<PAGE>
Registration Nos. 33-______/ 811-____
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No._ [ ]
Post-Effective Amendment No. _ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No._ [ ]
(Check appropriate box or boxes.)
COLUMBIA SMALL CAP FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (503) 222-3600
John A. Kemp
1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective (Check appropriate box)
immediately upon filing pursuant to paragraph (b)
---
on _______________ pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(i)
---
on _______________ pursuant to paragraph (a)(i)
---
75 days after filing pursuant to paragraph (a)(ii)
---
on _________________ pursuant to paragraph (a)(ii) of Rule 485
---
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
--- a previously filed post-effective amendment.
Please forward copies of communications to:
Robert J. Moorman
Stoel Rives L.L.P.
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204
------------------------------
An indefinite number of shares of Common Stock is being registered under the
Securities Act of 1933 by the Registrant. The Rule 24f-2 Notice for the year
ending December 31, 1996 will be filed on or before February 28, 1997
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
COLUMBIA SMALL CAP FUND, INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Location in
Part A - INFORMATION REQUIRED IN A PROSPECTUS Prospectus
-----------
<S> <C>
Item 1. Cover Page . . . . . . . . . . . Cover
Item 2. Synopsis . . . . . . . . . . . . "Fund Expenses"
Item 3. Condensed Financial
Information. . . . . . . . . . . Not applicable
Item 4. General Description of
Registrant . . . . . . . . . . . "Fund Description" and
"Additional Information"
Item 5. Management of the Fund . . . . . "Fund Management"
Item 5A. Management's Discussion of
Fund Performance . . . . . . . . Not applicable
Item 6. Capital Stock and Other
Securities . . . . . . . . . . . "Fund Management";
"Distributions and Taxes";
"Investor Services"; "Fund
Description"; and Cover
Item 7. Purchase of Securities Being
Offered. . . . . . . . . . . . . "Investor Services"; "Fund
Description" and "Fund
Management"
Item 8. Redemption or Repurchase . . . . "Investor Services"
Item 9. Pending Legal Proceedings. . . . Not applicable
Part B - INFORMATION REQUIRED IN A STATEMENT Statement of Additional
OF ADDITIONAL INFORMATION . . . . . . Information
-----------------------
Item 10. Cover Page . . . . . . . . . . . Cover
Item 11. Table of Contents. . . . . . . . "Table of Contents"
Item 12. General Information and
History. . . . . . . . . . . . Not applicable
Item 13. Investment Objectives and
Policies . . . . . . . . . . . "Investment Restrictions"; and
"Additional Information Regarding
Certain Investments by the Fund."
Additional information is in Prospectus
under "Fund Description" and "Additional
Information."
Item 14. Management of the Fund . . . . . "Management"
2
<PAGE>
Item 15. Control Persons and Principal
Holders of Securities. . . . . . "Management"
Item 16. Investment Advisory and
Other Services . . . . . . . . . "Investment Advisory and other
Fees Paid to Affiliates" and
"Custodians." Additional
information is in Prospectus
under "Fund Management."
Item 17. Brokerage Allocation and Other
Practices. . . . . . . . . . . . "Portfolio Transactions"
Item 18. Capital Stock and Other
Securities . . . . . . . . . . . All required information is
in Prospectus under "Fund
Management."
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered. . . . . . . . . . "Redemptions." Additional
information is in Prospectus
under "Investor Services."
Item 20. Tax Status . . . . . . . . . . . "Taxes." Additional
information is in Prospectus
under "Distributions and
Taxes."
Item 21. Underwriters . . . . . . . . . . "Management"
Item 22. Calculation of Performance
Data . . . . . . . . . . . . . . "Performance"
Item 23. Financial Statements . . . . . . To be provided in Pre-
Effective Amendment
</TABLE>
3
<PAGE>
PROSPECTUS
--------------------------
[LOGO]
COLUMBIA FUNDS
, 1996
-------------------------------------
COLUMBIA
SMALL CAP
FUND
----------
COLUMBIA FINANCIAL CENTER INCORPORATED
1301 S.W. Fifth Avenue
P.O. Box 1350
Portland, Oregon 97207-1350
1-800-547-1707
<PAGE>
COLUMBIA SMALL CAP
FUND, INC.
------------------------------------
PROSPECTUS -- , 1996
----------------------------------------------
This Prospectus contains information relating to Columbia Small Cap Fund, Inc.
(the "Fund"), a mutual fund managed by Columbia Funds Management Company (the
"Advisor"). The Fund seeks significant capital appreciation by investing
primarily in common stocks of companies that have a market capitalization of
less than $1 billion ("small cap"). Investing in small cap companies may offer
greater potential for capital growth, but is generally riskier than an
investment in larger, more established companies. See "Fund Description -- Risk
Factors."
This Prospectus contains information you should know about the Fund before
investing. Please keep it for future reference. A Statement of Additional
Information about the Fund dated , 1996 has been filed with the
Securities and Exchange Commission and is available without charge upon written
request to the Fund or by calling 1-800-547-1707. The Statement of Additional
Information is legally a part of (incorporated by reference into) this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE FUND CHARGES NO SALES LOAD. SHARES OF THE FUND ARE SOLD AND REDEEMED AT
THEIR NET ASSET VALUE.
THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SECURITIES OF THE FUND ONLY IN
THOSE STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED FOR SALE. THE FUND
WILL NOT ACCEPT APPLICATIONS FROM PERSONS RESIDING IN STATES WHERE THE FUND'S
SHARES ARE NOT REGISTERED.
TABLE OF CONTENTS
-------------------------
FUND EXPENSES................................................................ 1
MUTUAL FUND FEATURES...........................................................2
FUND DESCRIPTION...............................................................3
PERFORMANCE....................................................................6
FUND MANAGEMENT................................................................7
BOARD OF DIRECTORS...........................................................7
INVESTMENT ADVISOR...........................................................7
A TEAM APPROACH TO INVESTING.................................................8
PERSONAL TRADING.............................................................8
OTHER SERVICE PROVIDERS......................................................8
OTHER INFORMATION............................................................9
INVESTOR SERVICES.............................................................10
HOW TO OPEN A NEW ACCOUNT...................................................10
HOW TO PURCHASE SHARES......................................................10
MINIMUM INVESTMENTS.........................................................10
PAYING FOR YOUR SHARES......................................................11
HOW TO REDEEM (SELL) SHARES.................................................11
SIGNATURE POLICY............................................................12
PAYMENT OF REDEMPTION PROCEEDS..............................................12
HOW TO EXCHANGE SHARES......................................................13
PROCESSING YOUR ORDER.......................................................13
DETERMINING YOUR SHARE PRICE................................................13
INVESTOR INQUIRIES..........................................................14
ACCOUNT PRIVILEGES..........................................................14
IRAS, SEP IRAS, AND RETIREMENT PLANS........................................15
PRIVATE MANAGEMENT ACCOUNTS.................................................15
DISTRIBUTIONS AND TAXES.......................................................16
ADDITIONAL INFORMATION........................................................17
FOR FURTHER INFORMATION OR ASSISTANCE
IN OPENING AN ACCOUNT, PLEASE CALL:
222-3606 IN PORTLAND
OR 1-800-547-1707 NATIONWIDE
<PAGE>
FUND EXPENSES
-----------------------------------------------------------------
The following information is provided to assist you in understanding the various
costs and estimated expenses that an investor in the Fund will bear directly or
indirectly. The Fund is new, so the Annual Fund Operating Expenses are based on
estimates for the current fiscal year of the Fund. In the future, the amount of
expenses will depend on the annual average net assets of the Fund and a number
of other factors. Estimated expenses paid by the Fund include management fees as
well as audit, transfer agent, custodian and legal fees, and other business
operating expenses but exclude extraordinary expenses. For more information,
please see "Fund Description -- No Sales Load or 12b-1 Fees," "Fund Management,"
and "Investor Services -- How to Redeem (Sell) Shares."
-- SHAREHOLDER TRANSACTION EXPENSES --
<TABLE>
<S> <C>
SALES LOAD IMPOSED ON PURCHASES....... NONE
SALES LOAD IMPOSED ON REINVESTED
DIVIDENDS........................... NONE
REDEMPTION FEES*...................... NONE
EXCHANGE FEES......................... NONE
*WIRE REDEMPTIONS MAY BE SUBJECT TO A FEE OF UP
TO $5, IN ADDITION TO ANY CHARGES BY YOUR BANK.
</TABLE>
-- ANNUAL FUND OPERATING EXPENSES --
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
MANAGEMENT FEES....................... 1.00%
12B-1 FEES............................ NONE
OTHER OPERATING EXPENSES.............. .30%
TOTAL FUND OPERATING EXPENSES....... 1.30%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Assume that you have $1,000 to invest, the
Fund has a hypothetical return of 5%
annually, and the above expense ratio
remains the same. This table shows the
total expenses that you would pay
indirectly if you closed your account
after each time period shown:
</TABLE>
<TABLE>
<S> <C>
1 YEAR 3 YEARS
- - --------- ---------
$ $
</TABLE>
<TABLE>
<S> <C> <C> <C>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
OR PERFORMANCE; ACTUAL EXPENSES AND
PERFORMANCE MAY BE GREATER OR LESS THAN
THOSE SHOWN.
</TABLE>
1
<PAGE>
MUTUAL FUND FEATURES
-----------------------------------------------------------------
ALTHOUGH THERE ARE RISKS THAT CANNOT BE ELIMINATED IN OWNING SECURITIES, A
MUTUAL FUND OFFERS MANY ADVANTAGES THAT ITS SHAREHOLDERS WOULD FIND HARD TO
OBTAIN AS INDIVIDUAL INVESTORS. THE CHIEF ADVANTAGES INCLUDE:
-- CONTINUOUS PROFESSIONAL --
MANAGEMENT
By sharing the cost of hiring experienced money managers, individual investors
receive professional financial management of their investments.
-- DIVERSIFICATION --
The investment portfolio of the Fund is "diversified" under the Investment
Company Act, which tends to reduce investment risks. However, diversification
does not ensure a gain or eliminate the risk of loss.
-- CONVENIENCE --
Compared to owning many individual issues, the problems of recordkeeping, tax
calculation, liquidity, and dividends may be greatly simplified by investing in
a mutual fund.
Suppose, for example, you have $1,000 to invest but don't have the time or
training necessary to monitor securities markets, select securities, maintain
investment records, or keep track of tax information. One possible solution
would be to find a professional money manager to make these decisions for you
and provide full-time supervision of your investment. You could say, "Look, I
have $1,000 I want you to supervise for me, following trends in the economy and
the securities markets, making necessary investment decisions, and trying to
make this money worth more to me or earn income for me. I want you to give my
money the same continuous supervision and care you might give to someone who
invests $100,000 or even $1,000,000. But for that management service, I cannot
afford to pay you more than $5 or $10 each year."
As you might expect, it is not likely that the investment manager could accept
your proposal, for its costs would be many times your fee. But it might suggest
that if you could find another thousand investors like yourself, willing to
combine their funds with yours and willing to pay the same amount for continuous
supervision and control, then it might agree to work for you.
This is much like the agreement upon which mutual funds operate. By combining
the capital of many investors into one large account, it is possible to offer
all the shareholders who make up a mutual fund the kind of professional
investment supervision they desire, at a cost each can afford.
Despite the advantages of mutual funds, investing in them involves certain
risks. Some of these risks are described under "Fund Description" and
"Additional Information." As a prospective investor, you are encouraged to read
the entire Prospectus before investing in the Fund.
BY COMBINING THE CAPITAL OF MANY INVESTORS INTO ONE LARGE ACCOUNT, IT IS
POSSIBLE TO OFFER ALL THE SHAREHOLDERS WHO MAKE UP A MUTUAL FUND THE KIND OF
PROFESSIONAL INVESTMENT SUPERVISION THEY DESIRE, AT A COST EACH CAN
AFFORD. [LOGO]
2
<PAGE>
FUND DESCRIPTION
-----------------------------------------------------------------
The Fund is an open-end, diversified management investment company (that is, a
"mutual fund"). The Fund is managed by Columbia Funds Management Company (the
"Advisor").
-- NO SALES LOAD OR 12B-1 FEES --
MANY MUTUAL FUNDS CHARGE FEES TO COMPENSATE SALES REPRESENTATIVES FOR
PROMOTING AND SELLING THEIR FUNDS. THERE ARE FUNDS, HOWEVER, THAT CHARGE NO
SALES FEES WHEN YOU BUY SHARES. WITH THESE FUNDS, ALL OF YOUR MONEY, INSTEAD
OF JUST A PORTION, IS INVESTED. IN ADDITION, SOME "NO-LOAD" MUTUAL FUNDS
CHARGE AN ANNUAL 12B-1 FEE AGAINST FUND ASSETS TO HELP PAY FOR THE SALE OF
FUND SHARES. THE FUND IS SOLD WITHOUT SALES LOADS OR 12B-1 FEES; ALL THE MONEY
YOU PAY TO BUY SHARES IS INVESTED IN THE FUND.
-- COLUMBIA'S INVESTMENT APPROACH --
The Fund is managed by the Advisor using a team approach (please see "Fund
Management"). The investment team generally selects portfolio securities using
what is sometimes referred to as a "top down, sector rotating" emphasis. This
approach begins with an overall evaluation of the domestic and international
investment environment before focusing on individual security selection.
The investment environment is analyzed in terms of economic policy, trends in
monetary and fiscal policy, investor sentiment, the supply and demand for
credit, and market momentum.
"SECTOR ROTATING" REFERS TO THE DYNAMIC PROCESS OF OVER- OR UNDERWEIGHTING
INDUSTRY GROUPS OR ASSET CLASSES BASED ON THEIR RELATIVE ATTRACTIVENESS. [LOGO]
Once the "top down" analysis is completed, specific stocks are selected based on
a fundamental analysis of the company, such as:
- - - financial condition
- - - quality of management
- - - dynamics of the relevant industry
- - - earnings growth and profit margins
- - - sales trends
- - - potential for new product development
- - - dividend payment history and potential
- - - financial ratios -- including price/earnings and
price/book ratios
- - - investment for the future in research and facilities
The team continuously adapts its investment strategies to changing market
conditions. Although the Fund will generally emphasize investments for long-term
capital appreciation, it may invest for short-term capital appreciation when
management believes such action is consistent with sound investment practices
and the Fund's overall objective. These determinations will be made without a
vote of the shareholders of the Fund. There is no assurance that the Fund will
achieve its investment objective.
3
<PAGE>
FUND DESCRIPTION, CONTINUED
---------------------------------------------------------------------------
--_COLUMBIA SMALL CAP FUND_--
The Fund was incorporated on May 31, 1996 under Oregon law and began offering
shares to the public on , 1996.
-- INVESTMENT OBJECTIVE --
The investment objective of the Fund is to achieve capital appreciation by
investing, in normal circumstances, at least 65 percent of the value of the
Fund's total assets in common stocks, or securities convertible into common
stocks, of companies that have an aggregate market valuation of less than $1
billion ("small cap"). Upon notice to shareholders, the definition of small cap
may change in the future if the Advisor determines, based on changes in market
levels and accepted industry definitions, that a different definition is more
appropriate. There is no minimum aggregate market valuation for a company to be
considered an appropriate investment for the Fund. The Fund may, however, invest
from time to time up to 35 percent of the value of its total assets in the
securities of larger, more established companies when the Advisor believes they
offer capital appreciation potential that is generally comparable to small cap
securities. The Fund's investment objective may not be changed without
shareholder approval.
Investments in small cap companies may involve greater risks than investments in
larger companies, with a corresponding effect on the Fund's net asset value. For
this reason, the Fund is not intended to be used as the sole investment in your
portfolio. The Fund is designed for that portion of a portfolio that can
appropriately be invested in securities with greater risk but also greater
potential for appreciation.
The Fund may also invest in debt securities or preferred stock that is
convertible into or exchangeable for small cap stocks. Convertible debt
securities, typically unsecured, are interest bearing and represent a claim to
the corporation's earnings and assets before common and preferred stock owners,
generally on par with unsecured creditors. Convertible preferred stocks are
securities that represent a claim to the corporation's earnings and assets
before common stock owners but after bond owners. Investments by the Fund in
convertible debt or preferred stock could be a substitute for an investment in
the underlying common stock in circumstances where only the convertible security
is available in quantities necessary to satisfy the Fund's investment needs (for
example, in the case of a new issuance of convertible securities). In addition,
such securities may be purchased if the conversion price of the convertible
security is comparable to the price of the underlying common stock. In this
case, a preferred position with respect to the corporation's earnings and assets
may be preferable to holding common stock.
The Fund may invest up to 25% of its total assets in foreign securities,
principally securities of companies located in Canada, Western Europe, and Asia,
or in American Depository Receipts ("ADRs") for foreign securities. For a
discussion of the special risks involved with investing in foreign securities,
see "Risk Factors -- Foreign Securities."
Because the Fund focuses on the performance of the portfolio as a whole,
individual security positions may be sold without regard to the length of time
they have been held. This may result in a relatively high rate of portfolio
turnover. High portfolio turnover increases the Fund's transaction costs,
including brokerage commissions. To the extent short-term trades result in gains
on securities held one year or less, shareholders will be subject to taxes at
ordinary income rates. For non-corporate taxpayers, the highest rate that
applies to long-term capital gains is lower than the highest rate that applies
to ordinary income. See "Distributions and Taxes."
-- INVESTMENT RESTRICTIONS --
For information on the investment by the Fund in repurchase agreements, illiquid
securities, when-issued securities, options, and temporary investments, please
see "Additional Information." A description of other investment restrictions and
certain investment practices of the Fund is included in the Statement of
Additional Information.
4
<PAGE>
FUND DESCRIPTION, CONTINUED
---------------------------------------------------------------------------
-- RISK FACTORS --
An investment in any mutual fund, including the Fund, involves certain risks.
General market risk and other specific risks associated with different types of
securities used by the Fund, including foreign securities and stocks of small
companies, are discussed below and under "Additional Information."
STOCK MARKET RISK. The principal risk associated with a stock mutual fund is
that the stocks held by the fund will decline in value. Stock values may
fluctuate in response to the activities and financial prospects of an individual
company or in response to general market and economic conditions. Investments in
smaller or unseasoned companies may be both more volatile and more speculative.
See "Investments in Small and Unseasoned Companies."
ALTHOUGH COMMON STOCKS HAVE HISTORICALLY PROVIDED LONG-TERM RETURNS THAT ARE
GREATER THAN OTHER TYPES OF INVESTMENTS, STOCK RETURNS HAVE ALSO BEEN MORE
VOLATILE OVER SHORTER PERIODS OF TIME. [LOGO]
FOREIGN SECURITIES. Foreign securities, which are generally denominated in
foreign currencies, involve risks not typically associated with investing in
domestic securities. The value of the Fund's portfolio will be affected by
changes in currency exchange rates and in currency exchange regulations to the
extent the Fund holds foreign securities. Foreign securities may be subject to
foreign taxes that would reduce their effective yield. Certain foreign
governments levy withholding taxes against dividend and interest income.
Although in some countries a portion of these taxes is recoverable, the
unrecovered portion of any foreign withholding taxes would reduce the income the
Fund receives from its foreign investments.
Foreign investments involve certain other risks, including possible political or
economic instability of the country of the issuer, the difficulty of predicting
international trade patterns, and the possibility of currency exchange controls.
Foreign securities may also be subject to greater price fluctuations than
domestic securities. There may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing, and financial reporting standards
comparable to those of domestic companies. There is generally less government
regulation of stock exchanges, brokers, and listed companies abroad than in the
United States. In addition, with respect to certain foreign countries, there is
a possibility of the adoption of a policy to withhold dividends at the source,
or of expropriation, nationalization, confiscatory taxation, or diplomatic
developments that could affect investments in those countries. Finally, in the
event of default on a foreign debt obligation, it may be more difficult for the
Fund to obtain or enforce a judgment against the issuers of the obligation. The
Fund will normally execute its portfolio securities transactions on the
principal stock exchange on which the security is traded.
