assets. (g)Security purchased on a delayed delivery basis. (h)The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment principal and interest. (i)The security or a portion of the security pledged as collateral for open futures contracts. At June 30, 2004, the total market value of securities pledged amounted to $1,726,263. (j)Variable rate security. The interest rate shown reflects the rate as of June 30, 2004. (k)Variable rate demand notes. These securities are payable on demand and are secured by letters of credit or other credit support agreements from banks. The interest rates change periodically and the interest rates shown reflect the rates as of June 30, 2004. (l)Cost for federal income tax purposes is $465,790,657. (m)Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At June 30, 2004, the Fund held the following open short futures contracts: AGGREGATE EXPIRATION UNREALIZED TYPE VALUE FACE VALUE DATE DEPRECIATION -------- -------- ------------ ----------- ------------ 10-Year U.S. Treasury Note $53,293,875 $52,680,526 Sept-2004 $(613,349) ACRONYM NAME -------- ---- ABAG Association of Bay Area Government AMT Alternative Minimum Tax See notes to financial statements. 30
STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund ($) ------------------------------------------ ----------------------------------------------------------------------------- Assets Investments, at cost 466,083,390 ----------- Investments, at value 462,834,779 Cash 83,426 Receivable for: Investments sold 734,067 Fund shares sold 550,794 Interest 7,490,343 Deferred Trustees' compensation plan 12,740 ----------- Total Assets 471,706,149 ----------------------------------------------------------------------------- Liabilities Payable for: Investments purchased on a delayed delivery basis 285,000 Fund shares repurchased 728,363 Futures variation margin 469,688 Distributions 1,144,055 Investment advisory fee 156,759 Administration fee 43,534 Transfer agent fee 20,962 Pricing and bookkeeping fees 21,575 Trustees' fees 115 Custody fee 1,976 Distribution and service fees 45,875 Deferred Trustees' fees 12,740 Other liabilities 64,091 ----------- Total Liabilities 2,994,733 Net Assets 468,711,416 ----------------------------------------------------------------------------- Composition of Net Assets Paid-in capital 495,627,342 Undistributed net investment income 780,462 Accumulated net realized loss (23,834,428) Net unrealized depreciation on: Investments (3,248,611) Futures contracts (613,349) Net Assets 468,711,416 ----------------------------------------------------------------------------- Class A Net assets 77,738,302 Shares outstanding 7,089,810 Net asset value per share 10.96(a) Maximum offering price per share ($10.96/0.9525) 11.51(b) ----------------------------------------------------------------------------- Class B Net assets 39,096,991 Shares outstanding 3,565,623 Net asset value and offering price per share 10.96(a) ----------------------------------------------------------------------------- Class C Net assets 10,482,193 Shares outstanding 955,981 Net asset value and offering price per share 10.96(a) ----------------------------------------------------------------------------- Class Z Net assets 341,393,930 Shares outstanding 31,137,270 Net asset value, offering and redemption price per share 10.96 (a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements. 31
STATEMENT OF OPERATIONS -------------------------------------------------------------------------------- For the Year Ended June 30, 2004 Columbia High Yield Municipal Fund ($) ------------------------------------------ ----------------------------------------------------------------------------- Investment Income Interest 26,273,284 Dividends 13,385 ----------- Total Investment Income 26,286,669 ----------------------------------------------------------------------------- Expenses Investment advisory fee 1,847,914 Administration fee 518,228 Distribution fee: Class B 346,056 Class C 78,111 Service fee: Class A 157,955 Class B 92,282 Class C 20,817 Transfer agent fee 412,661 Pricing and bookkeeping fees 166,769 Trustees' fees 18,763 Custody fee 25,268 Non-recurring costs (See Note 7) 20,432 Other expenses 65,850 ----------- Total Expenses 3,771,106 Fees waived by Distributor - Class C (15,661) Non-recurring costs assumed by Investment Advisor (See Note 7) (20,432) Custody earnings credit (2,015) ----------- Net Expenses 3,732,998 ----------- Net Investment Income 22,553,671 ----------------------------------------------------------------------------- Net Realized and Unrealized Net realized gain (loss) on: Gain (Loss) on Investments Investments (4,130,273) and Futures Contracts Futures contracts 1,294,678 ----------- Net realized loss (2,835,595) ----------- Net change in unrealized appreciation/depreciation on: Investments (9,098,296) Futures contracts (803,599) ----------- Net change in unrealized appreciation/depreciation (9,901,895) ----------- Net Loss (12,737,490) ----------- Net Increase in Net Assets from Operations 9,816,181 See notes to financial statements.
32 STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Year Ended June 30, ------------------------- Increase (Decrease) in Net Assets: 2004($) 2003(a)($) ------------------------------------------ ----------------------------------------------------------------------------- Operations Net investment income 22,553,671 18,325,751 Net realized loss on investments and futures contracts (2,835,595) (3,496,306) Net change in unrealized appreciation/depreciation on investments and futures contracts (9,901,895) 6,334,881 -------------------------- Net Increase from Operations 9,816,181 21,164,326 ----------------------------------------------------------------------------- Distributions Declared to Shareholders From net investment income: Class A (3,706,340) (4,696,423) Class B (1,815,192) (3,013,907) Class C (424,459) (296,718) Class Z (15,175,224) (13,994,707) -------------------------- Total Distributions Declared to Shareholders (21,121,215) (22,001,755) ----------------------------------------------------------------------------- Share Transactions Class A: Subscriptions 16,363,219 18,354,905 Proceeds received in connection with merger -- 76,068,209 Distributions reinvested 1,627,683 2,010,003 Redemptions (16,560,731) (17,674,390) -------------------------- Net Increase 1,430,171 78,758,727 Class B: Subscriptions 4,301,221 7,804,555 Proceeds received in connection with merger -- 58,601,899 Distributions reinvested 790,221 1,355,241 Redemptions (16,184,713) (16,111,056) -------------------------- Net Increase (Decrease) (11,093,271) 51,650,639 Class C: Subscriptions 5,046,875 6,010,197 Proceeds received in connection with merger -- 4,760,489 Distributions reinvested 189,787 110,517 Redemptions (3,607,047) (1,770,277) -------------------------- Net Increase 1,629,615 9,110,926 Class Z: Subscriptions 159,946,744 81,763,744 Distributions reinvested 6,658,155 10,235,595 Redemptions (62,076,415) (60,473,287) -------------------------- Net Increase 104,528,484 31,526,052 Net Increase from Share Transactions 96,494,999 171,046,344 Total Increase in Net Assets 85,189,965 170,208,915 ----------------------------------------------------------------------------- Net Assets Beginning of period 383,521,451 213,312,536 End of period (including undistributed (overdistributed) net investment income of $780,462 and $(646,929), respectively) 468,711,416 383,521,451 (a) On July 29, 2002, the existing Fund Class S shares were redesignated Class Z shares. Class B and Class C shares were initially offered on July 15, 2002.
See notes to financial statements. 33
-------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Year Ended June 30, ------------------------- 2004($) 2003(a)($) ------------------------------------------ ----------------------------------------------------------------------------- Changes in Shares Class A: Subscriptions 1,465,019 1,639,804 Issued in connection with merger -- 6,725,748 Issued for distributions reinvested 146,315 177,053 Redemptions (1,487,321) (1,580,530) -------------------------- Net Increase 124,013 6,962,075 Class B: Subscriptions 386,742 696,631 Issued in connection with merger -- 5,181,423 Issued for distributions reinvested 71,050 121,313 Redemptions (1,452,718) (1,438,818) -------------------------- Net Increase (Decrease) (994,926) 4,560,549 Class C: Subscriptions 452,312 537,281 Issued in connection with merger -- 420,910 Issued for distributions reinvested 17,051 9,891 Redemptions (323,401) (158,063) -------------------------- Net Increase 145,962 810,019 Class Z: Subscriptions 14,361,735 7,296,394 Issued for distributions reinvested 598,631 915,399 Redemptions (5,590,536) (5,385,102) -------------------------- Net Increase 9,369,830 2,826,691 (a) On July 29, 2002, the existing Fund Class S shares were redesignated Class Z shares. Class B and Class C shares were initially offered on July 15, 2002.
See notes to financial statements. 34 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Note 1. Organization Columbia High Yield Municipal Fund (the "Fund"), a series of Columbia Funds Trust IX (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Investment Goal The Fund seeks a high level of total return consisting of current income exempt from federal income tax and opportunities for capital appreciation. Fund Shares The Fund may issue an unlimited number of shares and offers four classes of shares: Class A, Class B, Class C and Class Z. Each share class has its own sales charge and expense structure. Class A shares are subject to a maximum front-end sales charge of 4.75% based on the amount of initial investment. Class A shares purchased without an initial sales charge are subject to a 1.00% contingent deferred sales charge ("CDSC") on shares sold within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a maximum CDSC of 5.00% based upon the holding period after purchase. Class B shares will convert to Class A shares in a certain number of years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a 1.00% CDSC on shares sold within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. Note 2. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. Security Valuation Debt securities generally are valued by a pricing service approved by the Fund's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments in other investment companies are valued at net asset value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Options are valued at the last reported sale price, or in the absence of a sale, the mean between the last quoted bid and ask price. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Security Transactions Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. 35 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Futures Contracts The Fund may invest in municipal and U.S. Treasury futures contracts. The Fund may invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Fund and not for trading purposes. The use of futures contracts involves certain risks, which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to differing trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities, or (3) an inaccurate prediction by Columbia Management Advisors, Inc. of the future direction of interest rates. Any of these risks may involve amounts exceeding the variation margin recorded in the Fund's Statement of Assets and Liabilities at any given time. Upon entering into a futures contract, the Fund deposits cash or securities with the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin payable or receivable and offset in unrealized gains or losses. The Fund also identifies portfolio securities as segregated with the custodian in a separate account in an amount equal to the futures contract. The Fund recognizes a realized gain or loss when the contract is closed or expires. Options The Fund may write call and put options on futures it owns or in which it may invest. Writing put options tends to increase the Fund's exposure to the underlying instrument. Writing call options tends to decrease the Fund's exposure to the underlying instrument. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked-to-market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. The Fund may also purchase put and call options. Purchasing call options tends to increase the Fund's exposure to the underlying instrument. Purchasing put options tends to decrease the Fund's exposure to the underlying instrument. The Fund pays a premium, which is included in the Fund's Statement of Assets and Liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future transaction to determine the realized gain or loss. The Fund's custodian will set aside cash or liquid portfolio securities equal to the amount of the written options contract commitment in a separate account. Restricted Securities Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Fund will not incur any registration costs upon such resale. Delayed Delivery Securities The Fund may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. This may increase the risk if the other party to the transaction fails to deliver and causes the Fund to subsequently invest at less 36 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund advantageous prices. The Fund identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. Income Recognition Interest income is recorded on the accrual basis. Original issue discount is accreted to interest income over the life of the security with a corresponding increase in the cost basis. Premium and discount are amortized and accreted, respectively, on all debt securities. Dividend income is recorded on the ex-date. Determination of Class Net Asset Values All income, expenses (other than class-specific expenses, as shown on the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. Federal Income Tax Status The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable or tax-exempt income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. Distributions to Shareholders Dividends from net investment income are declared daily and paid monthly. Net realized capital gains from investment transactions in excess of available capital loss carryforwards would be taxable to the Fund if not distributed and therefore are distributed at least annually. Note 3. Federal Tax Information The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended June 30, 2004, permanent differences resulting primarily from differing treatments for amortization/accretion adjustments and market discount reclassification adjustments were identified and reclassified among the components of the Fundnet assets as follows: Undistributed Accumulated Net Investment Net Realized Paid-In Income Loss Capital ------------------------------------------------------------- $(5,065) $5,065 $-- Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended June 30, 2004 and June 30, 2003 was as follows: June 30, 2004 June 30, 2003 ----------------------------------------------------------- Distributions paid from: ----------------------------------------------------------- Tax-Exempt Income $21,095,918 $21,999,954 ----------------------------------------------------------- Ordinary Income* 25,297 1,801 ----------------------------------------------------------- Long-Term Capital Gains -- -- ----------------------------------------------------------- * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of June 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Undistributed Tax-Exempt Ordinary Long-Term Net Unrealized Income Income Capital Gains Depreciation* ---------------------------------------------------------------- $2,166,430 $-- $-- $ (2,955,878) * The differences between book-basis and tax-basis net unrealized depreciation are primarily due to amortization/accretion adjustments. Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 15,974,115 Unrealized depreciation (18,929,993) -------------------------------------------------------- Net unrealized depreciation $ (2,955,878) -------------------------------------------------------- 37 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund The following capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: Year of Capital Loss Expiration Carryforward -------------------------------------------------------- 2005 $ 1,525,965 -------------------------------------------------------- 2006 5,933,974 -------------------------------------------------------- 2007 1,931,613 -------------------------------------------------------- 2008 2,738,332 -------------------------------------------------------- 2009 1,928,565 -------------------------------------------------------- 2010 1,780,434 -------------------------------------------------------- 2011 697,947 -------------------------------------------------------- 2012 1,587,432 -------------------------------------------------------- Total $18,124,262 -------------------------------------------------------- Of the capital loss carryforwards attributable to the Fund, $8,372,400 ($1,525,965 will expire on June 30, 2005, $1,931,613 will expire on June 30, 2007, $2,738,332 will expire on June 30, 2008, $1,081,414 will expire on June 30, 2009 and $1,095,076 will on June 30, 2010) was obtained in the merger with Liberty High Yield Municipal Fund. Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of June 30, 2004, post-October capital losses of $3,037,305 attributed to security transactions were deferred to July 1, 2004. Note 4. Fees and Compensation Paid to Affiliates Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. Investment Advisory Fee Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: Average Daily Net Assets Annual Fee Rate -------------------------------------------------------- First $100 million 0.450% -------------------------------------------------------- Next $100 million 0.425% -------------------------------------------------------- Over $200 million 0.400% -------------------------------------------------------- For the year ended June 30, 2004, the Fund's effective investment advisory fee rate was 0.42%. Administration Fee Columbia provides administrative and other services to the Fund for a monthly administration fee based on the Fund's average daily net assets at the following annual rates: Average Daily Net Assets Annual Fee Rate -------------------------------------------------------- First $100 million 0.150% -------------------------------------------------------- Next $100 million 0.125% -------------------------------------------------------- Over $200 million 0.100% -------------------------------------------------------- For the year ended June 30, 2004, the Fund's effective administration fee rate was 0.12%. Pricing and Bookkeeping Fees Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the year ended June 30, 2004, the Fund's effective pricing and bookkeeping fee rate was 0.038%. 38 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Transfer Agent Fee Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $34.00 per open account. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly transfer agent fee at the annual rate of 0.06% of the Fund's average daily net assets plus flat-rate charges based on the number of shareholder accounts and transactions. The Transfer Agent was also entitled to receive reimbursement for certain out-of-pocket expenses. For the year ended June 30, 2004, the Fund's effective transfer agent fee rate, inclusive of out-of-pocket expenses, was 0.09%. Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia Funds Services, Inc. Underwriting Discounts, Service and Distribution Fees Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. For the year ended June 30, 2004, the Distributor has retained net underwriting discounts of $16,980 on sales of the Fund's Class A shares and received CDSC fees of $88,920 and $4,728 on Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a monthly service fee to the Distributor. The service fee is equal to 0.20% annually of the average daily net assets attributable to Class A, Class B and Class C shares. The Plan also requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.75% of the average daily net assets attributable to Class B and Class C shares only. The Distributor has voluntarily agreed to waive a portion of the Class C share distribution fee so that it will not exceed 0.60% annually. The CDSC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. Effective October 13, 2003, Liberty Funds Distributor, Inc. was renamed Columbia Funds Distributor, Inc. Custody Credits The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. Fees Paid to Officers and Trustees The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. Other Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended June 30, 2004, the Fund paid $1,941 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. Note 5. Portfolio Information For the year ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $146,848,026 and $40,541,762, respectively. Note 6. Line of Credit The Fund and other affiliated funds participate in a $350,000,000 credit facility, which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to the Fund based on its borrowings. In addition, the Fund has agreed to pay commitment fees on its pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. For the year ended June 30, 2004, the Fund did not borrow under this arrangement. 39 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund Note 7. Disclosure of Significant Risks and Contingencies High-Yield Securities Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid to the extent there is no established secondary market. Industry Focus The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. Legal Proceedings Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. 40 -------------------------------------------------------------------------------- June 30, 2004 Columbia High Yield Municipal Fund For the year ended June 30, 2004, Columbia has assumed $20,432 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. Note 8. Business Combinations and Mergers Name Change Effective October 13, 2003, the Fund changed its name from Liberty High Yield Municipal Fund to Columbia High Yield Municipal Fund. Also on that date, the Trust changed its name from Liberty-Stein Roe Funds Municipal Trust to Columbia Funds Trust IX. Effective July 15, 2002, the Stein Roe High-Yield Municipals Fund was renamed Liberty High Yield Municipal Fund and began offering Class B and Class C shares. Effective July 15, 2002, the Class S shares were subsequently redesignated Class Z shares. Fund Mergers As of the end of business on July 12, 2002, the Stein Roe High-Yield Municipals Fund acquired all the net assets of Liberty High Yield Municipal Fund pursuant to a plan of reorganization approved by Liberty High Yield Municipal Fund shareholders on June 28, 2002. All assets of Liberty High Yield Municipal Fund were transferred to Stein Roe High-Yield Municipals Fund in a tax-free exchange and shareholders of Liberty High Yield Municipal Fund received shares of Stein Roe High-Yield Municipals Fund in exchange for their shares as follows: Stein Roe Liberty High High-Yield Yield Municipal Municipals Fund Fund Net Unrealized Shares Issued Assets Received Depreciation1 --------------------------------------------------------------- 12,328,081 $139,430,597 $(2,726,785) Net Assets Net Assets Net Assets of Liberty of Stein Roe of Stein Roe High Yield High-Yield High-Yield Municipal Fund Municipals Fund Municipals Fund Immediately Immediately Prior to Prior to After Combination Combination Combination ---------------------------------------------------------------- $218,007,534 $139,430,597 $357,438,131 1 Unrealized depreciation is included in the Net Assets Received amount shown above. Change in Fund Structure Prior to July 15, 2002, the Stein Roe High-Yield Municipals Fund invested substantially all of its assets in the SR&F High-Yield Municipals Portfolio (the "Portfolio") as part of a master/feeder structure. The Portfolio allocated income, expenses, realized and unrealized gains and losses to its investors on a daily basis, based upon methods in compliance with the Internal Revenue Service. Prior to the reorganization described above, the Fund's pro-rata share of the Portfolio was distributed to Stein Roe High-Yield Municipals Fund based on allocation methods in compliance with the Internal Revenue Service. 41 FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Selected data for a share outstanding throughout each period is as follows:
Period Year Ended June 30, Ended ----------------------------------------------------- June 30, Class A Shares 2004 2003 2002 2001 (a) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 11.25 $ 11.26 $ 11.13 $ 11.11 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income (b) 0.56 0.60 0.61(c) 0.58 Net realized and unrealized gain (loss) on investments and futures contracts (0.33) 0.11 0.15(c) 0.01 -------- -------- -------- -------- Total from Investment Operations 0.23 0.71 0.76 0.59 -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.52) (0.72) (0.63) (0.57) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.96 $ 11.25 $ 11.26 $ 11.13 Total return (d) 2.10% 6.58% 6.93% 5.42%(e) -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (f) 0.89% 1.07% 1.13% 1.06%(g) Net investment income (f) 5.04% 5.39% 5.41%(c) 5.65%(g) Portfolio turnover rate 10% 17% 16%(h) 16%(h) Net assets, end of period (000's) $77,738 $78,335 $ 42 $ 1 --------------------------------------------------------------------------------------------------------------------------------
(a) Class A shares were initially offered on July 31, 2000. Per share data and total return reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective July 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended June 30, 2002 was to increase the ratio of net investment income to average net assets from 5.37% to 5.41%. The impact to the net investment income and the net realized and unrealized gain was less than $0.01. Per share data and ratios for periods prior to June 30, 2002 have not been restated to reflect this change in presentation. (d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (e) Not annualized. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g) Annualized. (h) Portfolio turnover rate disclosed is for the SR&F High-Yield Municipals Portfolio. 42 -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Selected data for a share outstanding throughout each period is as follows:
Period Year Ended Ended June 30, June 30, Class B Shares 2004 2003 (a) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 11.25 $ 11.31 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income (b) 0.48 0.51 Net realized and unrealized gain (loss) on investments and futures contracts (0.33) 0.05 -------- -------- Total from Investment Operations 0.15 0.56 -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.44) (0.62) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.96 $ 11.25 Total return (c) 1.33% 5.14%(d) -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (e) 1.64% 1.81%(f) Net investment income (e) 4.29% 4.70%(f) Portfolio turnover rate 10% 17% Net assets, end of period (000's) $ 39,097 $ 51,292 --------------------------------------------------------------------------------------------------------------------------------
(a) Class B shares were initially offered on July 15, 2002. Per share data and total return reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (d) Not annualized. (e) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f) Annualized. 43 -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Selected data for a share outstanding throughout each period is as follows:
Period Year Ended Ended June 30, June 30, Class C Shares 2004 2003 (a) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 11.25 $ 11.31 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income (b) 0.49 0.51 Net realized and unrealized gain (loss) on investments and futures contracts (0.32) 0.07 -------- -------- Total from Investment Operations 0.17 0.58 -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.46) (0.64) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.96 $ 11.25 Total return (c)(d) 1.48% 5.29%(e) -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (f) 1.49% 1.67%(g) Net investment income (f) 4.44% 4.75%(g) Waiver/reimbursement 0.15% 0.15%(g) Portfolio turnover rate 10% 17% Net assets, end of period (000's) $ 10,482 $ 9,110 --------------------------------------------------------------------------------------------------------------------------------
(a) Class C shares were initially offered on July 15, 2002. Per share data and total return reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (d) Had the Distributor not waived a portion of expenses, total return would have been reduced. (e) Not annualized. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g) Annualized. 44 -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Selected data for a share outstanding throughout each period is as follows:
Year Ended June 30, -------------------------------------------------------------------------------- Class Z Shares 2004 2003 (a) 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 11.25 $ 11.26 $ 11.12 $ 11.04 $ 11.71 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income 0.58(b) 0.63(b) 0.64(b)(c) 0.65(b) 0.65 Net realized and unrealized gain (loss) on investments and futures contracts (0.32) 0.11 0.15(c) 0.08 (0.68) -------- -------- -------- -------- -------- Total from Investment Operations 0.26 0.74 0.79 0.73 (0.03) -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.55) (0.75) (0.65) (0.65) (0.64) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 10.96 $ 11.25 $ 11.26 $ 11.12 $ 11.04 Total return (d) 2.33% 6.82% 7.30% 6.78% (0.16)% -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (e) 0.69% 0.86% 0.88% 0.81% 0.78% Net investment income (e) 5.24% 5.59% 5.66%(c) 5.86% 5.82% Portfolio turnover rate 10% 17% 16%(f) 16%(f) 14%(f) Net assets, end of period (000's) $341,394 $244,784 $213,271 $224,950 $253,787 --------------------------------------------------------------------------------------------------------------------------------
(a) On July 15, 2002, the existing Fund Class S shares were redesignated Class Z shares. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective July 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended June 30, 2002 was to increase the ratio of net investment income to average net assets from 5.62% to 5.66%. The impact to the net investment income and the net realized and unrealized gain was less than $0.01. Per share data and ratios for periods prior to June 30, 2002 have not been restated to reflect this change in presentation. (d) Total return at net asset value assuming all distributions reinvested. (e) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f) Portfolio turnover rate disclosed is for the SR&F High-Yield Municipals Portfolio. 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund To the Trustees of Columbia Funds Trust IX and the Shareholders of Columbia High Yield Municipal Fund In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Columbia High Yield Municipal Fund (the "Fund") (formerly Liberty High Yield Municipal Fund) (a series of Columbia Funds Trust IX, formerly Liberty-Stein Roe Funds Municipal Trust) at June 30, 2004, and the results of its operations, the changes in its net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at June 30, 2004 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. The financial statements of the Fund as of June 30, 2003 and for each of the periods specified therein were audited by other independent accountants whose report dated August 19, 2003 expressed an unqualified opinion on those statements. PricewaterhouseCoopers LLP Boston, Massachusetts August 17, 2004 46 UNAUDITED INFORMATION -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Federal Income Tax Information 99.88% of the distributions from net investment income will be treated as exempt income for federal income tax purposes. 47 TRUSTEES -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth had been directors of 15 Columbia Funds and 20 funds in the CMG Fund Trust. Also effective October 8, 2003, the incumbent trustees of the Fund were elected as directors of the 15 Columbia Funds and as trustees of the 20 funds in the CMG Fund Trust. The new combined Board of Trustees/Directors of the Fund now oversees 118 funds in the Columbia Funds Complex (including the former Liberty Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of these trustees/directors also serve on the Boards of other funds in the Columbia Funds Complex. The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
Name, address and age, Position with funds, Principal occupation(s) during past five years, Number of portfolios in Columbia Funds Year first elected or appointed to office(1) complex overseen by trustee/director, Other directorships held DISINTERESTED TRUSTEES DOUGLAS A. HACKER (age 48) Executive Vice President-Strategy of United Airlines (airline) since December 2002 P.O. Box 66100 (formerly President of UAL Loyalty Services (airline) from September 2001 to December Chicago, IL 60666 2002; Executive Vice President and Chief Financial Officer of United Airlines from Trustee (since 1996) July 1999 to September 2001). Oversees 118, Orbitz (online travel company) -------------------------------------------------------------------------------------- JANET LANGFORD KELLY (age 46) Private Investor since March 2004 (formerly Chief Administrative Officer and Senior 9534 W. Gull Lake Drive Vice President, Kmart Holding Corporation (consumer goods) from September 2003 to Richland, MI 49083-8530 March 2004; Executive Vice President- Corporate Development and Administration, Trustee (since 1996) General Counsel and Secretary, Kellogg Company (food manufacturer), from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September 1999). Oversees 118, None -------------------------------------------------------------------------------------- RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive Officer, 10701 Charleston Drive U.S. Plywood Corporation (building products manufacturer)). Oversees 1203, None Vero Beach, FL 32963 Trustee (since 1995) -------------------------------------------------------------------------------------- CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January 1976; Ford and Louisa Department of Economics Van Voorhis Professor of Political Economy, University of Washington, since September University of Washington 1993; (formerly Director, Institute for Economic Research, University of Washington Seattle, WA 98195 from September 2001 to June 2003) Adjunct Professor of Statistics, University of Trustee (since 1981) Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None -------------------------------------------------------------------------------------- JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College 84 College Road (formerly Dean, Boston College School of Management from September 1977 to September Chestnut Hill, MA 02467-3838 1999). Oversees 1213,4, Saucony, Inc. (athletic footwear and apparel) Trustee (since 1985) --------------------------------------------------------------------------------------
48 -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund
Name, address and age, Position with funds, Principal occupation(s) during past five years, Number of portfolios in Columbia Funds Year first elected or appointed to office(1) complex overseen by trustee/director, Other directorships held DISINTERESTED TRUSTEES PATRICK J. SIMPSON (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None 1120 N.W.Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000) -------------------------------------------------------------------------------------- THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, 2208 Tawny Woods Place College of Business, Boise State University); Chartered Financial Analyst. Boise, ID 83706 Oversees 118, None Trustee (since 1998) -------------------------------------------------------------------------------------- THOMAS C. THEOBALD (age 67) Managing Director, William Blair Capital Partners (private equity investing) since 227 West Monroe Street, September 1994. Oversees 118, Anixter International (network support equipment Suite 3500 distributor), Jones Lang LaSalle (real estate management services) and Ventas, Inc Chicago, IL 60606 (real estate investment trust) Trustee and Chairman of the Board5 (since 1996) -------------------------------------------------------------------------------------- ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM 359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 1194, Chairman of Hopkinton, NH 03229 the Board of Directors, Enesco Group, Inc. (designer, importer and distributor of Trustee (since 1998) giftware and collectibles) -------------------------------------------------------------------------------------- RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The 100 S.W. Market Street #1500 Regence Group (regional health insurer); Chairman and Chief Executive Officer, Portland, OR 97207 BlueCross BlueShield of Oregon; Certified Public Accountant. Oversees 118, Northwest Trustee (since 1991) Natural Gas Co. (natural gas service provider) -------------------------------------------------------------------------------------- INTERESTED TRUSTEES WILLIAM E. MAYER2 (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since February 1999 399 Park Avenue (formerly Founding Partner, Development Capital LLC from November 1996 to February Suite 3204 1999). Oversees 1203, Lee Enterprises (print media), WR Hambrecht + Co. (financial New York, NY 10022 service provider), First Health (healthcare), Reader's Digest (publishing) and Trustee (since 1994) OPENFIELD Solutions (retail industry technology provider) --------------------------------------------------------------------------------------
(1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. (5) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. 49 OFFICERS -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund
Name, address and age, Position with Columbia Funds, Year first elected or appointed to office Principal occupation(s) during past five years VICKI L. BENJAMIN (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty All-Star Funds since One Financial Center June 2001; Assistant Treasurer of Columbia Acorn and Wanger Funds since June Boston, MA 02111 2004 (formerly Controller of the Columbia Funds and of the Liberty All-Star Chief Accounting Officer (since 2001) Funds from May 2002 to May 2004); Controller and Chief Accounting Officer of the Galaxy Funds since September 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001). ------------------------------------------------------------------------------- MICHAEL CLARKE (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds since 2004; One Financial Center Assistant Treasurer of Columbia Acorn and Wanger Funds since June 2004 Boston, MA 02111 (formerly Assistant Treasurer of the Columbia Funds and of the Liberty All-Star Controller (since 2004) Funds from June 2002 to May 2004; Vice President, Product Strategy & Development of Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999). ------------------------------------------------------------------------------- J. KEVIN CONNAUGHTON (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer of the One Financial Center Columbia Funds and of the Liberty All-Star Funds since December 2000; Vice Boston, MA 02111 President of the Advisor since April 2003 (formerly Chief Accounting Officer Treasurer (since 2000) and President (since 2004) and Controller of the Liberty Funds and Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December 2002 (formerly Vice President of Colonial from February 1998 to October 2000). ------------------------------------------------------------------------------- DAVID A. ROZENSON (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds since One Financial Center December 2003; Senior Counsel, Bank of America Corporation (formerly Boston, MA 02111 FleetBoston Financial Corporation) since January 1996; Associate Counsel, Secretary (since 2003) Columbia Management Group since November 2002.