Additional costs may be incurred in connection with the Fund's foreign
investments. Foreign brokerage commissions are generally higher than those in
the United States. Expenses may also be incurred on currency conversions when
the Fund moves investments from one country to another. Increased custodian
costs as well as administrative difficulties may be experienced in connection
with maintaining assets in foreign jurisdictions.
INVESTMENTS IN SMALL AND UNSEASONED COMPANIES. Investments by the Fund in small
or unseasoned companies may be regarded as speculative. These companies may have
limited or unprofitable operating histories, limited financial resources, and
inexperienced management. In addition, they often face competition from larger
or more established firms that have greater resources. Securities of small and
young companies are frequently traded in the over-the-counter market or on
regional exchanges where low trading volumes may result in erratic or abrupt
price movements. To dispose of these securities, the Fund may have to sell them
over an extended period of time or below the original purchase price. Because of
these factors, an investment in the Fund may be subject to greater price
fluctuations than an investment in a fund that invests primarily in larger, more
established companies.
5
<PAGE>
PERFORMANCE
-----------------------------------------------------------------
This section is designed to help you understand terms used to describe Fund
performance, such as "total return" and "average annual total return."
-- UNDERSTANDING "RETURN" --
TOTAL RETURN REFERS TO THE CHANGE IN VALUE OF AN INVESTMENT IN THE FUND OVER A
STATED PERIOD, ASSUMING THE REINVESTMENT OF ANY DIVIDENDS AND CAPITAL GAINS.
"AVERAGE ANNUAL TOTAL RETURN" IS A HYPOTHETICAL RATE OF RETURN THAT, IF
ACHIEVED ANNUALLY, WOULD HAVE PRODUCED THE SAME TOTAL RETURN IF PERFORMANCE
HAD BEEN CONSTANT OVER THE ENTIRE PERIOD. AVERAGE ANNUAL TOTAL RETURNS SMOOTH
OUT THE VARIATIONS IN PERFORMANCE BUT ARE NOT THE SAME AS ACTUAL ANNUAL
RESULTS.
For more information on total return calculations for the Fund, please see the
Statement of Additional Information.
-- PERFORMANCE COMPARISONS --
The Fund may compare its performance to other mutual funds and to the mutual
fund industry as a whole, as quoted by ranking services such as Lipper
Analytical Services, Inc., or Morningstar, Inc., or as reported in financial
publications such as BARRON'S, BUSINESS WEEK, FORBES, MONEY MAGAZINE, and THE
WALL STREET JOURNAL. The Fund may also compare its performance to that of a
recognized stock or bond index, such as the S&P 500 Stock Index, the Russell
2000 Stock Index, the Lehman Aggregate Bond Index, and other relevant indices.
Unmanaged indices may assume the reinvestment of dividends, but generally do not
reflect deductions for administrative and management costs and expenses.
PERFORMANCE INFORMATION ON THE FUND IS HISTORICAL DATA AND IS NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. INVESTMENT RETURNS AND NET ASSET VALUES WILL
FLUCTUATE SO THAT YOUR SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. [LOGO]
6
<PAGE>
FUND MANAGEMENT
-----------------------------------------------------------------
-- BOARD OF DIRECTORS --
The Fund is managed under the supervision of its Board of Directors, which has
responsibility for overseeing decisions relating to the investment policies and
objectives of the Fund. The Board meets quarterly to review the Fund's
investment policies, performance, expenses, and other business matters.
-- INVESTMENT ADVISOR --
The Fund has contracted with Columbia Funds Management Company (the "Advisor")
to provide investment advisory services. The Advisor has acted as an investment
advisor since 1982, and also provides investment management services to each of
the following Columbia Funds: Columbia Common Stock Fund, Columbia International
Stock Fund, Columbia Special Fund, Columbia Growth Fund, Columbia Real Estate
Equity Fund, Columbia Balanced Fund, Columbia Daily Income Company, Columbia
U.S. Government Securities Fund, Columbia Fixed Income Securities Fund, Columbia
Municipal Bond Fund, and Columbia High Yield Fund. Until December 1985, the
Advisor was a wholly-owned subsidiary of Columbia Management Co. ("CMC"), which
was organized in 1969 and acts as investment manager for approximately $12
billion of assets of other institutions. In December 1985, CMC and its
subsidiaries were reorganized, and the Advisor is now owned principally by its
employees, including J. Jerry Inskeep, Jr. and James F. Rippey, who are also
principal shareholders of CMC. The address of the Advisor is 1300 S.W. Sixth
Avenue, P.O. Box 1350, Portland, Oregon 97207-1350.
Under the investment advisory contract with the Fund, the Advisor provides
research, advice, and supervision with respect to investment matters and
determines what securities to purchase or sell and what portion of the Fund's
assets to invest. The Advisor provides office space and pays all executive
salaries and expenses and ordinary office expenses of the Fund (other than the
expenses of clerical services relating to the administration of the Fund).
Certain employees of the Advisor are also officers of the Fund and, subject to
the authority of the Fund's Board of Directors, are responsible for the overall
management of the Fund's business affairs.
The investment advisory fee of the Fund is accrued daily and paid monthly. The
investment advisory fee of the Fund equals the annual rate of 1% of daily net
assets. While comparable to the advisory fees paid by other mutual funds with a
similar investment objective, the advisory fee paid by the Fund is higher than
the advisory fees paid by most mutual funds.
The Advisor has entered into an agreement with CMC under which CMC provides the
Advisor with statistical and other factual information, advice regarding
economic factors and trends, and advice as to occasional transactions in
specific securities. CMC, upon receipt of specific instructions from the
Advisor, also contacts brokerage firms to conduct securities transactions for
the Fund. The Advisor pays CMC a fee for these services. The Fund's expenses are
not increased by this arrangement, and no amounts are paid by the Fund to CMC
under this agreement.
The Fund assumes the following costs and expenses: costs relating to corporate
matters; cost of services to shareholders; transfer and dividend paying agent
fees; custodian fees; legal, auditing, and accounting expenses; disinterested
directors' fees; taxes and governmental fees; interest; brokers' commissions;
transaction expenses; cost of stock certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase, or redemption of its
shares; expenses of registering or qualifying its shares for sale; transfer
taxes; all expenses of preparing its registration statements, prospectuses, and
reports; and the cost of printing and delivering to shareholders its
prospectuses and reports. Third-party administrators of tax-qualified retirement
plans and other entities may establish omnibus accounts with the Fund and
provide sub-transfer agency, recordkeeping, or other services to participants in
the
7
<PAGE>
FUND MANAGEMENT, CONTINUED
---------------------------------------------------------------------------
omnibus accounts. In recognition that these arrangements reduce or eliminate the
need for the Fund's transfer agent to provide such services, the Fund may pay
the administrator or entity a sub-transfer agent or recordkeeping fee.
-- A TEAM APPROACH TO INVESTING --
The Advisor uses a team approach to analyze investment themes and strategies for
the Fund. Alan J. Folkman, a Senior Vice President and director of the Advisor,
is the Chief Investment Officer of the Investment Team. With over 29 years of
investment management experience, Mr. Folkman supervises the Investment Team in
establishing broad investment strategies and determining portfolio guidelines
for the Fund.
Members of the Investment Team are responsible for the analysis of particular
industries or types of fixed income securities and for recommendations on
individual securities within those industries or asset categories. Investment
decisions for the Fund are then made by the Investment Team and Richard J.
Johnson, the portfolio manager who has principal management responsibility for
investment decisions on behalf of the Fund. Mr. Johnson, a Vice President of the
Advisor and a Chartered Financial Analyst, joined the Columbia organization in
1994. Mr. Johnson is also the portfolio manager for CMC Small Cap Fund, a mutual
fund managed by CMC, and CTC Small Stock Fund, an investment fund managed by
Columbia Trust Company. Prior to joining the Investment Team, Mr. Johnson was a
Portfolio Manager and Analyst with Provident Investment Counsel (1990-1994). He
received a Masters of Business Administration from the Anderson Graduate School
of Management at UCLA in 1990.
-- PERSONAL TRADING --
Members of the Investment Team and other personnel of the Fund or the Advisor
are permitted to trade securities for their own or family accounts, subject to
the rules of the Code of Ethics adopted by the Fund and the Advisor. The rules
that govern personal trading by investment personnel are based on the principal
that employees owe a fiduciary duty to conduct their trades in a manner that is
not detrimental to the Fund or its shareholders. The Fund has adopted the
recommendations of the Investment Company Institute, an organization composed of
members of the mutual fund industry, relating to restrictions on personal
trading. For more information on the Code of Ethics and specific trading
restrictions, please refer to the Statement of Additional Information.
-- OTHER SERVICE PROVIDERS --
TRANSFER AGENT. Columbia Trust Company acts as transfer agent and dividend
paying agent for the Fund. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350,
Portland, Oregon 97207-1350. The Advisor is the principal shareholder, and
certain officers of the Fund are minority shareholders, of Columbia Trust
Company.
COLUMBIA FINANCIAL CENTER INCORPORATED. Columbia Financial Center Incorporated
("Columbia Financial"), a registered securities broker and a member of the
National Association of Securities Dealers, Inc., acts as a distributor of
shares of the Fund. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350,
Portland, Oregon 97207-1350. You may invest or redeem your investment in the
Fund through Columbia Financial, which will not charge a commission for handling
your order. J. Jerry Inskeep, Jr., director and chairman of the Fund, and James
F. Rippey, director of the Fund, are the principal shareholders of Columbia
Financial.
CUSTODIANS. United States National Bank of Oregon, 321 S.W. Sixth Avenue,
Portland, Oregon 97208, serves as general custodian for the Fund. Morgan Stanley
Trust Company, One Pierrepont Plaza, Brooklyn, New York, NY 11201, provides
custody services to the Fund to the extent it holds foreign securities.
8
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-- OTHER INFORMATION --
VOTING RIGHTS. The Fund is a separate corporation. All shares of the Fund have
equal voting, redemption, dividend, and liquidation rights. All issued and
outstanding shares of the Fund are fully paid and nonassessable. Shares have no
preemptive or conversion rights. Fractional shares have the same rights
proportionately as full shares. The shares of the Fund do not have cumulative
voting rights, which means that holders of more than 50 percent of the shares of
the Fund voting for the election of directors can elect all of the directors.
SHAREHOLDER MEETINGS. The Fund is not required to hold annual shareholder
meetings. Special meetings may be called, however, as required or deemed
desirable for purposes such as electing directors, changing fundamental
investment policies, or approving an investment management agreement. The
holders of not less than 10% of the shares of the Fund may request in writing
that a special meeting be called for a specified purpose. If such a special
meeting is called to vote on the removal of one or more directors of the Fund,
shareholders will be assisted in communications with other shareholders of the
Fund.
9
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INVESTOR SERVICES
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This section is designed to provide you with information on opening an account
and conducting transactions with the Fund. In addition, information is provided
on the different types of accounts and services offered by the Fund and the
policies relating to those services.
-- HOW TO OPEN A NEW ACCOUNT --
Please complete and sign a Fund application and make your check payable to the
Fund for the minimum required investment. See "Minimum Investments." Please be
sure to include a tax identification number on your application or it may be
rejected and returned to you. The completed application and a check should be
mailed to:
Columbia Financial Center
1301 S.W. Fifth Avenue
P.O. Box 1350
Portland, Oregon 97207-1350
Attn.: New Accounts
-- HOW TO PURCHASE SHARES --
Shares of the Fund are offered at the share price, or net asset value ("NAV"),
next determined after an order is accepted. See "Processing Your Order" and
"Determining Your Share Price." Shares can be purchased in the following ways:
IN PERSON: Investments can be made in person by visiting the Fund at 1301 S.W.
Fifth Avenue, Portland, Oregon between 7:30 a.m. and 5:00 p.m. on any business
day.
BY MAIL: Send a check, with either a completed Investment Slip from the bottom
of a confirmation statement, or a letter indicating the account number and
registration, to:
Columbia Financial Center
1301 S.W. Fifth Avenue
P.O. Box 1350
Portland, Oregon 97207-1350
Attn.: Investments
BY WIRE: You may have your bank wire federal funds. Be sure to call the Fund
for instructions and notification that money is being wired:
Portland area 222-3606
Nationwide (toll-free)
1-800-547-1707
BY TELEPHONE: You may make additional investments in the Fund by telephone from
a predesignated bank account ("Televest"). The minimum investment that can be
made by Televest is $100. Shareholders must complete the appropriate sections of
the application or call the Fund to have the Televest application sent to you.
An investment using Televest is processed on the day the Fund receives your
investment from your bank, usually the business day following the day of your
telephone call.
-- MINIMUM INVESTMENTS --
THE FUND HAS A MINIMUM INVESTMENT REQUIREMENT OF $2,000. THIS REQUIREMENT IS
WAIVED, HOWEVER, FOR ACCOUNTS USING THE AUTOMATIC INVESTMENT PLAN, WHERE THE
MINIMUM INVESTMENT IS $50 MONTH. SUBSEQUENT INVESTMENTS (OTHER THAN THROUGH AN
AUTOMATIC INVESTMENT PLAN) MUST BE AT LEAST $100 AND SHOULD ALWAYS IDENTIFY
YOUR NAME, THE FUND'S NAME, AND YOUR ACCOUNT NUMBER. MANAGEMENT OF THE FUND
MAY, AT ITS SOLE DISCRETION, WAIVE THE MINIMUM PURCHASE AND ACCOUNT SIZE
REQUIREMENTS FOR CERTAIN GROUP PLANS OR ACCOUNTS OPENED BY AGENTS OR
FIDUCIARIES (SUCH AS A BANK TRUST DEPARTMENT, INVESTMENT ADVISOR, OR
SECURITIES BROKER) OR IN OTHER CIRCUMSTANCES.
BY AUTOMATIC INVESTMENT: Investments in the Fund may be made automatically from
your bank under Columbia's Automatic Investment Plan ("AIP"). Shareholders whose
bank is a member of the National Automated Clearing House Association may choose
to
10
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INVESTOR SERVICES, CONTINUED
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have amounts of $50 or more automatically transferred from a bank checking
account to the Fund on or about the 5th or 20th, or both, of each month.
Shareholders must complete the AIP section of the application to participate in
the AIP. If you stop investing in the Fund using an AIP, your account may be
closed if you fail to reach or maintain a minimum account balance. See "Account
Privileges -- Involuntary Redemptions."
BY EXCHANGE: You may purchase shares of the Fund with the proceeds from a
redemption of shares of any other Columbia Fund with the same account number.
See "How to Exchange" below.
THROUGH YOUR BROKER-DEALER OR BANK: You may purchase or redeem shares of the
Fund through your broker, bank, or other financial institution, which may charge
a commission or fee for handling your order and which may be required to be
registered as a broker or dealer under federal or state securities laws.
CLOSING THE FUND TO NEW INVESTORS: The Advisor to the Fund reserves the right
at its discretion to close the Fund to new investors. A number of factors may be
considered in making such a decision, including the total assets and flow of new
investments into the Fund. If the Fund is closed, shareholders who maintain open
accounts with the Fund may make additional investments in the Fund. Once a
shareholder's account in the Fund is closed, additional investments may not be
possible.
-- PAYING FOR YOUR SHARES --
Payment for Fund shares is subject to the following policies:
- - - Checks should be drawn on U.S. banks and made payable to the Fund.
- - - Never send cash or cash equivalents; the Fund will not accept responsibility
for their receipt.
- - - The Fund reserves the right to reject any order.
- - - If your order is canceled because your check did not clear the bank or the
Fund was unable to debit your predesignated bank account, you will be
responsible for any losses or fees imposed by your bank or attributable to a
loss in value of the shares purchased.
- - - The Fund may reject any third party checks used to make an investment or open
a new account.
-- HOW TO REDEEM (SELL) SHARES --
You may redeem all or a portion of your investment in the Fund on any business
day. All redemptions of shares of the Fund will be at the share price (NAV)
computed after receipt of a valid redemption request, in whatever form, on days
when the NYSE is open for business. In every case, sufficient full and
fractional shares will be redeemed to cover the amount of the redemption
request.
If certificates for Fund shares have been issued to you, they must be returned
to the Fund, properly endorsed, before any redemption request may be processed.
Redemptions from a Columbia-sponsored IRA or retirement plan require the
completion of certain additional forms to ensure compliance with IRS
regulations. If a redemption request cannot be processed for any of these
reasons, the redemption request will be returned to you and no redemption will
be made until a valid request is submitted. Shares can be redeemed in the
following ways:
IN WRITING: You may redeem shares of the Fund by providing a written
instruction to the Fund either in person or by mail to:
1301 S.W. Fifth Avenue
P.O. Box 1350
Portland, Oregon 97207-1350
Attn.: Redemptions
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INVESTOR SERVICES, CONTINUED
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-- SIGNATURE POLICY --
SIGNATURES ON THE REQUEST MUST CORRESPOND EXACTLY WITH THOSE ON THE ACCOUNT.
ACCOUNTS IN THE NAMES OF CORPORATIONS, FIDUCIARIES, AND INSTITUTIONS MAY REQUIRE
ADDITIONAL DOCUMENTS. PLEASE CONTACT THE FUND IF YOUR ACCOUNT FALLS INTO ONE OF
THESE CATEGORIES.
A WRITTEN REDEMPTION REQUEST, WHETHER IN PERSON OR BY MAIL, IS NOT VALID UNLESS
THE SIGNATURE OR SIGNATURES ON THE REQUEST CORRESPOND EXACTLY WITH THOSE ON YOUR
ACCOUNT. THE FUND NORMALLY REQUIRES THAT SIGNATURES ON WRITTEN REDEMPTION,
TRANSFER, AND EXCHANGE REQUESTS BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION, SUCH AS A
BANK, BROKER-DEALER, CREDIT UNION, NATIONAL SECURITIES EXCHANGE, REGISTERED
SECURITIES EXCHANGE, CLEARING AGENCY, OR SAVINGS ASSOCIATION.
BY TELEPHONE: You may redeem shares by telephone unless you decline this
service by checking the appropriate box on the application. Proceeds from
telephone redemptions may be mailed only to the registered name and address on
your account or transferred to the bank designated on the application or to
another Columbia Fund. A maximum of $50,000 may be redeemed by telephone and
mailed to your registered address. There is no such limitation on telephone
redemptions transferred to your bank. Telephone redemptions may be made by
calling the Fund between 7:30 a.m. and 5:00 p.m., Pacific Time, at:
Portland area 222-3606
Nationwide (toll-free)
1-800-547-1707
You may experience some difficulty in implementing a telephone redemption during
periods of drastic economic or financial market changes. Telephone redemption
privileges may be modified or terminated at any time without notice to
shareholders. Please see "Account Privileges -- Telephone Redemptions."
BY AUTOMATIC WITHDRAWAL: If your account value in the Fund is $5,000 or more,
you may elect to receive automatic cash withdrawals of $50 or more from the Fund
in accordance with either of the following withdrawal options:
1. Income earned. You may elect to receive any dividends or capital gains
distributions on your shares, provided such dividends and distributions
exceed $25.
2. Fixed amount. You may elect to receive a monthly or quarterly fixed amount
of $50 or more.
Automatic withdrawals will be made within seven days after the end of the month
or quarter to which they relate.
To the extent redemptions for automatic withdrawals exceed dividends declared on
shares in your account, the number of shares in your account will be reduced. If
the value of your account falls below the Fund minimum, your account is subject
to being closed on 60 days written notice. The minimum withdrawal amount has
been established for administrative convenience and should not be considered as
recommended for all investors. For tax reporting, a capital gain or loss may be
realized on each fixed-amount withdrawal.
An automatic withdrawal plan may be modified or terminated at any time upon
prior notice by the Fund or the shareholder.
-- PAYMENT OF REDEMPTION PROCEEDS --
Redemption proceeds are normally transmitted in the manner specified in the
redemption request on the business day following the effective date of the
redemption. Except as provided by rules of the Securities and
12
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INVESTOR SERVICES, CONTINUED
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Exchange Commission, redemption proceeds must be transmitted to you within seven
days of the redemption date.