50 COLUMBIA FUNDS -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund --------------------------------------------- Large Growth Columbia Common Stock Columbia Growth Columbia Growth Stock Columbia Large Cap Growth Columbia Tax-Managed Growth Columbia Tax-Managed Growth II Columbia Young Investor --------------------------------------------- Large Value Columbia Disciplined Value Columbia Growth & Income Columbia Large Cap Core Columbia Tax-Managed Value --------------------------------------------- Midcap Growth Columbia Acorn Select Columbia Mid Cap Growth Columbia Tax-Managed Aggressive Growth --------------------------------------------- Midcap Value Columbia Dividend Income Columbia Mid Cap Columbia Strategic Investor --------------------------------------------- Small Growth Columbia Acorn Columbia Acorn USA Columbia Small Company Equity --------------------------------------------- Small Value Columbia Small Cap Columbia Small Cap Value --------------------------------------------- Balanced Columbia Asset Allocation Columbia Balanced Columbia Liberty Fund --------------------------------------------- Specialty Columbia Real Estate Equity Columbia Technology Columbia Utilities --------------------------------------------- Taxable Fixed-Income Columbia Contrarian Income Columbia Corporate Bond Columbia Federal Securities Columbia Fixed Income Securities Columbia High Yield Columbia High Yield Opportunities Columbia Income Columbia Intermediate Bond Columbia Intermediate Government Income Columbia Quality Plus Bond Columbia Short Term Bond Columbia Strategic Income --------------------------------------------- Floating Rate Columbia Floating Rate Columbia Floating Rate Advantage --------------------------------------------- Tax Exempt Columbia High Yield Municipal Columbia Intermediate Tax-Exempt Bond Columbia Managed Municipals Columbia National Municipal Bond Columbia Tax-Exempt Columbia Tax-Exempt Insured 51 -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund --------------------------------------------- Single State Tax Exempt Columbia California Tax-Exempt Columbia Connecticut Intermediate Municipal Bond Columbia Connecticut Tax-Exempt Columbia Florida Intermediate Municipal Bond Columbia Massachusetts Intermediate Municipal Bond Columbia Massachusetts Tax-Exempt Columbia New Jersey Intermediate Municipal Bond Columbia New York Intermediate Municipal Bond Columbia New York Tax-Exempt Columbia Oregon Municipal Bond Columbia Pennsylvania Intermediate Municipal Bond Columbia Rhode Island Intermediate Municipal Bond --------------------------------------------- Money Market Columbia Money Market Columbia Municipal Money Market --------------------------------------------- International/Global Columbia Acorn International Columbia Acorn International Select Columbia Europe Columbia Global Equity Columbia International Equity Columbia International Stock Columbia Newport Asia Pacific Columbia Newport Greater China Columbia Newport Tiger --------------------------------------------- Index Columbia Large Company Index Columbia Small Company Index Columbia U.S. Treasury Index Please consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. Contact us at 800-345-6611 for a prospectus which contains this and other important information about the fund. Read it carefully before you invest. For complete product information on any Columbia fund, visit our website at www.columbiafunds.com. Columbia Management Group and Columbia Management refer collectively to the various investment advisory subsidiaries of Columbia Management Group, including Columbia Management Advisors, Inc., the registered investment advisor, and Columbia Funds Distributor, Inc. 52 IMPORTANT INFORMATION ABOUT THIS REPORT -------------------------------------------------------------------------------- Columbia High Yield Municipal Fund Transfer Agent Columbia Funds Services, Inc. P.O. Box 8081 Boston MA 02266-8081 800.345.6611 Distributor Columbia Funds Distributor, Inc. One Financial Center Boston MA 02111 Investment Advisor Columbia Management Advisors, Inc. 100 Federal Street Boston MA 02110 Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP 125 High Street Boston MA 02110 The funds mail one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800-345-6611 and additional reports will be sent to you. This report has been prepared for shareholders of Columbia High Yield Municipal Fund. This report may also be used as sales literature when preceded or accompanied by the current prospectus which provides details of sales charges, investment objectives and operating policies of the funds and with the most recent copy of the Columbia Funds Performance Update. A description of the policies and procedures that fund's use to determine how to vote proxies relating to their portfolio securities and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov and (iii) without charge, upon request, by calling 800-368-0346. Please note that on March 1, 2004, Ernst & Young LLP ("E&Y") resigned as the fund's independent registered public accounting firm. During the two most recent fiscal years, E&Y's audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope, or accounting principle. Further, in connection with its audits for the two most recent fiscal years and through March 1, 2004, there were no disagreements between the fund and E&Y on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of E&Y would have caused it to make reference to the disagreement in its report on the financial statements for such years. Effective March 1, 2004, PricewaterhouseCoopers LLP was appointed by the audit committee of the Board of Trustees as the independent registered public accounting firm of the fund for the fiscal year ended June 30, 2004. 53 [eDELIVERY LOGO] Help your fund reduce printing and postage costs! Elect to get your shareholder reports by electronic delivery. With Columbia's eDelivery program, you receive an e-mail message when your shareholder report becomes available online. If your fund account is registered with Columbia Funds, you can sign up quickly and easily on our website at www.columbiafunds.com. Please note -- if you own your fund shares through a financial institution, contact the institution to see if it offers electronic delivery. If you own your fund shares through a retirement plan, electronic delivery may not be available to you. Columbia High Yield Municipal Fund ANNUAL REPORT, JUNE 30, 2004 PRSRT STD U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 [EAGLE HEAD LOGO]: COLUMBIA FUNDS A MEMBER OF COLUMBIA MANAGEMENT GROUP [C]2004 Columbia Funds Distributor, Inc. One Financial Center, Boston, MA 02111-2621 800.345.6611 www.columbiafunds.com 752-02/224S-0604 (08/04) 04/1766 COLUMBIA MANAGED MUNICIPALS FUND Annual Report June 30, 2004 [photo of man on laptop computer] [LOGO]: COLUMBIA FUNDS A MEMBER OF COLUMBIA MANGEMENT GROUP Table of Contents Fund Profile 1 Performance Information 2 Economic Update 3 Portfolio Manager's Report 4 Investment Portfolio 6 Statement of Assets and Liabilities 21 Statement of Operations 22 Statement of Changes in Net Assets 23 Notes to Financial Statements 25 Financial Highlights 32 Report of Independent Registered Public Accounting Firm 36 Unaudited Information 37 Trustees 38 Officers 40 Important Information About This Report 41 Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE TO OUR FELLOW SHAREHOLDERS -------------------------------------------------------------------------------- Columbia Managed Municipals Fund DEAR SHAREHOLDER: We are pleased to let you know that FleetBoston Financial Corporation and Bank of America Corporation have merged, effective April 1, 2004. As a result of the merger, Columbia Management Group became part of the Bank of America family of companies. Looking ahead, we believe this merger will be a real benefit to our shareholders. Preserving and leveraging our strengths, the combined organization intends to deliver additional research and management capabilities, as well as new products to you. There are no immediate changes planned for fund names or customer service contacts. As you might know, on March 15, 2004, FleetBoston Financial announced an agreement in principle between Columbia Management Advisors, Inc. and Columbia Funds Distributor, Inc. (collectively "Columbia Management") with the staff of the Securities and Exchange Commission ("SEC") and the New York Attorney General ("NYAG") to settle charges involving market timing in Columbia Management mutual funds. (Bank of America came to a similar settlement in principle at the same time.) Under the agreements Columbia Management agreed, among other things, to pay $70 million in disgorgement; $70 million in civil penalties and to reduce mutual fund fees by $80 million over a five-year period. Please rest assured that the settlement and all associated legal fees will be paid by Columbia Management; not by the affected funds or their shareholders. The agreement requires the final approval of the SEC and the NYAG. We want you to know that all of the members of your fund's Board of Trustees are independent of the fund's advisor and its affiliates. In addition, the board has been energetic over the past year in strengthening its capacity to oversee the Columbia funds. Recently, the Board of Trustees: o APPOINTED AN INTERIM CHIEF COMPLIANCE OFFICER OF THE COLUMBIA FUNDS, WHO REPORTS DIRECTLY TO EACH FUND'S AUDIT COMMITTEE. TRUSTEES WERE ALSO ASSIGNED TO FOUR SEPARATE INVESTMENT OVERSIGHT COMMITTEES, EACH DEDICATED TO MONITORING PERFORMANCE OF INDIVIDUAL FUNDS. o VOTED TO DOUBLE THE REQUIRED INVESTMENT BY EACH TRUSTEE IN THE COLUMBIA FUNDS -- TO FURTHER ALIGN THE INTERESTS OF THE TRUSTEES WITH THOSE OF OUR FUND SHAREHOLDERS. AT THE SAME TIME, NEW POLICIES WERE INSTITUTED REQUIRING ALL INVESTMENT PERSONNEL AND TRUSTEES TO HOLD THEIR COLUMBIA FUND SHARES FOR A MINIMUM OF ONE YEAR (UNLESS EXTRAORDINARY CIRCUMSTANCES WARRANT AN EXCEPTION TO BE GRANTED BY SENIOR EXECUTIVES OF THE ADVISOR FOR INVESTMENT PERSONNEL AND BY A DESIGNATED COMMITTEE FOR THE BOARD). Both your fund's trustees and Columbia Management are committed to serving the interests of our shareholders, and we will continue to work hard to help you achieve your financial goals. In the pages that follow, you'll find valuable information about the economic environment during the period and the performance of your Columbia fund. These discussions are followed by financial statements for your fund. We hope that you will take time to read this report and discuss it with your financial advisor if you have any questions. As always, thank you for choosing Columbia funds. It is a privilege to play a role in your financial future. Sincerely, /s/ Thomas C. Theobald /s/ J. Kevin Connaughton Thomas C. Theobald J. Kevin Connaughton Chairman, Board of Trustees President, Columbia Funds J. Kevin Connaughton was named president of Columbia Funds on February 27, 2004. FUND PROFILE -------------------------------------------------------------------------------- Columbia Managed Municipals Fund The information below gives you a snapshot of your fund at the end of the reporting period. Your fund is actively managed and the composition of its portfolio will change over time. Quality breakdown as of 06/30/04 (%) ----------------------------------- AAA 65.3 ----------------------------------- AA 7.0 ----------------------------------- A 10.9 ----------------------------------- BBB 7.6 ----------------------------------- B 0.3 ----------------------------------- CCC 0.2 ----------------------------------- Non-rated 6.9 ----------------------------------- Cash equivalents 1.8 ----------------------------------- Top 5 sectors as of 06/30/04 (%) ----------------------------------- Refunded/escrowed 13.3 ----------------------------------- Local general obligations 13.2 ----------------------------------- Joint power authority 10.5 ----------------------------------- Water & sewer 7.5 ----------------------------------- State general obligations 7.4 ----------------------------------- Maturity breakdown as of 06/30/04 (%) ----------------------------------- 0 - 1 years 0.1 ----------------------------------- 1 - 3 years 0.9 ----------------------------------- 3 - 5 years 6.8 ----------------------------------- 5 - 7 years 6.8 ----------------------------------- 7 - 10 years 18.7 ----------------------------------- 10 - 15 years 33.9 ----------------------------------- 15 - 20 years 18.9 ----------------------------------- 20 - 25 years 4.7 ----------------------------------- 25 years and over 7.4 ----------------------------------- Cash equivalents 1.8 ----------------------------------- Sector breakdowns are calculated as a percentage of net assets. Quality and maturity breakdowns are calculated as a percentage of total investments. Ratings shown in the quality breakdown represent the highest rating assigned to a particular bond by one of the following nationally-recognized rating agencies: Standard & Poor's Corporation, Moody's Investors Service, Inc. or Fitch Ratings Ltd. (C)2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Style BoxTM reveals a fund's investment strategy. For equity funds the vertical axis shows the market capitalization of the stocks owned and the horizontal axis shows investment style (value, blend or growth). For fixed-income funds the vertical axis shows the average credit quality of the bonds owned, and the horizontal axis shows interest rate sensitivity as measured by a bond's duration (short, intermediate or long). All of these numbers are drawn from the data most recently provided by the fund and entered into Morningstar's database as of month-end. Although the data is gathered from reliable sources, Morningstar cannot guarantee completeness and accuracy. As of 06/30/2004. [SIDE BAR DATA]: Summary o For the 12-month period ended June 30, 2004, the fund's class A shares returned negative 1.20% without sales charge in an environment that was challenging for all segments of the bond market. o The fund, its benchmark and peer group all felt the pressure of rising interest rates. o Because the fund's duration was longer than its benchmark and peer group, it lost slightly more ground as municipal bond yields rose and their prices fell. [1 arrow pointing down and second arrow pointing up]: Class A shares Lehman Brothers Municipal Bond Index -1.20% 0.76% Objective Seeks high level of total return consistent with prudent risk, consisting of current income exempt from federal income tax capital appreciation Total Net Assets $425.5 million Morningstar style box Maturity/Long // Quality/High 1 PERFORMANCE INFORMATION -------------------------------------------------------------------------------- Columbia Managed Municipals Fund Performance of a $10,000 investment 07/01/1994 - 06/30/04 ($) ------------------------------------ sales charge without with ------------------------------------ Class A 17,658 16,827 ------------------------------------ Class B 17,441 17,441 ------------------------------------ Class C 17,528 17,528 ------------------------------------ Class Z 17,718 n/a ------------------------------------ Performance data quoted represents past performance and current performance may be lower or higher. Past performance is no guarantee of future results. The investment return and principal value will fluctuate so that shares may be worth more or less than the original cost. Please visit www.columbiafunds.com for daily and most recent month-end performance updates. Value of a $10,000 investment 07/01/1994 - 06/30/04 [Line chart]: Class A shares Class A shares Lehman Brothers without sales charge with sales charge Municipal Bond Index 07/1994 $10,000 $ 9,525 $10,000 10,140 9,658 10,183 10,178 9,694 10,219 10,041 9,564 10,068 9,880 9,411 9,889 9,719 9,258 9,710 9,900 9,430 9,924 10,189 9,705 10,208 10,438 9,942 10,505 10,536 10,036 10,626 10,525 10,026 10,638 10,831 10,316 10,978 10,712 10,203 10,882 10,788 10,275 10,985 10,913 10,394 11,125 10,999 10,477 11,195 11,174 10,643 11,357 11,410 10,868 11,546 11,548 10,999 11,657 11,624 11,072 11,745 11,482 10,937 11,666 11,294 10,757 11,516 11,255 10,721 11,484 11,269 10,734 11,479 11,384 10,843 11,604 11,487 10,942 11,709 11,475 10,930 11,707 11,656 11,102 11,870 11,801 11,240 12,005 12,034 11,463 12,224 11,984 11,415 12,173 11,998 11,428 12,196 12,113 11,538 12,308 11,941 11,374 12,145 12,034 11,463 12,247 12,223 11,643 12,432 12,358 11,771 12,565 12,725 12,120 12,913 12,589 11,991 12,791 12,756 12,150 12,943 12,826 12,217 13,026 12,894 12,282 13,103 13,103 12,481 13,294 13,229 12,601 13,431 13,209 12,582 13,435 13,196 12,569 13,447 13,138 12,514 13,387 13,351 12,717 13,598 13,392 12,756 13,652 13,422 12,784 13,686 13,638 12,990 13,898 13,794 13,139 14,071 13,750 13,097 14,071 13,792 13,136 14,121 13,823 13,167 14,156 14,000 13,335 14,324 13,892 13,233 14,261 13,892 13,233 14,281 13,948 13,285 14,317 13,842 13,184 14,234 13,616 12,970 14,029 13,664 13,015 14,080 13,529 12,886 13,967 13,496 12,855 13,973 13,329 12,696 13,822 13,434 12,796 13,968 13,348 12,714 13,863 13,251 12,621 13,802 13,432 12,794 13,963 13,718 13,067 14,267 13,618 12,971 14,183 13,505 12,864 14,109 13,871 13,212 14,483 14,078 13,409 14,684 14,331 13,651 14,910 14,199 13,525 14,833 14,361 13,679 14,994 14,522 13,832 15,108 15,017 14,304 15,482 15,103 14,386 15,635 15,194 14,472 15,685 15,308 14,580 15,826 14,916 14,207 15,655 15,114 14,396 15,824 15,279 14,553 15,930 15,665 14,921 16,166 16,054 15,291 16,433 15,895 15,140 16,377 16,183 15,414 16,572 15,833 15,081 16,433 15,588 14,847 16,276 15,887 15,132 16,558 16,133 15,367 16,757 15,693 14,947 16,428 16,077 15,314 16,749 16,172 15,404 16,851 16,358 15,581 17,029 16,546 15,760 17,249 16,717 15,923 17,456 17,126 16,313 17,838 16,707 15,913 17,542 16,596 15,808 17,469 17,068 16,257 17,837 16,906 16,103 17,793 17,288 16,466 18,042 17,237 16,419 18,053 17,448 16,619 18,172 18,057 17,199 18,597 17,885 17,036 18,519 16,952 16,146 17,871 17,124 16,311 18,005 17,777 16,933 18,534 17,604 16,768 18,441 17,858 17,010 18,633 18,001 17,146 18,788 18,082 17,223 18,895 18,424 17,548 19,178 18,230 17,364 19,111 17,656 16,817 18,658 17,582 16,747 18,591 06/2004 17,658 16,827 18,660 The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Lehman Brothers Municipal Bond Index is an unmanaged index considered representative of the broad market for investment grade, tax exempt bonds with a maturity of at least one year. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index.
Average annual total return as of 06/30/04 (%) ------------------------------------------------------------------------------------------------------------------- Share class A B C Z ------------------------------------------------------------------------------------------------------------------- Inception 11/01/02 11/01/02 11/01/02 02/23/77 ------------------------------------------------------------------------------------------------------------------- Sales charge without with without with without with without ------------------------------------------------------------------------------------------------------------------- 1-year -1.20 -5.90 -1.94 -6.60 -1.65 -2.58 -1.02 ------------------------------------------------------------------------------------------------------------------- 5-year 5.34 4.33 5.08 4.76 5.19 5.19 5.41 ------------------------------------------------------------------------------------------------------------------- 10-year 5.85 5.34 5.72 5.72 5.77 5.77 5.89 -------------------------------------------------------------------------------------------------------------------
The "with sales charge" returns include the maximum initial sales charge of 4.75% for class A shares, maximum CDSC of 5.00% for class B shares and 1.00% for class C shares for the first year only. All results shown assume reinvestment of distributions. Class Z shares are sold at net asset value with no Rule 12b-1 fees. Performance for different share classes will vary based on differences in sales charges and fees associated with each class. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Class A, class B and class C are newer classes of shares. Their performance information includes returns of the fund's class Z shares (the oldest existing fund class) for periods prior to their inception. These returns have not been restated to reflect any differences in expenses (such as Rule 12b-1 fees) between class Z shares and the newer classes of shares. If differences in expenses had been reflected, the returns shown for periods prior to the inception of the newer classes of shares would have been lower. Class A, class B and class C shares were initially offered on November 1, 2002, and class Z shares were initially offered on February 23, 1977. 2 ECONOMIC UPDATE -------------------------------------------------------------------------------- Columbia Managed Municipals Fund The US economy staged a solid recovery during the 12-month period that began July 1, 2003 and ended June 30, 2004. The growth rate for the US gross domestic product (GDP) averaged more than 4.5% during the period--on par with the highest annualized pace it has experienced in two decades. Although consumer confidence wavered when the number of new jobs was well below expectations in January and February 2004, it moved generally higher throughout the period. Consumers continued to account for most of the economy's gains. Consumer spending rose as a sizeable package of tax cuts (implemented in 2003) gave disposable income a boost. As a result, retail sales and the housing market showed steady gains. Low interest rates fueled mortgage refinancing activity, which tapered off in the final quarter of the 12-month period. Relatively low mortgage rates provided an additional boost to the housing market. After months of disappointing reports on the number and quality of new jobs added to the labor market, doubts surfaced early in 2004 about the economy's ability to sustain its forward momentum. However, these concerns dissipated when more than a million new jobs were added between March and June. With the last remaining weak spot in the recovery--the employment picture--on the mend, the economy appeared to be on solid ground. The business sector also bounced back during the period. Industrial production turned higher in September 2003, and factories utilized more of their capacity as the period wore on. Business spending on technology rose. In 2004, spending on capital equipment also picked up. BONDS REFLECTED THE ECONOMIC NEWS The US bond market began the period with respectable gains, as yields drifted generally lower for the first seven months of the period. However, yields rose sharply and bonds gave back nearly all of their early gains as the economy strengthened and the employment picture brightened. Investors began to anticipate a shift in the Federal Reserve Board's policy on the key short-term interest rates it controls. On the last day of the period, the Fed raised the federal funds rate from 1.00% to 1.25%. In this environment, the Lehman Brothers Aggregate Bond Index, a broad measure of investment grade bond market performance, returned 0.32%. The strong economy was more good news than bad for the high yield bond sector, which historically has been less vulnerable to the threat of higher interest rates than other fixed income sectors. High yield bonds led the fixed income markets. However, most of the sector's gains came in the first half of the period. US STOCKS OUTPERFORMED BONDS The US stock market snapped a three-year losing streak in 2003. However, stocks gave back some of their gains in 2004. Concerns about geopolitical factors, higher interest rates and the impact of the forthcoming presidential election sidelined investors as the period wore on. The S&P 500 Index returned 19.11% during this reporting period. Late in the period, the market's leadership passed from small cap stocks, which were strong performers early in the period, to large cap stocks. Value stocks edged out growth stocks. But as the stock market lost ground near the end of the period, growth stocks generally held up better than value stocks. [SIDE BAR DATA]: Summary For the 12-month period ended June 30, 2004 o The investment grade bond market eked out a positive return as interest rates soared in April and May before settling back somewhat in June. The Lehman Brothers Aggregate Bond Index returned 0.32%. High yield bonds, which can be less sensitive to changing interest rates, fared better. The Merrill Lynch US High Yield, Cash Pay Index returned 9.97%. [2 arrows pointing up]: Lehman Index Merrill Lynch Index 0.32% 9.97% o As the economy strengthened and corporations reported higher profits, stock prices rose for all segments of the stock market, as measured by the S&P 500 Index and the broader Russell 3000 Index. But many sectors retreated in the final months of the period as interest rates moved higher. [2 arrows pointing up]: S&P 500 Index Russell 3000 Index 19.11% 20.46% The Lehman Brothers Aggregate Bond Index is a market value-weighted index that tracks fixed-rate, publicly placed, dollar-denominated, and non-convertible investment grade debt issues. The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that tracks the performance of non-investment grade corporate bonds. The S&P 500 Index is an unmanaged index that tracks the performance of 500 widely held, large capitalization US stocks. The Russell 3000 Index is an unmanaged index that tracks the performance of the 3,000 largest US companies based on total market capitalization. 3 PORTFOLIO MANAGER'S REPORT -------------------------------------------------------------------------------- Columbia Managed Municipals Fund For the 12-month period ended June 30, 2004, Columbia Managed Municipals Fund class A shares returned negative 1.20% without sales charge. The fund underperformed its benchmark, the Lehman Brothers Municipal Bond Index, which returned 0.76% for the same period. The fund also underperformed the 0.32% average return of the Lipper General Municipal Debt Fund Category.1 The fund's duration, which we believe was longer than that of its peers, detracted from performance as municipal bond yields rose and their prices fell. Duration measures the fund's sensitivity to a given change in interest rates. Typically, we shorten duration when we expect interest rates to rise and lengthen duration when we expect rates to fall. If we are right in our duration call, it can help performance. However, our longer duration hurt the fund because interest rates rose sharply, and unexpectedly, near the end of the period. The fund's returns also were hindered by its positions in non-callable bonds, including zero-coupon bonds. Prices of these securities are very sensitive to changes in interest rates. They performed well when interest rates were steady or declining. However, when signs of economic recovery began to appear, particularly in March and April, causing interest rates to rise, these securities underperformed. MIXED SIGNALS LED TO VOLATILITY IN BOND MARKETS The fixed income markets experienced extraordinary volatility over the 12-month reporting period. At the beginning of the period, consumer confidence and spending generally increased, while businesses increased their capital spending. These developments raised concerns about inflation early in the summer of 2003. As a result, yields on municipal and Treasury securities rose and their prices fell, because yields and prices tend to move in the opposite direction. But early in 2004, faced with uncertainty about job creation and lower expectations for inflation, yields declined. Then, when the Labor Department reported that the pace of new job creation had picked up, bond yields rose dramatically in anticipation of sharply higher short-term interest rates. As expected, the Federal Reserve Board raised a key short-term interest rate to 1.25% from 1.00%. We believe that subsequent Fed interest rate increases will be gradual, and that the Fed will closely monitor the economy's sensitivity to rate increases for signs of slower growth. HIGH YIELD BONDS MADE POSITIVE CONTRIBUTION TO FUND The fund's investment in high yield bonds contributed positively to performance. Historically, high yield bonds have been less sensitive to interest rate changes than higher-quality bonds, and tend to outperform during periods of economic growth. This pattern was repeated during the period. The improving economy also helped the fund's utility 1 Lipper, Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. [SIDE BAR DATA]: Net asset value per share as of 06/30/04 ($) ----------------------------------- Class A 8.74 ----------------------------------- Class B 8.74 ----------------------------------- Class C 8.74 ----------------------------------- Class Z 8.74 ----------------------------------- Distributions declared per share as of 07/01/03 - 06/30/04 ($) ----------------------------------- CLASS A 0.53 ----------------------------------- CLASS B 0.46 ----------------------------------- CLASS C 0.49 ----------------------------------- CLASS Z 0.55 ----------------------------------- SEC yields as of 06/30/04 (%) ----------------------------------- Class A 3.69 ----------------------------------- Class B 3.13 ----------------------------------- Class C 3.43 ----------------------------------- Class Z 4.11 ----------------------------------- The 30-day SEC yields reflect the portfolio earning power net of expenses, expressed as an annualized percentage of the public offering price per share at the end of the period. Taxable-equivalent SEC yields as of 06/30/04 (%) ----------------------------------- Class A 5.68 ----------------------------------- Class B 4.82 ----------------------------------- Class C 5.28 ----------------------------------- Class Z 6.32 ----------------------------------- Taxable-equivalent SEC yields are based on the maximum effective 35% federal income tax rate. This tax rate does not reflect the phase out of exemptions or the reduction of otherwise allowable deductions that occur when adjusted gross income exceeds certain levels. 4 -------------------------------------------------------------------------------- Columbia Managed Municipals Fund holdings. In addition, the fund's investments in hospitals and continuing care retirement communities performed well. GRADUAL RECOVERY WITH A POSSIBLE INCREASE IN SHORT-TERM RATES Yields in the fixed income markets rose substantially in April and May after strong payroll data was released. This fueled the market's expectation that short-term rates could increase a total of one and one-half percentage points by year end. Although we believe that the Federal Reserve Board will increase short-term rates this year, we also think it likely that the increase will be more gradual than the market's consensus view. Therefore, we believe the dramatic rise in yields was exaggerated. Given our outlook, we plan to continue to focus on bonds with good call protection that mature in the intermediate range. We think this maturity range offers good risk/reward potential for the fund. However, if inflationary pressures become stronger or economic growth accelerates we may change our outlook. [PHOTO OF Kimberly A. Campbell] Kimberly A. Campbell has been the portfolio manager of Columbia Managed Municipals Fund since December 2001. In addition to serving as portfolio manager of the fund, Ms. Campbell was chief trader for municipal investments of Columbia Management Advisors, Inc. or its predecessors since 1995. /s/ Kimberly A. Campbell Tax-exempt investing offers current tax-free income, but it also involves certain risks. Investing in high yield bonds involves greater risk of loss due to credit deterioration than higher-quality bonds. The value of the fund will be affected by interest rate changes and the creditworthiness of issues held in the fund. The manager seeks to identify opportunities and attempts to react quickly to market changes. [SIDE BAR DATA]: We expect interest rates to stay relatively low, based on our belief that the economy will continue to recover gradually and inflationary pressures will remain muted. 5
INVESTMENT PORTFOLIO -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - 96.0% EDUCATION - 4.8% Education - 4.0% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- CA State Educational Facilities Authority Loyola Marymount University, Series 2001 A, (a) 10/01/20 1,000,000 428,691 ----------------------------------------------------------------------------- MA State College Building Authority Project Series 1994 A: 7.500% 05/01/11 1,500,000 1,838,355 7.500% 05/01/14 3,500,000 4,400,340 ----------------------------------------------------------------------------- MA State Health & Educational Facilities Mass Institute of Technology, Series 2002 K, Authority 5.500% 07/01/22 1,000,000 1,106,770 ----------------------------------------------------------------------------- OH State Higher Educational Facilities Case Western Reserve University, Series 1994, Revenue 6.250% 10/01/17 4,340,000 5,129,837 ----------------------------------------------------------------------------- VA State College Building Authority Washington and Lee University, Series 2001, 5.375% 01/01/21 2,000,000 2,175,440 ----------------------------------------------------------------------------- WV State University Series 2000 A, (a) 04/01/18 3,800,000 1,908,702 ----------------------------------------------------------------------------- Education Total 16,988,135 Student Loan - 0.8% ------------------------------------------ ----------------------------------------------------------------------------- ME State Educational Loan Marketing Corp. Series 1994 B-1, AMT, 6.500% 11/01/09 3,000,000 3,271,050 ----------------------------------------------------------------------------- Student Loan Total 3,271,050 ---------- EDUCATION TOTAL 20,259,185 HEALTH CARE - 8.2% Congregate Care Retirement - 0.7% ------------------------------------------ ----------------------------------------------------------------------------- FL Capital Project Finance Authority Glenridge on Palmer Ranch, Series 2002 A, 8.000% 06/01/32 500,000 493,190 ----------------------------------------------------------------------------- HI State Department of Budget & Finance Kahala Nui Project, Series 2003 A, 7.875% 11/15/23 1,000,000 992,930 ----------------------------------------------------------------------------- OH Hamilton County Health Care Facilities Twin Towers, Series 1998 A, Revenue 5.125% 10/01/18 500,000 468,675 ----------------------------------------------------------------------------- TN Shelby County Health, Germantown Village, Series 2003 A, Educational & Housing Facilities Board 7.250% 12/01/34 1,000,000 972,280 ----------------------------------------------------------------------------- Congregate Care Retirement Total 2,927,075 Health Services - 0.5% ------------------------------------------ ----------------------------------------------------------------------------- MA State Development Finance Agency Boston Biomedical Research Institute, Series 1999, 5.650% 02/01/19 310,000 292,773 ----------------------------------------------------------------------------- WI State Health & Educational Facilities Marshfield Clinic, Series 1999, Authority 6.250% 02/15/29 1,600,000 1,720,000 ----------------------------------------------------------------------------- Health Services Total 2,012,773 See notes to investment portfolio. 6 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Hospitals - 6.6% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- CA ABAG Finance Authority for Nonprofit San Diego Hospital Association, Corps. Series 2003 C, 5.375% 03/01/20 1,320,000 1,298,629 ----------------------------------------------------------------------------- CA State Health Facilities Catholic Healthcare West, Series 2004 G, Financing Authority Revenue 5.250% 07/01/23 500,000 473,535 ----------------------------------------------------------------------------- FL Hillsborough County Tampa General Hospital Project, Industrial Development Authority Series 2003 A: 5.000% 10/01/18 825,000 818,301 5.250% 10/01/24 800,000 772,840 ----------------------------------------------------------------------------- FL West Orange Healthcare District Series 2001 A, 5.650% 02/01/22 1,050,000 1,051,229 ----------------------------------------------------------------------------- IL State Development Finance Authority Adventist Health System, Series 1999, 5.500% 11/15/20 1,650,000 1,670,823 ----------------------------------------------------------------------------- IL State Health Facilities Authority Swedish American Hospital, Series 2000, 6.875% 11/15/30 1,000,000 1,087,210 ----------------------------------------------------------------------------- LA State Public Facilities Authority Touro Infirmary, Series 1999 A, 5.625% 08/15/29 1,240,000 1,219,441 ----------------------------------------------------------------------------- MA State Health & Educational Facilities Massachusetts General Hospital, Series 1992 F, Authority 6.250% 07/01/12 5,750,000 6,493,303 South Shore Hospital, Series 1999 F: 5.625% 07/01/19 1,000,000 1,029,400 5.750% 07/01/29 2,500,000 2,525,800 ----------------------------------------------------------------------------- MD State Health & Educational Facilities University of Maryland Medical System, Authority Series 2000, 6.750% 07/01/30 500,000 559,915 ----------------------------------------------------------------------------- MO State Health & Educational Facilities Lake Regional Health Systems, Series 2003, Authority 5.600% 02/15/25 625,000 625,412 ----------------------------------------------------------------------------- MS State University of Mississippi Medical Center, Series 1998 B, 5.500% 12/01/23 1,000,000 1,085,090 ----------------------------------------------------------------------------- NM Farmington Hospital Revenue San Juan Regulated Medical Center, Series 2004 A, 5.000% 06/01/23 500,000 475,320 ----------------------------------------------------------------------------- NV Henderson Health Care Facilities Revenue Catholic Healthcare West, Series 1999 A, 6.750% 07/01/20 1,000,000 1,068,280 ----------------------------------------------------------------------------- NY State Dormitory Authorization Revenue Memorial Sloan-Kettering Cancer Center, Series 2003-1, (a) 07/01/25 600,000 200,400 ----------------------------------------------------------------------------- OH Highland County Joint Township Hospital Series 1999, District 6.750% 12/01/29 480,000 445,315 ----------------------------------------------------------------------------- OH Miami County Hospital Facilities Revenue Upper Valley Medical Center, Series 1996 C, 6.000% 05/15/06 525,000 549,969 ----------------------------------------------------------------------------- OK State Development Finance Authority Duncan Regional Hospital, Series 2003 A, 5.125% 12/01/23 1,000,000 963,630 See notes to investment portfolio. 7 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) HEALTH CARE - (continued) Hospitals - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- TN Knox County Health, Educational East Tennessee Hospital, Series 2003 B, & Housing Facilities Authority 5.750% 07/01/33 750,000 750,000 ----------------------------------------------------------------------------- VA Prince William County, Industrial Potomac Hospital Corp., Series 2003, Development Authority 5.200% 10/01/26 1,000,000 979,260 ----------------------------------------------------------------------------- WI State Health & Educational Facilities Aurora Health Care, Series 2003, Authority 6.400% 04/15/33 1,075,000 1,107,777 Wheaton Franciscan Services, Series 2002, 5.750% 08/15/30 900,000 915,219 Hospitals Total 28,166,098 Intermediate Care Facilities - 0.4% ------------------------------------------ ----------------------------------------------------------------------------- IN State Health Facilities Financing Hoosier Care, Inc., Series 1999 A, Authority 7.125% 06/01/34 2,405,000 1,954,543 ----------------------------------------------------------------------------- Intermediate Care Facilities Total 1,954,543 ---------- HEALTH CARE TOTAL 35,060,489 HOUSING - 1.6% Assisted Living/Senior - 0.2% ------------------------------------------ ----------------------------------------------------------------------------- NY Suffolk County Industrial Development Agency Gurwin Jewish-Phase II, Series 2004, 6.700% 05/01/39 900,000 902,007 ----------------------------------------------------------------------------- Assisted Living/Senior Total 902,007 Multi-Family - 0.9% ------------------------------------------ ----------------------------------------------------------------------------- FL Broward County Housing Finance Authority Chaves Lake Apartment Project, Series 2000 A, AMT, 7.500% 07/01/40 1,500,000 1,470,600 ----------------------------------------------------------------------------- FL Clay County Housing Finance Authority Madison Commons Apartments, Series 2000 A, AMT, 7.450% 07/01/40 730,000 720,094 ----------------------------------------------------------------------------- FL Orange County Housing Finance Authority Palms at Brentwood Apartments, Series 1998 K, 6.500% 12/01/34 1,925,000 1,541,675 ----------------------------------------------------------------------------- Multi-Family Total 3,732,369 Single Family - 0.5% ------------------------------------------ ----------------------------------------------------------------------------- NM State Mortgage Finance Authority Series 2000 A-2, AMT, 7.100% 09/01/30 735,000 754,345 ----------------------------------------------------------------------------- NV State Housing Division Series 1991 A-2, AMT, 7.750% 04/01/22 315,000 315,466 ----------------------------------------------------------------------------- OH Housing Finance Agency Series 1994 B-2, AMT, 6.700% 03/01/25 60,000 61,303 Series 1997 A-1, AMT, 6.050% 09/01/17 565,000 590,589 ----------------------------------------------------------------------------- RI State Housing & Mortgage Finance Corp. Series 1988, AMT, 7.550% 10/01/22 515,000 515,494 ----------------------------------------------------------------------------- Single Family Total 2,237,197 ---------- HOUSING TOTAL 6,871,573 See notes to investment portfolio. 