REDEMPTION OF RECENTLY PURCHASED SHARES. Although you may redeem shares of the
Fund that you have recently purchased by check, the Fund may hold the redemption
proceeds until payment for the purchase of such shares has cleared, which may
take up to 15 days from the date of purchase. No interest is paid on the
redemption proceeds after the redemption date and before the proceeds are sent
to you. This holding period does not apply to the redemption of shares purchased
by bank wire or with a cashiers or certified check.
There is no charge for redemption payments that are mailed. Amounts transferred
by wire must be at least $1,000, and the bank wire cost for each redemption will
be charged against your account. Your bank may also impose an incoming wire
charge.
-- HOW TO EXCHANGE SHARES --
You may use proceeds from the redemption of shares of the Fund to purchase
shares of any other Columbia Fund offering shares for sale in your state of
residence. There is no charge for this exchange privilege. Before making an
exchange, you should read the Prospectus relating to the Columbia Fund into
which the shares are to be exchanged. The shares of the Columbia Fund to be
acquired will be purchased at the NAV next determined after acceptance of the
purchase order by that fund in accordance with its policy for accepting
investments. The exchange of shares of the Fund for shares of another Columbia
Fund is treated, for federal income tax purposes, as a sale on which you may
realize taxable gain or loss. Certain restrictions may apply to exchange
transactions. See "Account Privileges -- Exchange Privilege."
-- PROCESSING YOUR ORDER --
Orders received by the Fund will be processed the day they are received. Orders
received before the close of regular trading on the NYSE (normally 4 p.m. New
York time) will be entered at the Fund's share price computed that day. Orders
received after the close of regular trading on the NYSE will be entered at the
Fund's share price next determined. All investments will be credited to your
account in full and fractional shares computed to the third decimal place. The
Fund reserves the right to reject any order.
Shares purchased will be credited to your account on the record books of the
Fund. The Fund will not issue share certificates except on request. Certificates
for fractional shares will not be issued.
-- DETERMINING YOUR SHARE PRICE --
The share price, or NAV, of the Fund is determined by the Advisor, under
procedures approved by the Fund's Board of Directors, as of the close of regular
trading (normally 4 p.m. New York time) on each day the NYSE is open for
business and at other times determined by the Board of Directors. The NAV is
computed by dividing the value of all assets of the Fund, less its liabilities,
by the number of shares outstanding.
Portfolio securities will be valued according to the market value obtained from
the broadest and most representative markets. These market quotations, depending
on local convention or regulation, may be the last sale price, last bid or asked
price, or the mean between the last bid and asked price as of, in each case, the
close of the applicable exchange or other designated time. Securities for which
market quotations are not readily available and other assets will be valued at
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of Directors of the Fund. These procedures
may include valuing portfolio securities by reference to other securities with
comparable ratings, interest rates, and maturities and by using pricing
services. Fair value for debt
13
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INVESTOR SERVICES, CONTINUED
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securities for which market quotations are not readily available and with
remaining maturities of less than 60 days is based on cost adjusted for
amortization of discount or premium and accrued interest (unless the Board of
Directors believes unusual circumstances indicate another method of determining
fair value should be used).
Trading in securities on many foreign securities exchanges and over-the-counter
markets is completed at various times before the close of the NYSE. In addition,
trading of these foreign securities may not take place on all NYSE business
days. Trading may take place in various foreign markets on Saturday or on other
days the NYSE is not open for business and on which the Fund's NAV is therefore
not calculated. The calculation of the Fund's NAV may not take place
contemporaneously with the determination of the prices of the Fund's portfolio
foreign securities. Events affecting the values of portfolio foreign securities
that occur between the time the prices are determined and the close of the NYSE
will not be reflected in the Fund's calculation of NAV unless the Board of
Directors determines that the event would materially affect the NAV. Assets of
foreign securities are translated from the local currency into U.S. dollars at
the prevailing exchange rates.
-- INVESTOR INQUIRIES --
If you have any questions about this Prospectus, the Fund or your account,
please call the Fund at:
Portland area 222-3606
Nationwide (toll-free) 1-800-547-1707
or write or visit the Fund at:
Columbia Financial Center
1301 S.W. Fifth Avenue
P.O. Box 1350
Portland, Oregon 97207-1350
-- ACCOUNT PRIVILEGES --
EXCHANGE PRIVILEGE. Telephone exchange privileges are available to you
automatically unless you decline this service by checking the appropriate box on
the application. Telephone exchanges may be made from the Fund into another
Columbia Fund only within the same account number. To prevent the abuse of the
exchange privilege to the disadvantage of other shareholders, the Fund reserves
the right to terminate the exchange privilege of any shareholder who makes more
than four exchanges out of the Fund during the calendar year. The exchange
privilege may be modified or terminated at any time, and the Fund may
discontinue offering its shares generally or in any particular state without
notice to shareholders.
TELEPHONE REDEMPTIONS. The Fund does not accept responsibility for the
authenticity of telephone instructions, and, accordingly, shareholders who have
approved telephone redemptions assume the risk of any losses due to fraudulent
telephone instructions that the Fund reasonably believes to be genuine. The Fund
employs certain procedures to determine whether telephone instructions are
genuine, including requesting personal shareholder information prior to acting
on telephone instructions, providing written confirmations of each telephone
transaction, and recording all telephone instructions. The Fund may be liable
for losses due to fraudulent telephone instructions if it fails to follow these
procedures. For your protection, the ability to redeem by telephone and have the
proceeds mailed to your registered address may be suspended for up to 30 days
following an account address change. This suspension period will not apply to
redemptions by mail, which can be made at any time. See "How to Redeem (Sell)
Shares."
INVOLUNTARY REDEMPTIONS. Upon 60 days prior written notice, the Fund may redeem
all of your shares without your consent if:
1. Your account balance falls below the minimum account requirement. However,
if you wish to
14
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INVESTOR SERVICES, CONTINUED
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maintain the account, you may during the 60-day notice period either (i) add
to your account to bring it to the $2,000 minimum, or (ii) establish an
Automatic Investment Plan with a minimum monthly investment of $50.
2. You are a U.S. shareholder and fail to provide the Fund with a certified
taxpayer identification number.
3. You are a foreign shareholder and fail to provide the Fund with a current
Form W-8, "Certificate of Foreign Status."
If the Fund redeems shares, payment will be made promptly at the current net
asset value. A redemption may result in a realized capital gain or loss.
TAXPAYER IDENTIFICATION NUMBER. Federal law requires the Fund to withhold 31%
of dividends and redemption proceeds paid to certain shareholders who have not
complied with certain tax regulations. The Fund will generally not accept an
investment to establish a new account that does not comply with these
regulations. You will be asked to certify on your account application that the
social security number or tax identification number provided is correct and that
you are not subject to 31% backup withholding for previous underreporting of
income to the Internal Revenue Service.
SHAREHOLDER STATEMENTS AND REPORTS. The Fund will send a separate confirmation
of each nonroutine transaction that affects your account balance or
registration. Routine, pre-authorized transactions are confirmed in the monthly
or quarterly account statements provided to shareholders. The types of
pre-authorized transactions that will be confirmed on your account statement
include:
- - - Periodic share purchases through an Automatic Investment Plan
- - - Reinvestment of dividends and capital gains distributions
- - - Automatic withdrawals or exchanges between the Fund and another Columbia Fund
The Fund will mail to its shareholders on or before January 31 of each year a
summary of the federal income tax status of the Fund's distributions for the
preceding year.
Financial reports on the Fund, which include a listing of the Fund's portfolio
securities, are mailed semiannually to shareholders. To reduce Fund expenses,
only one such report and the annually updated prospectus will be mailed to
accounts with the same Tax Identification Number. In addition, shareholders or
multiple accounts at the same mailing address can elect to eliminate duplicate
mailings to that address by filing a SAVMAIL form with the Fund. For a SAVMAIL
form or to receive additional copies of any shareholder report or prospectus,
please call an Investor Services Representative at 1-800-547-1707.
-- IRAS, SEP IRAS, AND --
RETIREMENT PLANS
Investors may invest in the Fund through the Columbia IRA and the Columbia
Prototype Money Purchase Pension and Profit Sharing Plan. Please contact the
Fund for further information and application forms. Investments may also be made
in the Fund in connection with established retirement plans.
-- PRIVATE MANAGEMENT ACCOUNTS --
Columbia Trust Company offers Private Management Accounts that provide
investment management tailored to the specific investment objectives of
individuals, institutions, trusts, and estates, using the Fund and other
Columbia Funds as investment vehicles. The annual fee for this service is .75 of
1% of net assets ($1,000 minimum fee) and is in addition to investment advisory
fees paid by the Fund and other Columbia Funds to the Advisor. For additional
information, call Columbia Trust Company at 503-222-3600.
15
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DISTRIBUTIONS AND TAXES
-----------------------------------------------------------------
-- DISTRIBUTIONS --
The Fund is required to distribute to shareholders each year all of its net
investment income and any net realized capital gains. Net investment income
(income from dividends, interest and any net realized short-term capital gains)
is distributed by the Fund as a dividend. Any net long-term capital gains
realized on the sale of portfolio securities by the Fund are distributed as
capital gains distributions. Dividends and capital gains distributions are
declared and paid in December.
-- DISTRIBUTION OPTIONS --
Unless you select a different option, all dividends and capital gains
distributions are reinvested on the record date in additional shares at a
reinvestment price equal to the NAV at the close of business on that day minus
the amount of the distribution. You may elect on your account application, or at
any other time by notifying the Fund, to receive your distributions in cash or
to reinvest them in the Fund.
-- TAXATION OF DISTRIBUTIONS --
The tax character of distributions from the Fund is the same whether they are
paid in cash or reinvested in additional shares. Dividends declared in October,
November, or December to shareholders of record as of a date in one of those
months and paid the following January will be reportable as if received by the
shareholders on December 31. This section is only a brief summary of the major
tax considerations affecting the Fund and its shareholders and is not a complete
or detailed explanation of tax matters. Investors should consult their tax
advisors concerning the tax consequences of investing in the Fund.
FEDERAL INCOME TAXES. Distributions from the Fund of net investment income or
net realized short-term capital gains are generally taxable to shareholders as
ordinary income. Distributions designated as the excess of net long-term capital
gain over net short-term capital loss are taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder held the Fund's
shares. A portion of any dividends received from the Fund may be eligible for
the dividends received deduction available to corporate shareholders.
Information on the tax status of distributions by the Fund is mailed to
shareholders each year on or before January 31.
STATE INCOME TAXES. In addition to federal taxes, shareholders of the Fund may
be subject to state and local taxes on distributions from the Fund. Shareholders
should consult with their tax advisors concerning state and local tax
consequences of investing in the Fund.
"BUYING A DIVIDEND." If you buy shares of the Fund before it pays a
distribution, you will pay the full price of the shares and receive a portion of
the purchase price back in the form of a taxable distribution. The Fund's NAV
and your cost basis in the purchased shares is reduced by the amount of the
distribution. The impact of this tax result is most significant when shares are
purchased shortly before an annual distribution of capital gains or other
earnings.
-- TAXATION OF THE FUND --
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code. By qualifying and meeting certain other requirements, the Fund
generally will not be subject to federal income taxes to the extent it
distributes to its shareholders its net investment income and realized capital
gains. The Fund intends to make sufficient distributions to relieve itself from
liability for federal income taxes.
16
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ADDITIONAL INFORMATION
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-- REPURCHASE AGREEMENTS --
The Fund may enter into repurchase agreements, which are agreements where the
Fund purchases a security and simultaneously commits to resell that security to
the seller (a commercial bank or recognized securities dealer) at a stated price
within a number of days (usually not more than seven) from the date of purchase.
The resale price reflects the purchase price plus a rate of interest which is
unrelated to the coupon rate or maturity of the purchased security. Repurchase
agreements may be considered loans by the Fund collateralized by the underlying
security. The obligation of the seller to pay the stated price is in effect
secured by the underlying security. The seller will be required to maintain the
value of the collateral underlying any repurchase agreement at a level at least
equal to the repurchase agreement. In the case of default by the seller, the
Fund could incur a loss. In the event of a bankruptcy proceeding against the
seller, the Fund may incur costs and delays in realizing upon the collateral.
The Fund will enter into repurchase agreements only with those banks or
securities dealers who are deemed creditworthy based on criteria adopted by its
Board of Directors. There is no limit on the portion of the Fund's assets that
may be invested in repurchase agreements with maturities of seven days or less.
-- ILLIQUID SECURITIES --
No illiquid securities will be acquired if upon the purchase more than 10% of
the value of the Fund's net assets would consist of these securities. "Illiquid
securities" are securities that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the price used to
determine the Fund's net asset value.
Under current interpretations of the Staff of the Securities and Exchange
Commission, the following securities in which the Fund may invest will be
considered illiquid:
- - - repurchase agreements maturing in more than seven days;
- - - restricted securities (securities whose public resale is subject to legal
restrictions);
- - - options, with respect to specific securities, not traded on a national
securities exchange that are not readily marketable; and
- - - any other securities in which the Fund may invest that are not readily
marketable.
The Fund may purchase without limit, however, certain restricted securities that
can be resold to qualifying institutions pursuant to a regulatory exemption
under SEC Rule 144A ("Rule 144A securities"). If a dealer or institutional
trading market exists for Rule 144A securities, such securities may be deemed to
be liquid and thus treated as exempt from the Fund's restrictions on illiquid
securities. Under the supervision of the Board of Directors of the Fund, the
Advisor determines the liquidity of Rule 144A securities and, through reports
from the Advisor, the Board of Directors monitors trading activity in these
securities. In reaching liquidity decisions, the Advisor will consider, among
other things, the following factors:
- - - the frequency of trades and price quotes for the security;
- - - the number of dealers willing to purchase or sell the security and the number
of other potential purchasers;
- - - dealer undertakings to make a market in the security; and
- - - the nature of the security and the marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers, and the
procedures for the transfer).
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Because institutional trading in Rule 144A securities is relatively new, it is
difficult to predict accurately how these markets will develop. If institutional
trading in Rule 144A securities declines, the Fund's liquidity could be
adversely affected to the extent it is invested in such securities.
-- OPTIONS AND FINANCIAL --
FUTURES TRANSACTIONS
The Fund may invest up to 5% of its net assets in premiums on put and call
exchange-traded options. A call option gives the holder (buyer) the right to
purchase a security at a specified price (the exercise price) at any time until
a certain date (the expiration date). A put option gives the buyer the right to
sell a security at the exercise price at any time until the expiration date. The
Fund may also purchase options on securities indices and foreign currencies.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive, on
exercise of the option, an amount of cash if the closing level of the securities
index on which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. The Fund may
enter into closing transactions, exercise its options, or permit the options to
expire. The Fund may only write call options that are covered. A call option is
covered if written on a security that the Fund already owns. The Fund may write
such options on up to 25% of its assets.
The Fund may also engage in financial futures transactions, including foreign
currency financial futures transactions. Financial futures contracts are
commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a security,
or the cash value of a securities index, during a specified future period at a
specified price. The Fund's investment restrictions do not limit the percentage
of the Fund's assets that may be invested in financial futures transactions. The
Fund, however, does not intend to enter into financial futures transactions for
which the aggregate initial margin exceeds 5% of the net assets of the Fund
after taking into account unrealized profits and unrealized losses on any such
transactions it has entered into. The Fund may engage in futures transactions
only on commodities exchanges or boards of trade.
The Fund will not engage in transactions in index options, financial futures
contracts, or related options for speculation, but only as an attempt to hedge
against market conditions affecting the values of securities that the Fund owns
or intends to purchase. When the Fund purchases a put on a stock index or on a
stock index future not held by the Fund, the put protects the Fund against a
decline in the value of all securities held by it to the extent that the stock
index moves in a similar pattern to the prices of the securities held. The
correlation, however, between stock indices and price movements of the stocks in
which the Fund will generally invest may be imperfect. The Fund expects,
nonetheless, that the use of put options that relate to such indices will, in
certain circumstances, protect against declines in values of specific portfolio
securities or the Fund's portfolio generally. Although the purchase of a put
option may partially protect the Fund from a decline in the value of a
particular security or its portfolio generally, the cost of a put will reduce
the potential return on the security or the portfolio if either increases in
value.
Upon entering into a futures contract, the Fund would be required to deposit
with its custodian in a segregated account cash or certain U.S. Government
securities in an amount known as the "initial margin." This amount, which is
subject to change, is in the nature of a performance bond or a good faith
deposit on the contract and would be returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been satisfied.
18
<PAGE>
ADDITIONAL INFORMATION, CONTINUED
---------------------------------------------------------------------------
The principal risks of options and futures transactions are:
- - - imperfect correlation between movements in the prices of options, currencies,
or futures contracts and movements in the prices of the securities or
currencies hedged or used for cover;
- - - lack of assurance that a liquid secondary market will exist for any particular
option, futures, or foreign currency contract at any particular time;
- - - the need for additional skills and techniques beyond those required for normal
portfolio management;
- - - losses on futures contracts resulting from market movements not anticipated by
the investment adviser; and
- - - possible need to defer closing out certain options or futures contracts in
order to continue to qualify for beneficial tax treatment afforded "regulated
investment companies" under the Internal Revenue Code of 1986, as amended.
-- TEMPORARY INVESTMENTS --
When, as a result of market conditions, the Fund determines that a temporary
defensive position is warranted to help preserve capital, the Fund may without
limit temporarily retain cash or invest in prime commercial paper, high-grade
debt securities, securities of the U.S. Government and its agencies and
instrumentalities, and high-quality money market instruments, including
repurchase agreements. When the Fund assumes a temporary defensive position, it
is not invested in securities designed to achieve its stated investment
objective.
-- WHEN-ISSUED SECURITIES --
Delayed-delivery or when-issued transactions arise when securities are purchased
or sold by the Fund, with payment and delivery taking place in the future, to
secure what is considered to be an advantageous price and yield to the Fund at
the time of the transaction. When-issued securities are subject to market
fluctuations, and no interest accrues to the Fund until delivery. The value of
the securities may be less at the time of delivery than it was when the
commitment was made. When the Fund engages in when-issued and delayed-delivery
transactions, the Fund relies on the buyer or seller, as the case may be, to
complete the sale. Failure to do so may result in the Fund missing the
opportunity to obtain a price or yield considered to be advantageous.
When-issued and delayed-delivery transactions typically occur approximately 30
days or more before delivery is due. However, no payment or delivery is made by
the Fund until it receives payment or delivery from the other party to the
transaction. A separate account of liquid assets consisting of cash, U.S.
Government securities, or other high-grade debt obligations and equal to the
value of such purchase commitments will be maintained by the Fund's custodian
until payment is made. To the extent the Fund engages in when-issued and
delayed-delivery transactions, it will do so to acquire portfolio securities
consistent with its investment objectives and policies and not for investment
leverage.
19
<PAGE>
Part B
Reg. Nos. 33-_________/811-_________
------------------------------------------------------------------------------
COLUMBIA SMALL CAP FUND, INC.
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STATEMENT OF ADDITIONAL INFORMATION
Columbia Financial Center
1301 S.W. Fifth Avenue
P.O. Box 1350
Portland, Oregon 97207
1-800-547-1707
This Statement of Additional Information contains information relating to
Columbia Small Cap Fund, Inc. (the "Fund"), an open-end, diversified investment
company of the management type. The Fund is an Oregon corporation and has a
specific investment objective.
This Statement of Additional Information is not a Prospectus. It relates
to a Prospectus dated __________ ___, 1996 (the "Prospectus") and should be read
in conjunction with the Prospectus. Copies of the Prospectus are available
without charge upon written request to the Fund or by calling 1-800-547-1707.
------------------------------------------------------------------------------
TABLE OF CONTENTS
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Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Advisory and Other Fees Paid to Affiliates. . . . . . . . 3
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 4
Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Custodians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . 6
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . 10
Additional Information Regarding Certain
Investments by the Fund. . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 13
_____________ _____, 1996
1
<PAGE>
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MANAGEMENT
------------------------------------------------------------------------------
The directors and officers of the Fund are listed below, together with
their principal business occupations. All principal business occupations
have been held for more than five years, except that positions with Columbia
International Stock Fund, Inc., Columbia High Yield Fund, Inc., and Columbia
Real Estate Equity Fund, Inc. have been held since July 1992, July 1993, and
January 1994, respectively, and except as otherwise indicated. The term
"Columbia Funds" refers to Columbia Common Stock Fund, Inc., Columbia Growth
Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia International
Stock Fund, Inc., Columbia Special Fund, Inc., Columbia High Yield Fund,
Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia
Municipal Bond Fund, Inc., Columbia U.S. Government Securities Fund, Inc.,
and Columbia Fixed Income Securities Fund, Inc.
J. JERRY INSKEEP, JR.,*+ Chairman and Director of the Fund and each of the
Columbia Funds; Chairman, Director, and a principal shareholder of Columbia
Funds Management Company (the "Advisor") and Columbia Management Co.; Chairman
and Director of Columbia Trust Company (the "Trust Company"); Director of
Columbia Financial Center Incorporated ("Columbia Financial"); Chairman and
Trustee of CMC Fund Trust ("CMC Trust").
JAMES F. RIPPEY,*+ Director of the Fund and each of the Columbia Funds;
President, Director, and a principal shareholder of the Advisor and Columbia
Management Co.; President and Director of the Trust Company; President and
Trustee of CMC Trust.
JAMES C. GEORGE, Director of the Fund and each of the Columbia Funds (since June
1994). Mr. George, the former Investment Manager of the Oregon State Treasury
(1962-1992), is an investment consultant; 1001 S.W. Fifth Avenue, Portland,
Oregon 97204.
JOHN A. KEMP,* Director (since June 1994) and President of the Fund and each of
the Columbia Funds; Senior Vice President and Director of the Advisor, Columbia
Management Co., and the Trust Company; Senior Vice President, Treasurer, and
Director of Columbia Financial; Vice President and Trustee of CMC Trust.
THOMAS R. MACKENZIE, Director of the Fund and each of the Columbia Funds.
Mr. Mackenzie is Chairman of the Board of Directors of Mackenzie Engineering
Incorporated, consulting engineers, 0690 S.W. Bancroft Street, Portland, Oregon
97201.
RICHARD L. WOOLWORTH,+ Director of the Fund and each of the Columbia Funds
(since January 1992). Mr. Woolworth is Chairman, President, and Chief Executive
Officer of The Benchmark Group, health insurers, 100 S.W. Market Street,
Portland, Oregon 97201.
GEORGE L. HANSETH,* Senior Vice President and Treasurer of the Fund and each of
the Columbia Funds; Vice President and Director of the Advisor, Columbia
Management Co., and the Trust Company; President and Director of Columbia
Financial; Vice President and Trustee of CMC Trust.
ALBERT D. CORRADO,* Vice President of the Fund and each of the Columbia Funds;
Vice President of the Advisor and the Trust Company.
LAWRENCE S. VIEHL,* Vice President of the Fund, each of the Columbia Funds, the
Advisor, Columbia Management Co., the Trust Company, and CMC Trust.
JEFF B. CURTIS,* Secretary of the Fund, each of the Columbia Funds, and CMC
Trust (since April 1994); General Counsel, Vice President and Secretary of the
Advisor, Columbia Management Co., the Trust Company, and Columbia Financial
(since March 1993). Attorney with Stoel Rives (1986-1993), a law firm in
Portland, Oregon.
2
<PAGE>
*These officers and directors are "interested persons" as defined by the
Investment Company Act of 1940 and receive no directors fees or salaries from
the Fund. Their business address is 1300 S.W. Sixth Avenue, P.O. Box 1350,
Portland, Oregon 97207.
+Members of the Executive Committee. The Executive Committee has all
powers of the Board of Directors when the Board is not in session, except as
limited by law.
Columbia Financial, a registered securities broker and a member of the
National Association of Securities Dealers, Inc., is authorized under a
distribution agreement with the Fund to sell shares of the Fund. Columbia
Financial does not charge any fees or commissions to investors or the Fund for
the sale of shares of the Fund.
At ___________ ____, 1996, officers and directors of the Fund, in the
aggregate, owned of record or beneficially __________ shares of the Fund (____%
of the total outstanding shares).
------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER FEES
PAID TO AFFILIATES
------------------------------------------------------------------
Information regarding services performed by the Advisor for the Fund and
the formula for calculating the fees are set forth in the Prospectus under "Fund
Management."
The Advisor has entered into an agreement with Columbia Management Co.
pursuant to which Columbia Management Co. provides the Advisor with statistical
and other factual information, advice regarding economic factors and trends, and
advice as to occasional transactions in specific securities. Columbia
Management Co., upon receipt of specific instructions from the Advisor, contacts
brokerage firms to effect securities transactions for the Fund. The Advisor
pays Columbia Management Co. a fee for this service. No amounts are paid by the
Fund to Columbia Management Co. pursuant to the agreement, and Fund expenses are
not increased as a result of this agreement.
The Trust Company, of which the Advisor is a principal shareholder and
certain officers of the Fund are minority shareholders, acts as custodian of
certain Individual Retirement Accounts (IRAs) and sponsor of Prototype Money
Purchase Pension and Profit Sharing Plans that invest in the Fund. The Trust
Company charges account holders an annual fee of $25 per IRA account (fee is
waived for accounts over $25,000) and a retirement plan setup fee of $100 and an
annual fee of $50.
The Trust Company also acts as transfer agent and dividend crediting
agent for the Fund. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350,
Portland, Oregon 97207. It issues certificates for shares of the Fund upon
request and records and disburses dividends. The Fund pays the Trust Company a
per-account fee of $1.00 per month for each shareholder account existing at any
time during the month. In addition, the Fund pays the Trust Company for extra
administrative services performed at cost in accordance with a schedule set
forth in the agreement and reimburses the Trust Company for certain
out-of-pocket expenses incurred in carrying out its duties under the agreement.
3
<PAGE>
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PORTFOLIO TRANSACTIONS
------------------------------------------------------------------------------
The Fund will not generally invest in securities for short-term capital
appreciation but, when business and economic conditions, market prices, or the
Fund's investment policy warrant, individual security positions may be sold
without regard to the length of time they have been held. The Fund is new and
without historical portfolio turnover information but expects that its portfolio
turnover rate will generally not exceed 125%.
Securities owned by the Fund may be purchased with brokerage commissions
or on a principal basis without brokerage commissions. The Fund may also
purchase securities from underwriters, the price of which will include a
commission or concession paid by the issuer to the underwriter. The purchase
price of securities purchased from dealers serving as market makers will include
the spread between the bid and asked prices. Brokerage transactions involving
securities of companies domiciled in countries other than the United States will
normally be conducted on the principal stock exchanges of those countries. In
most international markets, commission rates are not negotiable and may be
higher than negotiated commission rates available in the United States. There
is generally less government supervision and regulation of foreign stock
exchanges and broker-dealers than in the United States.
Prompt execution of orders at the most favorable price will be the
primary consideration of the Fund in transactions where brokerage fees are
involved. Research, statistical, and other services also may be taken into
consideration in selecting broker-dealers. These services may include: advice
concerning the value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of securities or the
purchasers or sellers of securities; and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategies, and performance of accounts. While the Fund has no
arrangements or formulas as to either the allocation of brokerage transactions
or commission rates paid thereon, a commission in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction may be paid by the Fund if management of the Fund determines in good
faith that the commission is reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of either that
particular transaction or management's overall responsibilities with respect to
the Fund.
Allocation of transactions to obtain research services for the Advisor
enables the Advisor to supplement its own research and analysis with the
statistics, information, and views of others. While it is not possible to place
a dollar value on these services, it is the opinion of the Advisor that the
receipt of such services will not reduce the overall expenses for its research
or those of its affiliated companies. The fees paid to the Advisor by the Fund
would not be reduced as a result of the receipt of such information and services
by the Fund. The receipt of research services from brokers or dealers might be
useful to the Advisor and its affiliates in rendering investment management
services to the Fund or other clients; and, conversely, information provided by
brokers or dealers who have executed orders on behalf of other clients might be
useful to the Advisor in carrying out its obligations to the Fund.
The Board of Directors of the Fund will from time to time review whether
the recapture for the benefit of the Fund of some portion of the brokerage
commissions or similar fees paid by the Fund on portfolio transactions is
legally permissible and, if so, determine, in the exercise of its business
judgment, whether it would be advisable for the Fund to seek such recapture.
Although the officers and directors of the Fund and each of the Columbia
Funds are the same, investment decisions for the Fund are made independently
from those of the other Columbia Funds or accounts managed by Columbia
Management Co. The same security is sometimes held in the portfolio of more
than one fund or account. Simultaneous transactions are inevitable when
several funds or accounts are managed by the same investment advisor,
particularly when the same security is suitable for the investment objective of
more than one fund or account. In the event of simultaneous transactions,
allocations among the Fund, the Columbia Funds, or accounts will be made on an
equitable basis.
4
<PAGE>
Since 1967, the Advisor and the Funds have had a Code of Ethics (the
"Code") that sets forth general and specific standards relating to the
securities trading activities of all employees of the Advisor and the Funds.
The purpose of the Code is to ensure that all employees conduct their personal
transactions in a manner that does not interfere with the portfolio transactions
of the Funds or take unfair advantage of their relationship with the Advisor or
the Funds. The specific standards included in the Code (as amended) include,
among others, a requirement that all employee trades be pre-cleared; a
prohibition on investing in initial public offerings; required pre-approval on
private placements; a prohibition on portfolio managers trading in a security
seven days before or after a trade in the same security by a Fund over which the
manager exercises investment discretion; and a prohibition on realizing any
profit on the trading of a security held less than 60 days. Certain securities
and transactions, such as mutual fund shares or U. S. Treasuries and purchases
of options on securities indexes or securities under an automatic dividend
reinvestment plan, are exempt from the restrictions in the Code because they
present little or no potential for abuse. Certain transactions involving the
stocks of large capitalization companies are exempt from the seven day black-out
period and short-term trading prohibitions because such transactions are highly
unlikely to affect the price of these stocks. In addition to the trading
restrictions, the Code contains reporting obligations that are designed to
ensure compliance and allow the Advisor's Ethics Committee to monitor that
compliance.
The Advisor and the Funds have also adopted a Policy and Procedures
Designed to Detect and Prevent Insider Trading (the "Insider Trading Policy").
The Insider Trading Policy prohibits any employee of the Advisor or the Funds
from trading, either personally or on behalf of others (including the Funds), on
material nonpublic information. All employees are required to certify each year
that they have read and complied with the provisions of the Code and the Insider
Trading Policy.
------------------------------------------------------------------------------
REDEMPTIONS
------------------------------------------------------------------------------
Information regarding redemptions is set forth in the Prospectus under
"Investor Services -- How to Redeem (Sell) Shares." As discussed under "Investor
Services -- Account Privileges -- Telephone Redemptions" in the Prospectus, the
Fund does not accept responsibility for the authenticity of telephone
instructions relating to redemptions and, accordingly, shareholders who have
approved telephone redemption assume the risk of any losses due to fraudulent
telephone instructions that the Fund reasonably believes to be genuine. The
Fund employs certain procedures to determine if telephone instructions are
genuine, including requesting personal shareholder information prior to acting
on telephone instructions, providing written confirmations of each telephone
transaction, and recording all telephone instructions. The Fund may be liable
for losses due to fraudulent telephone instructions if it fails to follow these
procedures.
The Fund may suspend the determination of net asset value and the right
of redemption for any period (1) when the New York Stock Exchange is closed,
other than customary weekend and holiday closings, (2) when trading on the New
York Stock Exchange is restricted, (3) when an emergency exists as a result of
which disposal of securities owned by the Fund is not reasonably practicable or
it is not reasonably practicable for the Fund to determine the value of its net
assets, or (4) as the Securities and Exchange Commission may by order permit for
the protection of security holders, provided that applicable rules and
regulations of the Securities and Exchange Commission which govern as to whether
the conditions prescribed in (2) or (3) exist are complied with. The New York
Stock Exchange observes the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas. In the case of suspension of the right to redeem, shareholders may
withdraw their redemption request or receive payment based upon the net asset
value computed upon the termination of the suspension.
5
<PAGE>
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CUSTODIANS
------------------------------------------------------------------------------
United States National Bank of Oregon, 321 S.W. Sixth Avenue, Portland,
Oregon 97208, acts as Custodian for the Fund. Morgan Stanley Trust Company
("Morgan Stanley" or "Custodian"), One Pierrepont Plaza, Brooklyn, New York
11201 has entered into a custodian agreement with the Fund with respect to the
purchase of foreign securities by the Fund. The Custodians hold all securities
and cash of the Fund, receive and pay for securities purchased, deliver against
payment securities sold, receive and collect income from investments, make all
payments covering expenses of the Fund, and perform other administrative duties,
all as directed by authorized officers of the Fund. The Custodians do not
exercise any supervisory function in the purchase and sale of portfolio
securities or payment of dividends.
Portfolio securities purchased in the United States are maintained in the
custody of the Fund's Custodian. Portfolio securities purchased outside the
United States are maintained in the custody of foreign banks, trust companies,
or depositories that have sub-custodian arrangements with Morgan Stanley (the
"foreign sub-custodians"). Each of the domestic and foreign custodial
institutions holding portfolio securities of the Fund has been approved by the
Board of Directors of the Fund in accordance with regulations under the
Investment Company Act of 1940.
The Board of Directors reviews, at least annually, whether it is in the
best interest of the Fund and its shareholders to maintain Fund assets, in each
of the countries (if any) in which the Fund invests, with particular foreign
sub-custodians in those countries, pursuant to contracts between the foreign
sub-custodians and Morgan Stanley. The review includes an assessment of the
risk of holding Fund assets in that country (including risks of expropriation or
imposition of exchange controls), the operational capability and reliability of
the foreign sub-custodian, and the impact of local laws on the custody
arrangement. The Board of Directors of the Fund is aided in its review by
Morgan Stanley, which has assembled the network of foreign sub-custodians used
by the Fund, as well as by the Advisor and counsel. With respect to foreign
sub-custodians, however, there can be no assurance that the Fund, and the value
of their shares, will not be adversely affected by acts of foreign governments,
financial or operational difficulties of the foreign sub-custodians,
difficulties and costs of obtaining jurisdiction over, or enforcing judgments
against, the foreign sub-custodians, or the application of foreign law to the
Fund's foreign sub-custodial arrangement. Accordingly, an investor should
recognize that the administrative risks involved in holding assets abroad are
greater than those associated with investing in the United States.
------------------------------------------------------------------------------
ACCOUNTING SERVICES
------------------------------------------------------------------------------
The statement of assets and liabilities of the Fund at ____________ ___,
1996, has been included in this Statement of Additional Information in reliance
on the report of the Fund's independent accountants, Coopers & Lybrand L.L.P.,
2700 First Interstate Tower, Portland, Oregon 97201. Coopers & Lybrand L.L.P.,
in addition to examining the financial statements of the Fund, assists in the
preparation of the tax returns of the Fund and in certain other matters.
6
<PAGE>
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TAXES
------------------------------------------------------------------------------
FEDERAL INCOME TAXES
The Fund intends and expects to meet continuously the tests for
qualification as a regulated investment company under Part I of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). The Fund believes
it satisfies the tests to qualify as a regulated investment company.
To qualify as a regulated investment company for any taxable year, the
Fund must, among other things:
(a) derive at least 90 percent of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies (the "90 Percent Test");
(b) derive less than 30 percent of its gross income from the sale or
other disposition of any of the following, if held for less than three months:
stock, securities, foreign currencies (or options, futures, or forward contracts
on foreign currencies) that are not directly related to the Fund's principal
business of investing in stocks or securities (or options and futures with
respect to stocks or securities), or certain other assets (the "30 Percent
Test"); and
(c) diversify its holdings so that, at the end of each quarter, (i) 50
percent or more of the value of the assets of the Fund is represented by cash,
government securities, and other securities limited, in respect of any one
issuer of such other securities, to an amount not greater than 5 percent of the
value of the assets of the Fund and 10 percent of the outstanding voting
securities of such issuer, and (ii) not more than 25 percent of the value of the
assets of the Fund is invested in the securities (other than government
securities) of any one issuer or of two or more issuers that the Fund "controls"
within the meaning of Section 851 of the Code and that meet certain requirements
(the "Diversification Test"). In addition, the Fund must file, or have filed, a
proper election with the Internal Revenue Service.
Part I of Subchapter M of the Code will apply to the Fund during a
taxable year only if it meets certain additional requirements. Among other
things, the Fund must: (a) have a deduction for dividends paid (without regard
to capital gain dividends) at least equal to the sum of 90 percent of its
investment company taxable income (computed without any deduction for dividends
paid) and 90 percent of its tax-exempt interest in excess of certain disallowed
deductions (unless the Internal Revenue Service waives this requirement), and
(b) either (i) have been subject to Part I of Subchapter M for all taxable years
ending after November 8, 1983 or (ii) as of the close of the taxable year have
no earnings and profits accumulated in any taxable year to which Part I of
Subchapter M did not apply.
A regulated investment company that meets the requirements described
above is taxed only on its "investment company taxable income," which generally
equals the undistributed portion of its ordinary net income and any excess of
net short-term capital gain over net long-term capital loss. In addition, any
excess of net long-term capital gain over net short-term capital loss that is
not distributed is taxed to the Fund at corporate capital gain tax rates. The
policy of the Fund is to apply capital loss carry-forwards as a deduction
against future capital gains before making a capital gain distribution to
shareholders. Under rules that are beyond the scope of this discussion, certain
capital losses and certain net foreign currency losses resulting from
transactions occurring in November and December of a taxable year may be taken
into account either in that taxable year or in the following taxable year.
If any net long-term capital gains in excess of net short-term capital
losses are retained by the Fund, requiring federal income taxes to be paid
thereon by the Fund, the Fund may elect to
7
<PAGE>
treat such capital gains as having been distributed to shareholders. In the
case of such an election, shareholders will be taxed on such amounts as
long-term capital gains, will be able to claim their proportional share of the
federal income taxes paid by the Fund on such gains as credits against their own
federal income tax liabilities, and generally will be entitled to increase the
adjusted tax basis of their shares in the Fund by the differences between their
pro rata shares of such gains and their tax credits.
Shareholders of the Fund are taxed on distributions of net investment
income, or of any excess of net short-term capital gain over net long-term
capital loss, as ordinary income. Income distributions to corporate
shareholders from the Fund may qualify, in whole or part, for the federal income
tax dividends-received deduction, depending on the amount of qualifying
dividends received by the Fund. Qualifying dividends may include those paid to
the Fund by domestic corporations but do not include those paid by foreign
corporations. The dividends-received deduction equals 70 percent of eligible
dividends received from the Fund by a shareholder. Distributions of any excess
of net long-term capital gain over net short-term capital loss from the Fund are
ineligible for the dividends-received deduction.
Distributions properly designated by the Fund as representing the excess
of net long-term capital gain over net short-term capital loss are taxable to
shareholders as long-term capital gain, regardless of the length of time the
shares of the Fund have been held by shareholders. For noncorporate taxpayers,
the highest rate that applies to long-term capital gains is lower than the
highest rate that applies to ordinary income. Any loss that is realized and
allowed on redemption of shares of the Fund less than 6 months from the date of
purchase of the shares and following the receipt of a capital gain dividend will
be treated as a long-term capital loss to the extent of the capital gain
dividend. For this purpose, Section 852(b)(4) of the Code contains special
rules on the computation of a shareholder's holding period.
Distributions of taxable net investment income and net realized capital
gains will be taxable as described above, whether paid in shares or in cash.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. Within 60 days after the close of each calendar
year, the Fund issues to each shareholder a statement of the federal income tax
status of all distributions, including a statement of the prior calendar year's
distributions which the Fund has designated to be treated as long-term capital
gain.