8 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) INDUSTRIAL - 4.8% Food Products - 2.8% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- GA Cartersville Development Authority Anheuser Busch Companies, Inc., Series 1989 A, AMT, 7.375% 05/01/09 (c) 9,000,000 10,430,550 ----------------------------------------------------------------------------- MI State Strategic Fund Michigan Sugar Co., Carollton Project: Series 1998 B, 6.450% 11/01/25 (d) 700,000 601,349 Series 1998 C, AMT, 6.550% 11/01/25 (d) 800,000 695,512 ----------------------------------------------------------------------------- Food Products Total 11,727,411 Forest Products - 1.4% ------------------------------------------ ----------------------------------------------------------------------------- FL Escambia County Environmental Series 2003 A, AMT, Improvement Revenue 5.750% 11/01/27 550,000 534,479 ----------------------------------------------------------------------------- WA Port Longview Industrial Development Weyerhaeuser Corp., Series 1992, AMT, Corp. 6.875% 10/01/08 4,750,000 5,273,925 ----------------------------------------------------------------------------- Forest Products Total 5,808,404 Manufacturing - 0.2% ------------------------------------------ ----------------------------------------------------------------------------- MO State Development Finance Board Procter & Gamble Co., Series 1999, AMT, 5.200% 03/15/29 1,000,000 998,540 ----------------------------------------------------------------------------- Manufacturing Total 998,540 Oil & Gas - 0.3% ------------------------------------------ ----------------------------------------------------------------------------- NJ Middlesex County Pollution Control Amerada Hess Corp., Series 2004, 6.050% 09/15/34 (e) 240,000 242,834 ----------------------------------------------------------------------------- VI Public Finance Authority Hovensa Refinery, Series 2003, AMT, 6.125% 07/01/22 875,000 902,318 ----------------------------------------------------------------------------- Oil & Gas Total 1,145,152 Other Industrial Development Bonds - 0.1% ------------------------------------------ ----------------------------------------------------------------------------- MI State Strategic Fund Obligation Ltd. NSF International Project, Series 2004, 5.250% 08/01/26 600,000 585,420 ----------------------------------------------------------------------------- Other Industrial Development Bonds Total 585,420 ---------- INDUSTRIAL TOTAL 20,264,927 OTHER - 13.6% Refunded/Escrowed (f) - 13.3% ------------------------------------------ ----------------------------------------------------------------------------- CA Foothill/Eastern Transportation Series 1995 A, Corridor Agency (a) 01/01/18 10,000,000 5,140,100 ----------------------------------------------------------------------------- CA Southern California Public Power Southern Transmission Project, Series 1988 A, Authority (a) 07/01/14 8,155,000 5,232,900 ----------------------------------------------------------------------------- FL Jacksonville Transportation Authority Series 1985, 9.200% 01/01/15 2,000,000 2,722,920 ----------------------------------------------------------------------------- GA Fulton County Series 1992, 6.375% 01/01/14 13,270,000 15,499,493 See notes to investment portfolio. 9 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) OTHER - (continued) Refunded/Escrowed (f) - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- GA State Municipal Electric Authority Series 1991, 6.600% 01/01/18 3,600,000 4,318,380 ----------------------------------------------------------------------------- ID State Health Facilities Authority Intermountain Health Care Hospitals, Inc., Revenue Series 1992, 6.650% 02/15/21 1,200,000 1,477,896 ----------------------------------------------------------------------------- IL Metropolitan Pier & Exposition Authority Series 1996 A, (a) 06/15/12 2,655,000 1,921,981 ----------------------------------------------------------------------------- NC Eastern Municipal Power Agency Series 1991 A, 6.500% 01/01/18 4,315,000 5,259,856 ----------------------------------------------------------------------------- NY Triborough Bridge & Tunnel Authority Series 1992 Y, 6.125% 01/01/21 5,500,000 6,441,380 ----------------------------------------------------------------------------- OH Cleveland-Cuyahoga County Port Authority Oglebay Northern Co. Project, Series 1997-1, AMT, 6.000% 03/01/07 160,000 170,357 ----------------------------------------------------------------------------- OH Hilliard School District Series 1995 A, (a) 12/01/12 2,505,000 1,754,001 ----------------------------------------------------------------------------- OH State Water Development Authority Series 1990-1, 6.000% 12/01/16 1,000,000 1,131,580 ----------------------------------------------------------------------------- SC Calhoun County Solid Waste Disposal Eastman Kodak Co., Series 1992, AMT, Facilities 6.750% 05/01/17 3,000,000 3,626,310 ----------------------------------------------------------------------------- TX State Municipal Power Agency Series 1989, (a) 09/01/08 75,000 65,486 ----------------------------------------------------------------------------- WV State Hospital Finance Authority Charlestown Area Medical Center, Series 2000 A, 6.750% 09/01/30 1,610,000 1,912,664 ----------------------------------------------------------------------------- Refunded/Escrowed Total 56,675,304 Tobacco - 0.3% ------------------------------------------ ----------------------------------------------------------------------------- NJ Tobacco Settlement Financing Corp. Series 2003, 6.750% 06/01/39 1,415,000 1,260,510 ----------------------------------------------------------------------------- Tobacco Total 1,260,510 ---------- OTHER TOTAL 57,935,814 OTHER REVENUE - 0.7% Recreation - 0.5% ------------------------------------------ ----------------------------------------------------------------------------- CA Agua Caliente Band Cahuilla Indians Series 2003, 6.000% 07/01/18 350,000 345,055 ----------------------------------------------------------------------------- FL Capital Trust Agency Seminole Tribe Convention Center, Series 2002 A, 10.000% 10/01/33 (b) 1,500,000 1,805,265 ----------------------------------------------------------------------------- Recreation Total 2,150,320 Retail - 0.2% ------------------------------------------ ----------------------------------------------------------------------------- NJ State Economic Development Authority Glimcher Properties L.P. Project, Series 1998, AMT, 6.000% 11/01/28 850,000 849,558 See notes to investment portfolio. 10 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) OTHER REVENUE - (continued) Retail - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- OH Lake County North Madison Properties, Ltd. Project, Series 1993, 8.819% 09/01/11 (d) 175,000 172,107 ----------------------------------------------------------------------------- Retail Total 1,021,665 ---------- OTHER REVENUE TOTAL 3,171,985 RESOURCE RECOVERY - 0.4% Disposal - 0.4% ------------------------------------------ ----------------------------------------------------------------------------- IL Development Finance Authority Waste Management, Inc., Series 1997, AMT, 5.050% 01/01/10 500,000 511,070 ----------------------------------------------------------------------------- MI State Strategic Fund United Waste Systems, Inc., Series 1995, AMT, 5.200% 04/01/10 500,000 514,975 ----------------------------------------------------------------------------- NV State Department of Business & Industry Republic Services, Inc. Project, Series 2003, AMT, 5.625% 12/01/26 500,000 508,190 ----------------------------------------------------------------------------- Disposal Total 1,534,235 ---------- RESOURCE RECOVERY TOTAL 1,534,235 TAX-BACKED - 31.7% Local Appropriated - 2.3% ------------------------------------------ ----------------------------------------------------------------------------- CA San Bernardino County Series 2002 A, 5.000% 07/01/15 2,210,000 2,348,479 ----------------------------------------------------------------------------- IL Chicago Board of Education Series 1992 A, 6.000% 01/01/16 5,000,000 5,735,600 ----------------------------------------------------------------------------- IN Crown Point School Building Corp. Series 2000: (a) 01/15/18 1,550,000 784,749 (a) 01/15/19 1,665,000 792,607 ----------------------------------------------------------------------------- Local Appropriated Total 9,661,435 Local General Obligations - 13.2% ------------------------------------------ ----------------------------------------------------------------------------- AK North Slope Borough Series 1999 A, (a) 06/30/10 2,515,000 1,991,251 Series 2000 B, (a) 06/30/10 2,000,000 1,585,640 Series 2001 A, (a) 06/30/12 5,000,000 3,547,850 ----------------------------------------------------------------------------- CA Golden West School Financing Authority Series 1999 A, (a) 08/01/15 1,500,000 886,575 ----------------------------------------------------------------------------- CA Los Angeles Unified School District Series 2002, 5.750% 07/01/16 400,000 455,148 ----------------------------------------------------------------------------- CA Union Elementary School District Series 1999 A, (a) 09/01/17 2,300,000 1,195,632 ----------------------------------------------------------------------------- CA Yuba City Unified School District Series 2000, (a) 09/01/18 1,160,000 566,695 ----------------------------------------------------------------------------- CA West Contra Costa Unified School Series 2001 B, District 6.000% 08/01/24 465,000 535,080 See notes to investment portfolio. 11 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) TAX-BACKED - (continued) Local General Obligations - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- IL Champaign County Series 1999, 8.250% 01/01/20 1,015,000 1,396,884 ----------------------------------------------------------------------------- IL Chicago Board of Education Series 1996, 6.250% 12/01/12 2,500,000 2,917,700 Series 1998 B-1: (a) 12/01/21 1,500,000 595,335 (a) 12/01/23 2,500,000 866,250 ----------------------------------------------------------------------------- IL Chicago Emergency Telephone System Series 1999, 5.500% 01/01/23 2,250,000 2,450,385 ----------------------------------------------------------------------------- IL Coles & Cumberland Counties Unified Series 2000, School District No. 001 (a) 12/01/13 3,120,000 2,057,359 ----------------------------------------------------------------------------- IL Cook County School District No. 102 Series 2001, (a) 12/01/20 3,065,000 1,300,510 ----------------------------------------------------------------------------- IL Will County Community Unit School Valley View, Series 1999 B, District No. 365 (a) 11/01/18 1,900,000 919,144 ----------------------------------------------------------------------------- IL Will County Forest Preservation District Series 1999, (a) 12/01/16 1,000,000 546,150 ----------------------------------------------------------------------------- LA New Orleans Series 1991, (a) 09/01/12 6,250,000 4,411,500 ----------------------------------------------------------------------------- MO Springfield School District No. R-12 Series 1991 B, 9.500% 03/01/07 600,000 704,682 ----------------------------------------------------------------------------- NE Omaha Omaha Convention Center Arena, Series 2004, 5.250% 04/01/23 1,000,000 1,067,980 ----------------------------------------------------------------------------- OH Adams County Ohio Valley Local School Series 1995, District 7.000% 12/01/15 3,000,000 3,683,250 ----------------------------------------------------------------------------- OH Beavercreek Local School District Series 1996, 6.600% 12/01/15 2,500,000 3,009,425 ----------------------------------------------------------------------------- OH Crooksville Exempt Village School Series 1986, District 7.375% 12/01/07 25,000 28,184 ----------------------------------------------------------------------------- OH Cuyahoga County Series 1993 A, (a) 10/01/12 1,000,000 707,730 ----------------------------------------------------------------------------- OH Dublin City School District Series 1997, (a) 12/01/11 900,000 667,593 ----------------------------------------------------------------------------- OH Eastern Local School District Brown Series 1995, & Highland Counties 6.250% 12/01/17 1,160,000 1,367,930 ----------------------------------------------------------------------------- OH Gahanna-Jefferson City School District Series 1993, (a) 12/01/11 795,000 590,136 ----------------------------------------------------------------------------- OH Hilliard School District Series 2000, 5.750% 12/01/24 1,000,000 1,072,570 ----------------------------------------------------------------------------- OH Kings Local School District Series 1995, 7.500% 12/01/16 2,110,000 2,678,075 ----------------------------------------------------------------------------- OH Lakota Local School District Series 2001, 5.500% 12/01/18 1,460,000 1,631,740 See notes to investment portfolio. 12 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) TAX-BACKED - (continued) Local General Obligations - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- OH Massillon City School District Series 2002: (a) 12/01/09 900,000 740,817 (a) 12/01/11 1,000,000 742,310 ----------------------------------------------------------------------------- OH Monroe Local School District Series 2002, 5.750% 12/01/19 1,195,000 1,365,503 ----------------------------------------------------------------------------- OH North Fork Local School District Series 2001, 5.750% 12/01/17 510,000 583,103 ----------------------------------------------------------------------------- OH Northwest Local School District Series 1998, 6.000% 12/01/13 1,030,000 1,190,927 ----------------------------------------------------------------------------- OH Pickerington Local School District Series 2001, (a) 12/01/16 1,340,000 747,090 ----------------------------------------------------------------------------- OH Plain Local School District Series 2000, (a) 12/01/27 1,315,000 364,031 ----------------------------------------------------------------------------- OH River Valley School District, School Series 2001, Facilities Construction & Improvement 5.250% 11/01/23 500,000 532,675 ----------------------------------------------------------------------------- OH Shaker Heights City School District Series 1990 A, 7.100% 12/15/10 620,000 705,262 ----------------------------------------------------------------------------- OH Southwest Licking Local School District Series 1999, 5.750% 12/01/16 400,000 454,932 ----------------------------------------------------------------------------- OH Tri-County North Local School District Series 1986, 8.125% 12/01/06 75,000 83,917 ----------------------------------------------------------------------------- OH West Chester Township Series 2002, 5.750% 12/01/20 1,000,000 1,140,200 ----------------------------------------------------------------------------- TX Dallas County Flood Control District Series 2002, 7.250% 04/01/32 1,500,000 1,522,170 ----------------------------------------------------------------------------- WA Clark County School District No. 037 Series 2001 C, (a) 12/01/20 1,150,000 487,956 ----------------------------------------------------------------------------- Local General Obligations Total 56,095,276 Special Non-Property Tax - 4.0% ------------------------------------------ ----------------------------------------------------------------------------- IL Metropolitan Pier & Exposition Authority Series 1996 A: (a) 12/15/12 8,850,000 6,165,618 (a) 06/15/12 2,345,000 1,650,341 ----------------------------------------------------------------------------- MA Massachusetts Bay Transportation Series 2003 A, Authority 5.250% 07/01/19 1,200,000 1,300,152 ----------------------------------------------------------------------------- MA State Series 2002 A, 5.500% 06/01/15 1,000,000 1,111,030 ----------------------------------------------------------------------------- MI State Trunk Line Series 2004, 5.000% 11/01/19 1,000,000 1,058,320 ----------------------------------------------------------------------------- NY State Local Government Assistance Corp. Series 1993 E, 5.000% 04/01/21 1,000,000 1,041,540 ----------------------------------------------------------------------------- OH Hamilton County Sales Tax Revenue Series 2000 B, (a) 12/01/20 2,000,000 874,820 See notes to investment portfolio. 13 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) TAX-BACKED - (continued) Special Non-Property Tax - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- PR Commonwealth of Puerto Rico Highway & Transportation Authority, Series 2003 AA, 5.500% 07/01/19 1,000,000 1,117,530 Public Building Authority, Series 2002 C, 5.500% 07/01/15 1,000,000 1,095,130 ----------------------------------------------------------------------------- WA Central Puget Sound Regional Series 1998, Transportation Authority 5.250% 02/01/21 1,500,000 1,594,230 ----------------------------------------------------------------------------- Special Non-Property Tax Total 17,008,711 Special Property Tax - 0.6% ------------------------------------------ ----------------------------------------------------------------------------- CA Huntington Beach Community Facilities Grand Coast Resort, Series 2001, District 6.450% 09/01/31 500,000 509,630 ----------------------------------------------------------------------------- CA Santa Margarita Water District Series 1999, 6.250% 09/01/29 750,000 761,745 ----------------------------------------------------------------------------- FL Double Branch Community Series 2002 A, Development District 6.700% 05/01/34 400,000 419,808 ----------------------------------------------------------------------------- FL Westchester Community Special Assessment, Series 2003, Development District No. 1 6.000% 05/01/23 560,000 554,182 ----------------------------------------------------------------------------- IL State Sports Facilities Authority Series 2001, (a) 06/15/18 1,000,000 501,230 ----------------------------------------------------------------------------- Special Property Tax Total 2,746,595 State Appropriated - 4.2% ------------------------------------------ ----------------------------------------------------------------------------- CA State Public Works Board Coalinga State Hospital, Series 2004 A, 5.500% 06/01/15 1,000,000 1,087,610 ----------------------------------------------------------------------------- KY State Turnpike Authority Series 1992, (a) 01/01/10 7,500,000 6,083,625 ----------------------------------------------------------------------------- MI State Certificate of Participation, Series 2000, (a) 06/01/21 1,000,000 413,990 ----------------------------------------------------------------------------- NJ State Transportation Trust Fund Series 1999 A: Authority 5.750% 06/15/18 5,000,000 5,614,800 5.750% 06/15/20 1,000,000 1,118,130 ----------------------------------------------------------------------------- UT State Building Ownership Authority Series 1998 C, 5.500% 05/15/19 3,450,000 3,805,177 ----------------------------------------------------------------------------- State Appropriated Total 18,123,332 State General Obligations - 7.4% ------------------------------------------ ----------------------------------------------------------------------------- CA State Series 2002, 5.250% 02/01/23 2,000,000 2,067,340 Series 2004, 5.000% 02/01/22 2,000,000 1,999,920 ----------------------------------------------------------------------------- MA Massachusetts Bay Transportation Series 1992 B, Authority 6.200% 03/01/16 3,825,000 4,453,601 Series 1994 A: 7.000% 03/01/14 3,150,000 3,818,965 7.000% 03/01/19 2,500,000 3,114,925 See notes to investment portfolio. 14 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) TAX-BACKED - (continued) State General Obligations - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- OH State Series 1992, 6.100% 08/01/12 380,000 439,998 ----------------------------------------------------------------------------- PA State Series 1992-2, 6.250% 07/01/12 7,200,000 8,423,712 ----------------------------------------------------------------------------- PR Commonwealth of Puerto Rico Series 1998, 6.000% 07/01/16 2,000,000 2,330,520 Series 2001 A, 5.500% 07/01/16 4,230,000 4,740,053 ----------------------------------------------------------------------------- State General Obligations Total 31,389,034 ----------- TAX-BACKED TOTAL 135,024,383 TRANSPORTATION - 5.6% Air Transportation - 1.4% ------------------------------------------ ----------------------------------------------------------------------------- IL Chicago O'Hare International Airport United Airlines, Inc., Series 2000 A, AMT, 6.750% 11/01/11 (g) 1,600,000 396,896 ----------------------------------------------------------------------------- IN Indianapolis Airport Authority United Airlines, Inc., Series 1995 A, AMT, 6.500% 11/15/31 (g) 1,360,000 279,616 ----------------------------------------------------------------------------- KY Kenton County Airport Board Delta Airlines, Inc., Series 1992 A, AMT, 7.500% 02/01/20 1,000,000 770,370 ----------------------------------------------------------------------------- MN Minneapolis & St. Paul Metropolitan Northwest Airlines: Airports Commission Series 2001 A, AMT, 7.000% 04/01/25 1,250,000 1,066,388 Series 2001 B, AMT, 6.500% 04/01/25 500,000 473,135 ----------------------------------------------------------------------------- NC Charlotte/Douglas International Airport US Airways, Inc.: Series 1998, AMT, 5.600% 07/01/27 1,000,000 534,500 Series 2000, AMT, 7.750% 02/01/28 1,000,000 713,820 ----------------------------------------------------------------------------- NJ State Economic Development Authority Continental Airlines, Inc., Series 1999, AMT, 6.250% 09/15/29 2,000,000 1,451,620 ----------------------------------------------------------------------------- TN Memphis-Shelby County Airport Authority Federal Express Corp., Series 2002, 5.050% 09/01/12 500,000 518,355 ----------------------------------------------------------------------------- Air Transportation Total 6,204,700 Airports - 0.3% ------------------------------------------ ----------------------------------------------------------------------------- MA State Port Authority Revenue Series 1999, AMT, IFRN, 10.680% 07/01/29 (b)(h) 1,000,000 1,119,380 ----------------------------------------------------------------------------- Airports Total 1,119,380 Toll Facilities - 2.0% ------------------------------------------ ----------------------------------------------------------------------------- CO E-470 Public Highway Authority Series 2000 B, (a) 09/01/18 4,600,000 2,244,478 ----------------------------------------------------------------------------- MA State Turnpike Authority Metro Highway Series 1997 C, Systems Revenue (a) 01/01/20 2,000,000 912,000 See notes to investment portfolio. 