A distribution may be taxable to a shareholder even if the distribution
reduces the net asset value of the shares held below their cost (and is in an
economic sense a return of the shareholder's capital). This tax result is most
likely when shares are purchased shortly before an annual distribution of
capital gains or other earnings.
The Fund is generally required to obtain from its shareholders a
certification of the shareholder's taxpayer identification number and certain
other information. The Fund generally will not accept an investment to
establish a new account that does not comply with this requirement. If a
shareholder fails to certify such number and other information, or upon receipt
of certain notices from the Internal Revenue Service, the Fund may be required
to withhold 31 percent of any reportable interest or dividends, or redemption
proceeds, payable to the shareholder, and to remit such sum to the Internal
Revenue Service, for credit toward the shareholder's federal income taxes. A
shareholder's failure to provide a social security number or other tax
identification number may subject the shareholder to a penalty of $50 imposed by
the Internal Revenue Service. In addition, that failure may subject the Fund to
a separate penalty of $50. This penalty will be charged against the
shareholder's account, which will be closed. Closure of the account may result
in a capital gain or loss.
If the Fund declares a dividend in October, November, or December payable
to shareholders of record on a certain date in such a month and pays the
dividend during January of the following year, the shareholders will be taxed as
if they had received the dividend on December 31 of the year in which the
dividend was declared. Thus, a shareholder may be taxed on the dividend in a
taxable year prior to the year of actual receipt.
A special tax may apply to the Fund if it fails to make enough
distributions during the calendar year. The required distributions for each
calendar year generally equal the sum of
8
<PAGE>
(a) 98 percent of the ordinary income for the calendar year plus (b) 98
percent of the capital gain net income for the one-year period that ends on
October 31 during the calendar year (or for the calendar year itself if the Fund
so elects), plus (c) an adjustment relating to any shortfall for the prior
taxable year. If the actual distributions are less than the required
distributions, a tax of 4 percent applies to the shortfall.
The Code allows the deduction by certain individuals, trusts, and estates
of "miscellaneous itemized deductions" only to the extent that such deductions
exceed 2 percent of adjusted gross income. The limit on miscellaneous itemized
deductions will NOT apply, however, with respect to the expenses incurred by any
"publicly offered regulated investment company." The Fund believes that it is a
publicly offered regulated investment company because its shares are
continuously offered pursuant to a public offering (within the meaning of
Section 4 of the Securities Act of 1933, as amended). Therefore, the limit on
miscellaneous itemized deductions should not apply to expenses incurred by the
Fund.
STATE INCOME TAXES
The state tax consequences of investments in the Fund are beyond the
scope of the tax discussions in the Prospectus and this Statement of Additional
Information.
ADDITIONAL INFORMATION
The foregoing summary and the summary included in the Prospectus under
"Taxes" of tax consequences of investment in the Fund are necessarily general
and abbreviated. No attempt has been made to present a complete or detailed
explanation of tax matters. Furthermore, the provisions of the statutes and
regulations on which they are based are subject to change by legislative or
administrative action. Local taxes are beyond the scope of this discussion.
Prospective investors in the Fund are urged to consult their own tax advisors
regarding specific questions as to federal, state, or local taxes.
This discussion applies only to general U.S. shareholders. Foreign
investors and U.S. shareholders with particular tax issues or statuses should
consult their own tax advisors regarding the special rules that may apply to
them.
------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------
The Fund will from time to time advertise or quote its total return
performance. These figures represent historical data and are calculated
according to Securities and Exchange Commission ("SEC") rules standardizing such
computations. The investment return and principal value will fluctuate so that
shares when redeemed may be worth more or less than their original cost.
The Fund may publish average annual total return quotations for recent 1,
5, and 10-year periods (or a fractional portion thereof) computed by finding the
average annual compounded rates of return over the 1, 5, and 10-year periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)to the nth power = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
9
<PAGE>
ERV = ending redeemable value of a hypothetical $1000 payment made at
the beginning of the 1, 5, and 10-year periods (or fractional
portion thereof)
Total return figures may also be published for recent 1, 5, and 10-year
periods where the total return figures represent the percentage return for the
1, 5, and 10-year periods that would equate the initial amount invested to the
ending redeemable value.
If the Fund's registration statement under the Investment Company Act of
1940 has been in effect less than 1, 5, or 10 years, the time period during
which the registration statement has been in effect will be substituted for the
periods stated.
The Fund may compare its performance to other mutual funds with similar
investment objectives and to the mutual fund industry as a whole, as quoted by
ranking services and publications of general interest. For example, these
services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, Barron's, Business Week, Changing Times,
The Financial Times, Financial World, Forbes, Investor's Daily, Money,
Morningstar, Inc., Personal Investor, The Economist, The Wall Street Journal,
and USA Today. These ranking services and publications rank the performance of
the Fund against all other funds over specified periods and against funds in
specified categories.
The Fund may also compare its performance to that of a recognized stock
or bond index including the Standard & Poor's 500, Dow Jones, Russell, and
Nasdaq stock indices, the NAREIT Equity Index, and the Shearson Lehman and
Salomon bond indices. The comparative material found in advertisements, sales
literature, or in reports to shareholders may contain past or present
performance ratings. This is not to be considered representative or indicative
of future results or future performance. Unmanaged indices may assume the
reinvestment of dividends, but generally do not reflect deductions for
administrative and management costs and expenses.
------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
------------------------------------------------------------------------------
The Prospectus sets forth the investment objectives and certain
restrictions applicable to the Fund. The following is a list of investment
restrictions applicable to the Fund. If a percentage limitation is adhered to
at the time of an investment by the Fund, a later increase or decrease in
percentage resulting from any change in value or net assets will not result in a
violation of the restriction. The Fund may not change these restrictions
without the approval of a majority of its shareholders, which means the vote at
any meeting of shareholders of the Fund of (i) 67 percent or more of the shares
present or represented by proxy at the meeting (if the holders of more than 50
percent of the outstanding shares are present or represented by proxy) or
(ii) more than 50 percent of the outstanding shares, whichever is less.
The Fund may not:
1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the restrictions
in paragraph 15.
2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25 percent of the value of the total assets in any one industry
and (b) invest for temporary defensive purposes up to 100 percent of the value
of the total assets in securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities.
3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate investment
trusts, which operate in real estate or interests therein.
4. Make loans to other persons (except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting part
of an issue).
10
<PAGE>
5. The Fund may not purchase a repurchase agreement with a maturity
greater than seven days or a security that is subject to legal or contractual
restrictions on resale or for which there are no readily available market
quotations if, as a result of such purchase, more than 10 percent of the assets
of the Fund (taken at current value) is invested in such securities.
6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting securities
of that issuer to be held in the Fund.
7. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the value of the total assets of the
Fund at market value to be invested in the securities of that issuer (other than
obligations of the U.S. Government and its agencies and instrumentalities), with
reference to 75 percent of the assets of the Fund.
8. Purchase securities of other open-end investment companies.
9. Issue senior securities, bonds, or debentures.
10. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities under circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed to be an
underwriter for purposes of the Securities Act of 1933.
11. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks and for extraordinary or emergency
purposes.
12. Invest its funds in the securities of any company if the purchase,
at the time thereof, would cause more than 10 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years' continuous operation.
13. Invest in companies for the purpose of exercising control or
management.
14. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such securities.
Such transactions may only be made to protect a profit in or to attempt to
minimize a loss with respect to convertible securities. In any event, no more
than 10 percent of the value of the Fund's net assets taken at market may, at
any time, be held as collateral for such sales.
15. Buy and sell puts and calls as securities, stock index futures or
options on stock index futures, or financial futures or options on financial
futures, unless such options are written by other persons and the options or
futures are offered through the facilities of a national securities association
or are listed on a national securities or commodities exchange.
16. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
Some of the policies described above prohibit particular practices.
Other policies (paragraphs 5, 11, 12, and 14) permit specified practices but
limit the portion of the Fund's assets that may be so invested. Subject to the
investment restriction, the Fund expects to engage in the practices described in
paragraph 12. The Fund has no current intention of engaging in the other
permitted practices in the foreseeable future.
OTHER RESTRICTIONS
To permit the sale of shares of the Fund in certain states, the Fund may
make commitments more restrictive than the fundamental restrictions described
above. If the Board of Directors of the Fund determines that a commitment is no
longer in the best interests of the Fund and its shareholders, it will revoke
the commitment, terminate sales of its shares in the state(s) involved, and
notify the affected shareholders.
11
<PAGE>
------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING CERTAIN
INVESTMENTS BY THE FUND
------------------------------------------------------------------
WARRANTS
Warrants are in effect longer-term call options. They give the holder
the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant
expects that the market price of the security will exceed the purchase price of
the warrant plus the exercise price of the warrant, thus giving him a profit.
Since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of the warrant, the current market value of the
underlying security, the life of the warrant, and various other investment
factors. The Fund's investment restrictions do not limit the percentage of the
Fund's assets that may be invested in warrants, but the Fund does not intend to
invest more than 5 percent of its assets in warrants or more than 2 percent of
its assets in warrants that are not listed on the New York Stock Exchange or
American Stock Exchange.
12
<PAGE>
FINANCIAL STATEMENTS
(to be provided in the pre-effective amendment)
13
<PAGE>
COLUMBIA SMALL CAP FUND, INC.
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
The Statement of Assets and Liabilities and Report of Independent
Accountants will be included in a pre-effective amendment to the
Registration Statement.
(b) Exhibits:
(1) Registrant's Articles of Incorporation.
(2) Registrant's Bylaws.
(4A) Specimen Stock Certificate.*
(4B) Application.*
(5) Investment Advisory Contract.
(6) Distribution Agreement.
(8A) Custodian Contract between the Registrant and United States
National Bank of Oregon.*
(8B) Custodian Contract between the Registrant and Morgan Stanley Trust
Company.*
(9) Transfer Agent Agreement.
(10) Opinion of Counsel.*
(11) Consent of Accountants.*
(12) See paragraph (a) of Item 24.
(14) IRA and Money Purchase Pension and Profit Sharing Plan booklets.*
(17) Powers of Attorney.
(27) Financial Data Schedule.*
* To be filed by Amendment.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Registrant, Columbia Balanced Fund, Inc., Columbia Common Stock Fund,
Inc., Columbia Fixed Income Securities Fund, Inc., Columbia Growth Fund, Inc.,
Columbia International Stock Fund, Inc., Columbia Daily Income Company, Columbia
Special Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia U.S. Government
Securities Fund, Inc., Columbia Real Estate Equity Fund, Inc., and Columbia High
Yield Fund, Inc., each an Oregon corporation (the "Columbia Funds"), have
investment advisory contracts with Columbia Funds Management Company (the
"Advisor"), an Oregon corporation. Columbia Trust Company, an Oregon
corporation, is 79% owned by the Advisor. J. Jerry Inskeep, Jr. and James F.
Rippey own 14.9% and 27.2%, respectively, of
C-1
<PAGE>
the voting securities of the Advisor; 32.3% each of the voting securities of
Columbia Financial Center Incorporated, an Oregon corporation; 41.1% each of the
voting securities of Columbia Management Co., an Oregon corporation; and 3.7%
and 1.2%, respectively, of the voting securities of Columbia Trust Company. CMC
Fund Trust, an Oregon business trust, has an investment advisory contract with
Columbia Management Co. See "Management" in Part B. The Registrant does not
have any subsidiaries.
Item 26. NUMBER OF HOLDERS OF SECURITIES
At the commencement of the offering of the Registrant's shares of Common
Stock to the public, all outstanding shares will be held by certain officers of
the Advisor or Columbia Management Co.
Item 27. INDEMNIFICATION
The articles of incorporation and bylaws of the Registrant provide that any
director or officer of the Registrant shall be indemnified by the Registrant
against all expenses incurred by him in connection with any claim, action, suit,
or proceeding, civil or criminal, by reason of his being an officer, director,
employee, or agent of the Registrant to the fullest extent not prohibited by the
Oregon Business Corporation Act and the Investment Company Act of 1940 and
related regulations and interpretations of the Securities and Exchange
Commission.
Insofar as reimbursement or indemnification for expenses incurred by a
director or officer in legal proceedings arising under the Securities Act of
1933 may be permitted by the above provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
reimbursement or indemnification is against public policy as expressed in the
Act and therefore unenforceable. In the event that any claim for
indemnification under the above provisions is asserted by an officer or director
in connection with the securities being registered, the Registrant, unless in
the opinion of its counsel the matter has already been settled by controlling
precedent, will (except insofar as such claim seeks reimbursement of expenses
paid or incurred by an officer or director in the successful defense of any such
action, suit or proceeding or claim, issue, or matter therein) submit to a court
of appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant's directors and officers are also named insureds under an
insurance policy issued by ICI Mutual Insurance Company.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Information regarding the businesses of the Advisor and its officers and
directors is set forth under "Fund Management" in the Prospectus and under
"Management" and "Investment Advisory and Other Fees Paid to Affiliates" in the
Statement of Additional Information and is incorporated herein by reference.
Columbia Trust Company also acts as trustee and/or agent for the investment of
the assets of pension and profit sharing plans in pooled accounts.
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<PAGE>
Item 29. PRINCIPAL UNDERWRITERS
Pursuant to a distribution agreement with each of the Columbia Funds,
including the Registrant, Columbia Financial is authorized to sell shares of
each fund to the public. No commission or other compensation is received by
Columbia Financial in connection with the sale of shares of the Columbia Funds.
Certain information on each director and officer of Columbia Financial is set
forth below:
Name and Principal Positions with
Business Address Columbia Financial Positions with Registrant
- - ------------------ ------------------ -------------------------
J. Jerry Inskeep, Jr. Director Chairman and Director
1301 SW Fifth Ave
Portland, OR 97207
George L. Hanseth President and Director Senior Vice President
1301 SW Fifth Ave and Treasurer
Portland, OR 97207
John A. Kemp Senior Vice President, President and Director
1301 SW Fifth Ave Treasurer and Director
Portland, OR 97207
Jeff B. Curtis General Counsel, Vice Secretary
1301 SW Fifth Avenue President and Secretary
Portland, OR 97201
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained by the
Registrant, Columbia Funds Management Company, and Columbia Trust Company at
1301 SW Fifth Avenue, Portland, Oregon 97201. Records relating to the
Registrant's portfolio securities are also maintained by United States National
Bank of Oregon and Morgan Stanley Trust Company.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
(a) The Registrant hereby undertakes to file a post-effective amendment, using
reasonably current unaudited financial statements, within four to six months
from the effective date of this Registration Statement, subject to the
instructions set forth in Item 32 of Form N-1A.
(b) The Registrant hereby undertakes to promptly call a meeting of the
shareholders of the Registrant for the purpose of voting on the removal of any
director of the Registrant when requested in writing by shareholders of at least
10 percent of the outstanding shares of Common Stock of the Registrant. The
Registrant undertakes to assist its shareholders in communicating with other
shareholders of the Registrant to the extent required by Section 16 of the
Investment Company Act of 1940 or any regulations promulgated thereunder.
(c) The Registrant hereby undertakes, upon request and without charge, to
furnish a copy of the Registrant's annual report to shareholders to each person
to whom a prospectus is delivered.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Portland and State of Oregon on the 11th day of
June, 1996.
COLUMBIA SMALL CAP FUND, INC.
By JOHN A KEMP
--------------------------------
John A. Kemp, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 11th day of June,
1996 by the following persons in the capacities indicated.
(i) Principal executive officer:
JOHN A. KEMP President and Director
- - -----------------------------------
John A. Kemp
(ii) Principal accounting and
financial officer:
GEORGE L. HANSETH Senior Vice President
- - -----------------------------------
George L. Hanseth
(iii) Director:
* RICHARD L. WOOLWORTH Director
- - -----------------------------------
Richard L. Woolworth
* JOHN A. KEMP
- - -----------------------------------
John A. Kemp
as Attorney-in-fact
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<PAGE>
COLUMBIA SMALL CAP FUND, INC.
EXHIBIT INDEX
Exhibit No. Sequential Page No.
- - ----------- -------------------
(1) Registrant's Articles of Incorporation.
(2) Registrant's Bylaws.
(4A) Specimen Stock Certificate. *
(4B) Application.*
(5) Investment Advisory Contract.
(6) Distribution Agreement.
(8A) Custodian Contract between the Registrant and United
States National Bank of Oregon.*
(8B) Custodian Contract between the Registrant and Morgan
Stanley Trust Company.*
(9) Transfer Agent Agreement.
(10) Opinion of Counsel.*
(11) Consent of Accountants.*
(12) See paragraph (a) of Item 24.
(14) IRA and Money Purchase Pension and Profit Sharing Plan booklets.*
(17) Powers of Attorney.
(27) Financial Data Schedule.*
* To be filed by amendment.
C-5
<PAGE>
ARTICLES OF INCORPORATION
OF
COLUMBIA SMALL CAP FUND, INC.
ARTICLE I
The name of the Corporation is Columbia Small Cap Fund, Inc.
ARTICLE II
The purposes for which the Corporation is organized are:
A. To conduct and carry on the business of an open-end investment
company of the management type under the Investment Company Act of 1940; and
B. To engage in any other lawful activity for which corporations may
be organized under the Oregon Business Corporation Act.
ARTICLE III
The Corporation is authorized to issue 100,000,000 shares.
ARTICLE IV
A. Except as otherwise provided in this Article, a shareholder may
require the Corporation to redeem all or any part of shares of the Corporation
upon deposit of the shares for redemption, in the manner and in accordance with
the conditions prescribed by the Board of Directors. Shares deposited for
redemption shall be redeemed by the Corporation at the redemption price for the
shares as determined in the manner set out in this Article.
B. The redemption price per share shall be the net asset value per
share (the total value of the assets of the Corporation less, to the extent
determined pursuant to the direction of the Board of Directors, all debts,
obligations, and liabilities of the Corporation, divided by the number of shares
outstanding), as determined by the Board of Directors, less the redemption fee
or other charge, if any, fixed by the Board of Directors in accordance with the
Investment Company Act of 1940. The net asset value per share shall be
determined on all days on which the New York Stock Exchange is open for business
and at such other time or times as the Board of Directors designates, unless
such determination is suspended.
C. The Board of Directors shall, in its absolute discretion,
establish from time to time the method for determining the net asset value per
share of the Corporation's shares. The Board of Directors may suspend the
determination of net asset value for all or any part of any period (i) during
which the New York
1
<PAGE>
Stock Exchange is closed other than customary weekend and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted,
(iii) during which an emergency exists as a result of which (a) the disposal by
the Corporation of investments owned by it is not reasonably practicable or
(b) it is not reasonably practicable for the Corporation fairly to determine the
value of its assets, or (iv) as the federal Securities and Exchange Commission
or any successor governmental authority may by order permit for the protection
of shareholders of the Corporation. Whenever the Board of Directors, by
declaration or resolution, has suspended the determination of net asset value
pursuant to this Article, the right of any shareholder to require the
Corporation to redeem shares shall be likewise suspended, despite deposit before
suspension. When a suspension is in effect, any shareholder may withdraw
certificates from deposit or may leave them on deposit, in which case the
redemption price shall be the net asset value next determined after the
suspension is terminated.
D. In determining for the purposes of this Article the total value of
the assets of the Corporation, investments and any other assets of the
Corporation shall be valued in the manner determined from time to time by the
Board of Directors.
E. The right of any holder of shares redeemed by the Corporation to
receive dividends or distributions thereon and all other rights of such holder
with respect to such shares shall terminate when the redemption price of the
shares is determined, except for the right of the holder to receive (i) the
redemption price of the shares from the Corporation in accordance with the
provisions hereof and (ii) any dividend or distribution to which the holder had
previously become entitled as the record holder of shares on the record date for
the dividend or distribution.
F. Payment of the redemption price by the Corporation may be made
either in cash or in securities or other assets at the time owned by the
Corporation, or partly in cash and partly in securities or other assets at the
time owned by the Corporation. Any payment to be made in securities or other
assets of the Corporation shall be the value used in determining the redemption
price.
G. The obligation of the Corporation to redeem its shares hereunder
is conditional upon the ability of the Corporation to comply with the provisions
of the Oregon Business Corporation Act relating to distributions to shareholders
by means of share redemptions. The right to redeem shall terminate upon
adoption of a plan of liquidation or dissolution of the Corporation by the Board
of Directors.
H. The Corporation, either directly or through an agent, may
repurchase its shares, out of funds legally available therefor, upon the terms
and conditions and for the consideration as the Board of Directors deems
advisable, by agreement with the owner at a price not exceeding the net asset
value per share as determined by the Board of Directors at the time or times as
the Board
2
<PAGE>
of Directors designates, and the Corporation may take all other steps deemed
necessary or advisable in connection therewith.
I. The Corporation, pursuant to resolution of the Board of Directors,
may cause the redemption, upon the terms set forth in the resolution and in this
Article, of shares owned by shareholders whose shares have an aggregate net
asset value of $500 or less. Notwithstanding any other provision of this
Article, if certificates representing such shares have been issued, the
redemption price need not be paid by the Corporation until the certificates are
presented in proper form for transfer to the Corporation or the agent of the
Corporation appointed for that purpose; however, the redemption shall be
effective, in accordance with the resolution of the Board of Directors,
regardless of whether or not such presentation has been made.
J. The Board of Directors may delegate any of its powers and duties
under this Article with respect to appraisal of assets and liabilities and
determination of net asset value or with respect to suspension of the
determination of net asset value to an officer of the Corporation, the custodian
or depository of the Corporation's assets, or to the investment adviser of the
Corporation.
K. The obligations set forth in this Article may be suspended or
postponed as permitted pursuant to the Investment Company Act of 1940.
ARTICLE V
Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles, by or pursuant to the direction of the Board of Directors, as to:
the amount and allocation of the assets, liabilities, income, expense, gain, or
loss of the Corporation; the amount of any reserves or charges set up and the
propriety thereof; the time of or purpose for creating such reserves or charges;
the use, alteration, or cancellation of any reserves or charges (whether or not
any debt, obligation, or liability for which such reserves or charges shall have
been created, shall have been paid or discharged, or shall be then or thereafter
required to be paid or discharged); the price or closing bid or asked price of
any investment owned or held by the Corporation; the amortized or market value
of any investment or fair value of any other asset of the Corporation; the fair
market value of assets accepted as consideration for shares; the number of
shares of the Corporation outstanding; the estimated expense to the Corporation
in connection with purchases of its shares; the ability to liquidate investments
in an orderly fashion; the extent to which it is practicable to deliver a cross-
section of the securities held in any portfolio of the Corporation in payment
for any shares pertaining to that portfolio; or any other matters relating to
the issue, sale, purchase, or other acquisition or disposition of investments or
shares of the Corporation shall be final and conclusive and shall be binding
upon the Corporation and all holders of its shares, past, present, and future;
and shares of
3
<PAGE>
the Corporation are issued and sold on the condition and understanding that any
and all such determinations shall be binding as set forth above.
ARTICLE VI
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director,
provided that this Article shall not eliminate the liability of a director for
any act or omission for which such elimination of liability is not permitted
under the Oregon Business Corporation Act or the Investment Company Act of 1940.
No amendment to the Oregon Business Corporation Act that further limits the acts
or omissions for which elimination of liability is permitted shall affect the
liability of a director for any act or omission which occurs prior to the
effective date of the amendment.
ARTICLE VII
The Corporation shall indemnify to the fullest extent not
prohibited by law, including the Oregon Business Corporation Act and the
Investment Company Act of 1940, any person who is made, or threatened to be
made, a party to an action, suit or proceeding, whether civil, criminal,
administrative, investigative, or other (including an action, suit, or
proceeding by or in the right of the Corporation), by reason of the fact that
such person is or was a director or officer of the Corporation or a fiduciary
within the meaning of the Employee Retirement Income Security Act of 1974 with
respect to any employee benefit plan of the Corporation, or serves or served at
the request of the Corporation as a director or officer or as a fiduciary of an
employee benefit plan, of another corporation, partnership, joint venture,
trust, or other enterprise. The Corporation shall pay for or reimburse the
reasonable expenses incurred by any such person in any such proceeding in
advance of the final disposition of the proceeding if the person sets forth in
writing (i) the person's good faith belief that the person is entitled to
indemnification under this Article and (ii) the person's agreement to repay all
advances if it is ultimately determined that the person is not entitled to
indemnification under this Article. No amendment to this Article that limits
the Corporation's obligation to indemnify any person shall have any effect on
such obligation for any act or omission that occurs prior to the later of the
effective date of the amendment or the date notice of the amendment is given to
the person. This Article shall not be deemed exclusive of any other provisions
for indemnification or advancement of expenses of directors, officers,
employees, agents, and fiduciaries that may be included in any statute, bylaw,
agreement, general or specific action of the Board of Directors, vote of
shareholders, or other document or arrangement.
ARTICLE VIII
The Corporation shall not be required to hold an annual meeting of
shareholders.
4
<PAGE>
ARTICLE IX
The street address and the mailing address of the initial
registered office of the Corporation is 1301 SW Fifth Avenue, PO Box 1350,
Portland, Oregon 97207 and the name of its initial registered agent at that
address is John A. Kemp.
ARTICLE X
The name of the incorporator is Jeff B. Curtis, and the address of
the incorporator is 1300 SW Sixth Avenue, PO Box 1350, Portland, Oregon 97207.
ARTICLE XI
The mailing address for the Corporation for notices is 1301 SW
Fifth Avenue, PO Box 1350, Portland, Oregon 97207.
Executed: May 24, 1996.
/s/ JEFF B. CURTIS
---------------------------------
Jeff B. Curtis, Incorporator
5
<PAGE>
BYLAWS
OF
COLUMBIA SMALL CAP FUND, INC.
ARTICLE I
SHAREHOLDERS MEETINGS AND VOTING
1.1 ANNUAL MEETING. The Corporation shall not be required to hold an
annual meeting of the shareholders.
1.2 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purposes, unless otherwise prescribed by statute, may be called by the President
or the Board of Directors and shall be called by the President upon the written
demand of the holders of not less than one-tenth of all the votes entitled to be
cast on any issue proposed to be considered at the meeting. The demand shall
describe the purposes for which the meeting is to be held and shall be signed,
dated and delivered to the Secretary.
1.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held at
any place in or out of Oregon designated by the Board of Directors. If a
meeting place is not designated by the Board of Directors, the meeting shall be
held at the Corporation's principal office.
1.4 NOTICE OF MEETINGS. Written or printed notice stating the date,
time and place of the shareholders meeting and, in the case of a special meeting
or a meeting for which special notice is required by law, the purposes for which
the meeting is called shall be mailed by the Corporation to each shareholder
entitled to vote at the meeting and, if required by law, to any other
shareholders entitled to receive notice, at the shareholder's address shown in
the Corporation's record of shareholders, with postage prepaid, not earlier than
60 days nor less than 10 days before the meeting date.
1.5 WAIVER OF NOTICE. A shareholder may at any time waive any notice
required by law, these Bylaws or the Articles of Incorporation. The waiver
shall be in writing, be signed by the shareholder entitled to the notice and be
delivered to the Corporation for inclusion in the minutes for filing with the
corporate records. A shareholder's attendance at a meeting waives objection to
(i) lack of notice or defective notice of the meeting, unless the shareholder at
the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (ii) consideration of a particular matter at the
meeting that is not within the purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.
1.6 FIXING OF RECORD DATE. The Board of Directors may fix a future
date as the record date to determine the shareholders entitled to notice of a
shareholders meeting, demand a special meeting, vote, take any other action or
receive payment of any share or cash dividend or other distribution. This date
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shall not be earlier than 70 days or, in the case of a meeting, later than 10
days before the meeting or action requiring a determination of shareholders.
The record date for any meeting, vote or other action of the shareholders shall
be the same for all voting groups. If not otherwise fixed by the Board of
Directors, the record date to determine shareholders entitled to notice of and
to vote at an annual or special shareholders meeting is the close of business on
the day before the notice is first mailed or delivered to shareholders. If not
otherwise fixed by the Board of Directors, the record date to determine
shareholders entitled to receive payment of any share or cash dividend or other
distribution is the close of business on the day the Board of Directors
authorizes the share or cash dividend or other distribution.
1.7 SHAREHOLDERS LIST FOR MEETING. After a record date for a meeting
is fixed, the Corporation shall prepare an alphabetical list of all shareholders
entitled to notice of the shareholders meeting. The list shall be arranged by
voting group and, within each voting group, by class or series of shares, and it
shall show the address of and number of shares held by each shareholder. The
shareholders list shall be available for inspection by any shareholder, upon
proper demand as may be required by law, beginning two business days after
notice of the meeting is given and continuing through the meeting, at the
Corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. The Corporation shall make the
shareholders list available at the meeting, and any shareholder or the
shareholder's agent or attorney shall be entitled to inspect the list at any
time during the meeting or any adjournment. Refusal or failure to prepare or
make available the shareholders list does not affect the validity of action
taken at the meeting.
1.8 QUORUM; ADJOURNMENT.
(1) Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter.
(2) A majority of votes represented at the meeting, although
less than a quorum, may adjourn the meeting from time to time to a different
time and place without further notice to any shareholder of any adjournment. At
an adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting originally held.
(3) Once a share is represented for any purpose at a meeting,
it shall be present for quorum purposes for the remainder of the meeting and for
any adjournment of that meeting unless a new record date is or must be set for
the adjourned meeting. A new record date must be set if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
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1.9 VOTING REQUIREMENTS; ACTION WITHOUT MEETING.
(1) If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless a greater number of affirmative votes is required by law or the Articles
of Incorporation. Unless otherwise provided in the Articles of Incorporation,
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present.
(2) Action required or permitted by law to be taken at a
shareholders meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action. The action must be
evidenced by one or more written consents describing the action taken, signed by
all the shareholders entitled to vote on the action and delivered to the
Secretary for inclusion in the minutes for filing with the corporate records.
Shareholder action taken by written consent is effective when the last
shareholder signs the consent, unless the consent specifies an earlier or later
effective date.
1.10 PROXIES. A shareholder may vote shares in person or by proxy. A
shareholder may appoint a proxy by signing an appointment form either personally
or by the shareholder's attorney-in-fact. An appointment of a proxy is
effective when received by the Secretary or other officer of the Corporation
authorized to tabulate votes. An appointment is valid for 11 months unless a
different period is provided in the appointment form. An appointment is
revocable by the shareholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest that has
not been extinguished.
ARTICLE II
BOARD OF DIRECTORS
2.1 DUTIES OF BOARD OF DIRECTORS. All corporate powers of the
Corporation shall be exercised by or under the authority of its Board of
Directors; the business and affairs of the Corporation shall be managed under
the direction of its Board of Directors.
2.2 NUMBER, TERM AND QUALIFICATION. The number of directors of the
Corporation shall be at least 1 and no more than 7. Within this range, the
initial number of directors shall be 2, and the number of directors shall
otherwise be determined from time to time by the Board of Directors. The term
of a director shall expire at the next annual meeting of shareholders after his
or her election. No reduction in the number of directors shall shorten the term
of any incumbent director. Despite the expiration of a director's term, the
director shall continue to serve until the director's successor is elected and
qualified or the number of directors is decreased. Directors need not be
residents of Oregon or shareholders of the Corporation.
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2.3 REGULAR MEETINGS. If an annual meeting of shareholders is held, a
regular meeting of the Board of Directors shall be held without notice other
than this Bylaw immediately after, and at the same place as, the annual meeting
of shareholders. The Board of Directors may provide by resolution the time and
place for the holding of additional regular meetings in or out of Oregon without
notice other than the resolution.
2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place in or out of Oregon as the place for holding any special
meeting of the Board of Directors called by them.
2.5 NOTICE. Notice of the date, time and place of any special meeting
of the Board of Directors shall be given at least 24 hours prior to the meeting
by notice communicated in person, by telephone, telegraph, teletype, other form
of wire or wireless communication, mail or private carrier. If written, notice
shall be effective at the earliest of (a) when received, (b) five days after its
deposit in the United States mail, as evidenced by the postmark, if mailed
postpaid and correctly addressed, or (c) on the date shown on the return
receipt, if sent by registered or certified mail, return receipt requested and
the receipt is signed by or on behalf of the addressee. Notice by all other
means shall be deemed effective when received by or on behalf of the director.
Notice of any regular or special meeting need not describe the purposes of the
meeting unless required by law or the Articles of Incorporation.
2.6 WAIVER OF NOTICE. A director may at any time waive any notice
required by law, these Bylaws or the Articles of Incorporation. Except as set
forth below, the waiver must be in writing, be signed by the director entitled
to the notice, specify the meeting for which notice is waived and be filed with
the minutes or corporate records. A director's attendance at or participation
in a meeting waives any required notice to the director of the meeting unless
the director at the beginning of the meeting, or promptly upon the director's
arrival, objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
2.7 QUORUM. A majority of the number of directors set forth in or
determined in accordance with Section 2.2 of these Bylaws shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors.
If less than a quorum is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.
2.8 MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless a different number is provided by law, the Articles of
Incorporation or these Bylaws.
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2.9 MEETING BY TELEPHONE CONFERENCE; ACTION WITHOUT MEETING.
(1) Directors may participate in a regular or special meeting
by, or conduct the meeting through, use of any means of communications by which
all directors participating may simultaneously hear each other during the
meeting. Participation in a meeting by this means shall constitute presence in
person at the meeting.
(2) Any action that is required or permitted to be taken at a
meeting of the Board of Directors may be taken without a meeting if one or more
written consents describing the action taken are signed by all of the directors
entitled to vote on the matter and included in the minutes or filed with the
corporate records reflecting the action taken. The action shall be effective
when the last director signs the consent, unless the consent specifies an
earlier or later effective date.
2.10 VACANCIES. Any vacancy on the Board of Directors, including a
vacancy resulting from an increase in the number of directors, may be filled by
the shareholders, the Board of Directors, the remaining directors if less than a
quorum (by the vote of a majority thereof) or by a sole remaining director. Any
vacancy not filled by the directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for that purpose. A
vacancy that will occur at a specified later date, by reason of a resignation or
otherwise, may be filled before the vacancy occurs, but the new director may not
take office until the vacancy occurs.
2.11 COMPENSATION. By resolution of the Board of Directors, the
directors may be paid reasonable compensation for services as directors and
their expenses of attending meetings of the Board of Directors.
2.12 PRESUMPTION OF ASSENT. A director who is present at a meeting of
the Board of Directors or a committee of the Board of Directors shall be deemed
to have assented to the action taken at the meeting unless (a) the director's
dissent or abstention from the action is entered in the minutes of the meeting,
(b) the director delivers a written notice of dissent or abstention to the
action to the presiding officer of the meeting before any adjournment or to the
Corporation immediately after the adjournment of the meeting or (c) the director
objects at the beginning of the meeting or promptly upon the director's arrival
to the holding of the meeting or transacting business at the meeting. The right
to dissent or abstain is not available to a director who voted in favor of the
action.
2.13 REMOVAL. The shareholders may remove one or more directors with
or without cause at a meeting called expressly for that purpose, unless the
Articles of Incorporation provide for removal for cause only.
2.14 RESIGNATION. Any director may resign by delivering written notice
to the Board of Directors, its chairperson or the Corporation. Unless the
notice specifies a later effective date, a resignation notice shall be effective
upon the earlier of (a) receipt, (b) five days after its deposit in the United
States mails, if
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mailed postpaid and correctly addressed, or (c) on the date shown on the return
receipt, if sent by registered or certified mail, return receipt requested, and
the receipt is signed by addressee. Once delivered, a resignation notice is
irrevocable unless revocation is permitted by the Board of Directors.
2.15 DIRECTORS EMERITUS. The Board of Directors may appoint one or
more former directors of the Corporation to serve as directors emeritus. A
director emeritus may be appointed to serve on a committee of the Board of
Directors. A director emeritus may resign at any time and may be removed by the
Board of Directors at any time with or without cause. The term of a director
emeritus shall commence upon appointment and continue for one year or until
resignation or removal of the director emeritus. The position of director
emeritus shall be advisory in nature only, and a director emeritus shall have no
vote or right to consent on any action taken by the Board of Directors. A
director emeritus shall have no duties or obligations to the Corporation or its
shareholders as a director of the Corporation, whether pursuant to the Oregon
Business Corporation Act or the Investment Company Act of 1940 or otherwise.
Subject to an express determination of the Board of Directors to the contrary,
whether generally or in a specific instance, a director emeritus shall have the
right to receive notice of and to attend all meetings of the Board of Directors
or of any committee to which the director emeritus has been appointed, provided
that the failure to provide notice of a meeting of the Board of Directors or of
a committee to a director emeritus pursuant to this Section shall not affect the
validity of any action taken at that meeting. Subject to an express
determination of the Board of Directors to the contrary, whether generally or in
a specific instance, a director emeritus shall have the same rights to inspect
the records of, or to request information about, the Corporation as any other
director of the Corporation acting in the capacity of a director. A director
emeritus shall not be counted for purposes of determining the number of
directors of the Corporation or the existence of a quorum for the transaction of
business at a meeting of the Board of Directors or any committee. By resolution
of the Board of Directors, a director emeritus may be paid reasonable
compensation for services on the Board of Directors or any committee and the
expenses of the director emeritus in attending meetings.
ARTICLE III
COMMITTEES OF THE BOARD
3.1 COMMITTEES. The Board of Directors may create one or more
committees and appoint the members thereof. Each committee shall have two or
more members. The creation of a committee and appointment of members to it must
be approved by a majority of all directors in office when the action is taken.
Subject to any limitation imposed by the Board of Directors or by law, each
committee may exercise all the authority of the Board of Directors in the
management of the Corporation. A committee may not take any action that a
committee is prohibited from taking by the Oregon Business Corporation Act.
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3.2 CHANGES OF SIZE AND FUNCTION. Subject to the provisions of law,
the Board of Directors shall have the power at any time to change the number of
committee members, fill committee vacancies, change any committee members and
change the functions and terminate the existence of a committee.
3.3 CONDUCT OF MEETINGS. Each committee shall conduct its meetings in
accordance with the applicable provisions of these Bylaws relating to meetings
and action without meetings of the Board of Directors. Each committee shall
adopt any further rules regarding its conduct, keep minutes and other records
and appoint subcommittees and assistants as it deems appropriate.
3.4 COMPENSATION. By resolution of the Board of Directors, committee
members may be paid reasonable compensation for services on committees and their
expenses of attending committee meetings.
ARTICLE IV
OFFICERS
4.1 APPOINTMENT. The Board of Directors at its first meeting
following its election each year or, in the absence of such a meeting (because
the Corporation was not required to hold an annual meeting of shareholders), at
any other meeting selected by the Board of Directors shall appoint a President
and a Secretary. At this meeting, or at any other time, the Board of Directors
may appoint one of its members as Chairman of the Board and may appoint any
other officers, assistant officers and agents. Any two or more offices may be
held by the same person.
4.2 COMPENSATION. The Corporation may pay its officers reasonable
compensation for their services as fixed from time to time by the Board of
Directors or by the President with respect to officers appointed by the
President.
4.3 TERM. The term of office of all officers commences upon their
appointment and continues until their successors are appointed or until their
resignation or removal.
4.4 REMOVAL. Any officer or agent appointed by the Board of Directors
or the President may be removed by the Board of Directors at any time with or
without cause. Any officer or agent appointed by the President may be removed
by the President at any time with or without cause.
4.5 CHAIRMAN OF THE BOARD. The Chairman of the Board, if that office
is filled, shall preside at all meetings of the Board of Directors and shall
perform any duties and responsibilities prescribed from time to time by the
Board of Directors.
4.6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, if that
office is filled, shall, with the President and subject to the control of the
Board of Directors, be responsible for the general operation of the Corporation,
and shall
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perform any other duties and responsibilities prescribed from time to time by
the Board of Directors.