15 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) TRANSPORTATION - (continued) Toll Facilities - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- NY Triborough Bridge & Tunnel Authority Series 2002 E, 5.500% 11/15/20 2,050,000 2,285,627 ----------------------------------------------------------------------------- OH State Turnpike Commission Series 1998 A, 5.500% 02/15/17 1,690,000 1,878,925 ----------------------------------------------------------------------------- VA Richmond Metropolitan Authority Series 1998, 5.250% 07/15/22 1,100,000 1,175,801 ----------------------------------------------------------------------------- Toll Facilities Total 8,496,831 Transportation - 1.9% ------------------------------------------ ----------------------------------------------------------------------------- GA Metropolitan Atlanta Rapid Transit Series 1992 P, Authority 6.250% 07/01/20 4,000,000 4,673,600 ----------------------------------------------------------------------------- NV State Department of Business & Industry Las Vegas Monorail Project, Series 2000: 7.375% 01/01/30 650,000 647,251 7.375% 01/01/40 500,000 491,630 ----------------------------------------------------------------------------- OH Toledo-Lucas County Port Authority CSX Transportation, Inc., Series 1992, 6.450% 12/15/21 2,000,000 2,180,020 ----------------------------------------------------------------------------- Transportation Total 7,992,501 ---------- TRANSPORTATION TOTAL 23,813,412 UTILITY - 24.6% Independent Power Producers - 0.6% ------------------------------------------ ----------------------------------------------------------------------------- NY Suffolk County Industrial Development Nissequogue Cogen Partners, Series 1998, AMT, Agency 5.500% 01/01/23 1,000,000 918,010 ----------------------------------------------------------------------------- PA Carbon County Industrial Development Panther Creek Partners Project, Series 2000, AMT, Authority 6.650% 05/01/10 830,000 888,673 ----------------------------------------------------------------------------- PR Commonwealth of Puerto Rico Industrial, Educational, Medical & Environmental AES Project, Series 2000, AMT, Cogeneration Facilities 6.625% 06/01/26 645,000 667,588 ----------------------------------------------------------------------------- Independent Power Producers Total 2,474,271 Investor Owned - 1.8% ------------------------------------------ ----------------------------------------------------------------------------- IN Petersburg Series 1995 C, AMT, 5.950% 12/01/29 1,500,000 1,527,885 ----------------------------------------------------------------------------- IN State Development Finance Authority Series 1999, AMT, 5.950% 08/01/30 1,000,000 1,004,110 ----------------------------------------------------------------------------- OH State Air Quality Development Authority Cleveland Electric Illuminating Co., Series 2002 A, 6.000% 12/01/13 500,000 512,725 JMG Funding Ltd. Project, Series 1997, AMT, 5.625% 01/01/23 1,000,000 1,030,860 ----------------------------------------------------------------------------- TX Brazos River Authority Texas Utilities Electric Co. Project: Series 1999 B, AMT, 6.750% 09/01/34 2,455,000 2,748,913 Series 2001 C, AMT, 5.750% 05/01/36 500,000 532,225 See notes to investment portfolio. 16 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) UTILITY - (continued) Investor Owned - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- WY Lincoln County, Environmental Pacificorp Project, Series 1995, Improvement Revenue 4.125% 11/01/25 500,000 472,795 ----------------------------------------------------------------------------- Investor Owned Total 7,829,513 Joint Power Authority - 10.5% ------------------------------------------ ----------------------------------------------------------------------------- GA State Municipal Electric Authority Series 1991, 6.600% 01/01/18 17,700,000 21,058,398 ----------------------------------------------------------------------------- NC Eastern Municipal Power Agency Series 1991 A, 6.500% 01/01/18 2,185,000 2,527,368 Series 1992, (a) 01/01/09 2,260,000 1,931,396 Series 1993, 6.000% 01/01/18 7,000,000 8,046,220 ----------------------------------------------------------------------------- OH State Municipal Electricity Generation Series 2001, Agency (a) 02/15/29 3,000,000 751,740 ----------------------------------------------------------------------------- WA State Public Power Supply System Nuclear Project No. 2, Series 1992 A, 6.300% 07/01/12 3,500,000 4,072,705 Nuclear Project No. 3, Series 1989 B, (a) 07/01/08 7,000,000 6,097,070 ----------------------------------------------------------------------------- Joint Power Authority Total 44,484,897 Municipal Electric - 4.2% ------------------------------------------ ----------------------------------------------------------------------------- NC University of North Carolina at Chapel Series 1997, Hill (a) 08/01/20 1,750,000 768,705 ----------------------------------------------------------------------------- NY Long Island Power Authority Series 2000, (a) 06/01/20 450,000 206,933 ----------------------------------------------------------------------------- OH Cleveland Public Power System Revenue Series 1994 A, (a) 11/15/13 2,000,000 1,333,580 ----------------------------------------------------------------------------- PA Westmoreland County Municipal Authority Series 2000 A, (a) 08/15/23 1,400,000 505,316 ----------------------------------------------------------------------------- PR Puerto Rico Electric Power Authority Series 2002 KK, 5.500% 07/01/16 2,000,000 2,241,160 ----------------------------------------------------------------------------- SD Heartland Consumers Power District Series 1992, 6.000% 01/01/17 8,000,000 9,162,720 ----------------------------------------------------------------------------- TX Austin Financial Service Department Series 1998, 5.250% 05/15/25 3,710,000 3,858,548 ----------------------------------------------------------------------------- Municipal Electric Total 18,076,962 Water & Sewer - 7.5% ------------------------------------------ ----------------------------------------------------------------------------- DE State Economic Development Authority General Waterworks Corp., Series 1992 B, 6.450% 12/01/07 1,160,000 1,280,524 ----------------------------------------------------------------------------- GA Atlanta Water & Wastewater Revenue Series 1999 A, 5.500% 11/01/22 3,225,000 3,535,342 Series 2001 A, 5.500% 11/01/27 1,500,000 1,611,795 See notes to investment portfolio. 17 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Municipal Bonds - (continued) UTILITY - (continued) Water & Sewer - (continued) Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- GA Fulton County Series 1992, 6.375% 01/01/14 430,000 500,266 ----------------------------------------------------------------------------- OH Cleveland Waterworks Revenue Series 1993, 5.500% 01/01/21 3,000,000 3,284,280 ----------------------------------------------------------------------------- OH Lakewood Water Systems Revenue Series 1995, 5.850% 07/01/20 2,405,000 2,761,229 ----------------------------------------------------------------------------- OH State Water Development Authority Series 1991 B, 5.500% 06/01/18 1,000,000 1,115,770 ----------------------------------------------------------------------------- OH Warren Waterworks Revenue Series 1997, 5.500% 11/01/15 500,000 554,140 ----------------------------------------------------------------------------- PA Allegheny County Sanitation Authority Series 1991 A, (a) 06/01/07 2,370,000 2,180,992 ----------------------------------------------------------------------------- PA Dauphin County Industrial Development Dauphin Water Supply Co., Series 1992 A, AMT, Authority 6.900% 06/01/24 3,400,000 4,072,622 ----------------------------------------------------------------------------- TX Houston Water & Sewer System Revenue Series 1998, (a) 12/01/23 3,500,000 1,215,725 Series 1991 C: (a) 12/01/08 4,000,000 3,432,240 (a) 12/01/09 4,000,000 3,277,480 (a) 12/01/10 3,750,000 2,923,388 ----------------------------------------------------------------------------- Water & Sewer Total 31,745,793 ----------- UTILITY TOTAL 104,611,436 Total Municipal Bonds (cost of $376,824,670) 408,547,439 Municipal Preferred Stocks - 1.0% HOUSING - 1.0% Multi-Family - 1.0% ------------------------------------------ ----------------------------------------------------------------------------- Charter Mac Equity Issue Trust AMT, 6.625% 06/30/09 (b)(h) 2,000,000 2,175,320 ----------------------------------------------------------------------------- MuniMae Equity Trust AMT, 7.750% 06/30/50 (b)(h) 2,000,000 2,225,980 ----------------------------------------------------------------------------- Total Municipal Preferred Stock (cost of $4,000,000) 4,401,300 See notes to investment portfolio. 18 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Short-Term Obligations - 1.8% Variable Rate Demand Notes (i) - 1.8% Par ($) Value ($) ------------------------------------------ ----------------------------------------------------------------------------- IA Finance Authority Drake University Project, Series 2001, 1.130% 07/01/31 100,000 100,000 ----------------------------------------------------------------------------- IA Higher Education Loan Authority Loras College, Project, Series 2000, 1.080% 11/01/30 1,000,000 1,000,000 ----------------------------------------------------------------------------- IL Health Facilities Authority Revenue OSF Healthcare System, Series 2002, 1.100% 11/15/27 500,000 500,000 ----------------------------------------------------------------------------- IN Health Facility Financing Authority Fayette Memorial Hospital Association, Inc., Series 2002, 1.130% 10/01/32 500,000 500,000 ----------------------------------------------------------------------------- MN Mankato Revenue Bethany Lutheran College, Series 2000 B, 1.130% 11/01/15 100,000 100,000 ----------------------------------------------------------------------------- MN State Higher Education Facilities Saint Olaf College, Series 2002 5-M1, Authority 1.080% 10/01/32 500,000 500,000 ----------------------------------------------------------------------------- MO State Health & Educational Facilities Bethesda Health Group of St. Louis, Inc., Series 2001 A, Authority 1.080% 08/01/31 100,000 100,000 Washington University, Series 2002, 1.080% 09/01/30 1,700,000 1,700,000 ----------------------------------------------------------------------------- MS Jackson County Pollution Control Revenue Chevron Corporation: Series 1992, 1.050% 12/01/16 1,600,000 1,600,000 Series 1993, 1.050% 06/01/23 300,000 300,000 ----------------------------------------------------------------------------- NY New York City Series 1993 A-7, 1.040% 08/01/21 900,000 900,000 ----------------------------------------------------------------------------- WI State Health & Educational Facilities ProHealth Care, Inc., Series 2001 B, Authority 1.080% 12/01/16 300,000 300,000 ----------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES TOTAL 7,600,000 Total Short-Term Obligations (cost of $7,600,000) 7,600,000 Total Investments - 98.8% (cost of $388,424,670) (j) 420,548,739 Other Assets & Liabilities, Net - 1.2% 4,945,831 Net Assets - 100.0% 425,494,570 See notes to investment portfolio.
19 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund NOTES TO INVESTMENT PORTFOLIO: (a)Zero coupon bond. (b)Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, these securities amounted to $7,325,945, which represents 1.7% of net assets. (c)A portion of the security with a market value of $3,360,955 pledged as collateral for open futures contracts. (d)Denotes a restricted security, which is subject to registrations with the SEC or is required to be exempted from such registration prior to resale. At June 30, 2004, the value of these securities amounted to $1,468,968 which represents 0.3% of net assets. ACQUISITION ACQUISITION SECURITY DATE COST -------- ---- ---- MI State Strategic Fund, Michigan Sugar Co., Carollton Project: Series 1998 B, 6.450% 11/01/25 11/24/98 $ 700,000 Series 1998 C, AMT, 6.550% 11/01/25 11/24/98 800,000 OHLake County, North Madison Properties, Ltd. Project, Series 1993, 8.819% 09/01/11 10/13/93 175,000 ---------- $1,675,000 ---------- (e)Security purchased on a delayed delivery basis. (f)The Fund has been informed that each issuer has placed direct obligations of the U.S. Government in an irrevocable trust, solely for the payment of principal and interest. (g)The issuer has filed for bankruptcy protection under Chapter 11 and is in default of certain debt covenants. Income is not being accrued. As of June 30, 2004, the value of these securities amounted to $676,512, which represents 0.2% of net assets. (h)Variable rate security. The interest rate shown reflects the rate as of June 30, 2004. (i)Variable rate demand notes. These securities are payable upon demand and are secured by letters of credit or other credit support agreements from banks. The interest rates change periodically and the interest rates shown reflect the rates as of June 30, 2004. (j)Cost for federal income purposes is $388,169,519. At June 30, 2004, the Fund held the following open long futures contracts: AGGREGATE EXPIRATION UNREALIZED TYPE VALUE FACE VALUE DATE APPRECIATION ---- ----- ----------- ---------- ------------- 10-Year U.S. Treasury Note $19,679,063 $19,488,803 Sept-2004 $190,260 ACRONYM NAME ABAG Association of Bay Area Government AMT Alternative Minimum Tax IFRN Inverse Floating Rate Note See notes to financial statements. 20 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund
($) ------------------------------------------ ----------------------------------------------------------------------------- Assets Investments, at cost 388,424,670 ----------- Investments, at value 420,548,739 Cash 99,714 Receivable for: Fund shares sold 51,555 Interest 6,072,610 Futures variation margin 129,375 Deferred Trustees' compensation plan 10,099 ----------- Total Assets 426,912,092 ----------------------------------------------------------------------------- Liabilities Payable for: Investments purchased on a delayed delivery basis 240,000 Fund shares repurchased 296,485 Distributions 570,431 Investment advisory fee 131,617 Administration fee 35,788 Transfer agent fee 32,369 Pricing and bookkeeping fees 14,116 Custody fee 2,083 Distribution and service fees 14,316 Deferred Trustees' fees 10,099 Other liabilities 70,218 ----------- Total Liabilities 1,417,522 Net Assets 425,494,570 ----------------------------------------------------------------------------- Composition of Net Assets Paid-in capital 397,371,928 Undistributed net investment income 593,469 Accumulated net realized loss (4,785,156) Net unrealized appreciation on: Investments 32,124,069 Futures contracts 190,260 ----------- Net Assets 425,494,570 ----------------------------------------------------------------------------- Class A Net assets 47,094,953 Shares outstanding 5,390,200 Net asset value per share 8.74(a) Maximum offering price per share ($8.74/0.9525) 9.18(b) ----------------------------------------------------------------------------- Class B Net assets 6,621,250 Shares outstanding 757,814 Net asset value and offering price per share 8.74(a) ----------------------------------------------------------------------------- Class C Net assets 1,906,833 Shares outstanding 218,239 Net asset value and offering price per share 8.74(a) ----------------------------------------------------------------------------- Class Z Net assets 369,871,534 Shares outstanding 42,330,539 Net asset value, offering and redemption price per share 8.74
(a)Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b)On sales of $50,000 or more the offering price is reduced. See notes to financial statements. 21 STATEMENT OF OPERATIONS -------------------------------------------------------------------------------- For the Year Ended June 30, 2004 Columbia Managed Municipals Fund
($) ------------------------------------------ ----------------------------------------------------------------------------- Investment Income Interest 23,828,178 Dividends 12,261 ----------- Total Investment Income 23,840,439 ----------------------------------------------------------------------------- Expenses Investment advisory fee 1,922,796 Administration fee 536,949 Distribution fee: Class B 59,113 Class C 13,112 Service fee: Class A 109,258 Class B 16,984 Class C 3,774 Transfer agent fee 423,144 Pricing and bookkeeping fees 151,670 Trustees' fees 18,500 Custody fee 23,417 Non-recurring costs (See Note 7) 19,001 Other expenses 240,764 ---------- Total Expenses 3,538,482 Fees waived by Distributor - Class C (5,843) Non-recurring costs assumed by Investment Advisor (See Note 7) (19,001) Custody earnings credit (1,509) ---------- Net Expenses 3,512,129 ---------- Net Investment Income 20,328,310 ----------------------------------------------------------------------------- Net Realized and Unrealized Net realized gain (loss) on: Gain (Loss) on Investments Investments (1,755,905) and Futures Contracts Futures contracts 501,950 ------------ Net realized loss (1,253,955) ------------ Net change in unrealized appreciation/depreciation on: Investments (23,980,310) Futures contracts (223,938) ------------ Net change in unrealized appreciation/depreciation (24,204,248) ------------ Net Loss (25,458,203) ------------ Net Decrease in Net Assets from Operations (5,129,893)
See notes to financial statements. 22
STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Year Ended June 30, ---------------------------- Increase (Decrease) in Net Assets: 2004 (a) ($) 2003 (b) ($) ------------------------------------------ ----------------------------------------------------------------------------- Operations Net investment income 20,328,310 22,129,688 Net realized gain (loss) on investments and futures contracts (1,253,955) 7,459,349 Net change in unrealized appreciation/depreciation on investments and futures contracts (24,204,248) 15,436,452 ---------------------------- Net Increase (Decrease) from Operations (5,129,893) 45,025,489 ----------------------------------------------------------------------------- Distributions Declared to Shareholders From net investment income: Class A (2,121,281) (1,528,000) Class B (269,381) (222,870) Class C (65,540) (37,406) Class Z (17,512,057) (19,508,563) From net realized gains: Class A (857,679) -- Class B (131,968) -- Class C (26,854) -- Class Z (6,747,258) -- ---------------------------- Total Distributions Declared to Shareholders (27,732,018) (21,296,839) ----------------------------------------------------------------------------- Share Transactions Class A: Subscriptions 2,317,399 2,335,628 Proceeds received in connection with merger -- 56,105,119 Distributions reinvested 1,867,215 890,534 Redemptions (7,450,680) (7,592,477) ---------------------------- Net Increase (Decrease) (3,266,066) 51,738,804 Class B: Subscriptions 384,216 302,522 Proceeds received in connection with merger -- 10,260,711 Distributions reinvested 271,743 145,914 Redemptions (2,432,358) (2,149,839) ---------------------------- Net Increase (Decrease) (1,776,399) 8,559,308 Class C: Subscriptions 773,448 349,095 Proceeds received in connection with merger -- 1,808,445 Distributions reinvested 66,607 28,468 Redemptions (389,459) (668,615) ---------------------------- Net Increase 450,596 1,517,393 Class Z: Subscriptions 35,414,788 95,478,788 Distributions reinvested 16,961,581 13,852,730 Redemptions (86,349,551) (140,614,453) ---------------------------- Net Decrease (33,973,182) (31,282,935) Net Increase (Decrease) from Share Transactions (38,565,051) 30,532,570 Total Increase (Decrease) in Net Assets (71,426,962) 54,261,220 ----------------------------------------------------------------------------- Net Assets Beginning of period 496,921,532 442,660,312 End of period (including undistributed net investment income of $593,469 and $721,332, respectively) 425,494,570 496,921,532 -----------------------------------------------------------------------------
(a)On October 13, 2003 the Liberty Managed Municipals Fund was renamed Columbia Managed Municipals Fund. (b)On July 29, 2002, the Stein Roe Managed Municipals Fund was redesignated Liberty Managed Municipals Fund, Class Z. Class A, Class B and Class C shares were initially offered on November 1, 2002. See notes to financial statements. 23 -------------------------------------------------------------------------------- Columbia Managed Municipals Fund
Year Ended June 30, ---------------------------- 2004 (a) 2003 (b) ------------------------------------------ ----------------------------------------------------------------------------- Changes in Shares Class A: Subscriptions 257,713 252,043 Issued in connection with merger -- 6,240,857 Issued for distributions reinvested 206,432 97,035 Redemptions (830,384) (833,496) ---------------------------- Net Increase (Decrease) (366,239) 5,756,439 Class B: Subscriptions 42,983 32,805 Issued in connection with merger -- 1,141,022 Issued for distributions reinvested 30,019 15,909 Redemptions (270,238) (234,686) ---------------------------- Net Increase (Decrease) (197,236) 955,050 Class C: Subscriptions 85,547 37,731 Issued in connection with merger -- 201,082 Issued for distributions reinvested 7,364 3,099 Redemptions (43,146) (73,438) ---------------------------- Net Increase 49,765 168,474 Class Z: Subscriptions 3,916,866 10,490,877 Issued for distributions reinvested 1,875,256 1,517,021 Redemptions (9,573,470) (15,369,022) ---------------------------- Net Decrease (3,781,348) (3,361,124)