4.7 PRESIDENT. Unless otherwise determined by the Board of Directors,
the President, subject to the control of the Board of Directors, shall be
responsible for the general operation of the Corporation. He shall have any
other duties and responsibilities prescribed by the Board of Directors. Unless
otherwise determined by the Board of Directors, the President shall have
authority to vote any shares of stock owned by the Corporation and to delegate
this authority to any other officer.
4.8 VICE PRESIDENTS. Each Vice President shall perform duties and
responsibilities prescribed by the Board of Directors or the President. The
Board of Directors or the President may confer a special title upon a Vice
President.
4.9 SECRETARY.
(1) The Secretary shall record and keep the minutes of all
meetings of the directors and shareholders in one or more books provided for
that purpose and perform any duties prescribed by the Board of Directors or the
President.
(2) Any assistant secretary shall have the duties prescribed
from time to time by the Board of Directors, the President or the Secretary. In
the absence or disability of the Secretary, the Secretary's duties shall be
performed by an assistant secretary.
4.10 TREASURER. The Treasurer shall have charge and custody and be
responsible for all funds and securities of the Corporation and shall have other
duties as prescribed from time to time by the Board of Directors or the
President.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent not
prohibited by law, including the Oregon Business Corporation Act and the
Investment Company Act of 1940, any person who is made, or threatened to be
made, a party to an action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (including an action, suit or
proceeding by or in the right of the Corporation) by reason of the fact that
such person is or was a director, director emeritus or officer of the
Corporation or a fiduciary within the meaning of the Employee Retirement Income
Security Act of 1974 with respect to any employee benefit plan of the
Corporation, or serves or served at the request of the Corporation as a director
or officer or as a fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation shall pay for or reimburse the reasonable expenses
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incurred by any such person in any such proceeding in advance of the final
disposition of the proceeding if the person sets forth in writing (i) the
person's good faith belief that the person is entitled to indemnification under
this Article and (ii) the person's agreement to repay all advances if it is
ultimately determined that the person is not entitled to indemnification under
this Article. No amendment to these Bylaws that limits the Corporation's
obligation to indemnify any person shall have any effect on such obligation for
any act or omission that occurs prior to the later to occur of the effective
date of the amendment or the date notice of the amendment is given to the
person. This Article shall not be deemed exclusive of any other provisions for
indemnification or advancement of expenses of directors, officers, employees,
agents and fiduciaries that may be included in the Articles of Incorporation or
any statute, bylaw, agreement, general or specific action of the Board of
Directors, vote of shareholders or other document or arrangement.
ARTICLE VI
ISSUANCE OF SHARES
6.1 ADEQUACY OF CONSIDERATION. Before the Corporation issues shares,
the Board of Directors shall determine that the consideration received or to be
received for the shares to be issued is adequate. The authorization by the
Board of Directors of the issuance of shares for stated consideration shall
evidence a determination by the Board that such consideration is adequate.
6.2 CERTIFICATES FOR SHARES.
(1) Certificates representing shares of the Corporation shall
be in any form determined by the Board of Directors consistent with the
requirements of the Oregon Business Corporation Act and these Bylaws. The
certificates shall be signed, either manually or in facsimile, by two officers
of the Corporation, at least one of whom shall be the President or a Vice
President, and may be sealed with the seal of the Corporation, if any, or a
facsimile thereof. All certificates for shares shall be consecutively numbered
or otherwise identified. The signatures of officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or any
assistant transfer agent or registered by a registrar, other than the
Corporation itself or an employee of the Corporation.
(2) Every certificate for shares of stock that are subject to
any restriction on transfer or registration of transfer pursuant to the Articles
of Incorporation, the Bylaws, securities laws, a shareholders agreement or any
agreement to which the Corporation is a party shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement of the existence of the restriction and that the Corporation retains a
copy of the full text. Every certificate issued when the Corporation is
authorized to issue more than one class or series within a class of shares shall
set forth on its face or back either (a) a summary of the designations, relative
rights, preferences and limitations of the shares of each class and the
variations in rights, preferences and limitations for each series authorized to
be issued and the authority of the
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Board of Directors to determine variations for future series or (b) a
statement of the existence of those designations, relative rights, preferences
and limitations and a statement that the Corporation will furnish a copy thereof
to the holder of the certificate upon written request and without charge.
(3) All certificates surrendered to the Corporation for
transfer shall be canceled. The Corporation shall not issue a new certificate
for previously issued shares until the former certificate or certificates for
those shares are surrendered and canceled; except that in case of a lost,
destroyed or mutilated certificate, a new certificate may be issued on terms
prescribed by the Board of Directors.
6.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from
time to time appoint one or more transfer agents and one or more registrars for
the shares of the Corporation, with powers and duties determined by the Board of
Directors.
6.4 OFFICER CEASING TO ACT. If the person who signed a share
certificate, either manually or in facsimile, no longer holds office when the
certificate is issued, the certificate is nevertheless valid.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
7.1 CONTRACTS. Except as otherwise provided by law, the Board of
Directors may authorize any officers or agents to execute and deliver any
contract or other instrument in the name of and on behalf of the Corporation,
and this authority may be general or confined to specific instances.
7.2 LOANS. The Corporation shall not borrow money and no evidence of
indebtedness shall be issued in its name unless authorized by the Board of
Directors. This authority may be general or confined to specific instances.
7.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money and notes or other evidences of indebtedness issued in the name
of the Corporation shall be signed in the manner and by the officers or agents
of the Corporation designated by the Board of Directors.
7.4 DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited to the credit of the Corporation in those banks, trust
companies or other depositaries as the Board of Directors or officers of the
Corporation designated by the Board of Directors select, or be invested as
authorized by the Board of Directors.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 SEVERABILITY. A determination that any provision of these Bylaws
is for any reason inapplicable, invalid, illegal or otherwise ineffective shall
not affect or invalidate any other provision of these Bylaws.
8.2 AMENDMENTS. These Bylaws may be amended or repealed and new
Bylaws may be adopted by the Board of Directors or the shareholders of the
Corporation.
Adopted: May 31, 1996
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COLUMBIA SMALL CAP FUND, INC.
INVESTMENT ADVISORY CONTRACT
This Agreement is made the __th day of _______, 1996 between
COLUMBIA SMALL CAP FUND, INC., an Oregon corporation, (the "Fund") and COLUMBIA
FUNDS MANAGEMENT COMPANY, an Oregon corporation having its principal place of
business in Portland, Oregon (the "Adviser"). The Fund is registered as an
open-end investment company pursuant to the Investment Company Act of 1940 (the
"Act"). The Adviser is registered as an investment adviser pursuant to the
Investment Advisers Act of 1940. This Agreement relates to services to be
performed by the Adviser with respect to the Fund.
The parties agree as follows:
1. DUTIES OF ADVISER. The Adviser shall regularly provide the Fund with
research, advice, and supervision with respect to investment matters and shall
furnish continuously an investment program, recommend what securities shall be
purchased or sold and what portion of the Fund's assets shall be held invested
or uninvested, subject always to the provisions of the Act and the Fund's
Articles of Incorporation and Bylaws, and amendments thereto, which amendments
shall be furnished to the Adviser by the Fund. The Adviser shall take any steps
necessary or appropriate to carry out its decisions in regard to the foregoing
matters and the general conduct of the business of the Fund. The Adviser may
take into consideration receipt of research and statistical information and
other services rendered to the Fund in the allocation of commissions from
portfolio brokerage business.
2. ALLOCATION OF CHARGES AND EXPENSES.
(a) The Adviser shall pay or reimburse the Fund for payments
made by the Fund for all executive salaries and executive expenses, office rent
of the Fund, ordinary office expenses (other than the expense of clerical
services relating to the administration of the Fund), and for any other expenses
that, if otherwise borne by the Fund, would cause the Fund to "be deemed to be
acting as a distributor of securities of which it is the issuer, other than
through an underwriter," pursuant to Rule 12b-1 under the Act. The Adviser
shall provide investment advisory, statistical, and research facilities and all
clerical services relating to research, statistical, and investment work with
respect to the Fund.
(b) The Adviser shall not be required to pay any expenses of
the Fund other than those enumerated in this Agreement. The Fund will assume
all other costs, including the cost of its custodian, legal, auditing, and
accounting expenses, disinterested directors' fees, taxes, and governmental
fees, interest, brokers' commissions, transaction expenses, cost of stock
certificates, and any other expenses (including clerical expenses) of issue,
sale, repurchase, or redemption of shares, expenses of registering or qualifying
shares for sale, transfer taxes, and all expenses of preparing the Fund's
registration statement and prospectus, and the cost of printing and delivering
to shareholders prospectuses and reports.
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3. COMPENSATION OF THE ADVISER. For the services to be rendered, the
facilities to be furnished, and the payments to be made by the Adviser, as
provided in Sections 1 and 2 hereof, for each calendar month the Fund shall pay
to the Adviser a fee computed at the annual rate of [1] percent of daily net
assets. If the asset value is not required to be determined on any particular
business day, then for the purposes of this Section 3, the asset value of a
share as last determined shall be deemed to be the asset value of a share as of
the close of business on that day. If there is no business day in any calendar
month, the fee shall be computed on the basis of the asset value of a share as
last determined, multiplied by the average number of shares outstanding on the
last day of the month.
4. COVENANTS OF THE ADVISER. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor any
officer, director, or employee of the Adviser shall act as a principal. The
Adviser covenants that it and its employees will comply with investment
restrictions of the Fund's Bylaws applicable to them. If the Adviser or any of
its affiliates give any advice to clients concerning the shares of the Fund, it
will act solely as investment counsel for the clients and not on behalf of the
Fund.
5. LIMITATION ON LIABILITY OF ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this agreement relates, except a loss
resulting from willful malfeasance, bad faith, or gross negligence on the part
of the Adviser in the performance of its duties or from reckless disregard by
the Adviser of its obligations and duties under this Agreement.
6. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) This Agreement shall remain in force for two years from the
date hereof, and it may be continued from year to year thereafter if approved
annually by a vote of a majority of the Fund's shareholders or by its Board of
Directors and in either case a vote of a majority of the Board of Directors who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the
payment of any penalty by vote of the Board of Directors of the Fund, by vote of
a majority of the outstanding shares of the Fund, or by the Adviser, on 60 days
written notice to the other party.
(c) This Agreement shall automatically terminate if it is
assigned. The Adviser shall notify the Fund of any change in the officers or
directors of the Adviser within a reasonable time after the change. The terms
"assignment," "vote of a majority of the outstanding voting securities", and
"interested persons" shall have the meanings specified in the Act.
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IN WITNESS WHEREOF the parties have caused this Agreement to be
executed as of the day and year first written above.
COLUMBIA SMALL CAP FUND, INC.
By
------------------------------------
Title:
COLUMBIA FUNDS MANAGEMENT COMPANY
By
------------------------------------
Title:
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DISTRIBUTION AGREEMENT
DATED: SEPTEMBER __, 1996
BETWEEN: COLUMBIA SMALL CAP FUND, INC.
an Oregon corporation
1301 SW Fifth Avenue, Portland, Oregon 97207 the Fund
AND: COLUMBIA FINANCIAL CENTER
INCORPORATED, an Oregon corporation
1301 SW Fifth Avenue, Portland, Oregon 97207 the Distributor
The Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended, (Investment Company Act).
The Distributor is engaged principally in the business of distributing shares of
the investment companies sponsored and managed by Columbia Funds Management
Company (the Adviser), is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, (the Exchange Act), and is a member of the
National Association of Securities Dealers, Inc. (NASD). The Fund desires the
Distributor to act as a distributor in the public offering of its shares.
The parties agree as follows:
1. DELIVERY OF FUND DOCUMENTS. The Fund shall make available
promptly to the Distributor copies of any registration statements filed by it
with the Securities and Exchange Commission (SEC) under the Securities Act of
1933, as amended, (Securities Act) or the Investment Company Act, together with
any financial statements and exhibits included therein, and all amendments or
supplements thereto.
2. SALE OF SHARES. Subject to the provisions of Sections 3, 4, and 6
and to any minimum purchase requirements from time to time described in the
Fund's prospectus, the Distributor is authorized to sell, as agent on behalf of
the Fund, shares of the Fund's capital stock (Shares) authorized for issuance
and registered under the Securities Act. The Distributor may also sell Shares
under offers of exchange between and among the investment companies for which
the Adviser acts as investment adviser (Columbia Funds). Sales will be made by
the Distributor on behalf of the Fund by accepting unconditional orders to
purchase Shares placed with the Distributor by investors, and purchases will be
made by the Distributor only after acceptance by the Distributor of orders. The
sales price to the public of Shares shall be the public offering price as
defined in Section 5.
3. SALE OF SHARES BY THE FUND. The Fund reserves the right to sell
Shares to investors pursuant to applications received and accepted by the Fund
or its transfer agent or any other lawful method. The Fund also reserves the
right to issue
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Shares in connection with the merger or consolidation of any other investment
company, trust, or personal holding company with the Fund or the Fund's
acquisition by purchase or otherwise of all or substantially all of the assets
of an investment company, trust, or personal holding company. Any right granted
to the Distributor to accept orders for Shares, to make sales on behalf of the
Fund, or to purchase Shares for resale will not apply to Shares issued in
connection with the merger or consolidation of any other investment company with
the Fund or its acquisition by purchase or otherwise of all or substantially all
of the assets of any investment company, trust, or personal holding company, or
substantially all of the outstanding shares or interests of any such entity, and
this right shall not apply to shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the Fund.
4. SHARES COVERED BY THIS AGREEMENT. This Agreement relates to the
issuance and sale of Shares that are duly authorized, registered, and available
for sale by the Fund, including redeemed or repurchased Shares if and to the
extent they may be legally sold and if, but only if, the Fund authorizes the
Distributor to sell them.
5. PUBLIC OFFERING PRICE. All Shares sold by the Distributor
pursuant to this Agreement shall be sold at the public offering price. The
public offering price for all accepted subscriptions will be the net asset value
per share, as determined in the manner provided in the Fund's articles of
incorporation or bylaws, as now in effect or as later amended (and as reflected
in the Fund's then current prospectus), next after the order is accepted by the
Distributor. The Distributor will process orders submitted by brokers for the
sale of Shares at the public offering price exclusive of any commission charged
by such broker to the customer.
6. SUSPENSION OF SALES. If and whenever the determination of net
asset value is suspended and until the suspension is terminated, no further
orders for Shares shall be accepted by the Distributor except unconditional
orders placed with the Distributor before it had knowledge of the suspension. In
addition, the Fund reserves the right to suspend sales and the Distributor's
authority to accept orders for Shares on behalf of the Fund if, in the judgment
of the board of directors of the Fund, it is in the best interests of the Fund
to do so. The suspension will continue for the period determined by the Board
of Directors of the Fund. In that event, no orders to purchase Shares shall be
processed or accepted by the Distributor on behalf of the Fund while the
suspension remains in effect, except for Shares necessary to cover unconditional
orders accepted by the Distributor before it had knowledge of the suspension,
unless otherwise directed by the board of directors of the Fund.
7. SOLICITATION OF ORDERS. In consideration of the rights granted to
the Distributor under this Agreement, the Distributor will use its best efforts
(but only in jurisdictions in which the Distributor may lawfully do so) to
obtain from investors unconditional orders for Shares authorized for issuance by
the Fund and registered under the Securities Act, provided that the Distributor
may in its discretion reject any order to purchase Shares. This does not
obligate the Distributor to register or maintain its registration as a broker or
dealer under the securities laws of any jurisdiction if, in the discretion of
the Distributor, registration is not practical or feasible. The Fund shall make
available to the Distributor at the expense of the
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<PAGE>
Distributor the number of copies of the Fund's then effective prospectus as the
Distributor reasonably requests. The Fund shall furnish to the Distributor
copies of all information, financial statements, statements of additional
information, and other papers the Distributor reasonably requests for use in
connection with the distribution of Shares.
8. AUTHORIZED REPRESENTATIONS.
(a) The Fund is not authorized by the Distributor to give on
behalf of the Distributor any information or to make any representations other
than the information and representations contained in a registration statement
or prospectus filed with the SEC under the Securities Act or the Investment
Company Act covering Shares, as the registration statement and prospectus is
amended or supplemented from time to time.
(b) The Distributor is not authorized by the Fund to give on
behalf of the Fund any information or to make any representations in connection
with the sale of Shares other than the information and representations contained
in a registration statement or prospectus filed with the SEC under the
Securities Act or the Investment Company Act covering Shares, as the
registration statement and prospectus is amended or supplemented from time to
time,or contained in shareholder reports or other material that may be prepared
by or on behalf of the Fund for the Distributor's use. This paragraph shall not
be construed to prevent the Distributor from preparing and distributing
tombstone and sales literature or other materials it deems appropriate. No
person other than the Distributor is authorized to act as principal underwriter
(as defined in the Investment Company Act) for the Fund.
9. REGISTRATION AND SALE OF ADDITIONAL SHARES. The Fund agrees to
register with the SEC an indefinite number of Shares pursuant to Rule 24f-2
under the Investment Company Act. The Fund will, in cooperation with the
Distributor, take action necessary from time to time to qualify the Shares
(registered or otherwise qualified for sale under the Securities Act) in any
jurisdiction agreeable to the Distributor and Fund and to maintain such
qualification.
10. EXPENSES.
(a) The Distributor shall pay (or will enter into arrangements
providing that persons other than the Distributor shall pay) all fees and
expenses:
(i) incurred in connection with its registration as a
broker or dealer or the registration or qualification of its officers,
directors, or representatives under the laws of various jurisdictions; and
(ii) that, if otherwise borne by the Fund, would cause the
Fund to "be deemed to be acting as a distributor of securities of which it is
the issuer, other than through an underwriter," pursuant to Rule 12b-1 under the
Investment Company Act.
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<PAGE>
(b) The Fund shall pay all other fees and expenses incurred by
the Fund and not allocated to the Distributor pursuant to 10(a) above.
11. CONFORMITY WITH LAW. The Distributor agrees that in selling
Shares it shall conform in all respects with the laws of the United States and
any jurisdiction in which the Shares are offered for sale by the Distributor
pursuant to this Agreement and the rules and regulations of the NASD.
12. INDEPENDENT CONTRACTOR. The Distributor shall be an independent
contractor, and neither the Distributor nor any of its officers, directors,
employees, or representatives is or shall be an employee of the Fund in the
performance of the Distributor's duties hereunder. The Distributor shall be
responsible for its own conduct and the employment, control, and conduct of its
agents and employees and for injury to its agents or employees or to others
through its agents or employees. The Distributor assumes full responsibility
for its agents and employees, as such, under applicable statutes and agrees to
pay all employee taxes thereunder.
13. INDEMNIFICATION.
(a) The Distributor agrees to indemnify and hold harmless the
Fund and each of its directors, officers, employees, and representatives and
each person, if any, who controls the Fund within the meaning of Section 15 of
the Securities Act against any and all losses, liabilities, damages, claims, or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim, or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Fund or such directors,
officers, employees, representatives, or controlling person may become subject
under the Securities Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Distributor or any of Distributor's
directors, officers, employees, or representatives or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report, or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to the Fund by the Distributor. In no case (x) is the
Distributor's indemnity in favor of the Fund or any person indemnified to be
deemed to protect the Fund or such indemnified person against any liability to
which the Fund or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement or
(y) is the Distributor to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or such person, as the case may be, shall have
notified the Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the nature
of the claim shall have been served upon the Fund or upon such person (or after
the Fund or such person shall have received notice of such service on any
designated agent). Failure to notify the Distributor of any such claim,
however, shall not relieve the
4
<PAGE>
Distributor from any liability the Distributor may have to the Fund or any
person against whom such action is brought otherwise than on account of the
Distributor's indemnity agreement contained in this paragraph.