(a)On October 13, 2003 the Liberty Managed Municipals Fund was renamed Columbia Managed Municipals Fund. (b)On July 29, 2002, the Stein Roe Managed Municipals Fund was redesignated Liberty Managed Municipals Fund, Class Z. Class A, Class B and Class C shares were initially offered on November 1, 2002. See notes to financial statements. 24 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Note 1. Organization Columbia Managed Municipals Fund (the "Fund"), a series of Columbia Funds Trust IX (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Investment Goal The Fund seeks a high level of total return consistent with prudent risk, consisting of current income exempt from federal income tax and opportunities for capital appreciation. Fund Shares The Fund may issue an unlimited number of shares and offers four classes of shares: Class A, Class B, Class C and Class Z. Each share class has its own sales charge and expense structure. Class A shares are subject to a maximum front-end sales charge of 4.75% based on the amount of initial investment. Class A shares purchased without an initial sales charge are subject to a 1.00% contingent deferred sales charge ("CDSC") on shares sold within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a maximum CDSC of 5.00% based upon the holding period after purchase. Class B shares will convert to Class A shares in a certain number of years after purchase, depending on the program under which shares were purchased. Class C shares are subject to a 1.00% CDSC on shares sold within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. Note 2. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. Security Valuation Debt securities generally are valued by a pricing service approved by the Fund's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments in other investment companies are valued at net asset value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Options are valued at the last reported sale price, or in the absence of a sale, the mean between the last quoted bid and ask price. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Security Transactions Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based 25 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund upon the specific identification method for both financial statement and federal income tax purposes. Futures Contracts The Fund may invest in municipal and U.S. Treasury futures contracts. The Fund may invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Fund and not for trading purposes. The use of futures contracts involves certain risks, which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to differing trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities, or (3) an inaccurate prediction by Columbia Management Advisors, Inc. of the future direction of interest rates. Any of these risks may involve amounts exceeding the variation margin recorded in the Fund's Statement of Assets and Liabilities at any given time. Upon entering into a futures contract, the Fund deposits cash or securities with the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin payable or receivable and offset in unrealized gains or losses. The Fund also identifies portfolio securities as segregated with the custodian in a separate account in an amount equal to the futures contract. The Fund recognizes a realized gain or loss when the contract is closed or expires. Options The Fund may write call and put options on futures it owns or in which it may invest. Writing put options tends to increase the Fund's exposure to the underlying instrument. Writing call options tends to decrease the Fund's exposure to the underlying instrument. When the Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked-to-market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against the amounts paid on the underlying future transaction to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying future may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the future underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. The Fund may also purchase put and call options. Purchasing call options tends to increase the Fund's exposure to the underlying instrument. Purchasing put options tends to decrease the Fund's exposure to the underlying instrument. The Fund pays a premium, which is included on the Fund's Statement of Assets and Liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future transaction to determine the realized gain or loss. The Fund's custodian will set aside cash or liquid portfolio securities equal to the amount of the written options contract commitment in a separate account. Restricted Securities Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Fund will not incur any registration costs upon such resale. Delayed Delivery Securities The Fund may trade securities on other than normal settlement terms, including securities purchased or 26 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund sold on a "when-issued" basis. This may increase the risk if the other party to the transaction fails to deliver and causes the Fund to subsequently invest at less advantageous prices. The Fund identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. Income Recognition Interest income is recorded on the accrual basis. Original issue discount is accreted to interest income over the life of the security with a corresponding increase in the cost basis. Premium and discount are amortized and accreted, respectively, on all debt securities. Dividend income is recorded on the ex-date. Determination of Class Net Asset Values All income, expenses (other than class-specific expenses, as shown on the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. Federal Income Tax Status The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable or tax-exempt income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. Distributions to Shareholders Dividends from net investment income are declared daily and paid monthly. Net realized capital gains from investment transactions in excess of available capital loss carryforwards would be taxable to the Fund if not distributed and therefore are distributed at least annually. Note 3. Federal Tax Information The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended June 30, 2004, permanent differences resulting primarily from differing treatments for amortization/accretion adjustments, market discount reclassification adjustments and distribution reclassifications were identified and reclassified among the components of the Fund's net assets as follows: Undistributed Accumulated Net Investment Net Realized Paid-In Income Loss Capital ---------------------------------------------------------- $(487,914) $487,914 $-- Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended June 30, 2004 and June 30, 2003 was as follows: June 30, 2004 June 30, 2003 ---------------------------------------------------------- Distributions paid from: ---------------------------------------------------------- Tax-Exempt Income $19,931,482 $21,266,033 ---------------------------------------------------------- Ordinary Income* 40,499 30,806 ---------------------------------------------------------- Long-Term Capital Gains 7,760,037 -- ---------------------------------------------------------- * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of June 30, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Undistributed Net Tax-Exempt Ordinary Long-Term Unrealized Income Income Capital Gains Appreciation* ------------------------------------------------------------- $922,298 $-- $-- $32,379,220 * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to amortization/accretion adjustments. 27 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 37,339,610 Unrealized depreciation (4,960,390) ---------------------------------------------------------- Net unrealized appreciation $ 32,379,220 The following capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code: Year of Capital Loss Expiration Carryforward -------------------------------------------------- 2012 $1,522,991 Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of June 30, 2004, post-October capital losses of $700,523 attributed to security transactions were deferred to July 1, 2004. Note 4. Fees and Compensation Paid to Affiliates Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. Investment Advisory Fee Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: Average Daily Net Assets Annual Fee Rate ----------------------------------------------------- First $100 million 0.450% ----------------------------------------------------- Next $100 million 0.425% ----------------------------------------------------- Next $800 million 0.400% ----------------------------------------------------- Over $1 billion 0.375% ----------------------------------------------------- For the year ended June 30, 2004, the Fund's effective investment advisory fee rate was 0.42%. Administration Fee Columbia provides administrative and other services to the Fund for a monthly administration fee based on the Fund's average daily net assets at the following annual rates: Average Daily Net Assets Annual Fee Rate ----------------------------------------------------- First $100 million 0.150% ----------------------------------------------------- Next $100 million 0.125% ----------------------------------------------------- Next $800 million 0.100% ----------------------------------------------------- Over $1 billion 0.075% ----------------------------------------------------- For the year ended June 30, 2004, the Fund's effective administration fee rate was 0.12%. Pricing and Bookkeeping Fees Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the year ended June 30, 2004, the Fund's effective pricing and bookkeeping fee rate was 0.033%. Transfer Agent Fee Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $34.00 per open account. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly transfer agent fee at the annual rate of 0.06% of the Fund's average daily net assets plus flat-rate charges based on the number of shareholder accounts and 28 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund transactions. The Transfer Agent was also entitled to receive reimbursement for certain out-of-pocket expenses. For the year ended June 30, 2004, the Fund's effective transfer agent fee rate, inclusive of out-of-pocket expenses, was 0.09%. Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia Funds Services, Inc. Underwriting Discounts, Service and Distribution Fees Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. For the year ended June 30, 2004, the Distributor has retained net underwriting discounts of $3,119 on sales of the Fund's Class A shares and received CDSC fees of $19,434 and $662 on Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan") for its Class A, Class B and Class C shares which requires the payment of a monthly service fee to the Distributor. The service fee is equal to 0.10% annually of the net assets attributable to shares of the Liberty Ohio Tax-Exempt Fund issued prior to December 1, 1994 and 0.25% annually of the net assets attributable to shares issued thereafter. This arrangement results in a service fee between the 0.10% and 0.25% annual rates. For the year ended June 30, 2004, the effective service fee rates were 0.22%, 0.22% and 0.22% for Class A, Class B and Class C shares, respectively. The Plan also requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.75% of the average daily net assets attributable to Class B and Class C shares only. The Distributor has voluntarily agreed to waive a portion of the Class C share distribution fee so that it will not exceed 0.45% annually. Prior to August 5, 2003, the Distributor voluntarily waived a portion of the Class C share distribution fee so that it did not exceed 0.05% annually. For the year ended June 30, 2004, the effective distribution fee rate for Class C shares was 0.42%. The CDSC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. Effective October 13, 2003, Liberty Funds Distributor, Inc. was renamed Columbia Funds Distributor, Inc. Custody Credits The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. Fees Paid to Officers and Trustees The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. Other Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended June 30, 2004, the Fund paid $2,026 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. Note 5. Portfolio Information For the year ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $34,428,446 and $83,493,710, respectively. Note 6. Line of Credit The Fund and other affiliated funds participate in a $350,000,000 credit facility, which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to the Fund based on its borrowings. In addition, the Fund has agreed to pay commitment fees on its pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. For the year ended June 30, 2004, the Fund did not borrow under this arrangement. 29 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund Note 7. Disclosure of Significant Risks and Contingencies High-Yield Securities Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid to the extent there is no established secondary market. Industry Focus The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. Legal Proceedings Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. 30 -------------------------------------------------------------------------------- June 30, 2004 Columbia Managed Municipals Fund For the year ended June 30, 2004, Columbia has assumed $19,001 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. Note 8. Business Combinations and Mergers Name Change Effective October 13, 2003, the Fund changed its name from Liberty Managed Municipals Fund to Columbia Managed Municipals Fund. Also on that date, the Trust changed its name from Liberty-Stein Roe Funds Municipal Trust to Columbia Funds Trust IX. On July 29, 2002, the Stein Roe Managed Municipals Fund was redesignated Liberty Managed Municipals Fund, Class Z. Class A, Class B and Class C shares were initially offered on November 1, 2002. Fund Mergers As of the end of business on November 1, 2002, the Liberty Managed Municipals Fund acquired all the net assets of Liberty Ohio Tax-Exempt Fund pursuant to a plan of reorganization. All assets of Liberty Ohio Tax-Exempt Fund were transferred to the Liberty Managed Municipals Fund in a tax-free exchange and shareholders of Liberty Ohio Tax-Exempt Fund received shares of Liberty Managed Municipals Fund in exchange for their shares as follows: Liberty Liberty Ohio Managed Tax-Exempt Municipals Fund Fund Net Unrealized Shares Issued Assets Received Appreciation1 ------------------------------------------------------------ 7,582,961 $68,174,275 $5,937,882 Net Assets Net Assets Net Assets of Liberty of Liberty of Liberty Ohio Managed Managed Tax-Exempt Fund Municipals Fund Municipals Fund Immediately Immediately Prior to Prior to After Combination Combination Combination ------------------------------------------------------------- $443,275,288 $68,174,275 $511,449,563 1 Unrealized Appreciation is included in the Net Assets Received amount above. 31
FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Columbia Managed Municipals Fund Selected data for a share outstanding throughout each period is as follows: Year Ended Period Ended June 30, June 30, Class A Shares 2004 2003 (a) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 9.38 $ 9.01 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income (b) 0.38 0.26 Net realized and unrealized gain (loss) on investments and futures contracts (0.49) 0.37 -------- -------- Total from Investment Operations (0.11) 0.63 -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.38) (0.26) From net realized gains (0.15) -- -------- -------- Total Distributions Declared to Shareholders (0.53) (0.26) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 8.74 $ 9.38 Total return (c) (1.20)% 7.06%(d) -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (e) 0.94% 0.97%(f) Net investment income (e) 4.23% 4.27%(f) Portfolio turnover rate 8% 40% Net assets, end of period (000's) $ 47,095 $ 53,979 -------------------------------------------------------------------------------------------------------------------------------- (a)Class A shares were initially offered on November 1, 2002. Per share data and total return reflect activity from that date. (b)Per share data was calculated using average shares outstanding during the period. (c)Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales charge. (d)Not annualized. (e)The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f)Annualized. 32 -------------------------------------------------------------------------------- Columbia Managed Municipals Fund Selected data for a share outstanding throughout each period is as follows: Year Ended Period Ended June 30, June 30, Class B Shares 2004 2003 (a) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 9.38 $ 9.01 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income (b) 0.31 0.21 Net realized and unrealized gain (loss) on investments and futures contracts (0.49) 0.37 -------- -------- Total from Investment Operations (0.18) 0.58 -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.31) (0.21) From net realized gains (0.15) -- -------- -------- Total Distributions Declared to Shareholders (0.46) (0.21) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 8.74 $ 9.38 Total return (c) (1.94)% 6.54%(d) -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (e) 1.69% 1.72%(f) Net investment income (e) 3.48% 3.52%(f) Portfolio turnover rate 8% 40% Net assets, end of period (000's) $ 6,621 $ 8,956 --------------------------------------------------------------------------------------------------------------------------------
(a)Class B shares were initially offered on November 1, 2002. Per share data and total return reflect activity from that date. (b)Per share data was calculated using average shares outstanding during the period. (c)Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (d)Not annualized. (e)The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (f)Annualized. 33
-------------------------------------------------------------------------------- Columbia Managed Municipals Fund Selected data for a share outstanding throughout each period is as follows: Year Ended Period Ended June 30, June 30, Class C Shares 2004 2003 (a) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 9.38 $ 9.01 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income (b) 0.34 0.25 Net realized and unrealized gain (loss) on investments and futures contracts (0.49) 0.35 -------- -------- Total from Investment Operations (0.15) 0.60 -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.34) (0.23) From net realized gains (0.15) -- -------- -------- Total Distributions Declared to Shareholders (0.49) (0.23) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 8.74 $ 9.38 Total return (c)(d) (1.65)% 6.75%(e) -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (f) 1.36% 1.02%(g) Net investment income (f) 3.81% 4.20%(g) Waiver/reimbursement 0.33% 0.70%(g) Portfolio turnover rate 8% 40% Net assets, end of period (000's) $ 1,907 $ 1,579 --------------------------------------------------------------------------------------------------------------------------------
(a)Class C shares were initially offered on November 1, 2002. Per share data and total return reflect activity from that date. (b)Per share data was calculated using average shares outstanding during the period. (c)Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (d)Had the Distributor not waived a portion of expenses, total return would have been reduced. (e)Not annualized. (f)The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g)Annualized. 34
-------------------------------------------------------------------------------- Columbia Managed Municipals Fund Selected data for a share outstanding throughout each period is as follows: Year Ended June 30, Class Z Shares 2004 2003 (a) 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 9.38 $ 8.95 $ 8.99 $ 8.65 $ 9.07 -------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: Net investment income 0.40(b) 0.42(b) 0.43(b)(c) 0.45(b) 0.47 Net realized and unrealized gain (loss) on investments and futures contracts (0.49) 0.41 0.18(c) 0.41 (0.32) -------- -------- -------- -------- -------- Total from Investment Operations (0.09) 0.83 0.61 0.86 0.15 -------------------------------------------------------------------------------------------------------------------------------- Less Distributions Declared to Shareholders: From net investment income (0.40) (0.40) (0.44) (0.45) (0.47) From net realized gains (0.15) -- (0.21) (0.07) (0.10) -------- -------- -------- -------- -------- Total Distributions Declared to Shareholders (0.55) (0.40) (0.65) (0.52) (0.57) -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 8.74 $ 9.38 $ 8.95 $ 8.99 $ 8.65 Total return (d) (1.02)% 9.50% 7.06% 10.13% 1.86% -------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets/Supplemental Data: Expenses (e) 0.72% 0.76% 0.76% 0.74% 0.69% Net investment income (e) 4.45% 4.58% 4.82%(c) 5.07% 5.39% Portfolio turnover rate 8% 40% 17% 17% 19% Net assets, end of period (000's) $369,872 $432,407 $442,660 $454,366 $458,205 --------------------------------------------------------------------------------------------------------------------------------
(a)On July 29, 2002, the Fund's existing shares were redesignated Class Z shares. (b)Per share data was calculated using average shares outstanding during the period. (c)Effective July 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting premium and discount on all debt securities. The effect of this change for the year ended June 30, 2002 was to increase the ratio of investment income to average net assets from 4.81% to 4.82%. The impact to the net investment income and the net realized and unrealized gain was less than $0.01. Per share data and ratios for periods prior to June 30, 2002 have not been restated to reflect this change in presentation. (d)Total return at net asset value assuming all distributions reinvested. (e)The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. 35 Report of Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- Columbia Managed Municipals Fund To the Trustees of Columbia Funds Trust IX and the Shareholders of Columbia Managed Municipals Fund In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Columbia Managed Municipals Fund (the "Fund") (formerly the Liberty Managed Municipals Fund) (a series of Columbia Funds Trust IX, formerly Liberty-Stein Roe Funds Municipal Trust) at June 30, 2004, and the results of its operations, the changes in its net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at June 30, 2004 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. The financial statements of the Fund as of June 30, 2003 and for each of the periods specified therein were audited by other independent accountants whose report dated August 19, 2003 expressed an unqualified opinion on those statements. PricewaterhouseCoopers LLP Boston, Massachusetts August 17, 2004 36 Unaudited Information -------------------------------------------------------------------------------- Columbia Managed Municipals Fund Federal Income Tax Information 99.80% of the distributions from net investment income will be treated as exempt income for federal income tax purposes. 37 TRUSTEES -------------------------------------------------------------------------------- Columbia Managed Municipals Fund Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth had been directors of 15 Columbia Funds and 20 funds in the CMG Fund Trust. Also effective October 8, 2003, the incumbent trustees of the Fund were elected as directors of the 15 Columbia Funds and as trustees of the 20 funds in the CMG Fund Trust. The new combined Board of Trustees/Directors of the Fund now oversees 118 funds in the Columbia Funds Complex (including the former Liberty Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of these trustees/directors also serve on the Boards of other funds in the Columbia Funds Complex. The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