(b) The Distributor shall be entitled to participate, at its
own expense, in the defense, or, if the Distributor elects, to assume the
defense, of any suit brought to enforce any such claim, but, if the Distributor
elects to assume the defense, such defense shall be conducted by legal counsel
chosen by the Distributor and satisfactory to the Fund, to its directors,
officers, employees, or representatives, or to any controlling person or
persons, defendant or defendants, in the suit. If the Distributor elects to
assume the defense of any such suit and retain such legal counsel, the Fund, its
directors, officers, employees, representatives, or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional legal counsel retained by them. If the Distributor does not
elect to assume the defense of any such suit, Distributor will reimburse the
Fund, such directors, officers, employees, representatives, or controlling
person or persons, defendant or defendants in such suit for the reasonable fees
and expenses of any legal counsel retained by them. The Distributor agrees to
notify promptly the Fund of the commencement of any litigation or proceedings
against it or any of its directors, officers, employees, or representatives in
connection with the issue or sale of any Shares.
(c) The Fund agrees to indemnify and hold harmless the
Distributor and each of its directors, officers, employees, and representatives
and each person, if any, who controls the Distributor within the meaning of
Section 15 of the Securities Act against any and all losses, liabilities,
damages, claims, or expenses (including the reasonable costs of investigating or
defending any alleged loss, liability, damage, claim, or expense and reasonable
legal counsel fees incurred in connection therewith) to which the Distributor or
such directors, officers, employees, representatives, or controlling person may
become subject under the Securities Act, under any other statute, at common law,
or otherwise, arising out of the acquisition of any Shares by any person which
(i) may be based upon any wrongful act by the Fund or any of Fund's directors,
officers, employees, or representatives or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report, or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to Distributor by the Fund. In no case (x) is the Fund's
indemnity in favor of the Distributor or any person indemnified to be deemed to
protect the Distributor or such indemnified person against any liability to
which the Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties under this
Agreement or (y) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or person indemnified unless the Distributor or such person, as the
case may be, shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
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<PAGE>
information of the nature of the claim shall have been served upon the
Distributor or upon such person (or after the Distributor or such person shall
have received notice of such service on any designated agent). Failure to
notify the Fund of any such claim, however, shall not relieve the Fund from any
liability which the Fund may have to the Distributor or any person against whom
such action is brought otherwise than on account of the Fund's indemnity
agreement contained in this paragraph.
(d) The Fund shall be entitled to participate, at its own
expense, in the defense, or, if the Fund elects, to assume the defense, of any
suit brought to enforce any such claim, but, if the Fund elects to assume the
defense, such defense shall be conducted by legal counsel chosen by the Fund and
satisfactory to the Distributor, to its directors, officers, employees, or
representatives, or to any controlling person or persons, defendant or
defendants, in the suit. If the Fund elects to assume the defense of any such
suit and retain such legal counsel, the Distributor, its directors, officers,
employees, representatives, or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional legal
counsel retained by them. If the Fund does not elect to assume the defense of
any such suit, the Fund will reimburse the Distributor, such directors,
officers, employees, representatives, or controlling person or persons,
defendant or defendants in such suit for the reasonable fees and expenses of any
legal counsel retained by them. The Fund agrees to notify promptly the
Distributor of the commencement of any litigation or proceedings against it or
any of its directors, officers, employees, or representatives in connection with
the issue or sale of any Shares.
14. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective upon its execution (effective date) and, unless terminated as
provided, shall remain in effect for two years from the date first set forth
above (the date of its execution) and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by the vote
of a majority of the directors of the Fund who are not interested persons of the
Distributor or of the Fund, cast in person at a meeting called for the purpose
of voting on such approval, and by vote of the directors of the Fund or of a
majority of the outstanding voting securities of the Fund. This Agreement may,
on 60 days written notice, be terminated at any time, without the payment of any
penalty, by the vote of a majority of the directors of the Fund who are not
interested persons of the Distributor or the Fund, by a vote of a majority of
the outstanding voting securities of the Fund, or by the Distributor. This
Agreement will automatically terminate in the event of its assignment. In
interpreting the provisions of this Section 14, the definitions contained in
Section 2(a) of the Investment Company Act (including the definitions of
"interested person," "assignment," and "majority of the outstanding securities")
shall be applied.
15. AMENDMENT OF THIS AGREEMENT. This Agreement may be amended,
waived, discharged, or terminated only by a written instrument signed by the
party against which enforcement of the amendment, waiver, discharge, or
termination is sought. If the Fund at any time deems it necessary or advisable
in the best interests of the Fund that any amendment of this Agreement be made
to comply with the recommendations or requirements of the SEC or other
governmental authority or to
6
<PAGE>
obtain any advantage under state or federal tax laws and notifies the
Distributor of the form of the amendment and the reasons therefor, and if the
Distributor declines to assent to the amendment, the Fund may terminate this
Agreement immediately without regard to the 60-day period referred to in
Section 14. If the Distributor at any time requests that a change be made in
the Fund's articles of incorporation or bylaws or in its methods of doing
business to comply with any requirements of federal law or regulations of the
SEC or of a national securities association of which the Distributor is or may
be a member relating to the sale of Shares, and the Fund does not make such
necessary change within a reasonable time, the Distributor may terminate this
Agreement immediately without regard to the 60-day period referred to in
Section 14.
16. MISCELLANEOUS. It is understood and expressly stipulated that
neither the shareholders of the Fund nor the directors of the Fund shall be
personally liable hereunder. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
17. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the address set forth on the first page of this Agreement.
COLUMBIA SMALL CAP FUND, INC.
By
-----------------------------------------
Title:
COLUMBIA FINANCIAL CENTER
INCORPORATED
By
-----------------------------------------
Title:
7
<PAGE>
COLUMBIA SMALL CAP FUND, INC.
TRANSFER AGENT AGREEMENT
September __, 1996
This Agreement is made between COLUMBIA SMALL CAP FUND, INC. ("Fund"),
an Oregon corporation, and COLUMBIA TRUST COMPANY ("Agent"), an Oregon
corporation, as of February 24, 1994.
Fund is an investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), whose shares are registered for sale
under the Securities Act of 1933, as amended (the "1933 Act"); and
Fund desires to have Agent serve as transfer agent and dividend
disbursing agent for Fund, and Agent is willing to serve as transfer agent and
dividend disbursing agent for Fund.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, Fund and Agent agree as follows:
1. APPOINTMENT. Fund hereby appoints Agent as transfer agent for the
shares of the Fund, as described in the Articles of Incorporation of the Fund,
(the "Stock") and dividend disbursing agent for Fund, and Agent agrees to serve
as transfer agent and dividend disbursing agent under the terms and conditions
hereinafter set forth.
2. DOCUMENTS. Fund has furnished Agent copies of Fund's Articles of
Incorporation, investment advisory contract, custodian contract, all account
application forms, and other documents relating to shareholders' accounts and a
certified copy of the resolutions of Fund's Board of Directors adopting Fund's
form of stock certificate and approving the appointment of Agent hereunder.
Fund shall furnish promptly to Agent a copy of any amendment or supplement to
the above-mentioned documents and any additional documents necessary for Agent
to perform its functions hereunder.
3. AUTHORIZED SHARES. Fund certifies to Agent that, as of the date
hereof, Fund is authorized to issue 100,000,000 shares.
4. SERVICES TO BE PERFORMED. Agent shall be responsible for performing
the duties of transfer agent and dividend disbursing agent for Fund, which
duties are more fully set forth in Schedule A to this Agreement. All computer
programs and procedures developed by Agent to perform services required under
this Agreement shall remain the exclusive property of Agent.
5. MAINTENANCE OF RECORDS; CONFIDENTIALITY. All records maintained by
Agent as required on Schedule A shall remain the exclusive property of Fund and
shall be preserved and retained by Agent while this Agreement remains in effect.
Agent shall make available during regular business hours all records and
1
<PAGE>
other data created and maintained pursuant to this Agreement for reasonable
audit and inspection by the Fund or any person retained by Fund. Agent shall
treat all records and other information with respect to Fund with confidence.
6. COMPENSATION. As compensation for the performance of the services
described in parts I and II of Schedule A, Agent shall receive from Fund a per
account fee in the amount set forth in Schedule B. These fees will be charged
for any account in existence during any part of a month, and the fees will be
charged for any part of a month preceding termination of this Agreement. As
compensation for the performance of extra charge services described in part III
of Schedule A, Agent shall be paid by Fund at the rates listed on Schedule B.
Upon request of the Agent, the hourly rates listed on Schedule B may be
adjusted, subject to approval by the Fund's Board of Directors in accordance
with paragraph 17.
7. EXPENSES. Fund agrees to pay directly or reimburse Agent for postage
and the procurement or printing of share certificates, statements, envelopes,
checks, reports, tax forms, proxies, or other forms of printed material required
in the performance of its services to Fund under this Agreement, and Agent
agrees that Fund may purchase these materials directly for use by Agent, subject
to prior approval by Agent as to the compatibility of any materials with Agent's
data processing equipment. Fund agrees to pay directly or reimburse Agent for
all freight and other delivery charges and insurance or bonding charges incurred
by Agent in delivering certificates to shareholders and any and all other out-
of-pocket expenses and charges incurred by Agent in performing services under
this Agreement.
8. MONTHLY STATEMENT. At the end of each month during the term of this
Agreement and upon termination of this Agreement, Agent will render an itemized
statement to Fund for its fees and expenses under this Agreement. Payment by
Fund is due 10 days from the date the statement is received.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
9.1 Agent represents that it is registered with the Securities and
Exchange Commission as a transfer agent under Section 17A of the Securities
Exchange Act of 1934, as amended, and will notify the Fund promptly if its
registration is revoked or if any proceeding is commenced before the Securities
and Exchange Commission which may lead to revocation. Agent shall be
responsible for compliance with all laws, rules, and regulations of governmental
authorities having jurisdiction over transfer agents and their activities.
9.2 Except for the accuracy of information furnished to Fund by
Agent, Fund assumes full responsibility for the preparation, contents, and
distribution of its prospectuses and for compliance with all applicable
requirements of the 1933 Act, the 1940 Act, and any other laws, rules, or
regulations of governmental authorities with jurisdiction over Fund.
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<PAGE>
10. REFERENCES TO AGENT. Fund shall not circulate any printed matter
that contains any reference to Agent without the prior written approval of
Agent, except printed matter that identifies Agent as transfer agent and
dividend disbursing agent for Fund.
11. ACTS OF GOD, NATIONAL EMERGENCY, ETC. Agent shall not be liable for
loss of data, delays, or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or military authority,
national emergencies, fire, flood, catastrophe, acts of God, insurrection, war,
riot, failure of transportation, communication, or power supply, or machine
breakdown. Agent shall use its best efforts to minimize the likelihood of
damage, loss of data, delays, or errors resulting from such uncontrollable
events, and if damage, loss of data, delays, or errors occur, Agent shall use
its best efforts to mitigate the effects of the occurrence.
12. STANDARD OF CARE. Agent shall at all times act in good faith and use
its best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to absorb all costs for time, materials, or
other expenses necessary to correct any errors made by Agent. Agent shall not
be liable for any loss or damage due to its errors unless the errors are caused
by its gross negligence, bad faith, or willful misconduct or that of its
employees or agents. Fund agrees to pay Agent, at the rates set forth in
Schedule B, for any excess work required by Agent due to the errors of Fund's
employees or representatives or due to incorrect data furnished to Agent by
Fund, Fund's investment adviser, or Fund's custodian.
13. INSTRUCTIONS AND OPINION OF COUNSEL. At any time Agent may apply to
an officer of Fund for instructions and consult counsel for Fund or its own
counsel on any matter arising in connection with this Agreement. Agent shall
not be liable for any action taken or omitted by it in good faith in accordance
with such instructions or with the advice or opinion of such counsel.
14. INDEMNIFICATION. Fund shall indemnify and hold Agent harmless from
all loss, cost, damage, and expense, including reasonable expenses for counsel,
incurred by Agent resulting from any claim, demand, action, or suit in
connection with the performance of its duties hereunder or as the result of
acting upon any instruction, advice, or opinion obtained pursuant to
paragraph 13 hereof, upon any other instruction reasonably believed by Agent to
have been properly executed by a duly authorized officer of Fund, or upon any
information, data, records, or documents provided to Agent by Fund, Fund's
investment adviser, or Fund's custodian. This indemnification shall not apply
to actions or omissions constituting gross negligence, bad faith, or willful
misconduct of Agent, its employees, or agents. Prior to confessing any claim
against it which may be subject to this indemnification, Agent shall give Fund
reasonable opportunity to defend against that claim in its own name or in the
name of Agent.
15. FIDELITY BOND. Agent will maintain in force throughout the duration
of this Agreement a fidelity bond that complies with applicable regulatory
requirements, written by a reputable bonding company, covering theft,
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<PAGE>
embezzlement, forgery, and other acts of malfeasance by Agent, its employees, or
agents in connection with services performed for Fund.
16. DURATION AND TERMINATION.
16.1 This Agreement shall remain in force until two years from the
date hereof and may be continued from year to year thereafter if approved
annually by a vote of a majority of the Fund's shareholders (as determined in
accordance with the requirements of the 1940 Act) or by its Board of Directors
and in either case a vote of a majority of the directors who are not parties to
this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on approval.
16.2 This Agreement may be terminated at any time without the payment
of any penalty by vote of the Trustees of Fund or by vote of a majority of the
outstanding shares of Fund on 60 days written notice to the other party. This
Agreement may be terminated by Agent upon 180 days written notice thereof to
Fund. Any termination in accordance with this Agreement shall not affect the
rights and obligations of the parties under paragraphs 11, 12, 13, and 14
hereof. Immediately upon termination of this Agreement, all records and other
data in the possession of Agent which are the property of Fund shall be
furnished to Fund in computer written data forms as requested by Fund.
16.3 This Agreement shall automatically terminate if it is assigned,
the term "assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act. Agent shall notify Fund of any change in the officers
or directors of Agent within a reasonable time after the change.
17. AMENDMENTS. This Agreement may be amended with the written consent
of Agent and Fund if the amendment has been approved by the Board of Directors
of Fund, including a majority of the disinterested directors.
18. NOTICES. Any notice shall be officially given when sent by
registered or certified mail by either party to the following addresses,
provided that either party may notify the other of any changed address to which
such notices should be mailed hereunder:
If to Fund: Columbia Small Cap Fund, Inc.
1301 SW Fifth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
If to Agent: Columbia Trust Company
1301 SW Fifth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
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<PAGE>
19. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Oregon.
20. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, supersedes any agreements previously entered into by them,
and may be amended only by written amendment, duly executed on behalf of the
respective parties in accordance with paragraph 17.
IN WITNESS WHEREOF, the parties hereto cause this agreement to be duly
executed and to become effective as of the date first written above.
COLUMBIA SMALL CAP FUND, INC.
By
----------------------------------
Title:
COLUMBIA TRUST COMPANY
By
----------------------------------
Title:
5
<PAGE>
SCHEDULE A
I. Shareholder Services
A. Maintain all shareholder records on electronic data processing
equipment, including:
1. Share balances
2. Account transaction history
3. Names and addresses
4. Certificate records
5. Distribution records
6. Transfer records
7. Over-all control records
B. New Accounts
1. Deposit all moneys received into transfer account maintained for
the Custodian
2. Set up account according to shareholders' instructions as to:
a. Amount of shares purchased
b. Whether to deliver stock certificates to shareholders
C. Additional Purchases
1. Deposit moneys received into a transfer account maintained for
the Custodian
2. Issue shareholder confirmations
D. Redemptions - Full and Partial
1. Redeem shares upon shareholder request
2. Issue checks for the amount of redemption
3. Issue and mail shareholder confirmations
E. Transfer shares as requested, which includes obtaining necessary
papers and documents to satisfy transfer requirements. On irregular
transfers requiring special legal opinions, such special legal fees,
if any, are to be paid for by the Fund.
F. Prepare and mail certificates as requested by shareholders
6
<PAGE>
G. Process changes, corrections of addresses and registrations
H. Compute distributions, dividends and capital gains
1. Reinvest in additional shares as requested by shareholders
2. Issue checks as requested by shareholders
3. Advise each shareholder of amount of dividends received and tax
status annually
I. Handle replacement of lost certificates
J. Produce transcripts of shareholder account history as required
K. Maintain the controls associated with the computer programs and manual
systems to arrive at the Company's total shares outstanding
L. Receive mail and perform other administrative functions relating to
transfer agent work
II. Reports and Schedules
A. Daily
1. Name and address changes
2. Name and address additions and deletions
3. Transaction Register
a. Purchases
b. Redemptions
c. Transfer and adjustments
4. Cash reconciliation - Cash received for day
5. Check reconciliation - checks issued for day
6. Transaction reconciliation
a. Amount received
b. Total shares purchased
c. Number of purchase transactions
7
<PAGE>
d. Dollar amount redeemed
e. Shares redeemed
f. Number of accounts redeeming
g. Checks issued for redemptions
B. Monthly/Daily
1. Balance list of shareholders in account number sequence
a. Number of shares outstanding for which stock certificates
were issued
b. Number of shares outstanding for which stock certificates
were not issued
c. Total shares outstanding (a + b)
2. a. Purchases, sales and adjustments
b. Certificates issued
c. Certificates, redemptions and transfers
d. Certificates reconciliations by certificate number
C. Monthly
1. Sales by states for month
D. Periodically
1. Alphabetical account listing
III. Extra Charge Services
A. Mailing labels or other mailing services to shareholders
B. Services in connection with any stock splits
C. The computer system is designed to produce almost any display of
statistical management or accounting data in almost any format desired
by the management, auditors or directors. The parameters of reporting
are only limited to the data contained on disc. With sufficient
notice this information is available to management in accordance with
charges as itemized in Schedule B.
8
<PAGE>
COLUMBIA REAL ESTATE EQUITY FUND, INC.
SCHEDULE B
BASIC FEE
$1.00 per account per month
TIME AND MATERIAL FOR EXTRA SERVICES
Computer. . . . . . . . . . . . . . . . . .At Cost
Key punch . . . . . . . . . . . . . . . . .At Cost
Clerical. . . . . . . . . . . . . . . . . .At Cost
Programming and Direct
Technical Management. . . . . . . . . . . .At Cost
Travel and per diem expenses
(Chargeable only when authorized
in advance by Fund) . . . . . . . . . . . .At Cost
Mailing Services. . . . . . . . . . . . . . .At Cost
Permanent file supplies, forms,
microfilm, microfiche . . . . . . . . . . .At Cost
Any of the above services when performed outside regular working hours of Agent
may be billed at 150 percent of the above.
9
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and
appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George
L. Hanseth as the undersigned's true and lawful attorney and agent, with full
power of substitution and resubstitution for and in the name, place and stead of
the undersigned, in any and all capacities, to sign the Registration Statement
on Form N-1A for the registration of shares of Columbia Small Cap Fund, Inc.,
and any and all amendments (including post-effective amendments) thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each
attorney and agent full power and authority to do any and all acts and things
necessary or advisable to be done, as fully and to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and confirming all
that the attorney and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated: June 7, 1996
/s/ GEORGE L. HANSETH
--------------------------------
George L. Hanseth
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and
appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George
L. Hanseth as the undersigned's true and lawful attorney and agent, with full
power of substitution and resubstitution for and in the name, place and stead of
the undersigned, in any and all capacities, to sign the Registration Statement
on Form N-1A for the registration of shares of Columbia Small Cap Fund, Inc.,
and any and all amendments (including post-effective amendments) thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each
attorney and agent full power and authority to do any and all acts and things
necessary or advisable to be done, as fully and to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and confirming all
that the attorney and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated: June 10, 1996
/s/ RICHARD L. WOOLWORTH
--------------------------------
Richard L. Woolworth
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and
appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George
L. Hanseth as the undersigned's true and lawful attorney and agent, with full
power of substitution and resubstitution for and in the name, place and stead of
the undersigned, in any and all capacities, to sign the Registration Statement
on Form N-1A for the registration of shares of Columbia Small Cap Fund, Inc.,
and any and all amendments (including post-effective amendments) thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each
attorney and agent full power and authority to do any and all acts and things
necessary or advisable to be done, as fully and to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and confirming all
that the attorney and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated: June 7, 1996
/s/ JOHN A. KEMP
--------------------------------
John A. Kemp