Name, address and age, Position with funds, Principal occupation(s) during past five years, Number of portfolios in Columbia Funds Year first elected or appointed to office(1) complex overseen by trustee/director, Other directorships held DISINTERESTED TRUSTEES DOUGLAS A. HACKER (age 48) Executive Vice President-Strategy of United Airlines (airline) since December 2002 P.O. Box 66100 (formerly President of UAL Loyalty Services (airline) from September 2001 to December Chicago, IL 60666 2002; Executive Vice President and Chief Financial Officer of United Airlines from Trustee (since 1996) July 1999 to September 2001). Oversees 118, Orbitz (online travel company) -------------------------------------------------------------------------------------- JANET LANGFORD KELLY (age 46) Private Investor since March 2004 (formerly Chief Administrative Officer and Senior 9534 W. Gull Lake Drive Vice President, Kmart Holding Corporation (consumer goods) from September 2003 to Richland, MI 49083-8530 March 2004; Executive Vice President- Corporate Development and Administration, Trustee (since 1996) General Counsel and Secretary, Kellogg Company (food manufacturer), from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September 1999). Oversees 118, None -------------------------------------------------------------------------------------- RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive Officer, 10701 Charleston Drive U.S. Plywood Corporation (building products manufacturer)). Oversees 1203, None Vero Beach, FL 32963 Trustee (since 1995) -------------------------------------------------------------------------------------- CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January 1976; Ford and Louisa Department of Economics Van Voorhis Professor of Political Economy, University of Washington, since September University of Washington 1993; (formerly Director, Institute for Economic Research, University of Washington Seattle, WA 98195 from September 2001 to June 2003) Adjunct Professor of Statistics, University of Trustee (since 1981) Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None -------------------------------------------------------------------------------------- JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College 84 College Road (formerly Dean, Boston College School of Management from September 1977 to September Chestnut Hill, MA 02467-3838 1999). Oversees 1213,4, Saucony, Inc. (athletic footwear and apparel) -------------------------------------------------------------------------------------- Trustee (since 1985)
38 -------------------------------------------------------------------------------- Columbia Managed Municipals Fund
Name, address and age, Position with funds, Principal occupation(s) during past five years, Number of portfolios in Columbia Funds Year first elected or appointed to office(1) complex overseen by trustee/director, Other directorships held DISINTERESTED TRUSTEES PATRICK J. SIMPSON (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None 1120 N.W.Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000) -------------------------------------------------------------------------------------- THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, 2208 Tawny Woods Place College of Business, Boise State University); Chartered Financial Analyst. Boise, ID 83706 Oversees 118, None Trustee (since 1998) -------------------------------------------------------------------------------------- THOMAS C. THEOBALD (age 67) Managing Director, William Blair Capital Partners (private equity investing) since 227 West Monroe Street, September 1994. Oversees 118, Anixter International (network support equipment Suite 3500 distributor), Jones Lang LaSalle (real estate management services) and Ventas, Inc Chicago, IL 60606 (real estate investment trust) Trustee and Chairman of the Board5 (since 1996) -------------------------------------------------------------------------------------- ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM 359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 1194, Chairman of Hopkinton, NH 03229 the Board of Directors, Enesco Group, Inc. (designer, importer and distributor of Trustee (since 1998) giftware and collectibles) -------------------------------------------------------------------------------------- RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The 100 S.W. Market Street #1500 Regence Group (regional health insurer); Chairman and Chief Executive Officer, Portland, OR 97207 BlueCross BlueShield of Oregon; Certified Public Accountant. Oversees 118, Northwest Trustee (since 1991) Natural Gas Co. (natural gas service provider) -------------------------------------------------------------------------------------- INTERESTED TRUSTEES WILLIAM E. MAYER2 (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since February 1999 399 Park Avenue (formerly Founding Partner, Development Capital LLC from November 1996 to February Suite 3204 1999). Oversees 1203, Lee Enterprises (print media), WR Hambrecht + Co. (financial New York, NY 10022 service provider), First Health (healthcare), Reader's Digest (publishing) and Trustee (since 1994) OPENFIELD Solutions (retail industry technology provider) --------------------------------------------------------------------------------------
(1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. (5) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. 39 OFFICERS -------------------------------------------------------------------------------- Columbia Managed Municipals Fund
Name, address and age, Position with Columbia Funds, Year first elected or appointed to office Principal occupation(s) during past five years VICKI L. BENJAMIN (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty All-Star Funds since One Financial Center June 2001; Assistant Treasurer of Columbia Acorn and Wanger Funds since June Boston, MA 02111 2004 (formerly Controller of the Columbia Funds and of the Liberty All-Star Chief Accounting Officer (since 2001) Funds from May 2002 to May 2004); Controller and Chief Accounting Officer of the Galaxy Funds since September 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001). ------------------------------------------------------------------------------- MICHAEL CLARKE (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds since 2004; One Financial Center Assistant Treasurer of Columbia Acorn and Wanger Funds since June 2004 Boston, MA 02111 (formerly Assistant Treasurer of the Columbia Funds and of the Liberty All-Star Controller (since 2004) Funds from June 2002 to May 2004; Vice President, Product Strategy & Development of Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999). ------------------------------------------------------------------------------- J. KEVIN CONNAUGHTON (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer of the One Financial Center Columbia Funds and of the Liberty All-Star Funds since December 2000; Vice Boston, MA 02111 President of the Advisor since April 2003 (formerly Chief Accounting Officer Treasurer (since 2000) and President (since 2004) and Controller of the Liberty Funds and Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December 2002 (formerly Vice President of Colonial from February 1998 to October 2000). ------------------------------------------------------------------------------- DAVID A. ROZENSON (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds since One Financial Center December 2003; Senior Counsel, Bank of America Corporation (formerly Boston, MA 02111 FleetBoston Financial Corporation) since January 1996; Associate Counsel, Secretary (since 2003) Columbia Management Group since November 2002.
40 IMPORTANT INFORMATION ABOUT THIS REPORT -------------------------------------------------------------------------------- Columbia Managed Municipals Fund Transfer Agent Columbia Funds Services, Inc. P.O. Box 8081 Boston MA 02266-8081 800.345.6611 Distributor Columbia Funds Distributor, Inc. One Financial Center Boston MA 02111 Investment Advisor Columbia Management Advisors, Inc. 100 Federal Street Boston MA 02110 Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP 125 High Street Boston MA 02110 The funds mail one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800-345-6611 and additional reports will be sent to you. This report has been prepared for shareholders of Columbia Managed Municipals Fund. This report may also be used as sales literature when preceded or accompanied by the current prospectus which provides details of sales charges, investment objectives and operating policies of the funds and with the most recent copy of the Columbia Funds Performance Update. A description of the policies and procedures that fund's use to determine how to vote proxies relating to their portfolio securities and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov and (iii) without charge, upon request, by calling 800-368-0346. Please note that on March 1, 2004, Ernst & Young LLP ("E&Y") resigned as the fund's independent registered public accounting firm. During the two most recent fiscal years, E&Y's audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope, or accounting principle. Further, in connection with its audits for the two most recent fiscal years and through March 1, 2004, there were no disagreements between the fund and E&Y on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of E&Y would have caused it to make reference to the disagreement in its report on the financial statements for such years. Effective March 1, 2004, PricewaterhouseCoopers LLP was appointed by the audit committee of the Board of Trustees as the independent registered public accounting firm of the fund for the fiscal year ended June 30, 2004. 41 [eDELIVERY LOGO] Help your fund reduce printing and postage costs! Elect to get your shareholder reports by electronic delivery. With Columbia's eDelivery program, you receive an e-mail message when your shareholder report becomes available online. If your fund account is registered with Columbia Funds, you can sign up quickly and easily on our website at www.columbiafunds.com. Please note -- if you own your fund shares through a financial institution, contact the institution to see if it offers electronic delivery. If you own your fund shares through a retirement plan, electronic delivery may not be available to you. Columbia Managed Municipals Fund ANNUAL REPORT, JUNE 30, 2004 PRSRT STD U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 [LOGO]: COLUMBIA FUNDS A MEMBER OF COLUMBIA MANAGEMENT GROUP [C]2004 Columbia Funds Distributor, Inc. One Financial Center, Boston, MA 02111-2621 800.345.6611 www.columbiafunds.com 798-02/217S-0604 (08/04) 04/1746 ITEM 2. CODE OF ETHICS. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr. Woolworth are each independent trustees, as defined in paragraph (a)(2) of this item's instructions and collectively constitute the entire Audit Committee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fee information below is disclosed in aggregate for the series of the registrant whose reports to stockholders are included in this annual filing. Effective March 1, 2004, the series of the registrant engaged new independent accountants. Unless otherwise noted, fees disclosed below represent fees paid or accrued to the current and predecessor principal accountants while each was engaged by the registrant. (a) Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended June 30, 2004 and June 30, 2003 are approximately as follows: 2004 2003 $52,800 $51,500 Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years ended June 30, 2004 and June 30, 2003 are approximately as follows: 2004 2003 $8,000 $19,000 Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. In both fiscal years 2004 and 2003, Audit-Related Fees include certain agreed-upon procedures performed for semi-annual shareholder reports. Fiscal year 2003 also includes fees for agreed-upon procedures conducted during the conversion of the fund's accounting system and agreed-upon procedures relating to fund mergers. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. For the registrant, the percentage of Audit-Related services that were approved under the "de minimis" exception during the fiscal years ended June 30, 2004 and June 30, 2003 was zero. The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal years ended June 30, 2004 and June 30, 2003, there were no Audit-Related Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Audit-Related fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended June 30, 2004 and June 30, 2003 was zero. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years ended June 30, 2004 and June 30, 2003 are approximately as follows: 2004 2003 $7,100 $9,800 Tax Fees include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. Tax Fees in both fiscal years 2004 and 2003 primarily consist of the review of annual tax returns and the review of calculations of required shareholder distributions. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. For the registrant, the percentage of Tax Fees that were approved under the "de minimis" exception during the fiscal years ended June 30, 2004 and June 30, 2003 was zero. The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal years ended June 30, 2004 and June 30, 2003, there were no Tax Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Tax fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended June 30, 2004 and June 30, 2003 was zero. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years ended June 30, 2004 and June 30, 2003 are as follows: 2004 2003 $0 $0 All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in (a)-(c) above. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. For the registrant, the percentage of All Other Fees that were approved under the "de minimis" exception during the fiscal years ended June 30, 2004 and June 30, 2003 was zero. The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal year ended June 30, 2004, All Other Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $95,000 (note that fees were paid to the current principal accountant). During the fiscal year ended June 30, 2003, All Other Fees that would have been subject to pre-approval had paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X been applicable at the time the services were provided, were approximately $95,000 (note that fees were paid to the current principal accountant). For both fiscal years, All Other Fees relate to internal controls reviews of the registrant's transfer agent. The percentage of All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended June 30, 2004 and June 30, 2003 was zero. (e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES I. GENERAL OVERVIEW The Audit Committee of the registrant has adopted a formal policy (the "Policy") which sets forth the procedures and the conditions pursuant to which the Audit Committee will pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant's independent auditor to the registrant and individual funds (collectively "Fund Services"), and (ii) all non-audit services provided by the registrant's independent auditor to the funds' adviser or a control affiliate of the adviser, that relate directly to the funds' operations and financial reporting (collectively "Fund-related Adviser Services"). A "control affiliate" is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser. The adviser and control affiliates are collectively referred to as "Adviser Entities." The Audit Committee uses a combination of specific (on a case-by-case basis as potential services are contemplated) and general (pre-determined list of permitted services) pre-approvals. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. The Policy does not delegate the Audit Committee's responsibilities to pre-approve services performed by the independent auditor to management. II. GENERAL PROCEDURES On an annual basis, the Fund Treasurer and/or Director of Trustee Administration shall submit to the Audit Committee a schedule of the types of Fund Services and Fund-related Adviser Services that are subject to general pre-approval. These schedules will provide a description of each type of service that is subject to general pre-approval and, where possible, will provide estimated fees for each instance of providing each service. This general pre-approval and related fees (where provided) will generally cover a one-year period (for example, from July 1 through June 30 of the following year). The Audit Committee will review and approve the types of services and review the projected fees for the next one-year period and may add to, or subtract from, the list of general pre-approved services from time to time, based on subsequent determinations. This approval acknowledges that the Audit Committee is in agreement with the specific types of services that the independent auditor will be permitted to perform. The fee amounts will be updated to the extent necessary at other regularly scheduled meetings of the Audit Committee. In addition to the fees for each individual service, the Audit Committee has the authority to implement a fee cap on the aggregate amount of non-audit services provided to an individual fund. If, subsequent to general pre-approval, a fund, its investment adviser or a control affiliate determines that it would like to engage the independent auditor to perform a service that requires pre-approval and that is not included in the general pre-approval list, the specific pre-approval procedure shall be as follows: o A brief written request shall be prepared by management detailing the proposed engagement with explanation as to why the work is proposed to be performed by the independent auditor; o The request should be addressed to the Audit Committee with copies to the Fund Treasurer and/or Director of Trustee Administration; o The Fund Treasurer and/or Director of Trustee Administration will arrange for a discussion of the service to be included on the agenda for the next regularly scheduled Audit Committee meeting, when the Committee will discuss the proposed engagement and approve or deny the request. o If the timing of the project is critical and the project needs to commence before the next regularly scheduled meeting, the Chairperson of the Audit Committee may approve or deny the request on behalf of the Audit Committee, or, in the Chairperson's discretion, determine to call a special meeting of the Audit Committee for the purpose of considering the proposal. Should the Chairperson of the Audit Committee be unavailable, any other member of the Audit Committee may serve as an alternate for the purpose of approving or denying the request. Discussion with the Chairperson (or alternate, if necessary) will be arranged by the Fund Treasurer and/or Director of Trustee Administration. The independent auditor will not commence any such project unless and until specific approval has been given. III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES The Audit Committee recognizes that there are cases where services proposed to be provided by the independent auditor to the adviser or control affiliates are not Fund-related Adviser Services within the meaning of the Policy, but nonetheless may be relevant to the Audit Committee's ongoing evaluation of the auditor's independence and objectivity with respect to its audit services to the funds. As a result, in all cases where an Adviser Entity engages the independent auditor to provide audit or non-audit services that are not Fund Services or Fund-related Adviser Services, were not subject to pre-approval by the Audit Committee, and the projected fees for any such engagement (or the aggregate of all such engagements during the period covered by the Policy) exceeds a pre-determined threshold established by the Audit Committee; the independent auditor, Fund Treasurer and/or Director of Trustee Administration will notify the Audit Committee not later than its next meeting. Such notification shall include a general description of the services provided, the entity that is to be the recipient of such services, the timing of the engagement, the entity's reasons for selecting the independent auditor, and the projected fees. Such information will allow the Audit Committee to consider whether non-audit services provided to the adviser and Adviser Entities, which were not subject to Audit Committee pre-approval, are compatible with maintaining the auditor's independence with respect to the Funds. IV. REPORTING TO THE AUDIT COMMITTEE The Fund Treasurer or Director of Trustee Administration shall report to the Audit Committee at each of its regular meetings regarding all Fund Services or Fund-related Adviser Services initiated since the last such report was rendered, including: o A general description of the services, and o Actual billed and projected fees, and o The means by which such Fund Services or Fund-related Adviser Services were pre-approved by the Audit Committee. In addition, the independent auditor shall report to the Audit Committee annually, and no more than 90 days prior to the filing of audit reports with the SEC, all non-audit services provided to entities in the funds' "investment company complex," as defined by SEC rules, that did not require pre-approval under the Policy. V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE The Policy may be amended from time to time by the Audit Committee. Prompt notice of any amendments will be provided to the independent auditor, Fund Treasurer and Director of Trustee Administration. The Policy shall be reviewed and approved at least annually by the Audit Committee. ***** (e)(2) This information has been included in items (b)-(d) above. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years ended June 30, 2004 and June 30, 2003 are disclosed in (b)-(d) above. All non-audit fees billed by the registrant's accountant for services rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal years ended June 30, 2004 and June 30, 2003 are also disclosed in (b)-(d) above. Such fees were approximately $95,000 and $95,000, respectively. (h) The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Not applicable at this time. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The registrant has not filed Schedule 14A subsequent to the effective date of that Schedule's Item 7(d)(2)(ii)(G). However, it is the registrant's policy to consider candidates for the Board of Trustees/Directors who are recommended by shareholders. A Fund shareholder who wishes to nominate a candidate to the Board may send information regarding prospective candidates to the Fund's Governance Committee, care of the Fund's Secretary. The information should include evidence of the shareholder's Fund ownership, a full listing of the proposed candidate's education, experience, current employment, date of birth, names and addresses of at least three professional references, information as to whether the candidate is not an "interested person" under the 1940 Act and "independent" under NYSE Listing Standards in relation to the Fund, and such other information as may be helpful to the independent trustees/directors in evaluating the candidate. All satisfactorily completed information packages regarding a candidate will be forwarded to an independent trustee/director for consideration. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer, based on his evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, has concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Columbia Funds Trust IX ------------------------------------------------------------------- By (Signature and Title) /s/ J. Kevin Connaughton ------------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date September 2, 2004 --------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ J. Kevin Connaughton ------------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date September 2, 2004 ---------------------------------------------------------------------------